Document:

exv10w14

Exhibit 10.14

CHINA HYDROELECTRIC CORPORATION

- and -

SANMING RUIFENG HYDROPOWER

INVESTMENT CO., LTD.

 

Agreement

relating to

the sale and purchase of the equity of

Sunpower Asia Limited

 

July, 2008

 

 

Table of Content

	 	 	 	 	 	 	 
	Chapter 1

	 	Interpretation
	 	 	1	 
	 
	 	 	 	 	 	 
	Chapter 2

	 	Sale and Purchase of the Target Equity
	 	 	3	 
	 
	 	 	 	 	 	 
	Chapter 3

	 	Equity Transfer Price and Conditions Precedent
	 	 	3	 
	 
	 	 	 	 	 	 
	Chapter 4

	 	Completion
	 	 	5	 
	 
	 	 	 	 	 	 
	Chapter 5

	 	Assumption of the Target Company’s Liabilities
	 	 	6	 
	 
	 	 	 	 	 	 
	Chapter 6

	 	Warranties
	 	 	7	 
	 
	 	 	 	 	 	 
	Chapter 7

	 	Performance and Rescind
	 	 	8	 
	 
	 	 	 	 	 	 
	Chapter 8

	 	Purchaser’s Representations and Warranties
	 	 	9	 
	 
	 	 	 	 	 	 
	Chapter 9

	 	Confidentiality
	 	 	9	 
	 
	 	 	 	 	 	 
	Chapter 10

	 	Liability for Default
	 	 	10	 
	 
	 	 	 	 	 	 
	Chapter 11

	 	Settlement of Disputes
	 	 	11	 
	 
	 	 	 	 	 	 
	Chapter 12

	 	Governing Law
	 	 	11	 
	 
	 	 	 	 	 	 
	Chapter 13

	 	Others
	 	 	12	 

 

 

This Equity Sales and Purchase Agreement (the “Agreement”) is made on [ ] 2008 in
Beijing, China by and between:

	(1)	 	China Hydroelectric Corporation, a company incorporated under the laws of the Cayman Islands
and whose legal address is at 558 Lime Rock Road, Lime Rock, Connecticut 06039, and its
authorized representative is John D. Kuhns (“Purchaser”); and
	 
	(2)	 	Sanming Ruifeng Hydropower Investment Co., Ltd., a limited company
incorporated in China and whose registered address is at Block 160, Qian Long Xin Cun, Xin Shi
North Road, Sanming City, Fujian Province, PRC (“Vendor”),

The Purchaser and the Vendor are hereinafter collectively referred to as the “Parties”, each a
“Party”.

Whereas:

	1.	 	Sunpower Asia Limited (hereinafter referred to as the “Target Company”) is a company
incorporated under the laws of Hong Kong, whose legal address is at 5th Floor, Jardine House,
1 Connaught Place, Central, Hong Kong. Further information relating to the Target Company
is set out in Schedule 1. The Target Company is the legal owner of 25% equity in Sanming
Zhongyin Banzhu Hydroelectric Co., Ltd. (hereinafter referred to as “Banzhu”). The Vendor
is the sole legal and beneficial owner of the Target Company. All of the issued shares in the
Target Company are currently held in trust by Lin Shenfang and Tao Minxuan.
	 
	2.	 	On [      ] 2008, the Purchaser executed an Equity Transfer Agreement with Sanming
Ruifeng Hydropower Investment Co., Ltd. and Yong’an Ruifeng Hydroelectric Ltd.,
whereby the Purchaser agreed to acquire the equity shares held by Sanming Ruifeng
Hydropower Investment Co., Ltd. and Yong’an Ruifeng Hydroelectric Ltd.
respectively.
	 
	3.	 	Pursuant and subject to the terms of this Agreement, the Purchase intends to acquire the 100%
equity shares of the Target Company held by the Vendor so as to attain its objective of
indirect equity share holding in Banzhu. This Agreement is executed by the Parties
pursuant to the principle of mutual benefits following friendly consultations and
for mutual observance.

Chapter 1 Interpretation

	 	 	 
	Article 1

	 	Interpretation
	 
	 	 
	 

	 	In this Agreement the following words and expressions will have the following
meanings:

	 	1.1	 	“Equity Transfer Contract” means the “Equity Transfer
Contract Relating to the Transfer of Equity in Sanming Zhongyin Banzhu
Hydroelectric Co., Ltd.” dated [ ] 2008
executed  by the
Purchaser, Sanming Ruifeng Hydropower Investment Co., Ltd. and Yong’an
Ruifeng Hydroelectric Ltd..
	 
	 	1.2	 	“Claims” means all claims however arising.
	 
	 	1.3	 	“Encumbrance” means a mortgage, charge, pledge, lien, option,

 

 

	 	 	 	restriction, equity, right to acquire, right of pre-emption, third party
right or interest, other encumbrance or security interest of any kind or
any other type of preferential arrangement (including, without
limitation, a title transfer and retention arrangement) having similar
effect;
	 
	 	1.4	 	“PRC” means the People’s Republic of China, excluding, for
the purpose of the Agreement, Hong Kong and Macau Special
Administrative Regions and Taiwan;
	 
	 	1.5	 	“Hong Kong” means the Hong Kong Special Administrative
Region of the People’s Republic of China;
	 
	 	1.6	 	“Target Equity” means all the issued common shares of the
Target Company.
	 
	 	1.7	 	“Completion” has the meaning ascribed thereto under Article 17.
	 
	 	1.8	 	“Completion Date” has the meaning ascribed thereto under
Article 1.8 of the Equity Transfer Contract.
	 
	 	1.9	 	“Pre-Completion Liabilities” means all and any liabilities,
contingent liabilities, taxation, legal liabilities or other liabilities
(including Shareholders’ Loans) arising from or incurred in respect of the
Target Company and/or any business of the target Company existing at
Completion or any transaction conducted by the Target Company (including
without limitation any contractual liabilities assumed) and/or any assets
held or used by the Target Company on or before the Completion Date.
	 
	 	1.10	 	“Warranties” means the representations and warranties made
by the Vendor under Chapter 6 of this Agreement and Schedule 3.
	 
	 	1.11	 	“Target Group” means the Target Company and its
subsidiaries, including Banzhu.
	 
	 	1.12	 	“Disclosed” means fully, fairly and specifically disclosed
to the Purchasers in the Disclosure Letter, with sufficient clarity and
detail to enable the Purchaser to identify clearly and accurately the nature,
scope and effect of the matter disclosed;
	 
	 	1.13	 	“Disclosure Letter” means the letter of even date with this
Agreement issued by the Vendor to the Purchaser, which is initialed by the
Purchaser, relating to the Warranties together with any documents annexed to
it.
	 
	 	1.14	 	“Accounting Statements” means the audited and consolidated
profit and loss accounts, balance sheet, Notes and consolidated cash flow
accounts (if applicable) as at the Account Base Date relating to the Target
Company and prepared in accordance with Hong Kong’s principles of accounting.

 

 

	 	1.15	 	“Account Base Date” means 31 December, 2007.
	 
	 	1.16	 	“Management Statements” means the unaudited consolidated
balance sheet[s] and profit and loss account[s] of the Target Company as at
and for 1 January 2008 to 30 June 2008 prepared in accordance with Hong
Kong’s principles of accounting, as set out in Schedule 5 of this Agreement.
	 
	 	1.17	 	“Employee” means any director, ex-director, employee or ex-employee of the respective members of the Target Group.
	 
	 	1.18	 	“Business Day” means a day other than a Saturday or Sunday on which
commercial banks are open for business in Hong Kong.
	 
	 	1.19	 	“Member of the Target Group” means any member within the Target
Group.
	 
	 	1.20	 	“Taxation” or “Tax” means any forms of tax and impost, levy or duty
of any nature imposed in Hong Kong, PRC or any part of the world and
includes any levy in respect of pre-reorganization.
	 
	 	1.21	 	“Tax Authority” means the tax authority or agency in Hong Kong, PRC
or any other place having the power or authority or other ability to
collect taxes.
	 
	 	1.22	 	“Deposit” has the meaning ascribed thereto under Article 13.
	 
	 	1.23	 	“Purchaser’s Solicitor in Hong Kong” means DLA Piper Hong Kong of
40th Floor, Bank of China Building, 1 Garden Road, Central, Hong Kong.

	 	 	 
	 
	Chapter 2 Sale and Purchase of the Target Equity
	 
	 	 
	Article 2

	 	Pursuant to the agreement hereunder and subject to the terms and conditions
of this Agreement, the Vendor agrees to sell and the Purchase agrees to assume
the transfer of the Target Equity free from all Encumbrances and subject to the
Purchaser’s warranty of its full beneficial ownership of the Target Equity in
accordance with the terms and conditions of this Agreement.
	 
	 	 
	Article 3

	 	The Vendor hereby waives any right of first refusal or other rights of transfer
restriction in respect of the transfer of all or part of the Target Equity
whether derived from the provisions of any contract or law; at the same time, the
Vendor agrees to procure, before Completion, the irrevocable waiver of any such
rights by any third party who acquired such rights (if any).
	 
	 	 
	Article 4

	 	After Completion, the Vendor shall hold 100% of the equity of the Target
Company.
	 
	 	 
	 
	Chapter 3 Equity Transfer Price and Conditions Precedent
	 
	 	 
	Article 5

	 	The price for the transfer of equity in this sale and purchase of equity will be
the USD equivalent of RMB62,500,000 (“Equity Transfer Price”).
	 
	 	 
	Article 6

	 	Completion is conditional on the fulfillment of the following conditions in all
aspects or waived in accordance with the provisions of this Agreement (“Conditions Precedent”):

 

 

	 	6.1	 	the Purchaser being reasonably satisfied with all aspects
of the business operation, financial status and the result of legal due
diligence relating to the Target Group;
	 
	 	6.2	 	All Warranties are true, accurate and not misleading as if
such Warranties were repeated on Completion Date and during the period from
the date of execution of this Agreement to the Completion Date;
	 
	 	6.3	 	the Vendor has perform or complied with all
covenants and obligations required by this Agreement to be performed by it
prior to the Completion Date;
	 
	 	6.4	 	all the shareholders’ loans of the Target Company were
repaid in full or duly revoked; and
	 
	 	6.5	 	submission of the accounting statements to the Purchaser.

	 	 	 
	Article 7

	 	The Vendor will provide to the Purchase all materials and information in its
possession or under its control which is necessary for the satisfaction of any of
the Conditions Precedents and the Vendor undertakes that the Purchaser, its
employees, professional advisers and agents must be given all reasonable access
to the books, accounting records and other records of the Target Group for such
purpose.
	 
	 	 
	Article 8

	 	The Vendor undertakes to the Purchaser that it will use all endeavors to
procure that the Conditions Precedents will be fulfilled within 30 days after the
execution of this Agreement;
	 
	 	 
	Article 9

	 	The Purchaser may waive any of the Conditions Precedents by notice in
writing to the Vendor, without prejudice to the Vendor’s obligations to satisfy,
as soon as possible after Completion, any Conditions Precedent so waived.
	 
	 	 
	Article 10

	 	If any of the Conditions Precedent is not satisfied or waived within 30 days of the date
of execution of this Agreement or such later date as may be agreed in writing by the Parties,
then:

	 	10.1	 	the Purchase will not be obliged to complete the sale and
purchase of the Target Equity under this Agreement and neither of the Parties
will have any further rights or obligations under this Agreement, without
prejudice to the rights and obligations accrued to either Party on the
termination of the Agreement; and
	 
	 	10.2	 	The Vendor shall promptly return the Deposit to the
Purchaser or its designated person in the manner then specified by the
Purchaser.

	 	 	 
	Article 11

	 	To enable the Purchaser to conduct verifications of the Target Group, the
Vendor will, to the Purchaser’s reasonable satisfaction:

	 	11.1	 	provide the Purchaser access to all books and records of
the Target Group; and
	 
	 	11.2	 	the management personnel or any employee of the Target
Company must make themselves available at any time to answer questions

 

 

	 	 	 	raised by the Purchaser or give explanations in relation thereto,
	 
	 	provided that such verifications in respect of the Target Company: (1) is an
investigation set forth in Article 30; and (2) does not relate to establishing
the accuracy or otherwise of the Warranties.

	 	 	 
	Article 12

	 	Within 10 Working Days after the execution of this
Agreement, the Vendor will deliver all documents under Part 1
of Schedule 6 to the Purchaser’s Solicitors, such documents
to be jointly kept in custody and use in accordance with the
provisions of Part 2 of Schedule 6.
	 
	 	 
	Article 13

	 	Payment of the Equity Transfer Price

	 	13.1	 	First Instalment
	 
	 	 	 	The Parties agree unanimously that subject to the performance of the
liabilities under Article 12 by the Vendor, the first installment of the
Equity Transfer Price, that is USD equivalent of RMB35,000,000 payable
hereunder (“First Instalment”) will be paid within 10 Working Days after
the execution of this Agreement to an account designated by the Vendor.
(A USD account at the Bank of China (Hong Kong) Limited under the names
of Mr. Lin Shenfang and Ms. Tao Minxuan, of which account number is
01259592044392; A HKD account at the Bank of China (Hong Kong) Limited
under the names of Mr. Lin Shenfang and Ms. Tao Minxuan, of which account
number is 01259510088752)
	 
	 	13.2	 	The second instalment, that is USD equivalent of RMB
10,000,000 (together with the Initial Deposit hereinafter collectively
referred to as the “Deposit”) will be paid at the same time as the payment of
the payment as agreed under Clause 7.2 of the Equity Transfer Contract. The
details of payment accounts are same as described under clause 13.1.
	 
	 	13.3	 	Subject to the performance by the Vendor of its obligations
under Schedule 2, the USD equivalent of RMB17,500,000 will be paid on the
Completion Date. The details of payment accounts are same as described under
clause 13.1.

	 	 	 
	Article 14

	 	The amount payable under Article 13 shall be calculated in accordance with
the medium price of the foreign exchange rates quoted by the People’s Bank of
China on the date of the payment in question.
	 
	 	 
	Article 15

	 	Each of the Parties shall be responsible respectively for the taxes and fees payable by
it in respect of the income derived from or acts done under this Agreement as required by the
applicable laws.
	 
	 	 
	Article 16

	 	The Vendor shall issue proper and valid receipt voucher to the Purchaser at
the time of the receipt of each payment of the Equity Transfer Price paid by the
Purchaser.
	 
	 	 

Chapter 4 Completion

	 	 	 
	Article 17

	 	The completion of the sale and purchase of the Target Equity hereunder shall
take place (“Completion”) on Completion Date at the premises agreed by the

 

 

	 	 	 
	 

	 	Parties when each of the Parties must comply with the provisions of and perform
its obligations under Schedule 2.
	 
	 	 
	Article 18

	 	The Purchaser will not be obliged to complete the purchase of the Target Equity under
this Agreement unless the Vendor complies fully with its obligations under Schedule 2.
	 
	 	 
	Article 19

	 	If Completion does not take place on the Completion Date because the Vendor fails to
comply with any of its obligations under Schedule 2, the Purchaser may, by notice in writing
to the Vendor, elect to:

	 	19.1	 	proceed to Completion to the extent reasonably practicable;
	 
	 	19.2	 	postpone Completion to a date not more than 30 Business
Days after the Completion Date; or
	 
	 	19.3	 	terminate this Agreement.

	 	 	 
	Article 20

	 	If the Purchaser postpones Completion to another date in accordance with Article 19.2,
the provisions of this Agreement apply as if that other date is the Completion Date.
	 
	 	 
	Article 21

	 	If the Purchaser terminates this Agreement pursuant to Article 19.3:

	 	21.1	 	each Party’s rights and obligations will cease
immediately on termination, but termination of this Agreement will not
affect a Party’s accrued rights and obligations as at the date of
termination; and
	 
	 	21.2	 	the Vendor shall forthwith return the Deposit to the
Purchaser or any other person designated by the Purchaser, in the manner
specified by the Purchaser.

Chapter 5 Assumption of the Target Company’s Liabilities

	 	 	 
	Article 22

	 	The Vendor will be responsible for the discharge of all liabilities of the Target
Company incurred prior to Completion. In respect of Pre-Completion Liabilities not discharged
on Completion Date, the Vendor shall enter into a liabilities transfer agreement with the
Target Company and the relevant debtors which is acceptable by the Purchaser, expressly
agreeing that such liabilities will be assumed by the Vendor.
	 
	 	 
	Article 23

	 	If the Vendor discharged all Pre-Completion Liabilities prior to the Completion Date, it
shall procure that such discharge complies with the fundamental documents of the liabilities
so discharged and that the act of discharge is legal, valid and shall hold the Target Company
free from any demands or claims deriving therefrom.
	 
	 	 
	Article 24

	 	The Vendor hereby irrevocably undertakes to compensate and indemnify the Purchaser
and/the Target Company in full from any loss and/damages incurred and/or suffered by the
Purchaser and/or the Target Company from the Pre-Completion Liabilities.

 

 

Chapter 6 Warranties

	 	 	 
	Article 25

	 	The Vendor warrants and undertakes to the Purchaser that, subject to the information
Disclosed, at the date of this Agreement, each of the statements set
out in Schedule 3 is
true, accurate and complete in all respects and not misleading and will be true and accurate
in all respects and not misleading at all times before Completion up to and including the
Completion Date and, for this purpose, an express or implied reference in a Warranty to the
“date of this Agreement” is to be construed as including a reference to the Completion Date.
	 
	 	 
	Article 26

	 	The Vendor acknowledges that:

	 	26.1	 	the Purchaser is entering into this Agreement in reliance
on each Warranty;
	 
	 	26.2	 	each of the Warranty has been given as a representation and
with the intention of inducing the Purchaser to enter into this Agreement;
and
	 
	 	26.3	 	the Purchaser has been induced to enter into this Agreement
on the basis of and in full reliance upon the Warranties and that the
Purchaser may rely on the Warranties in warranting to any
subsequent purchaser of all or any of the Target Equity.

	 	 	 
	Article 27

	 	Each of the Warranties is to be construed as a separate and independent warranty and
(except where this Agreement provides otherwise) will not be limited or restricted by
reference to or inference from any other term of this Agreement or any other Warranty.
	 
	 	 
	Article 28

	 	The rights and remedies of the Purchaser in respect of any breach of any of the
Warranties will survive Completion.
	 
	 	 
	Article 29

	 	Between the date of execution of this Agreement and Completion, the Vendor agrees that
it will:

	 	29.1	 	procure that neither the Vendor nor the Target Group will
allow or procure any act or omission which would constitute a breach of any
of the Warranties;
	 
	 	29.2	 	procure that the Company complies with the provisions of Schedule 4;
and
	 
	 	29.3	 	immediately disclose in writing to the Purchaser any event
or circumstance which may arise or become known to the Vendor which would be
a breach of Article 29.2 or which constitutes a breach of or is materially
inconsistent with any of the Warranties or which might make any of them
inaccurate or misleading or which has or is likely to have an adverse effect
on the financial position or business prospects of the Target Group or which
is otherwise material to be known by a purchaser for value of the Target
Equity.

	 	 	 
	Article 30

	 	The Vendor and the Target Group shall provide the convenience reasonably requested by
the Purchaser, its employee and authorized representative to enable the Purchaser to verify
the accuracy of the Warranties, such reasonable requests by the Purchaser, its employee and
authorized representative shall

 

 

	 	 	 
	 

	 	not be refused by the Vendor, but the Warranties will not deemed in anyway
modified or discharged by reason of any investigation made by the Purchaser or
its employee or by reason of any information about the Target Company of which
the Purchaser has knowledge (actual or constructive) except that the Warranties
will be qualified by such information Disclosed.
	 
	Article 31

	 	If on or before the Completion Date the Purchaser reasonable considers that
the Vendor is in breach of any of the Warranties or any other provision of this
Agreement, the Purchaser may by notice to the Vendor elect to proceed to
Completion (but without prejudice to the Purchaser’s accrued rights as at the
occurrence of the breach) or terminate this Agreement.
	 
	Article 32

	 	If the Purchaser elects to terminate the Agreement pursuant to Article 31:

	 	32.1	 	the Vendor shall indemnify the Purchaser against all costs
incurred by it relating to the negotiation, preparation, execution or
termination of this Agreement or the satisfaction of any of the Conditions
Precedent;
	 
	 	32.2	 	each Party’s further rights and obligations will cease
immediately on termination, but termination will not affect a Party’s accrued
rights and obligations as at the date of termination; and
	 
	 	32.3	 	the Vendor shall forthwith return the deposit to the
Purchaser or any other person designated by the Purchaser, in the manner
specified by the Purchaser.

	 	 	 
	Article 33

	 	The Vendor agrees to indemnify the Purchaser in full for and against all costs
(including legal costs) and expenses incurred by the Purchaser either before or after the
commencement of any action in connection with:

	 	33.1	 	the settlement of any claim that any of the Warranties has
been breached or is untrue, inaccurate or misleading;
	 
	 	33.2	 	any legal proceedings arising out of or in connection with
any claim for breach of Warranty in which judgment is given in favour of the
Purchaser; or
	 
	 	33.3	 	the enforcement of any such settlement or judgment.

	 	 	 
	Article 34

	 	The rights of the Purchaser under Article 33 will be in addition and without prejudice
to any other right or remedy available to it under this Agreement or otherwise.

Chapter 7 Performance and Rescind

	 	 	 
	Article 35

	 	The Parties shall perform their respective obligations fully and completely as agreed
hereunder.
	 
	 	 
	Article 36

	 	In the case of the existence of any facts or circumstances relating to the Target Group
not disclosed by the Vendor at the date of this Agreement which will have material adverse
effects on the continuing validity and normal operations of the Target Group after the
Completion Date, the Vendor shall have the right to rescind this Agreement without prejudice
to the rights of the Purchaser under the other provisions of this Agreement.

 

 

	 	 	 
	Article 37

	 	Sanming Ruifeng Hydropower Investment Co., Ltd. and Yong’an Ruifeng
Hydroelectric Ltd. jointly or severally failed to fully and validly perform their
obligations under the Equity Transfer Contract causing serious damages to the
Purchaser’s interests, the Purchaser shall have the right to unilaterally rescind
this Agreement without prejudice to the rights of the Purchaser under the other
provisions of this Agreement.
	 
	 	 
	Article 38

	 	If the Purchaser rescinds this Agreement pursuant to Article 36 or Article 37:

	 	38.1	 	each Party’s further rights and obligations will cease
immediately on termination, but such termination will not affect a Party’s
accrued rights and obligations as at the date of termination; and
	 
	 	38.2	 	the Vendor shall forthwith return the Deposit to the
Purchaser or any other person designated by the Purchaser, in the manner
specified by the Purchaser.

Chapter 8 Purchaser’s Representations and Warranties

As a material inducement for the Vendor in entering into this Agreement, the Purchaser represents
and warrants as follows:

	 	 	 
	Article 39

	 	the Purchaser is a corporation incorporated and validly existing and
conducting normal operations under the laws of the Cayman Islands.
	 
	 	 
	Article 40

	 	the Purchaser has full civil rights and capacity to enter into and perform
this Agreement and has obtained the authorization necessary for the execution
and performance of this Agreement.
	 
	 	 
	Article 41

	 	upon coming into force, this Agreement shall be legally binding on the
Purchaser and is enforceable against the Purchaser, subject to the provisions
of laws on insolvency, liquidation, reorganization, extension of performance
and other laws relating to or having effects on the rights and remedies of the
creditors.
	 
	 	 
	Article 42

	 	neither the execution nor the performance of this Agreement by the
Purchaser will (1) result in the breach of any agreements, deeds, undertakings
or other documents to which the Purchaser is a party, (2) violate any law,
statute, regulations, rules or any judgment, injunction or order which will
have material adverse effects on the business, operations, assets or financial
condition of the Purchaser.

Chapter 9 Confidentiality

	 	 	 
	Article 43

	 	In respect of any information obtained or provided under this Agreement, each Party
shall: (1) keep confidential all such information for a period of five years from the date of
execution of this Agreement; (2) not disclose any of such materials or information to any
third party except to its employees or adviser as necessary.
	 
	 	 
	Article 44

	 	The provision of Article 43 is not applicable to materials and information which: (1)
can be shown by the receiving party or proved by the receiving party that it has obtained such
information through other legal means prior to disclosure or provision; (2) were obtained by
the receiving party from a third party having no obligations of confidentiality; (3) were
required to be disclosed by laws and
	 
	 	 

 

 

	 	 	 
	 

	 	regulations; and (4) information which is public
knowledge.

Chapter 10 Liability for Default

	 	 	 
	Article 45

	 	In the event that either Party fails to obtain the corporate authorization for the
execution and performance of this Agreement or such authorization is in conflict with other
agreements, its articles of association, government authorization or approval or any other
reasons attributable to such Party resulting in the invalidity or inability to perform or
perform in full of this Agreement, such event shall constitute a default by such Party. The
Party in default shall be liable for payment of default penalty equivalent to one percent of
the Equity Transfer Price to the non-defaulting Party. If the amount of the default penalty
is insufficient to compensate the non-defaulting for the economic losses suffered by it as a
result of the execution and performance of this Agreement, the defaulting Party shall pay the
amount in shortage to the non-defaulting Party for compensation of its economic losses.
	 
	 	 
	Article 46

	 	If the validity of the existence of the Target Company after Completion is affected as
a result of the omission in the disclosure before Completion of any matter having effects on
the validity of the existence of the Target Company, the Purchaser shall have the right to
rescind this Agreement and the Vendor shall forthwith return all payments received under this
Agreement with interest at the prevailing interest rate for bank loans during the period of
the possession of such payments, together with a default penalty at one percent of the Equity
Transfer Price. If the amount of the default penalty is insufficient to compensate the
non-defaulting for the economic losses suffered by it as a result of the execution and
performance of this Agreement, the defaulting Party shall pay the amount in shortage to the
non-defaulting Party for compensation of its economic losses.
	 
	 	 
	Article 47

	 	In the event of any major adverse effects on the Target Company after Completion as a
result of the failure by the Vendor to disclose any information for which the Vendor is
obliged to disclose and the Vendor fails to promptly eliminate such adverse affect or perform
its liability for indemnification upon request by the Purchaser, the Purchaser shall have the
right to rescind this Agreement and the Vendor shall forthwith return all payments received
under this Agreement with interest at the prevailing interest rate for bank loans during the
period of the possession of such payments, together with default penalty at one percent of
the Equity Transfer Price. If the amount of the default penalty is insufficient to compensate
the non-defaulting for the economic losses suffered by the non-defaulting Party as a result
of the execution and performance of this Agreement, the defaulting Party shall pay the amount
in shortage to the non-defaulting Party for compensation of its economic losses.
	 
	 	 
	Article 48

	 	If the Purchaser fails to make payment of the Equity Transfer Price during the agreed
period of payment, a default penalty at a daily rate of 0.08% on the aggregate amount delayed
shall be payable. If the delay in payment exceeds 30 days, the Vendor shall have the right to
rescind this Agreement.
	 
	 	 
	Article 49

	 	Any breach of the obligations under this Agreement or misrepresentations or statements
or non-performance of warranty liability by either of the Parties shall constitute a default.
If this Agreement could not be performed due to such default, the defaulting Party shall be
liable for payment of default penalty equivalent to one percent of the Equity Transfer Price
to the non-defaulting Party. If the amount of the penalty is insufficient to compensate the

 

 

	 	 	 
	 

	 	non-defaulting for the economic losses suffered by the non-defaulting Party as a
result of the execution and performance of this Agreement, the defaulting Party
shall pay the amount in shortage to the non-defaulting Party for compensation of
its economic losses.
	 
	 	 
	Article 50

	 	If the Purchaser fails to pay the Equity Transfer Price on time, the Vendor shall have
the right to postpone the performance of the obligations in connection therewith while the
Vendor and its affiliated company, Yong’an Ruifeng Hydroelectric Ltd., shall also have the
right to postpone the performance of their obligations under the Equity Transfer Contract
without constituting a default. If this Agreement could not become effective, could not be
performed, is rescinded or is terminated for whatever reasons, the Vendor and Yong’an Ruifeng
Hydroelectric Ltd. shall have the right to rescind the Equity Transfer Contract at the same
time, without being subject to any default by the Purchaser under the Equity Transfer
Contract. The Parties agree that the Vendor shall inform Yong’an Ruifeng Hydroelectric Ltd. of
the provisions of this Article on third party authorization together with a copy of this
Agreement attached.

Chapter 11
Settlement of Disputes

	 	 	 
	Article 51

	 	In the event of any problem or dispute in connection with the interpretation or
performance of this Agreement, the Parties shall endeavor to settle such disputes
through friendly consultations or mediation. Failing solution of the disputes
within ninety days of the dispute arising, either Party may elect to submit the
dispute for arbitration to Hong Kong International Arbitration Centre (“HKIAC”) in
accordance with its arbitration procedures and rules then in force and the
following provisions:

	 	51.1	 	arbitration shall be conducted in Hong Kong;
	 
	 	51.2	 	There shall be three (3) arbitrators in the arbitration
tribunal, of which one (1) will be appointed by the Purchaser, one (1) by the
Vendor and the third (3) arbitrator shall be appointed conclusively by the
HKIAC in accordance with its applicable arbitration rules.
	 
	 	51.3	 	The arbitral award rendered by the HKIAC is final and
binding on the Parties. Each Party agrees to be bound thereby and shall
act accordingly. Each Party may apply for judicial recognition of and
enforcement order for the arbitral award in any court of competent
jurisdiction.
	 
	 	51.4	 	The costs of arbitration shall be borne by the losing
Party, unless otherwise determined by the arbitration award.
	 
	 	51.5	 	Throughout any dispute arbitration, the other parts of this
Agreement shall continue in effect and the Parties shall continue to perform
their other obligations under this Agreement, with the exception of those
parts that are under arbitration between the Parties.

Chapter 12 Governing Law

	 	 	 
	Article 52

	 	Governing Law
	 
	 	 
	 

	 	The formation, validity and interpretation of this Agreement will be governed

 

 

	 	 	 
	 

	 	   by and construed in accordance with the laws of
Hong Kong.

Chapter 13 Others

	 	 	 
	Article 53

	 	Variations
	 
	 	 
	 

	 	No variation of this Agreement will be valid unless it is in writing and signed
by or on behalf of each of the Parties to this Agreement.
	 
	 	 
	Article 54

	 	Severability
	 
	 

	 	The invalidity of any provisions (or any part thereof) of this Agreement will not
affect the continuation in force of the remainder of this Agreement.
	 
	Article 55

	 	This Agreement is executed in Chinese.
	 
	 	 
	Article 56

	 	This Agreement is made in four copies with two copies to be held by each Party to this
Agreement.
	 
	 	 
	Article 57

	 	No waiver by the Purchaser of any breach or non-performance by the Vendor
of any provisions of this Agreement will be deemed to be a waiver of any
subsequent or other breach of that or any other provision and no failure to
exercise or delay in exercising any right or remedy under this Agreement will
constitute a waiver of the relevant provision or provisions of this Agreement. No
single or partial exercise of any right or remedy under this Agreement will
preclude or restrict the further exercise of any such right or remedy. The rights
and remedies of the Purchaser provided in this Agreement are cumulative and not
exclusive of any rights and remedies provided by law.
	 
	 	 
	Article 58

	 	This Agreement will remain in full force and effect so far as concerns any matter
remaining to be performed at Completion even though Completion will have taken place.
	 
	 	 
	Article 59

	 	Further Assurance and Agency

	 	59.1	 	On and after Completion, the Vendor must, at the request of
the Purchaser, do and execute all such acts, deeds, documents and things as
may be necessary to give full effect to this Agreement and the transactions
hereunder.
	 
	 	59.2	 	If, on Completion, any Target Equity has not been
transferred validly and effectively to and in the name of the Purchaser, the
Vendor shall hold such Target Equity in trust for the Purchaser and shall
comply with any instructions given by the Purchase in relation thereto.

	 	 	 
	Article 60

	 	Announcements
	 
	 	 
	 

	 	No announcement, communication or circular concerning this Agreement or
announcement or publication relating to any information obtained by one Party from
the other during the negotiation or implementation of this Agreement will be made
(whether before or after the Completion Date) by any of the Parties to this
Agreement without the prior approval of the other

 

 

	 	 	 
	 

	 	(such approval not to be unreasonably withheld or delayed) save for:

	 	60.1	 	announcements to its professional adviser or management
personnel or employees who need to know such information required for the
performance of their duties; and
	 
	 	60.2	 	such announcements as may be required by any applicable
laws and regulations, the Listing Rules and/or securities trading rules
and/or any other relevant authorities.

	 	 	 
	Article 61

	 	Costs and Stamp Duty

	 	61.1	 	Unless otherwise provided in this Agreement, each of the
Parties will bear and pay its own legal, accountancy and other expenses
incurred in and incidental to the preparation, negotiation and implementation
of this Agreement.
	 
	 	61.2	 	The cost of all stamp duty payable in respect of the
transfer of the Target Equity will be borne by the Parties respectively.

	 	 	 
	Article 62

	 	No Assignment

	 	62.1	 	This Agreement shall be binding on and enure for the
benefit of each Party’s successors and personal representatives.
	 
	 	62.2	 	This Agreement shall not be assigned except that each Party
may assign all or any part of its rights and obligations hereunder to its
wholly-owned subsidiaries and the Purchaser may assign any of its rights and
interests under this Agreement to any third party.
	 
	 	62.3	 	Except as otherwise expressly provided in this Agreement,
all rights and benefits under this Agreement are personal to the Parties and
may not be assigned at law or in equity without the prior written consent of
the other Party.

	 	 	 
	Article 63

	 	Entire Agreement

	 	63.1	 	This Agreement (including the schedules to it) and any
documents in the agreed form (collectively referred to as the “Acquisition
Documents”) constitute the entire agreement between the Parties with respect
to the subject matter of this Agreement.
	 
	 	63.2	 	Except for any misrepresentation or breach of warranty
which constitutes fraud:

	 	63.2.1	 	the Acquisition Documents supersede all previous agreements
(including the Letter of Intent) between the Parties relating to the
subject matter contained in the Acquisition Documents and any
representations and warranties previously given or made other than
those contained in the Acquisition Documents;

 

 

	 	63.2.2	 	each Party acknowledges to the other that it has not relied
on any representation or warranty other than the representations
and warranties contained in the Acquisition Documents;
	 
	 	63.2.3	 	each Party hereby irrevocably and unconditionally waives
any right it may have to claim damages or to rescind this
Agreement or any of the other Acquisition Documents by
reason of any misrepresentation and warranty not set forth
in
any such document.

	 	 	 
	Article 64

	 	This Agreement shall be effective from the date of effectiveness of the
Equity Transfer Contract.
	 
	 	 
	Article 65

	 	Notice

	 	65.1	 	Unless otherwise provided in this
Agreement, any notice or communication in writing to be given to either hereunder to the other
shall be given by express courier. All notices shall be served on the
5th day after posting (based on the postage stamp), but if the actual
date of receipt is earlier, shall be served on the actual date of receipt.
	 
	 	65.2	 	All notice and communications must be given to the following
addresses or such other address as may have been notified to the
other Party in writing:

	 	 	 	 	 
	 

	 	Purchaser’s address:
	 	Area B, Level 25, New Bao Li Building,
	 
	 	 	 	 
	 

	 	 	 	No. 1, Chaoyangmen Bei Dajie
	 
	 	 	 	 
	 

	 	 	 	Dong Cheng District, Beijing
	 
	 	 	 	 
	 

	 	Tel:
	 	010-64082341
	 
	 	 	 	 
	 

	 	Fax:
	 	010-64974430
	 
	 	 	 	 
	 

	 	Attention:
	 	Chen
	 
	 	 	 	 
	 

	 	Vendor’s address:
	 	Block 160, Qian Long Xin Cun, Xin Shi
	 
	 	 	 	 
	 

	 	 	 	North Road, Sanming City, Fujian Province,
	 
	 	 	 	 
	 

	 	 	 	PRC
	 
	 	 	 	 
	 

	 	Tel:
	 	0598-8202158
	 
	 	 	 	 
	 

	 	Fax:
	 	0598-8202031
	 
	 	 	 	 
	 

	 	Attention:
	 	Zhuang Kun Wei

 

 

Schedule 1

TARGET COMPANY

	 	 	 
	Name of Company:
	 	Sunpower Asia
limited 
	 
	 	 
	Company code:
	 	715770
	 
	 	 
	Date of incorporation:
	 	10 May, 2000
	 
	 	 
	Place of incorporation:
	 	Hong Kong
	 
	 	 
	Place of registration:
	 	5th Floor, Jardine House, 1 Connaught Place, Central, Hong Kong
	 
	 	 
	Directors:
	 	Lin Sheng Fang, Tao Minxuan
	 
	 	 
	Company Secretary:
	 	Gytho Company Limited
	 
	 	 
	Authorized capital:
	 	HK$10,000 - 10,000 common shares of HK$1 each
	 
	 	 
	Issued capital:
	 	HK$10,000 - 10,000 common shares of   HK$1 each
	 
	 	 
	Auditors:
	 	 
	 
	 	 
	Financial year closing date:
	 	31 December

 

 

Schedule 2

OBLIGATIONS ON COMPLETION

On Completion, the Vendor shall perform the following obligations:

	1.	 	The Vendor shall deliver or procure to be delivered to the Purchaser:

	 	1.1	 	a certificate duly executed by the Vendor the form and substance of which is
to the satisfaction of the Purchaser, evidencing that the conditions precedent
(other than the first item) have been fulfilled;
	 
	 	1.2	 	the deeds of assignment and the certificates of sales and purchase required for
the actual transfer of the Target Equity to the Purchaser, the necessary powers
of attorney and other documents of authorization, and all other documents
required for the transfer of the title of the Target Equity to the Purchaser so as
to enable the Purchaser to become its registered owner;
	 
	 	1.3	 	The share certificates representing the Target Equity issued to the Purchaser;
	 
	 	1.4	 	the board resolution duly and validly adopted by the directors of the Vendor
and the shareholders resolutions duly and validly adopted by the shareholders
of the Vendor, in form and substance satisfactory to the Purchaser. These
resolutions evidence that the Vendor has been authorized (1) to execute and
deliver this Agreement and any documents required to be delivered under this
Agreement, (2) to complete the transaction anticipated in this Agreement, and
(3) the name or names and his or their signature(s) of one or more of the
management personnel who shall execute this Agreement and any documents
required to be delivered under this Agreement on behalf of the Vendor;
	 
	 	1.5	 	the originals of the resolutions of the board of directors relating to the transfer
of the Target Equity and other related matters duly and validly adopted by the
board of directors of the Target Company, in form and substance satisfactory
to the Purchaser;
	 
	 	1.6	 	all the certificates of incorporation, certificates of change of company names,
certificates of business registrations, memorandum, articles of association,
business licenses, approval certificates and all documents issued or granted to
the Target Company by other competent authorities;
	 
	 	1.7	 	all the rubber chops, common seals, statutory registration books (including all
minutes of meetings which shall all be in writing), the certificates of shares
not yet issued and the books of account as at the Completion Date of the
Target Company;

 

 

	 	1.8	 	photo copies of all bank mandates given by the Target Company and the photo
copies of duly executed forms of cancellation of such bank mandates (if any);
	 
	 	1.9	 	all the bank accounting records to the Target Company, bank statements dated
not earlier than five working days before the Completion Date, and the balances
of the cash account books as at the Completion Date, the reconciliation
statements reconciling such balances with the bank statements;
	 
	 	1.10	 	all cheque books, cheques for transfer, bank statements, voucher receipt books,
current insurance policies, accounting records, title deeds, the title certificates
of all the assets, current contracts and other accounting records in possession or
under the control of the Target Company;
	 
	 	1.11	 	the photo copies of all tax returns and tax assessment (received on the date of
payment and before the date of completion);
	 
	 	1.12	 	all the letters, contracts and other documents belonging to the Target Company;
	 
	 	1.13	 	either a cheque drawn by the Vendor with the Hong Kong Special
Administrative Region as the payee, of which amount is equal to the amount of
the stamp duty assumed by the Vendor in accordance with this Agreement, or
cash equivalent to such amount of stamp duty assumed by the Vendor;
	 
	 	1.14	 	an undertaking executed by the Vendor given to the stamp duty officer of the
Stamp Office of the Inland Revenue Department, undertaking that the Vendor
shall pay any additional stamp duty as required in respect of the transfer of the
Target Equity;
	 
	 	1.15	 	undated letters of resignation duly executed by the directors and the company
secretary of the Target Company, and written confirmation that they have no
claims against the Target Company;
	 
	 	1.16	 	company documents under common custody; and
	 
	 	1.17	 	other documents and matters which the Purchaser may properly and reasonably
request for conducting any transactions.

	2.	 	The Vendor shall procure the Target Company to convene a meeting of the board of directors
of the company to pass the following matters which the Purchaser requests to deal with,
including but not limited to:

	 	2.1	 	acceptance of the resignation of the current directors and the company
secretary;

 

 

	 	2.2	 	appointment of the persons nominated by the Purchaser as the directors and
the company secretary of the Target Company; and
	 
	 	2.3	 	change of the signatories of all the accounts maintained by the Target
Company in the banks or financial institutions and bank mandates.

 

 

Schedule 3

WARRANTIES

Part 1

	1.	 	Basic Information

	 	1.1	 	All information and descriptions given in the recitals and Schedule 1 to this
Agreement relating to the Target Group are complete, true, accurate in all
respects and not misleading.
	 
	 	1.2	 	All written information given by or on behalf of the Vendor or any of its
representatives to the Purchaser, when given, shall be deemed to be true,
complete, accurate in all respects, and will not give rise to misunderstanding
in any way.
	 
	 	1.3	 	All information which when disclosed might be reasonably expected to affect
the Purchaser’s decision to enter into this Agreement or result in Purchaser’s
reduction of the assessed value of the Target Equity or induce it to require the
Vendor to perform other contractual obligations has been disclosed.
	 
	 	1.4	 	Information relating to the Target Equity and Target Group has been fully and
thoroughly disclosed to the Purchaser in writing before execution of this
Agreement.
	 
	 	1.5	 	All board resolutions and minutes and shareholders’ resolutions and minutes
of the Target Group are complete and accurate, and have been fully and
accurately given to the Purchaser.
	 
	 	1.6	 	Except for the ownership of 25% equity interests in Banzhu, the Target
Company does not own any shares, securities or other interests or any other
assets of any other persons.

	2.	 	Capacity and Ownership of Target Equity

	 	2.1	 	The Vendor has full power to execute this Agreement and exercise its rights
and perform its obligations under this Agreement, and has taken all action
necessary to authorize the Vendor to execute this Agreement and perform its
obligations under this Agreement. This Agreement, when executed, shall
constitute a lawful, valid and binding agreement on the Vendor and may be
enforced against the Vendor in accordance with the terms and provisions of
this Agreement.
	 
	 	2.2	 	The Vendor’s execution, delivery and performance of this Agreement will not
breach:

 

 

	 	2.2.1	 	Any laws, regulations, orders or decrees of any government
department, regulatory authority or court of any jurisdiction with
competent jurisdiction over the Vendor;
	 
	 	2.2.2	 	The laws and documents on which the establishment and creation of
the Vendor is based; or
	 
	 	2.2.3	 	Any agreement or other undertaking to which the Vendor is a party or
which is binding on the Vendor or any of its assets.

	 	2.3	 	There is no encumbrance on the Target Equity or any parts thereof or any
unissued share capital of the Target Company and there are no commitments,
agreements or arrangements which create or might create such encumbrance.
Neither are there negotiations which may lead to such an agreement or
commitment and no claim has been made by any person to be entitled to the
foregoing Encumbrance.
	 
	 	2.4	 	The Vendor is the sole and beneficial owner of the Target Equity and has full
rights, power and authority to sell, transfer and assign the full legal and
beneficial ownership in the Target Equity and all its existing and future
additional rights and such transfer will not result in any breach of the
provisions of any contract or other obligations binding upon the Vendor or
their respective property.
	 
	 	2.5	 	There is no agreement, arrangement or obligation requiring the creation,
allotment, issue, transfer, redemption or repayment of any shares in the share
capital and authorized capital of the Target Company, or the grant to any
person of the right to require the creation, allotment, issue, transfer,
redemption or repayment of any shares in the capital of the Target Company
(including, without limitation, an option or right of pre-emption or
conversion).
	 
	 	2.6	 	There is no litigation, arbitration, prosecution, administrative or other legal
proceedings or dispute in existence or threatened against the Vendor in
respect of the Target Equity or the Vendor’s entitlement to dispose of the
Target Equity and there are no facts known to the Vendor which might give
rise to any such proceedings or any such dispute.
	 
	 	2.7	 	Neither the Target Equity nor any property of members of the Target Group
has been a subject of a transaction at an undervalue.
	 
	 	2.8	 	The Target Company has never received any notice or any application or
notice of any intended application issued under the provisions of the relevant
laws in relation to the register of members of the Target Company.

 

 

	 	2.9	 	The Company has never exercised nor attempted to exercise or
claim any lien
over the Target Equity and no call on the Target Equity (if any) is outstanding
and all the share capital of the Target Equity are fully paid up.
	 
	 	2.10	 	The Company has not at any time given any financial assistance in
connection with the purchase of the Target Equity.

	3.	 	Accounts

	 	3.1	 	The Accounts Statement has been prepared in accordance with
the requirements of the applicable laws and on a basis consistent with that
adopted in the preparation of the audited combined accounts statement of the
Target Company for each of the financial years since its incorporation and in
accordance with all financial reporting standards, statements of standard
accounting practice and generally accepted accounting principles and
practices in Hong Kong and gives a true and fair view of the assets and
liabilities and state of affairs of the Target Group as at the Accounts Date and
its profits and losses for the relevant period ended on the Accounts Date.
	 
	 	3.2	 	The Management Statement has been prepared on a basis consistent with the
monthly management accounting records of the Target Company before
execution of this Agreement and in accordance with the accounting policies
applied to the accounting records and gives a true and fair view in all respects
of the assets and liabilities, profits and losses of the Target Group for the
period as at and to 30 June 2008.
	 
	 	3.3	 	The Accounts Statement discloses all the assets and either makes full
provision or reserve for or, as appropriate, discloses all bad and doubtful
debts and all accruals and liabilities whether actual, contingent, unquantified
or disputed and all capital commitments whether actual or contingent of the
Target Group as at the Accounts Date.
	 
	 	3.4	 	All the audited/or unaudited balance sheets and profit and loss accounts of
the
members of the Target Group for the financial years since its incorporation
ended on the Accounts Date complied with the requirements of all relevant
laws and with all statements of standard accounting practice, all financial
reporting standards and generally accepted accounting principles and
practices of Hong Kong or China (as the case may be) then in force.
	 
	 	3.5	 	The rate of depreciation adopted in the audited/or unaudited balance sheets
of
the members of the Target Group for each of the financial years since its
incorporation ended on the Accounts Date was sufficient for the book value
of each of the fixed assets of the members of the Target Group to be written
down to nil by the end of its useful life.

 

 

	 	3.6	 	Except as specifically stated in the audited/or unaudited balance sheets and
profit and loss accounts of the members of the Target Group for each of the
financial years ended on the Accounts Date, no changes in the policies of
accounting adopted for the audited/or unaudited balance sheets and profit and
loss accounts have been made for any of those financial years and the method
of valuing stock and work in progress and the basis of depreciation and
amortisation adopted has been consistent during each of these financial years.
	 
	 	3.7	 	The profits shown by the audited/ or unaudited balance sheets and profit and
loss accounts of the members of the Target Group for each of the financial
years since its incorporation ended on the Accounts Date have not (except as
disclosed in such accounts) been affected by any extraordinary or exceptional
item or by any other factor rendering such profits for all or any of such
periods unusually high or low.
	 
	 	3.8	 	Full provision has been made in the deferred tax account for any tax revenue
from enterprises subject to taxation and the differential tax arising from the
sale of fixed assets based on the value recorded in the accounting records,
and no overstatement has been made in the accounting records for the value
of any assets.
	 
	 	3.9	 	No value has been attributed to any type or category of stock which has
previously been attributed no value.
	 
	 	3.10	 	No asset (whether fixed intangible investment or current) has been revalued
upwards in the accounting records and no intangible asset has been brought
into the accounting records.
	 
	 	3.11	 	No surplus on any pension arrangements has been written back or brought
into reserves and full provision has been made for pension obligations.

	4.	 	Position Since Accounts Date

	 	4.1	 	Since the Accounts Date:

	 	4.1.1	 	the business of the members of the Target Group has been
carried on
in the ordinary and usual course and so as to maintain the same as a
going concern.
	 
	 	4.1.2	 	there has been no deterioration either in turnover or in
the financial
or trading position or in the prospects of the members of the Target
Group compared with the same periods during each of the two
preceding years and the Vendor is not aware of any matter or
circumstance which has affected or is likely to affect adversely the
volume or level of trading of the members of the Target Group.

 

 

	 	4.1.3	 	the members of the Target Group have not acquired or disposed of
or agreed to acquire or dispose of any business or any material asset
or assumed or acquired any material liability (including a contingent
liability) otherwise than in the ordinary course of business.
	 
	 	4.1.4	 	the members of the Target Group have paid their creditors in
accordance with their respective credit terms otherwise than in the
ordinary course of business and there are no amounts owing by the
members of the Target Group which have been due for more than
three months.
	 
	 	4.1.5	 	no debtor has been released by the members of the Target Group on
terms that he pays less than the book value of his debt and no debt
owing to the members of the Target Group has been deferred,
subordinated or written off or has proved to any extent irrecoverable
and all book debts at the date hereof are good and will be
recoverable in full on their respective due dates in the ordinary
course.
	 
	 	4.1.6	 	neither the turnover nor the expenses (direct and indirect) nor the
trading position nor the margin of profitability of the members of
the Target Group shows any material deterioration by comparison
with the turnover, expenses, trading position and margin of
profitability of the members of the Target Group for the
corresponding period in its last completed accounting reference
period.
	 
	 	4.1.7	 	there has not been any material change in the assets or liabilities
(including contingent liabilities) of the members of the Target Group
as shown in the accounting record except for changes arising from
routine payments and from routine supplies of goods and services in
the normal course of trading.
	 
	 	4.1.8	 	all payments, receipts and invoices of the members of the Target
Group have been fully and accurately recorded in their respective
books.
	 
	 	4.1.9	 	there has not been any capitalization of reserves of the members of
the Target Group and the members of the Target Group have not
issued or agreed to issue any share or loan capital other than that
issued at the Accounts Date and have not granted or agreed to grant
any option in respect of any share or loan capital and the members
of the Target Group have not repaid any loan capital in whole or in
part nor have they, by reason of any default by them in their

 

 

	 	 	 	obligations, become bound or liable to be called upon to repay
prematurely any loan capital or borrowed monies.
	 
	 	4.1.10	 	there has been no resolution of or agreement by the members of the
Target Group (except as provided in this Agreement or with the prior
written consent of the Purchaser) and in particular there has been no
capital reorganization or other change in the capital structure of the
members of the Target Group.
	 
	 	4.1.11	 	the members of the Target Group have not changed their accounting
reference period.
	 
	 	4.1.12	 	no supplier to or customer of the members of the Target Group who
accounted for five per cent of the members of the Target Group’s
annual turnover in the last financial year has ceased to trade with the
members of the Target Group or notified the members of the Target
Group of their intention to do so and the business of the members of
the Target Group has not been materially affected by any change in
the terms of business with such a supplier or customer and the
members of the Target Group have not been notified of any such
proposed change.
	 
	 	4.1.13	 	the members of Target Group have not declared or paid any
dividends or other distributions.

	5.	 	Business Name

	 	5.1	 	The members of the Target Group do not use any name for any purpose other
than their full corporate names.
	 
	 	5.2	 	The members of the Target Group may lawfully use all or any part of their
corporate names in their operations. The use of such names will not lead to
infringement of the intellectual property of any third party.

	6.	 	Licences, Permits and Consents

	 	6.1	 	The members of the Target Group have obtained all licences, permissions,
authorizations and consents required to own and operate their assets and for the
carrying on of its business (full details of which are set out in the Disclosure
Letter). All such licences, permissions, authorizations and consents are in full force
and effect, and the members of the Target Group are not in breach of any of the terms
and conditions attached to those licences, permissions, authorizations and consents.
There are no circumstances which indicate that any of such licences, permissions,
authorizations or consents may be revoked or be refused to be renewed in the ordinary
course

 

 

	 	 	 	of events nor are there any circumstances which indicate that equivalent
licences, permissions, authorizations or consents on terms no less favorable than
at present cannot be granted to the members of the Target Group after the Target
Equity has been transferred to the Purchaser.

	 	6.2	 	The members of the Target Group carry on their business in accordance with
the applicable laws and regulations at all times. The members of the Target
Group carry on their business within the scope of operation stated in their
business licences. None of the members of the Target Group or any of their
directors, officers, employees or agents related to the Group has engaged in
offences, torts, or violated the requirements or terms of any decrees, treaties,
rules, regulations or other obligations in connection with the Group or the
business conducted by it. Without prejudice to the generality of the
foregoing, the members of the Target Group have obtained all registrations,
approvals, permits, licences and consents required for the ownership of their
assets and the carrying on of their business and all such registrations,
approvals, licences and consents are validly subsisting and without reasons
leading to their suspension, revocation and cancellation (whether due to the
transfer of the Target Equity hereunder or as a result of other causes).
	 
	 	6.3	 	The members of the Target Group have not given any power of attorney or
any other authority (express, implied or ostensible) which is still outstanding
or effective to any person to enter into any contract or do anything on their
behalf (other than any authority of employees to enter into routine trading
contracts in the normal course of their duties).

	7.	 	Assets

	 	7.1	 	All the property and assets which are described and included in the Accounts
Statement and/or in the books of account or records of the members of the Target
Group or which are used in connection with the business of the members of the Target
Group or which are in the reputed ownership of the members of the Target Group
(including but not limited to the Property) are:

	 	7.1.1	 	legally and beneficially owned by the members of the
Target Group with good and marketable title;
	 
	 	7.1.2	 	in the possession or under the control of the members of
the Target Group;
	 
	 	7.1.3	 	free from all Encumbrances and there is not any agreement or
commitment to give or create, and no claim has been made by any

person entitled to any Encumbrance; and
	 
	 	7.1.4	 	situated in Hong Kong or within the territory of China.

 

 

	 	7.2	 	The members of the Target Group own the assets necessary or desirable for
the effective operation of their business.
	 
	 	7.3	 	None of the assets referred to in Paragraph 7.1 are the subject of any
assignment, franchise, preferential franchise, factoring arrangement, leasing
or hiring agreement, hire purchase agreement for payment on deferred terms
or any similar agreement or arrangement.
	 
	 	7.4	 	All the plant, machinery, equipment and vehicles owned or used by the
members of the Target Group (if any) are in good repair and working order
and have been regularly and properly maintained and no substantial repairs
are in hand or are necessary and none of the plant, machinery, equipment or
vehicles is out of date, dangerous, inefficient, unsuitable or in need of
renewal or replacement or fails to comply with all the applicable safety
standards.
	 
	 	7.5	 	None of the members of the Target Group has owned or used any other plant,
machinery, equipment or vehicles, nor are there any other members of the
Target Group which have renewed the required plant, machinery, equipment
or vehicles.

 

 

	8.	 	Insurance

	 	8.1	 	Full details of all insurance policies effected by persons in relation to any
of the members of the Target Group’s assets have been disclosed to the Purchaser and
all such details are true and correct in all respects and all such insurance policies
are currently in full force and effect.
	 
	 	8.2	 	The members of the Target Group have not done or omitted to do or suffered
anything to be done or not to be done which has or might render any policies of
insurance taken out by the members of the Target Group or by any other person in
relation to any of the members of the Target Group’s assets void or voidable or
which would or might result in an increase in the rate of premiums on the said
policies and there are no claims outstanding and no circumstances which would or might
give rise to any claim under any of such policies of insurance.
	 
	 	8.3	 	All the assets of the members of the Target Group of an insurable nature are
and have at all material times been insured in amounts representing their full
replacement or reinstatement value (with no provision for deduction or excess) against
fire and other risks normally insured against by persons carrying on similar
businesses to the business of the members of the Target Group. The members of the
Target Group are and have at all material times been insured against accident, third
party and other risks normally insured against by persons carrying on similar
businesses to the business of the members of the Target Group.
	 
	 	8.4	 	The members of the Target Group have taken out and participated in insurance
in respect of employment, labour, industrial injury, unemployment and retirement
insurance in accordance with the relevant laws, regulations and administrative rules
in Hong Kong and China, and have paid premiums in accordance with the relevant laws,
regulations and administrative rules and requirements of insurance contracts
and complied with all relevant regulations and provisions.

	9.	 	Records
	 
	 	 	All the accounting records, books, registers, ledgers and financial and other material
records of whatsoever kind (including all invoices and other value-added tax records) of
the members of the Target Group are up to date, in the possession or under control of the
members of the Target Group respectively and have been fully properly and accurately kept
and compiled and properly filed, registered or stamped in the relevant departments of the
government; there are no material errors or discrepancies contained or reflected in such
records and they give and reflect a true and fair view of the financial, contractual and
trading position of the members of the Target Group and

 

 

of the condition of their respective plant and machinery, fixed and current assets and
liabilities (actual and contingent), debtors, creditors, goods-in-stock and
work-in-progress.

	10.	 	Confidential Information

	 	10.1	 	The members of the Target Group do not use any processes and are not engaged
in any activities which involve the misuse of any confidential information possessed
by any third party.
	 
	 	10.2	 	The Vendor and the members of the Target Group are not aware of any actual or
alleged misuse by any person of any of their Confidential Information.
	 
	 	10.3	 	The members of the Target Group have not disclosed to any person any of their
Confidential Information except where such disclosure was properly made in the normal
course of their respective business and was made subject to an agreement under which
the recipient is obliged to maintain the confidentiality of such Confidential
Information and is restrained from further disclosing or using it.
	 
	 	10.4	 	Confidential Information used by the members of the Target Group is kept
strictly confidential and the members of the Target Group operate and fully comply
with procedures which maintain such confidentiality, which confidentiality
has not been breached.

	11.	 	Employees

	 	11.1	 	None of the employees of the members of the Target Group has given or
received notice terminating his employment or will be entitled to receive such notice
pursuant to the provisions of this Agreement.
	 
	 	11.2	 	Full particulars of the terms and conditions of employment of all the
employees of the members of the Target Group (including, without
limitation, all remuneration, incentives, bonuses, expenses, profit-sharing
arrangements and other payments, share option schemes and other benefits whatsoever
payable) and, where an employee has been continuously absent from work for more than
one month, the reason for the absence, have been disclosed.
	 
	 	11.3	 	There is not in existence any employment or labour contract with any employee
of the members of the Target Group (or any individual service agreement) which cannot
be terminated by the member of the Group giving three months’ notice or less without
giving rise to the making of a payment in lieu of notice or a claim for damages or
compensation (other than a statutory redundancy payment or statutory compensation for
unfair dismissal) or which

 

 

	 	 	 	is in suspension or has been terminated but is capable of being revived or enforced or in
respect of which the Target Group has a continuing obligation.

	 	11.4	 	In relation to each of the present employees of the members of the Target Group (and so far
as relevant to each former employee) the member of the Group has:

	 	11.4.1	 	complied with all statutes, regulations and codes of conduct relevant to the
relations between it and its employees or between it and any approved trade union or
appropriate representative.
	 
	 	11.4.2	 	maintained adequate and suitable records regarding the service of each of its
employees.
	 
	 	11.4.3	 	complied with all collective agreements and customs and practices for the time
being dealing with such relations or the conditions of service of its employees; and
complied with all relevant orders and awards made under any statute affecting the
conditions of service of its employees.
	 
	 	11.4.4	 	paid the social insurance premiums/mandatory provident fund and individual income
tax regarding all its employees.

	 	11.5	 	The members of the Target Group are not involved in any disputes and there are no
circumstances which may result in any dispute involving any of their officers or employees or
former employees and none of the provisions of this Agreement is likely to lead to any such
dispute.
	 
	 	11.6	 	There is not outstanding any agreement or arrangement to which a member of the Target Group
is a party for profit sharing or for payment to any of its officers or employees or former
employees of bonuses or for incentive payments or other similar matters.
	 
	 	11.7	 	There is no agreement or arrangement between the members of the Target Group and any of their
employees with respect to his employment, his ceasing to be employed or his retirement which
is not included in the written terms of his employment contract or previous employment
contract.
	 
	 	11.8	 	Since the Accounts Date, no change has been made in the terms of employment (other than
those required by law) of any of the employees of the members of the Target Group and the
members of the Target Group are not obliged or required to increase the remuneration of their
employee by 10% or more.

 

 

	 	11.9	 	None of the members of the Target Group has entered into any recognition
agreement with any trade union or done any acts which might be taken as
recognition.
	 
	 	11.10	 	There is no agreement, arrangement, scheme or obligation (whether legal or
moral) for the payment of any pensions, allowances, lump sums or other like benefits
on redundancy, on retirement or on death or during periods of sickness or disablement
for the benefit of any of the employees of any member of the Target Group or for the
benefit of dependants of such persons.
	 
	 	11.11	 	No amounts due to or in respect of any of the employees of the members of
the Target Group are in arrears or unpaid.
	 
	 	11.12	 	No monies or benefits other than in respect of contractual emoluments are
payable to any of the employees of the members of the Target Group and there is not at
present a claim, occurrence or state of affairs which may hereafter give rise to a
claim against any member of the Target Group arising out of the employment or
termination of employment of any employee for compensation for loss of office or
employment or otherwise.

	12.	 	Contracts

	 	12.1	 	There is not outstanding in connection with the business of the members
of the Target Group:

	 	12.1.1	 	any agreement or arrangement between a member of the Target Group and
any third party the signature or performance of which will
contravene this Agreement or under which the third party will acquire a right
of termination or any;
	 
	 	12.1.2	 	any agreement or arrangement between a member of the Target Group and a
company which is a member of the Target Group;
	 
	 	12.1.3	 	any sale or purchase, option or similar agreement,
arrangement or obligation affecting the assets of the Target Group or by
which the Target Group is bound;
	 
	 	12.1.4	 	any agreement or contract containing any unusual or onerous terms to be
observed or performed by the members of the Target Group or which the members
of the Target Group cannot comply with on time or without undue or unusual
expenditure of money or effort;

 

 

	 	12.1.5	 	any agreement or contract which is unusual, unprofitable
(that is to say known to have been likely to result in a loss to
the members of the Target Group on completion of
performance) or of a long-term nature (that is to say
incapable of performance in accordance with its terms within three
months after the date on which it was entered into or undertaken);
or
	 
	 	12.1.6	 	any agreement or arrangement which involves or may involve
obligations which by reason of their material nature ought to be made known
to the Purchaser.

	 	12.2	 	None of the members of the Target Group nor any party with whom any member of
the Target Group has entered into any agreement or contract is in default being a
default which would have a material effect on the financial or trading position or
prospects of any member of the Target Group and there are no circumstances likely to
give rise to such a default.
	 
	 	12.3	 	No breach of contract, event or omission has occurred which would entitle any
third party to terminate any contract to which any member of the Target Group is a
party or to call in any money before the due date. None of the members of the Target
Group has received notice of intention to terminate any of such agreements or
contracts.
	 
	 	12.4	 	The Vendor has no reason to believe that any customer or supplier of any
member of the Target Group other person dealing with any member of the Target Group
will refuse to continue to deal with the members of the Target Group and/or the
Purchaser or will deal with them on a smaller scale than at present as a result of the
change of control of the members of the Target Group to be effected pursuant to this
Agreement.
	 
	 	12.5	 	Full details of all agreements, arrangements or contracts (whether oral or in
writing) made between the members of the Target Group and their employees,
clients or customers other than in the ordinary course of business have been
disclosed.
	 
	 	12.6	 	The members of the Target Group have not provided or agreed to provide any
warranty or compensation in favour of any third party.

	13.	 	Borrowings
	 
	 	 	Except as disclosed in the Accounts Statement and Management Statement, none of the members
of the Target Group has outstanding:

 

 

	 	13.1	 	any borrowing or indebtedness in the nature of borrowing including any bank
overdrafts, liabilities under acceptances (otherwise than in respect of normal
trade bills) and acceptance credits;
	 
	 	13.2	 	any guarantee, indemnity or undertaking (whether or not legally binding) to
procure the solvency of any person or any similar obligation; or
	 
	 	13.3	 	any Encumbrance or any obligation (including a conditional obligation) to
create an Encumbrance.

	14.	 	Litigation, Offences and Compliance with Statutes

	 	14.1	 	Neither the members of the Target Group nor any person for whose acts the
members of the Target Group may be jointly liable or who may render the Target Group
jointly liable is a claimant, defendant or otherwise a party to any litigation,
arbitration or administrative proceedings which are in progress or are threatened or
pending by or against or concerning any member of the Target Group or any of its
assets. None of the members of the Target Group is being prosecuted for any
criminal offence and no governmental, administrative or official investigation
or inquiry concerning the business or management officers of the members of the Target
Group or its assets is in progress or pending and there are no circumstances which are
likely to give rise to any such proceedings, investigation or inquiry.
	 
	 	14.2	 	Neither the members of the Target Group nor any of its management officers,
agents or employees (during the course of their duties in relation to the business of
the Company) has committed or omitted to do any act or thing the commission or
omission of which could be in contravention of the statutory obligations or laws of
Hong Kong, China or any other country giving rise to any fine, penalty, default
proceedings or other liability in relation to the business, management officers or
property of the members of the Target Group or any judgment or decision which would
materially affect the financial or trading position or prospects of the members of the
Target Group.
	 
	 	14.3	 	The members of the Target Group have not done or agreed to do anything as a
result of which either any investment or other grant paid to the them is or may be
liable to be refunded in whole or in part or any such grant for which application has
been made by them may not be paid or may be reduced.
	 
	 	14.4	 	The members of the Target Group do not have any outstanding debts in respect
of any statutory or governmental levies or charges.
	 
	 	14.5	 	The Target Equity was not purchased or subscribed for by the Vendor with
funds (and financing guarantees of the bank) derived from criminal proceeds.

 

 

	 	14.6	 	To the best of the Vendor’s knowledge, information and belief:

	 	14.6.1	 	none of the assets owned by the members of the Target Group has been
acquired with monies representing the proceeds of crime.
	 
	 	14.6.2	 	the members of the Target Group have not at any time received monies
representing criminal proceeds.

	15.	 	Restrictive Agreements and Competition

	 	15.1	 	There are no effective agreements restricting the liberty of any member of
the Target Group to provide services or restricting the liberty to establish trade
contacts with any person it deems fit at any time, and there are no contracts in
whatever form restricting the members of the Target Group to carry on any activities
in any part of the world.
	 
	 	15.2	 	None of the members of the Target Group is or has been a party to any
agreement, arrangement, concerted practice or usual transaction which act is subject
to the competition law, anti-restriction trading practice,
anti-monopoly law, consumer protection law or any relevant applicable legislation
(“Anti-monopoly Rules”) under any jurisdiction. Neither is it or has it been
required by its regulations to declare or in conflict with it or is or has become the
subject of any inquiry, investigation or litigation proceedings under such legislation
or in breach of such legislation (as far as the Vendor knows).
	 
	 	15.3	 	None of the members of the Target Group is in breach or in contravention of
any terms, decrees, judgments, rules or other legal documents, or in breach or in
contravention of undertakings relating to any Anti-monopoly Rules. Neither has it
received any complaint made or threatened to be made by any person under
Anti-monopoly Rules, received information requests, investigations or
protests relating to Anti-monopoly Rules, nor has it instituted any litigation
proceedings on the ground or basis of Anti-monopoly Rules (or any of their provisions)
as defence.

	16.	 	Subsidiaries
	 
	 	 	The Target Company has not since its incorporation had any subsidiary or subsidiary
undertaking other than Banzhu.
	 
	17.	 	Insolvency

	 	17.1	 	No resolution has been passed nor meeting called to consider such
resolution for the winding up of or for the appointment of a liquidator by any member

 

 

of the Target Group, and no such petition or order has been presented or made.

	 	17.2	 	No liquidator, administrator, receiver, receiver and manager, administrative receiver or
similar officer has been appointed in relation to any member of the Target Group or in
relation to the whole or any part of its assets, rights or revenues.
	 
	 	17.3	 	In relation to the members of the Target Group:

	 	17.3.1	 	no voluntary liquidation arrangement has been proposed or implemented under
applicable laws;
	 
	 	17.3.2	 	no scheme for debt repayment arrangements has been proposed or implemented
under applicable laws;
	 
	 	17.3.3	 	there is no scheme for the benefit of creditors, whether or not under the
protection of the court and whether or not involving a reorganization or
rescheduling of debt; or
	 
	 	17.3.4	 	there is no law, regulation or proceeding relating to the reconstruction or
adjustment of debts.

	 	17.4	 	None of the members of the Target Group has stopped or suspended payment of its debts, and
each member of the Target Group is able or deemed able to pay its debts.
	 
	 	17.5	 	No distress, execution or other process has been levied on an asset of any member of the
Target Group or the Vendor and no unsatisfied judgment, order or award is outstanding against
any member of the Target Group or the Vendor.
	 
	 	17.6	 	No action has been or is being taken by the competent authority to strike any member of the
Target Group off the register, under applicable laws.
	 
	 	17.7	 	None of the Vendor or members of the Target Group has been forced into liquidation, nor has
any petition for its liquidation has been proposed.

 

 

Part 2

Environmental Issues

Environmental Issues

	1.	 	None of the members of the Target Group, its management officers, agents or employees has
violated any environmental laws, whether as a result of intentional or negligent acts. They
have always complied with the relevant implementation criteria, guiding directions, standards
and the consultation materials issued by the other competent authorities.
	 
	2.	 	In relation to the business carried on by them or the property owned, possessed or controlled
by them at any time, the members of the Target Group have not received any notice or other
information from any competent authority claiming that they have violated or failed to comply
with environmental laws or mandatory demands and the compliance of such laws or demands
may be ensured through further proceedings. Nor are there any existing circumstances which
will likely lead to the receipt of such notice, order or other information or the receipt of
any communication or information or the receipt of communication, information or circumstances
from the competent authority indicating the giving of such notice.
	 
	3.	 	In relation to the property, assets or business of the members of the Target Group, the
competent authority has not exercised the right of access, the right to sample, survey or take
photos, has not removed, demolished or tested any materials, articles or living things, has
not required any person to make representations in respect of any examination or investigation
(with or without signature), has not demanded the production of any data, nor has it taken
any steps to seize any materials, articles or living things and/or keep them unharmed.
	 
	4.	 	In relation to the business carried on by them or the property owned, possessed or controlled
by them at any time, the members of the Target Group have not received any complaints from any
third party (including employees) claiming that they have violated environmental laws.
Neither the Vendor nor any member of the Target Group is aware of any circumstances which may
give rise to such complaints.

 

 

Part 3

Taxation

	1.	 	The Accounts Statement and Management Accounts Statement include all Taxation for which the
members of the Target Group are liable to pay during the period ended on the Accounts Date (or
30 June 2008, if applicable) or any subsequent period, including deferred taxation and
provisional taxation. The Taxation is based on the tax rate and tax laws in force on the
Accounts Date targeted at any transaction, event, occurrence of negligence, any revenue,
profit or income obtained, accrued or received before the Accounts Date (or 30 June 2008, if
applicable) or the liabilities of the Target Company up to that date. All potential tax
liability has been paid or disclosed in the accounting records.
	 
	2.	 	Other than the trading activities in the ordinary course of business, the members of the
Target Group have not further incurred any tax liability or potential tax liability since the
Accounts Date.
	 
	3.	 	All declarations made by the members of the Target Group for taxation purpose were at the
time and are still correct and proper, all other information provided to the relevant Taxation
Authority for such purpose was at the time and is still correct and proper and such
declarations include all declarations and information which should have been provided or given
by the members of the Target Group and there is at the date of this Agreement no dispute with
the relevant Taxation Authority, nor is there any fact or matter which may lead to such
dispute. There is no tax liability (present or future) which has not been provided in the
accounting records.
	 
	4.	 	All declarations and information provided or given by the members of the Target Group to the
relevant Taxation Authority in respect of the import and export of any products are correct.
The members of the Target Group have all complied with all regulations relating to the import
and export of products and import duty and consumption tax.
	 
	5.	 	The members of the Target Group have paid all Taxation for which they are liable to the
relevant Taxation Authority on the due date for payment and are not liable to pay any penalty
or interest in respect thereof. Without prejudice to the generality of the foregoing, the
members of the Target Group have made all deductions and withholding in respect of the
Taxation required by the relevant legislation, such deductions and withholding to be made from
their payments, including but not limited to interest, pensions or other annual
payments, franchise fees, rent,  remuneration payable to employees or
sub-contractors or payments made to non-residents. The members of the Target Group have
accounted in full to the appropriate authority for the Taxation so deducted or withheld when
necessary.

 

 

	6.	 	Under any applicable laws, no asset has been transferred to the members of the Target
Group which will or may give rise to any claims, tax assessments or payment demands in
respect of estate duty; and there is no charge or potential charge on any asset or property
of the members of the Target Group.
	 
	7.	 	All remuneration, pensions, severance compensation or other amounts paid or payable to the
current or former employees and officers of the members of the Target Group and all interest,
pensions, franchise fees, rent and other annual payments paid or payable under any obligations
existing at the date of execution of this Agreement (whether before or after the date of
execution of this Agreement) (based on the tax legislation in force at the date of execution
of this Agreement) may be deducted for profit tax purpose at the time of calculating the
profit of the members of the Target Group or charging fees with respect to the income of the
members of the Target Group.
	 
	8.	 	During the period between the Accounts Date and the Completion Date, no act or omission which
may give rise to claims under the terms of Taxation compensation will occur.
	 
	9.	 	The members of the Target Group have all complied with all applicable laws in respect of
Taxation and all directions issued by the relevant Taxation Authority in any way, and have
issued and maintained complete, correct and up-to-date records, invoices and other documents
required by all applicable laws and directions.

 

 

Schedule 4

OBLIGATIONS BEFORE COMPLETION

The Vendor covenants with the Purchaser that, unless otherwise provided for in this Agreement or
previously agreed in writing by the Purchaser, in the period from the date of this Agreement to the
Completion Date, it will procure that each member of the Target Group must:

	1.	 	continue in the ordinary and usual course the business carried on by it at the date of
execution of this Agreement and so as to maintain the same as a going concern;
	 
	2.	 	not dispose of or agree to dispose of or acquire or agree to acquire any assets or shares or
assume or incur or agree to assume or incur a liability, obligation or expense (actual or
contingent) except in the ordinary and usual course of business;
	 
	3.	 	not merge or amalgamate or agree to merge or amalgamate its business with any other company;
	 
	4.	 	not enter into any scheme or arrangement with creditors;
	 
	5.	 	not enter into any contract, transaction or arrangement with the Vendor or other members of
the Vendor’s Group;
	 
	6.	 	not pass any shareholders’ resolution;
	 
	7.	 	not create, allot, issue, acquire, redeem or repay any share or loan capital or agree,
arrange or undertake to do any of those things or acquire or agree to acquire shares or any
other interest in any other company;
	 
	8.	 	not enter into any long-term contract for a term of twelve months or more or any contract or
arrangement involving expenditure or liabilities in excess of HK$50,000 or undertake any
unusual or new form of expenditure;
	 
	9.	 	not make any capital commitment in the amount of more than HK$50,000 or approve or agree to
make any capital expenditure in excess of that amount;
	 
	10.	 	not amend or terminate any material agreement, arrangement or obligation to which it is a
party;
	 
	11.	 	not enter into, amend, terminate or dispose of any property lease contract or
acquire or dispose of any property;
	 
	12.	 	not engage in any transaction except on an arm’s-length basis in the ordinary course of
business;

 

 

	13.	 	not increase or agree to increase the remuneration (including, without limitation,
salary, bonuses, commissions, profits in kind, annuity payments and welfare funds) of any
of its employees or vary the terms of employment of or dismiss any core employee or engage
any new employee or agree to provide any gratuitous payment or benefit to any person in the
ordinary course of business except as provided for in any laws;
	 
	14.	 	not alter or agree to alter the terms of any existing borrowing facilities or arrange
additional borrowing facilities;
	 
	15.	 	not create or agree to create any Encumbrance over any of its assets or make any loans or
enter into any guarantee or stand surety for the obligations of any third party;
	 
	16.	 	not grant any credit except for the provision of general trading credit in the ordinary
course of business;
	 
	17.	 	not declare, make or pay any dividend or other distribution;
	 
	18.	 	not change its current accounting reference date;
	 
	19.	 	not enter into any litigation or arbitration proceedings unless it is necessary to enter into
such litigation or arbitration proceedings in order to respond to the litigation or
arbitration proceedings instituted by any third party;
	 
	20.	 	not compromise, settle, waive a right, drop or agree to drop a lawsuit in relation to
litigation or arbitration proceedings or a liability, claim, action, summons, or waive a right
in relation to litigation or arbitration proceedings except in the ordinary course of business
or unless it is necessary to protect its interests;
	 
	21.	 	conduct its business in all material respects in accordance with all existing legal and
administrative requirements in any jurisdiction;
	 
	22.	 	not cancel by the due date the insurance policies in force at the date of this Agreement nor
do or omit to do anything to render such policies void or voidable; and
	 
	23.	 	co-operate with the Purchaser to:

	 	23.1	 	ensure the efficient continuation of management after Completion;
	 
	 	23.2	 	prepare for the introduction of the Purchaser’s normal working procedures in
readiness for Completion; and
	 
	 	23.3	 	provide a copy of its books of management account to the Purchaser within
five working days after the end of each month.

 

 

SCHEDULE 5

MANAGEMENT STATEMENTS

 

 

SUNPOWER ASIA LIMITED

MANAGEMENT ACCOUNT

PER IOD: from January 1, 2008 to September 30, 2008

 

 

SUNPOWER ASIA LIMITED

	 	 	 	 	 
	CONTENT	 	PAGE
	Balance Sheet
	 	 	1	 
	 
	 	 	 	 
	Income Statement
	 	 	2	 

 

 

P. 1

SUNPOWER ASIA LIMITED

THE BALANCE SHEET AS OF SEPTEMBER 30, 2008

	 	 	 	 	 
	 	 	September 30, 2008
	 	 	HK$
	Non-cash Assets
	 	 	 	 
	Related Rights and Interests
	 	 	 	 
	 
	 	 	1	 
	 
	 	 	 	 
	Current Liabilities
	 	 	 	 
	Accrued Expenses
	 	 	3,000	 
	Deposit of Related Parties
	 	 	392,448	 
	Deposit of Directors
	 	 	92,564	 
	 
	 	 	488,012	 
	 
	 	 	 	 
	Net Liabilities
	 	 	(488,011	)
	 
	 	 	 	 
	Subentry
	 	 	 	 
	Share Capital
	 	 	10,000	 
	Accumulated Losses
	 	 	(498,011	)
	 
	 	 	 	 
	 
	 	 	(498,011	)
	 
	 	 	 	 

The genuineness and accuracy shall be guaranteed by the following persons:

	 	 	 	 	 
	 

Director

	 	 
	 	 
 Director

 

 

P. 2

SUNPOWER ASIA LIMITED

INCOME STATEMENT

The period is from January 1, 2008 to September 30, 2008

	 	 	 	 	 
	 	 	2008.1.1-2008.9.30
	 	 	HK$
	Other Revenues
	 	 	—	 
	Audit Compensation
	 	 	3,000	 
	Yearly Income
	 	 	105	 
	Business Registration Expenses
	 	 	450	 
	Company Searching Expenses
	 	 	450	 
	Registration of Office
	 	 	4,000	 
	Secretary Expenses
	 	 	5,000	 
	Miscellaneous Expenses
	 	 	2,595	 
	 
	 	 	 	 
	Pre-tax Losses
	 	 	(15,600	)
	Tax
	 	 	—	 
	 
	 	 	 	 
	Yearly Losses
	 	 	(15,600	)
	Balance B/F
	 	 	(482,411	)
	 
	 	 	 	 
	Surplus Transferred to the Next Year
	 	 	(498,011	)
	 
	 	 	 	 

 

 

SCHEDULE 6

Part 1

List of Documents handed over under Article 12

	1.	 	Share certificates formally endorsed in respect of the Target Equity registered in the name
of the Vendor;
	 
	2.	 	Certificate of incorporation, Certificate of change in name and business registration
certificate of the Target Company; and
	 
	3.	 	Common seal and statutory books (including minute books) and books of account of the Target
Company;

	 	 	The above are collectively known as the “Corporate Documents”.

Part 2

Joint Custody and Arrangement for the use of Documents handed over under
Article 12

	1.	 	The Corporate Documents will be deposited in the safe deposit box in the office of the
Purchaser’s Hong Kong Solicitors (“Place of Joint Custody”) which is jointly designated by the
Purchaser and the Vendor and can only be jointly opened by the Purchaser and the Vendor. At
the time of deposit, the Purchaser and the Vendor shall confirm in writing the name, type and
quantity of the subject matter.
	 
	2.	 	Before Completion, if the Vendor needs to use any such Corporate Documents, it shall
give notice to the Purchaser and if it agrees to such use, the Purchaser will arrange
for the Vendor’s personnel to go to the Place of Joint Custody to use the documents.
	 
	3.	 	Upon Completion, the Purchaser and the Vendor shall jointly open the above safe deposit
box and the Vendor shall deliver all Corporate Documents to the Purchaser.

 

 

The Parties to this Agreement have executed this Agreement at the date set forth above for
observance.

Purchaser:

Authorized Representative:

Date: July 11, 2008

Vendor:

Authorized Representative:

Date: July 11, 2008exv10w69

Exhibit 10.69

WARRANT AGREEMENT

CHINA HYDROELECTRIC CORPORATION

And

[THE BANK OF NEW YORK MELLON], as Warrant Agent

WARRANT AGREEMENT

Dated as
of [          ], 2010

 

 

THIS WARRANT AGREEMENT (this “Agreement”), dated as of [          ], 2010, is by and
between China Hydroelectric Corporation, a Cayman Islands company (the “Company”), and The Bank of
New York Mellon, a New York banking corporation (the “Warrant Agent”).

     WHEREAS, the Company proposes to issue up to 3,593,750 warrants to be offered in the Company’s
initial public offering of ADSs (as defined below) and Warrants (as defined below) (the “IPO”)
pursuant to a registration statement (the “Registration Statement”) filed with the Securities
Exchange Commission. Each American Depositary Share (“ADS”)
representing three ordinary shares of the Company, par value $0.001 per share (the “Ordinary
Shares”), and one warrant (the “Warrants”) to purchase three Ordinary Shares at an exercise price
of $15.00 for three Ordinary Shares (the Ordinary Shares issuable on exercise of the Warrants, the
“Warrant Shares”);

     WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the
Warrant Agent is willing to so act, in connection with the issuance, transfer, exchange and
exercise of Warrants and other matters as provided herein.

     NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth herein,
the parties hereto, intending to be legally bound, hereby agree as follows:

     SECTION 1. Appointment of Warrant Agent. The Company hereby appoints the Warrant
Agent to act as agent for the Company for purposes of the administration of the Warrants in accordance with the instructions set forth in this
Agreement, and the Warrant Agent hereby accepts such appointment.

     SECTION 2. Warrant Certificates. The certificates including the global warrants certificates evidencing the Warrants (the
“Warrant Certificates”) to be delivered pursuant to this Agreement shall be in registered form only
and shall be substantially in the form set forth in Exhibit A attached hereto.

     SECTION 3. Execution of Warrant Certificates. Warrant Certificates shall be
signed on behalf of the Company by its Chairman of the Board or its President or Chief Executive
Officer or a Vice President and by its Secretary or an Assistant Secretary. Each such signature
upon the Warrant Certificates may be in the form of a facsimile signature of the present or any
future Chairman of the Board, President, Chief Executive Officer, Vice President, Secretary or
Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant Certificates and
for that purpose the Company may adopt and use the facsimile signature of any person who shall have
been Chairman of the Board, President, Chief Executive Officer, Vice President, Secretary or
Assistant Secretary, notwithstanding the fact that at the time the Warrant Certificates shall be
countersigned and delivered or disposed of he or she shall have ceased to hold such office.

     In case any officer of the Company who shall have signed any of the Warrant Certificates shall
cease to be such officer before the Warrant Certificates so signed shall have been countersigned by
the Warrant Agent, or disposed of by the Company, such Warrant Certificates nevertheless may be
countersigned and delivered or disposed of as though such person had not ceased to be such officer
of the Company; and any Warrant Certificate may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of
the Company to sign such Warrant Certificate, although at the date of the execution of this Warrant
Agreement any such person was not such officer.

     Warrant Certificates shall be dated the date of countersignature by the Warrant Agent.

     SECTION 4. Registration and Countersignature. Warrant Certificates shall be
countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned.
The Warrant Agent shall, upon the written instructions of the Chairman of the Board, the President
or Chief Executive Officer, a Vice President, the Treasurer or the Chief Financial Officer of the
Company, countersign, issue and deliver Warrants as provided in this Agreement.

     The Company and the Warrant Agent may deem and treat the registered holder(s) of the Warrant
Certificates as the absolute owner(s) thereof (notwithstanding any notation of ownership or other
writing thereon made by anyone), for all purposes, and neither the Company nor the Warrant Agent
shall be affected by any notice to the contrary.

2

 

     SECTION 5. Transfers and Exchanges. The Company will
provide the Warrant Agent with Warrant certificate issuance instructions after the close of the IPO. At such time,
the Warrant Agent will keep or cause to be kept, books for registration and transfer of the Warrant Certificate(s)
including any global warrant certificate issued hereunder. Such books shall show the name(s) and address(es) of any holder of the Warrants,
the number of China Hydroelectric Warrants on the fact of the Warrant and the date thereon. The Warrant Agent shall from time to time,
subject to the limitations of this Section 5, register the transfer of any outstanding Warrant
Certificates upon the records to be maintained by it for that purpose, upon surrender thereof duly
endorsed or accompanied (if so required by the Warrant Agent) by a written instrument or
instruments of transfer in form satisfactory to the Warrant Agent,
including a Medallion guarantee duly executed by the registered
holder or holders thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney. Upon any such registration of transfer, a new Warrant Certificate shall be
issued to the transferee(s) and the surrendered Warrant Certificate shall be cancelled by the
Warrant Agent. Cancelled Warrant Certificates shall thereafter be disposed of by the Warrant Agent
in its customary manner.

     Each Warrant shall initially be issued together with one ADS. The ADS and the accompanying
Warrant shall be separately transferable immediately upon the consummation of the
IPO.

     Subject to the terms of this Agreement, Warrant Certificates may be exchanged at the option of
the holder(s) thereof, when surrendered to the Warrant Agent at its principal corporate trust
office, which is currently located at the address listed in Section 17 hereof, for another Warrant
Certificate or other Warrant Certificates of like tenor and representing in the aggregate a like
number of Warrants. Any holder desiring to exchange a Warrant Certificate shall deliver a written
request to the Warrant Agent, and shall surrender, duly endorsed or accompanied (if so required by
the Warrant Agent) by a written instrument or instruments of transfer in form satisfactory to the
Warrant Agent, the Warrant Certificate or Certificates to be so exchanged. Warrant Certificates
surrendered for exchange shall be cancelled by the Warrant Agent. Such cancelled Warrant
Certificates shall then be disposed of by such Warrant Agent in its customary manner.

     The Warrant Agent is hereby authorized to countersign, in accordance with the provisions of
Section 4 hereof and of this Section 5, the new Warrant Certificates required pursuant to the
provisions of this Section 5.

     Warrant Agent shall follow its regular procedures to attempt to reconcile any discrepancies between the number of Warrants that
any exercise instructions may indicate and the number that the Warrant Agent indicates such holder owns. In any instance
where Warrant Agent cannot reconcile such discrepancies by following such procedures, Warrant Agent will consult with the Company for
instructions as to the number of certificated Warrants, if any, Warrant Agent is authorized to accept for exercise.
In the absence of such instructions, Warrant Agent is authorized not to accept any such certificated Warrants for exercise and will return to
the Warrant holder (at Warrant Agent's option by either first class mail under a blanket surety bond or insurance protecting Warrant
Agent and the Company from losses or liabilities arising out of the non-receipt or non-delivery of such Warrants or by registered mail
insured separately for the value of such Warrants) to such Warrant holder's address as set forth in the Warrants surrendered in connection with an exercise.

     SECTION 6. Terms of Warrants

     (a) Exercise Price and Exercise Period

     The initial exercise price at which Warrant Shares shall be purchasable upon the exercise of
Warrants (the “Exercise Price”) shall be $15 for every three Ordinary Shares, and each Warrant
shall be initially exercisable to purchase three Ordinary Shares. For avoidance of doubt, no
Warrant shall be exercisable for less than three Ordinary Shares.

     Subject to the terms of this Agreement (including without limitation Section 6(d) below), each
Warrant holder shall have the right, which may be exercised commencing at the opening of business
on the first day of the applicable Warrant Exercise Period set forth below and until 5:00 p.m., New
York City time, on the last day of such Warrant Exercise Period, to receive from the Company the
number of fully paid and nonassessable Warrant Shares which the holder may at the time be entitled
to receive upon the proper exercise of such Warrant in accordance with Section 6(c) of this
Agreement. No adjustments as to dividends will be made upon exercise of the Warrants.

     The “Warrant Exercise Period” shall commence (subject to Section 6(d) below) immediately upon
the consummation of the IPO and shall end on the earlier of (x) the fourth anniversary of the date
of the final prospectus relating to the IPO and (y) the Business Day preceding the date on which
such Warrants are redeemed pursuant to Section 6(b) below.

     “Business Day” shall mean any day on which the New York Stock Exchange is open for trading and
which is not a Saturday, a Sunday or any other day on which banks in the City of New York, New
York, are authorized or required by law to close.

     Each Warrant not exercised or redeemed prior to 5:00 p.m., New York City time, on the last day
of the Warrant Exercise Period shall become void and all rights thereunder and all rights in
respect thereof under this Agreement shall cease as of such time.

     (b) Redemption of Warrants

3

 

     The Company may call the Warrants for redemption, in whole and not in part, at a price of
$0.01 per Warrant, upon not less than 30 days’ prior written notice of redemption to each Warrant
holder, at any time after such Warrants have become exercisable pursuant to Section 6(a) above, if,
and only if, (A) the Closing Price has equaled or exceeded $23.00 per ADS for any 20 trading days
within a 30-trading-day period ending on the third Business Day prior to the notice of redemption
to Warrant holders and (B) at all times between the date of such notice of redemption and the
redemption date a registration statement filed pursuant to the Securities Act is in effect covering
the Warrant Shares issuable upon exercise of the Warrants and a current prospectus relating to
those Warrant Shares is available. The Company shall send to the Warrant holders and file with the Warrant
Agent a notice of such redemption. Such notice shall be mailed to the registered holders at their addresses as they appear in the warrant register.

     The “Closing Price” of the ADSs on any date of determination means: (A) the last
reported sale price for the regular trading session (without considering after hours or other
trading outside regular trading session hours) of the ADSs on the New York Stock Exchange on that
date, (B) if the ADSs are not listed for trading on the New York Stock Exchange on that date, the
last reported sale price reported in the composite transactions for the principal United States
securities exchange on which the ADSs are so listed, (C) if the ADSs are not so reported, the last
quoted bid price for the ADSs in the over-the-counter market as reported by the OTC Bulletin Board,
the National Quotation Bureau or similar organization, or (D) if the ADSs are not so quoted, the
average of the mid-point of the last bid and ask prices for the ADSs from at least three nationally
recognized investment banking firms that the Company selects for this purpose.

     (c) Exercise Procedure.

     A Warrant may be exercised upon surrender to the Company at the principal stock transfer
office of the Warrant Agent, which is currently located at the address listed in Section 17 hereof,
of the Warrant Certificate or Certificates to be exercised with the form of election to purchase on
the reverse thereof duly filled in and signed and such other documentation as the Warrant Agent may
reasonably request, and upon payment to the Warrant Agent for the account of the Company of the
Exercise Price (adjusted as herein provided if applicable) for the number of Warrant Shares in
respect of which such Warrants are then exercised. Payment of the aggregate Exercise Price shall be
made by certified check or wire transfer in lawful money of the United States of America. In no event will any Warrants be settled on a net cash
basis.

     Subject to the provisions of Section 7 hereof, upon such surrender of Warrants and payment of
the Exercise Price the Company shall issue and cause to be delivered with all reasonable dispatch
to and in such name or names as the Warrant holder may designate, a certificate or certificates for
the number of full Warrant Shares issuable upon the exercise of such Warrants. Such certificate or
certificates shall be deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of record of such Warrant Shares as of the date of the
surrender of such Warrants and payment of the Exercise Price.

     The Warrants shall be exercisable, at the election of the holders thereof, either in full or
from time to time in part and, in the event that a certificate evidencing Warrants is exercised in
respect of fewer than all of the Warrant Shares issuable on such exercise at any time prior to the
date of expiration of the Warrants, a new certificate evidencing the remaining Warrant or Warrants
will be issued, and the Warrant Agent is hereby irrevocably authorized to countersign and to
deliver the required new Warrant Certificate or Certificates pursuant to the provisions of Section
4 hereof and of this Section 6, and the Company, whenever required by the Warrant Agent, shall
supply the Warrant Agent with Warrant Certificates duly executed on behalf of the Company for such
purpose. The Warrant Agent may assume that any Warrant presented for exercise is permitted to be so
exercised under applicable law and shall have no liability for acting in reliance on such
assumption.

     All Warrant Certificates surrendered upon exercise of Warrants shall be canceled by the
Warrant Agent. Such canceled Warrant Certificates shall then be disposed of by the Warrant Agent in
its customary manner. The Warrant Agent shall account promptly to the Company with respect to
Warrants exercised and concurrently pay to the Company all cleared monies received by the Warrant
Agent for the purchase of the Warrant Shares through the exercise of such Warrants.

     The Warrant Agent shall keep copies of this Agreement and any notices given or received
hereunder available for inspection by the holders with reasonable prior written notice during
normal business hours at its office. The Company shall supply the Warrant Agent from time to time
with such numbers of copies of this Agreement as the Warrant Agent may request.

4

 

     (d) Registration Requirement. Notwithstanding anything else in this Section 6, no
Warrant may be exercised unless at the time of exercise (A) a registration statement covering the
Warrant Shares to be issued upon exercise of the Warrants is effective under the Securities Act and
(B) a prospectus thereunder relating to the Warrant Shares is current. The Company shall use its
best efforts to have a registration statement in effect covering Warrant Shares issuable upon
exercise of the Warrants from the date the Warrants become exercisable and to maintain a current
prospectus relating to those Warrant Shares until the Warrants expire or are redeemed. In no event
shall the Company be required to issue unregistered shares upon the exercise of any Warrant or
settle Warrants on a net cash basis.

     SECTION 7. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided,
however, that the Company shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issue of any Warrant Certificates or any certificates for
Warrant Shares in a name other than that of the registered holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or
deliver such Warrant Certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.

     SECTION 8. Mutilated or Missing Warrant Certificates. In case any of the Warrant
Certificates shall be mutilated, lost, stolen or destroyed, the Company shall issue and the Warrant
Agent shall countersign, in exchange and substitution for and upon cancellation of the mutilated
Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence satisfactory to the Company and the Warrant Agent of
such loss, theft or destruction of such Warrant Certificate and indemnity, also satisfactory to the
Company and the Warrant Agent. Applicants for such new Warrant Certificates must pay such
reasonable charges as the Company may prescribe.

     SECTION 9. Reservation of Warrant Shares. The Company will at all times reserve
and keep available, free from preemptive rights, out of the aggregate of its authorized but
unissued Ordinary Shares or its authorized and issued Ordinary Shares held in its treasury, for the
purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants,
the maximum number of Ordinary Shares which may then be deliverable upon the exercise of all
outstanding Warrants. The Warrant Agent shall have no duty to verify availability of such shares
set aside by the Company.

     The Company or, if appointed, the registrar for the Ordinary Shares (the “Registrar”) and every subsequent Registrar
for any Ordinary Shares issuable upon the exercise of
any of the Warrants will be irrevocably authorized and directed at all times to reserve such number
of authorized shares as shall be required for such purpose. The Company will keep a copy of this
Agreement on file with the Registrar and with every subsequent Registrar for any Ordinary
Shares issuable upon the exercise of the Warrants. The Warrant Agent is hereby irrevocably
authorized to instruct from time to time from the Registrar to issue the Ordinary Share certificates
required to honor outstanding Warrants upon exercise thereof in accordance with the terms of this
Agreement. The Company will supply such Registrar with duly executed certificates for such
purposes. The Company will furnish such Registrar a copy of all notices of adjustments and
certificates related thereto, transmitted to each holder pursuant to Section 13 hereof.

     Before taking any action which would cause an adjustment pursuant to Section 11 hereof to
reduce the Exercise Price below the then par value (if any) of the Warrant Shares, the Company will
take any commercially reasonable corporate action which may, in the opinion of its counsel (which
may be counsel employed by the Company), be necessary in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted.

     The Company covenants that all Ordinary Shares which may be issued upon exercise of Warrants
will, upon payment of the Exercise Price therefor and issue, be fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests with respect to
the issue thereof.

     SECTION 10. Obtaining Stock Exchange Listings. The Company will from time to
time take all commercially reasonable actions which may be necessary so that the Warrant Shares,
immediately upon their

5

 

issuance upon the exercise of Warrants, will be listed on the principal securities exchanges and
markets within the United States of America, if any, on which the ADSs are then listed. To the
extent that the ADSs are not listed on a national securities exchange or there is no exemption from
state “blue sky” securities laws for the issuance of the Warrant Shares, the Company will take all
commercially reasonable actions which may be necessary so that the Warrant Shares are registered in
all states in which the holders of the Warrants reside.

     SECTION 11. Adjustment of Number of Warrant Shares. The number of Warrant Shares
issuable upon the exercise of each Warrant is subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 11.

     (a) Stock Dividends — Split-Ups. If after the date hereof, and subject to the
provisions of Section 12 hereof, the number of outstanding Ordinary Shares is increased by a stock
dividend payable in Ordinary Shares, or by a split-up of Ordinary Shares, or other similar event,
then, on the effective date of such stock dividend, split-up or similar event, the number of
Ordinary Shares issuable on exercise of each Warrant shall be increased in proportion to such
increase in outstanding Ordinary Shares.

     (b) Aggregation of Shares. If after the date hereof, and subject to the
provisions of Section 12 hereof, the number of outstanding Ordinary Shares is decreased by a
consolidation, combination, reverse stock split or reclassification of Ordinary Shares or other
similar event, then, on the effective date of such consolidation, combination, reverse stock split,
reclassification or similar event, the number of Ordinary Shares issuable on exercise of each
Warrant shall be decreased in proportion to such decrease in outstanding Ordinary Shares.

     (c) Merger, Reorganization, etc. In case of any reclassification or
reorganization of the outstanding Ordinary Shares (other than a change covered by Section 11(a) or
11(b) hereof or that solely affects the par value of such Ordinary Shares), or in the case of any
merger or consolidation of the Company with or into another corporation (other than a consolidation
or merger in which the Company is the continuing corporation and that does not result in any
reclassification or reorganization of the outstanding Ordinary Shares), or in the case of any sale
or conveyance to another corporation or entity of the assets or other property of the Company as an
entirety or substantially as an entirety in connection with which the Company is dissolved, the
Warrant holders shall thereafter have the right to purchase and receive, upon the basis and upon
the terms and conditions specified in the Warrants and in lieu of the Ordinary Shares of the
Company immediately theretofore purchasable and receivable upon the exercise of the rights
represented thereby, the kind and amount of shares of stock or other securities or property
(including cash) receivable upon such reclassification, reorganization, merger or consolidation, or
upon a dissolution following any such sale or transfer, that the Warrant holder would have received
if such Warrant holder had exercised his, her or its Warrant(s) immediately prior to such event;
and if any reclassification also results in a change in Ordinary Shares covered by Section 11(a) or
11(b) hereof, then such adjustment shall be made pursuant to Sections 11(a), 11(b), and 11(d)
hereof and this Section 11(c). The provisions of this Section 11(c) shall similarly apply to
successive reclassifications, reorganizations, mergers or consolidations, sales or other transfers.

     (d) Extraordinary Dividends. If the Company distributes to all holders of its
Ordinary Shares any of its assets (including cash) or debt securities or any rights, options or
warrants to purchase debt securities, assets or other securities of the Company (other than
Ordinary Shares), the number of Ordinary Shares issuable upon exercise of each Warrant shall be
adjusted in accordance with the formula:

	 	 	 	 	 
	N’ = N x

	 	M
	 	 
	 

	 	 	 	 
	 

	 	M - F	 	 

     where:

N’ = the adjusted number of Ordinary Shares issuable upon exercise of each
Warrant.

N = the current number of Ordinary Shares issuable upon exercise of each Warrant.

M = one third of the Closing Price per ADS on the Business Day immediately
preceding the ex-dividend date for such distribution.

F = the fair market value on the ex-dividend date for such distribution of the
assets, securities, options, rights or warrants distributable to one Ordinary Share after
taking into account, in the case of any rights,

6

 

options or warrants, the consideration required to be paid upon exercise thereof. The Board
of Directors (the “Board”) shall reasonably determine the fair market value in good faith.

     The adjustment shall be made successively whenever any such distribution is made and shall
become effective immediately after the record date for the determination of stockholders entitled
to receive such distribution.

     This subsection (d) does not apply to any dividends or distributions made in connection with,
or as part of, (i) regular quarterly or other periodic dividends; or (ii) any of the actions
contemplated by Sections 11(a), 11(b) or 11(e). If any adjustment is made pursuant to this
subsection (d) as a result of the issuance of rights, options or warrants and at the end of the
period during which any such rights, options or warrants are exercisable, not all such rights,
options or warrants shall have been exercised, the Warrant shall be immediately readjusted as if
“F” in the above formula was the fair market value on the ex-dividend date for such distribution of
the indebtedness or assets actually distributed upon exercise of such rights, options or warrants
divided by the number of Ordinary Shares outstanding on the ex-dividend date for such distribution.
Notwithstanding anything to the contrary contained in this subsection (d), if “M-F” in the above
formula is less than $1.00, the Company may elect to, or if “M-F” is a negative number, the Company
shall, in lieu of the adjustment otherwise required by this subsection (d), distribute to the
holders of the Warrants, upon exercise thereof, the evidences of indebtedness, assets, rights,
options or warrants (or the proceeds thereof) which would have been distributed to such holders had
such Warrants been exercised immediately prior to the record date for such distribution.

     (e) Adjustments To Exercise Price. Whenever the number of Ordinary Shares
purchasable upon the exercise of the Warrants is adjusted, as provided in Sections 11(a) and 11(b)
hereof, the Exercise Price shall be adjusted (to the nearest cent) by multiplying such Exercise
Price immediately prior to such adjustment by a fraction (A) the numerator of which shall be the
number of Ordinary Shares purchasable upon the exercise of the Warrants immediately prior to such
adjustment, and (B) the denominator of which shall be the number of Ordinary Shares so purchasable
immediately thereafter.

     (f) Form of Warrant. The form of Warrant need not be changed because of any
adjustment pursuant to this Section 11, and Warrants issued after such adjustment may state the
same Exercise Price and the same number of shares as is stated in the Warrants initially issued
pursuant to this Agreement. However, the Company may at any time in its sole discretion make any
change in the form of Warrant that the Company may deem appropriate and that does not affect the
substance thereof, and any Warrant thereafter issued or countersigned, whether in exchange or
substitution for an outstanding Warrant or otherwise, may be in the form as so changed.

     (g) Notices of Changes in Warrant. Upon every adjustment of the Exercise Price
or the number of shares issuable upon exercise of a Warrant, the Company shall give written notice
thereof to the Warrant Agent, which notice shall state the Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares purchasable at such price
upon the exercise of a Warrant, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Upon the occurrence of any event specified in
Sections 11(a), 11(b), 11(c) or 11(e), then, in any such event, the Company shall give written
notice to each Warrant holder, at the last address set forth for such holder in the warrant
register, of the record date or the effective date of the event. Failure to give such notice, or
any defect therein, shall not affect the legality or validity of such event.

     (h) Notice of Certain Transactions. In the event that the Company shall propose
to (a) offer the holders of its Ordinary Shares rights to subscribe for or to purchase any
securities convertible into Ordinary Shares or shares of capital stock of any class or any other
securities, rights or options, (b) issue any rights, options or warrants to the holders of Ordinary
Shares entitling them to subscribe for Ordinary Shares or (c) make a tender offer or exchange offer
with respect to the Ordinary Shares, the Company shall send to the Warrant holders and file with
the Warrant Agent a notice of such proposed action or offer. Such notice shall be mailed to the
registered holders at their addresses as they appear in the warrant register, and, shall specify
the record date for, or the date such offer or issuance is to take place and the date of
participation therein by the holders of Ordinary Shares, if any such date is to be. Such notice
shall be given as promptly as practicable after the Board has determined to take any such action
and (x) in the case of any action covered by clause (a) or (b) above at least 10 days prior to the
record date for determining the holders of the Ordinary Shares for purposes of such action or (y)
in the case of any other such action at least 20 days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of Ordinary Shares, whichever
shall be the earlier.

7

 

     (i) Other Events. If any event occurs as to which the foregoing provisions of
this Section 11 are not strictly applicable or, if strictly applicable, would not, in the good
faith judgment of the Board, fairly and adequately protect the purchase rights of the registered
holders of the Warrants in accordance with the essential intent and principles of such provisions,
then the Board shall make such adjustments in the application of such provisions, in accordance
with such essential intent and principles, as shall be reasonably necessary, in the good faith
opinion of the Board, to protect such purchase rights as aforesaid.

     SECTION 12. Fractional Interests. Notwithstanding any provision contained in
this Agreement to the contrary, the Company shall not issue fractional shares upon exercise of
Warrants. If, by reason of any adjustment made pursuant to this Section 12, the holder of any
Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a
share, the Company shall, upon such exercise, round up to the nearest whole number of the Ordinary
Shares to be issued to the Warrant holder.

     SECTION 13. Notice to Warrant Holders. Upon any adjustment of the Exercise Price
pursuant to Section 11, the Company shall promptly thereafter, and in any event within five days,
(i) cause to be filed with the Warrant Agent a certificate executed by the Chief Financial Officer
or principal financial officer of the Company setting forth the number of Warrant Shares issuable
upon exercise of each Warrant after such adjustment and setting forth in reasonable detail the
method of calculation and the facts upon which such calculations are based, and (ii) cause to be
given to each of the registered holders of the Warrant Certificates at his address appearing on the
Warrant register written notice of such adjustments by first-class mail, postage prepaid. Where
appropriate, such notice may be given in advance and included as a part of the notice required to
be mailed under the other provisions of this Section 13. The Warrant Agent shall be fully protected
in relying on any such certificate and on any adjustment therein contained and shall not be deemed
to have knowledge of such adjustment unless and until it shall have received such certificate. In
case:

     (a) the Company shall authorize the issuance to all holders of Ordinary Shares of rights,
options or warrants to subscribe for or purchase Ordinary Shares or of any other subscription
rights or warrants; or

     (b) the Company shall authorize the distribution to all holders of Ordinary Shares of
evidences of its indebtedness or assets (other than regular cash dividends or dividends payable in
Ordinary Shares or distributions referred to in subsection (b) of Section 11 hereof); or

     (c) of any consolidation or merger to which the Company is a party and for which approval of
any shareholders of the Company is required, or of the conveyance or transfer of the properties and
assets of the Company substantially as an entirety, or of any reclassification or change of
Ordinary Shares issuable upon exercise of the Warrants (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for Ordinary Shares; or

     (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company;
or

     (e) the Company proposes to take any action not specified above which would require an
adjustment of the Exercise Price pursuant to Section 11 hereof;

     then the Company shall cause to be filed with the Warrant Agent and shall cause to be given to
each of the registered holders of the Warrant Certificates at his address appearing on the Warrant
register, at least 10 calendar days prior to the applicable record date hereinafter specified, or
as promptly as practicable under the circumstances in the case of events for which there is no
record date, by first-class mail, postage prepaid, a written notice stating (i) the date as of
which the holders of record of Ordinary Shares to be entitled to receive any such rights, options,
warrants or distribution are to be determined, or (ii) the initial expiration date set forth in any
tender offer or exchange offer for Ordinary Shares, or (iii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to
become effective or consummated, and the date as of which it is expected that holders of record of
Ordinary Shares shall be entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up. The failure to give the notice required by this Section 13 or any defect
therein shall not affect the legality or validity of any distribution, right, option, warrant,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote
upon any action.

8

 

     Nothing contained in this Agreement or in any of the Warrant Certificates shall be construed
as conferring upon the holders thereof the right to vote or to consent or to receive notice as
shareholders in respect of the meetings of shareholders or the election of directors of the Company
or any other matter, or any rights whatsoever as shareholders of the Company.

     SECTION 14. Merger, Consolidation or Change of Name of Warrant Agent. Any
corporation into which the Warrant Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party,
or any corporation succeeding to all or substantially all the corporate trust or agency business of
the Warrant Agent, shall be the successor to the Warrant Agent hereunder without the execution or
filing of any paper or any further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor warrant agent under the provisions of
Section 16 hereof. In case at the time such successor to the Warrant Agent shall succeed to the
agency created by this Agreement, and in case at that time any of the Warrant Certificates shall
have been countersigned but not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent; and in case at that time any of the Warrant
Certificates shall not have been countersigned, any successor to the Warrant Agent may countersign
such Warrant Certificates either in the name of the predecessor Warrant Agent or in the name of the
successor to the Warrant Agent; and in all such cases such Warrant Certificates shall have the full
force and effect provided in the Warrant Certificates and in this Agreement.

     In case at any time the name of the Warrant Agent shall be changed and at such time any of the
Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent whose name
has been changed may adopt the countersignature under its prior name, and in case at that time any
of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign
such Warrant Certificates either in its prior name or in its changed name, and in all such cases
such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates
and in this Agreement.

     SECTION 15. Warrant Agent. The Warrant Agent undertakes the duties and
obligations imposed by this Agreement (and no implied duties or obligations shall be read into this
Agreement against the Warrant Agent) upon the following terms and conditions, by all of which the
Company and the holders of Warrants, by their acceptance thereof, shall be bound:

     (a) The statements contained herein and in the Warrant Certificates shall be taken as
statements of the Company and the Warrant Agent assumes no responsibility for the correctness of
any of the same except to the extent that any such statements describe the Warrant Agent or action
taken or to be taken by it. The Warrant Agent assumes no responsibility with respect to the
distribution of the Warrant Certificates except as otherwise provided herein.

     (b) The Warrant Agent shall not be responsible for any failure of the Company to comply with
any of the covenants contained in this Agreement or in the Warrant Certificates to be complied with
by the Company.

     (c) The Warrant Agent may consult at any time with counsel of its own selection (who may be
counsel for the Company) and the Warrant Agent shall incur no liability or responsibility to the
Company or to any holder of any Warrant Certificate in respect of any action taken, suffered or
omitted by it hereunder in good faith and in accordance with the opinion or the advice of such
counsel. The Warrant Agent may execute any of the trusts or powers hereunder or perform any duties
hereunder either directly or through agents or attorneys and the Warrant Agent shall not be
responsible for any misconduct or negligence on the part of any agent or attorney appointed with
due care by it hereunder.

     (d) The Warrant Agent may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions furnished to the
Warrant Agent and conforming to the requirements of this Agreement. The Warrant Agent shall incur
no liability or responsibility to the Company or to any holder of any Warrant Certificate for any
action taken in reliance on any Warrant Certificate, certificate of shares, notice, resolution,
waiver, consent, order, certificate, or other paper, document or instrument (whether in its
original or facsimile form) believed by it to be genuine and to have been signed, sent or presented
by the proper party or parties.

9

 

     (e) The Company hereby agrees to (A) pay to the Warrant Agent such compensation for all
services rendered by the Warrant Agent in the administration and execution of this Agreement as the
Company and the Warrant Agent shall agree to in writing, (B) reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement (including fees and expenses of its counsel) and
(C) indemnify the Warrant Agent (and any predecessor Warrant Agent) and hold it harmless against
any and all claims (whether asserted by the Company, a holder or any other person), damages,
losses, expenses (including taxes other than taxes based on the income of the Warrant Agent) and
liabilities (including judgments, costs and counsel fees and expenses), suffered or incurred by the
Warrant Agent for anything done or omitted by the Warrant Agent in the execution of this Agreement
except as a result of its gross negligence or willful misconduct. The provisions of this Section
15(e) shall survive the expiration of the Warrants and the termination of this Agreement.

     (f) The Warrant Agent shall be under no obligation to institute any action, suit or legal
proceeding or to take any other action likely to involve expense unless the Company or one or more
registered holders of Warrant Certificates shall furnish the Warrant Agent with security and
indemnity satisfactory to it for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as it may consider proper,
whether with or without any such security or indemnity. All rights of action under this Agreement
or under any of the Warrants may be enforced by the Warrant Agent without the possession of any of
the Warrant Certificates or the production thereof at any trial or other proceeding relative
thereto, and any such action, suit or proceeding instituted by the Warrant Agent shall be brought
in its name as Warrant Agent and any recovery of judgment shall be for the ratable benefit of the
registered holders of the Warrants, as their respective rights or interests may appear.

     (g) The Warrant Agent, and any stockholder, director, officer or employee of it, may buy,
sell or deal in any of the Warrants or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under
this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity
for the Company or for any other legal entity.

     (h) The Warrant Agent shall act hereunder solely as agent for the Company, and its duties
shall be determined solely by the provisions hereof. The Warrant Agent shall not be liable for
anything which it may do or refrain from doing in connection with this Agreement except for its own
gross negligence or willful misconduct. The Warrant Agent shall not be liable for any error of
judgment made in good faith by it, unless it shall be proved that the Warrant Agent was negligent
in ascertaining the pertinent facts. Notwithstanding anything in this Agreement to the contrary, in
no event shall the Warrant Agent be liable for any special, indirect, punitive or consequential
loss or damage of any kind whatsoever (including but not limited to lost profits), even if the
Warrant Agent has been advised of the likelihood of the loss or damage and regardless of the form
of the action.

     (i) The Warrant Agent shall not at any time be under any duty or responsibility to any
holder of any Warrant Certificate to make or cause to be made any adjustment of the Exercise Price
or number of the Warrant Shares or other securities or property deliverable as provided in this
Agreement, or to determine whether any facts exist which may require any such adjustments, or with
respect to the nature or extent of any such adjustments, when made, or with respect to the method
employed in making the same. The Warrant Agent shall not be accountable with respect to the
validity or value or the kind or amount of any Warrant Shares or of any securities or property
which may at any time be issued or delivered upon the exercise of any Warrant or with respect to
whether any such Warrant Shares or other securities will when issued be validly issued and fully
paid and nonassessable, and makes no representation with respect thereto.

     (j) Notwithstanding anything in this Agreement to the contrary, neither the Company nor the
Warrant Agent shall have any liability to any holder of a Warrant Certificate or other Person as a
result of its inability to perform any of its obligations under this Agreement by reason of any
preliminary or permanent injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or enacted by any governmental authority
prohibiting or otherwise restraining performance of such obligation; provided, however that (A) the
Company must use its reasonable best efforts to have any such order, decree or ruling lifted or
otherwise overturned as soon as possible and (B) nothing in this Section 15(j) shall affect the
Company’s obligation under

10

 

Section 6(d) hereof to use its best efforts to have a registration statement in effect covering the
Warrant Shares issuable upon exercise of the Warrants and to maintain a current prospectus relating
to those Warrant Shares.

     (k) Any application by the Warrant Agent for written instructions from the Company may, at
the option of the Warrant Agent, set forth in writing any action proposed to be taken or omitted by the Warrant Agent under
this Agreement and the date on and/or after which such action shall be taken or such omission shall
be effective. The Warrant Agent shall not be liable for any action taken by, or omission of, the
Warrant Agent in accordance with a proposal included in such application on or after the date
specified in such application (which date shall not be less than three Business Days after the date
any officer of the Company actually receives such application, unless any such officer shall have
consented in writing to any earlier date) unless prior to taking any such action (or the effective
date in the case of an omission), the Warrant Agent shall have received written instructions in
response to such application specifying the action to be taken or omitted.

     (l) No provision of this Agreement shall require the Warrant Agent to expend or risk its
own funds or otherwise incur any financial liability in the performance of any of its duties
hereunder or in the exercise of its rights.

     (m) In addition to the foregoing, the Warrant Agent shall be protected and shall incur no
liability for, or in respect of, any action taken or omitted by it in connection with its
administration of this Agreement if such acts or omissions are not the result of the Warrant
Agent’s reckless disregard of its duty, gross negligence or willful misconduct and are in reliance
upon (A) the proper execution of the certification concerning beneficial ownership appended to the
form of assignment and the form of the election attached hereto unless the Warrant Agent shall have
actual knowledge that, as executed, such certification is untrue, or (B) the non-execution of such
certification including, without limitation, any refusal to honor any otherwise permissible
assignment or election by reason of such non-execution.

     SECTION 16. Change of Warrant Agent. The Warrant Agent may at any time resign as
Warrant Agent upon written notice to the Company. If the Warrant Agent shall become incapable of
acting as Warrant Agent hereunder, the Company shall appoint a successor to such Warrant Agent. If
the Company shall fail to make such appointment within a period of 30 days after it has been
notified in writing of such resignation or of such incapacity by the Warrant Agent or by the
registered holder of a Warrant Certificate, then the registered holder of any Warrant Certificate
or the Warrant Agent may apply, at the expense of the Company, to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Pending appointment of a
successor to such Warrant Agent, either by the Company or by such a court, the duties of the
Warrant Agent shall be carried out by the Company. The holders of a majority of the unexercised
Warrants shall be entitled at any time to remove the Warrant Agent and appoint a successor to such
Warrant Agent. If a successor to the Warrant Agent shall not have been appointed within 30 days of
such removal, the Warrant Agent may apply, at the expense of the Company, to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Such successor to the Warrant
Agent need not be approved by the Company or the former Warrant Agent. After appointment, the
successor to the Warrant Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without further act or deed;
but the former Warrant Agent upon payment of all fees and expenses due it and its agents and
counsel shall deliver and transfer to the successor to the Warrant Agent any property at the time
held by it hereunder and execute and deliver any further assurance, conveyance, act or deed
necessary for the purpose. Failure to give any notice provided for in this Section 16, however, or
any defect therein, shall not affect the legality or validity of the appointment of a successor to
the Warrant Agent.

     SECTION 17. Notices to Company and Warrant Agent. Any notice or demand
authorized by this Agreement to be given or made by the Warrant Agent or by the registered holder
of any Warrant Certificate to or on the Company shall be sufficiently given or made when and if
deposited in the mail, first class or registered, postage prepaid, addressed (until another address
is filed in writing by the Company with the Warrant Agent), as follows:

China Hydroelectric Corporation

420 Lexington, Suite 860

New York, NY 10170

Attention: Chief Executive Officer and President

11

 

     In case the Company shall fail to maintain such office or agency or shall fail to give such
notice of the location or of any change in the location thereof, presentations may be made and
notices and demands may be served at the principal corporate trust office of the Warrant Agent.

     Any notice pursuant to this Agreement to be given by the Company or by the registered
holder(s) of any Warrant Certificate to the Warrant Agent shall be sufficiently given when and if
deposited in the mail, first-class or registered, postage prepaid, addressed (until another address
is filed in writing by the Warrant Agent with the Company) to the Warrant Agent as follows:

[                    ]

     SECTION 18. Supplements and Amendments. The Company and the Warrant Agent may
from time to time supplement or amend this Agreement without the approval of any holders of Warrant
Certificates in order to cure any ambiguity or to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provision herein, or to make any other
provisions in regard to matters or questions arising hereunder which the Company and the Warrant
Agent may deem necessary or desirable and which shall not in any way adversely affect the interests
of the holders of Warrant Certificates theretofore issued. Upon the delivery of a certificate from
an appropriate officer of the Company which states that the proposed supplement or amendment is in
compliance with the terms of this Section 18, the Warrant Agent shall execute such supplement or
amendment. Notwithstanding anything in this Agreement to the contrary, the prior written consent of
the Warrant Agent must be obtained in connection with any supplement or amendment which alters the
rights or duties of the Warrant Agent. The Company and the Warrant Agent may amend any provision
herein with the consent of the holders of Warrants exercisable for a majority of the Warrant Shares
issuable on exercise of all outstanding Warrants that would be affected by such amendment.

     SECTION 19. Successors. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.

     SECTION 20. Termination. This Agreement will terminate on any earlier date if
all Warrants have been exercised or expired without exercise. The provisions of Section 15 hereof
shall survive such termination.

     SECTION 21. Governing Law. This Agreement and each Warrant Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of New York and for all
purposes shall be construed in accordance with the internal laws of the State of New York. The
parties agree that all actions and proceedings arising out of this Agreement or any of the
transactions contemplated hereby shall be brought in the United States District Court for the
Southern District of New York or in a New York State Court in the County of New York and that, in
connection with any such action or proceeding, the parties will submit to the jurisdiction of, and
venue in, such court. Each of the parties hereto also irrevocably waives all right to trial by jury
in any action, proceeding or counterclaim arising out of this Agreement or the transactions
contemplated hereby.

     SECTION 22. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the Warrant Agent and the
registered holders of the Warrant Certificates any legal or equitable right, remedy or claim under
this Agreement, and this Agreement shall be for the sole and exclusive benefit of the Company, the
Warrant Agent and the registered holders of the Warrant Certificates.

     SECTION 23. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to be an original, and
all such counterparts shall together constitute but one and the same instrument.

     SECTION 24. Force Majeure. In no event shall the Warrant Agent be responsible or
liable for any failure or delay in the performance of its obligations under this Agreement arising
out of or caused by, directly or indirectly, forces beyond its reasonable control, including
without limitation strikes, work stoppages, accidents, acts of war or terrorism, civil or military
disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or
malfunctions of utilities, communications or computer (software or hardware) services.

[SIGNATURE PAGE FOLLOWS]

12

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of
the date first above written.

	 	 	 	 	 
	 	CHINA HYDROELECTRIC CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	as Warrant Agent

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

13

 

EXHIBIT A

[Form of Warrant Certificate]

[FACE]

	 	 	 	 	 
	Number

	 	 
	 	Warrants
	 
	 	 	 	 
	 

	 	 	 	 

THIS WARRANT WILL BE VOID IF NOT EXERCISED PRIOR TO

5:00 P.M. NEW YORK CITY TIME,                     , 2014

CHINA HYDROELECTRIC CORPORATION

a Cayman Islands company

CUSIP:                     

Warrant Certificate

     This Warrant Certificate certifies that is the registered holder of                     
warrants (the “Warrants”) to purchase ordinary shares, par value $0.001 per share (the “Ordinary
Shares”), of China Hydroelectric Corporation, a Cayman Islands company (the “Company”). Each
Warrant entitles the holder, upon exercise during the period set forth in the Warrant Agreement
referred to below, to receive from the Company that number of fully paid and nonassessable Ordinary
Shares (each, a “Warrant Share”) as set forth below, at the exercise price (the “Exercise Price”)
as determined pursuant to the Warrant Agreement, payable as provided in the Warrant Agreement upon
surrender of this Warrant Certificate and payment of the Exercise Price at the office or agency of
the Warrant Agent referred to below, subject to the conditions set forth herein and in the Warrant
Agreement. Defined terms used in this Warrant Certificate but not defined herein shall have the
meanings given to them in the Warrant Agreement.

     Each Warrant is initially exercisable for three fully paid and non-assessable Ordinary Shares.
The number of Warrant Shares issuable upon exercise of the Warrants are subject to adjustment upon
the occurrence of certain events set forth in the Warrant Agreement.

     The initial Exercise Price for any Warrant is equal to $15.00 for every three Ordinary Shares.
The Exercise Price is subject to adjustment upon the occurrence of certain events set forth in the
Warrant Agreement.

     Warrants may be exercised only during the Warrant Exercise Period subject to the conditions
set forth in the Warrant Agreement and to the extent not exercised by the end of such Warrant
Exercise Period such Warrants shall become void.

     Reference is hereby made to the further provisions of this Warrant Certificate set forth on
the reverse hereof and such further provisions shall for all purposes have the same effect as
though fully set forth at this place.

     This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such
term is used in the Warrant Agreement.

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

	 	 	 	 	 
	 	CHINA HYDROELECTRIC CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	John Kuhns 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	Mary Fellows 	 
	 	 	Title:  	Secretary 	 
	 

	 	 	 	 	 	 	 
	Countersigned:	 	 	 	 
	Dated:
	 	 	 	 	 	 
	 

	 	 
	 	 
	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	as Warrant Agent	 	 	 	 
	 
	 	 	 	 	 	 
	By
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Authorized Signatory	 	 	 	 

14

 

[Form of Warrant Certificate]

[Reverse]

     The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of
Warrants entitling the holder on exercise to receive Ordinary Shares and are issued or to be issued
pursuant to a Warrant Agreement dated as of [          ], 2010 (the “Warrant
Agreement”), duly executed and delivered by the Company to [The Bank of New York Mellon] (the
“Warrant Agent”), which Warrant Agreement is hereby incorporated by reference in and made a part of
this instrument and is hereby referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Warrant Agent, the Company and the holders
(the words “holders” or “holder” meaning the registered holders or registered holder) of the
Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request
to the Company. Defined terms used in this Warrant Certificate but not defined herein shall have
the meanings given to them in the Warrant Agreement.

     Warrants may be exercised at any time during the Warrant Exercise Period set forth in the
Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate may exercise them
by surrendering this Warrant Certificate, with the form of Election to Purchase set forth hereon
properly completed and executed, together with payment of the Exercise Price as specified in the
Warrant Agreement at the principal corporate trust office of the Warrant Agent. In the event that
upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than
the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his
assignee a new Warrant Certificate evidencing the number of Warrants not exercised. No adjustment
shall be made for any dividends on any Ordinary Shares issuable upon exercise of this Warrant.

     Notwithstanding anything else in this Warrant Certificate or the Warrant Agreement, no Warrant
may be exercised unless at the time of exercise (i) a registration statement covering the Warrant
Shares to be issued upon exercise of the Warrants is effective under the Act and (ii) a prospectus
thereunder relating to the Warrant Shares is current. In no event shall the Company be required to
issue unregistered shares upon the exercise of any Warrant or settle warrants on a net cash basis.

     The Company may call the Warrants for redemption, in whole and not in part, at a price of
$0.01 per Warrant, upon not less than 30 days’ prior written notice of redemption to each Warrant
holder, at any time after such Warrants have become exercisable, if, and only if, (A) the Closing
Price has equaled or exceeded $23.00 per ADS for any 20 trading days within a 30-trading-day period
ending on the third Business Day prior to the notice of redemption to Warrant holders and (B) at
all times between the date of such notice of redemption and the redemption date a registration
statement filed pursuant to the Securities Act is in effect covering the Warrant Shares issuable
upon exercise of the Warrants and a current prospectus relating to those Warrant Shares is
available.

     The Warrant Agreement provides that upon the occurrence of certain events the number of
Warrant Shares set forth on the face hereof may, subject to certain conditions, be adjusted. If,
upon exercise of a Warrant, the holder thereof would be entitled to receive a fractional interest
in an Ordinary Share, the Company will, upon exercise, round up to the nearest whole number of
Ordinary Shares to be issued to the Warrant holder.

     Warrant Certificates, when surrendered at the principal corporate trust office of the Warrant
Agent by the registered holder thereof in person or by legal representative or attorney duly
authorized in writing, may be exchanged, in the manner and subject to the terms of
the Warrant Agreement, for another Warrant Certificate
or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants.

     Upon due presentation for registration of transfer of this Warrant Certificate at the office
of the Warrant Agent a new Warrant Certificate or Warrant Certificates of like tenor and evidencing
in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for
this Warrant Certificate, subject to the terms of the Warrant Agreement.

     The Company and the Warrant Agent may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other
writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other

15

 

purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the
contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any
rights of a security holder of the Company.

Election to Purchase

(To Be Executed Upon Exercise Of Warrant)

     The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant
Certificate, to receive                      Ordinary Shares and herewith
tenders payment for such shares to the order of China Hydroelectric Corporation in the amount of
$                     in accordance with the terms hereof. The undersigned
requests that a certificate for such shares be registered in the name of                     , whose address is  and that such
shares be delivered to                      whose address is                     . If said number of shares is less than
all of the Ordinary Shares purchasable hereunder, the undersigned requests that a new Warrant
Certificate representing the remaining balance of such shares be registered in the name of                     , whose address is                     ,
and that such Warrant Certificate be delivered to                     , whose address is                     .

	 	 	 	 	 	 	 
	Date:

	 	 
	 	 
	 	 
	 

	 	 
	 	 
	 	 
	 

	 	 	 	 	 	(Signature)
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	(Address)
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	(Tax Identification Number)

Signature Guaranteed:

 

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).

16

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