Document:

Unassociated Document

    NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A, IF APPLICABLE, UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

    

    A-POWER
ENERGY GENERATION SYSTEMS, LTD.

    

    Warrant
To Purchase Common Shares

    

    Warrant
No.: ________

    Number of
Common Shares: _______

    Date of
Issuance: June 19, 2009 ("Issuance Date")

    

    A-Power
Energy Generation Systems, Ltd., a company organized under the laws of British
Virgin Islands (the "Company"), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, ___________, the registered holder hereof or its
permitted assigns (the "Holder"), is entitled, subject
to the terms set forth below, to purchase from the Company, at the Exercise
Price (as defined below) then in effect, upon surrender of this Warrant to
Purchase Common Shares (including any Warrants to Purchase Common Shares issued
in exchange, transfer or replacement hereof, the "Warrant"), at any time or
times on or after the Shareholder Approval Date (as defined in the Securities
Purchase Agreement) (the "Initial Exercisability Date"),
but not after 11:59 p.m., New York time, on the Expiration Date (as defined
below), _________ fully paid nonassessable Common Shares par value $0.0001 per
share (the "Warrant
Shares").  Except as otherwise defined herein, capitalized
terms in this Warrant shall have the meanings set forth in Section
18.  This Warrant is one of the Warrants to purchase Common Shares
(the "SPA Warrants")
issued pursuant to Section 1 of that certain Securities Purchase Agreement,
dated as of June 18, 2009 (the "Subscription Date"), by and
among the Company and the investors (the "Buyers") referred to therein
(the "Securities Purchase
Agreement").

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.   EXERCISE OF WARRANT.

     

    
      (a)  Mechanics of
Exercise.  Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in Section 1(f)), this
Warrant may be exercised by the Holder on any time or times on or after the
Initial Exercisability Date, in whole or in part, by (i) delivery of a written
notice, in the form attached hereto as Exhibit A (the "Exercise Notice"), of the Holder's election to
exercise this Warrant and (ii) (A) payment to the Company of an amount equal to
the applicable Exercise Price multiplied by the number of Warrant Shares as to
which this Warrant is being exercised (the "Aggregate Exercise Price") in cash or by wire
transfer of immediately available funds or (B) by notifying the Company that
this Warrant is being exercised pursuant to a Cashless Exercise (as defined in
Section 1(d)).  The Holder shall not be required to deliver the
original Warrant in order to effect an exercise hereunder unless (A) this
Warrant is being exercised in full to purchase (or acquire by Cashless Exercise)
the total number of Warrant Shares issuable upon exercise of this Warrant or (B)
the Holder has provided the Company with prior written notice (which notice may
be included in an Exercise Notice) requesting the reissuance of this Warrant
upon physical surrender of this Warrant.  Execution and delivery of
the Exercise Notice with respect to less than all of the Warrant Shares shall
have the same effect as cancellation of the original Warrant and issuance of a
new Warrant evidencing the right to purchase the remaining number of Warrant
Shares.  On or before the first (1st) Trading Day following the date
on which the Company has received each of the Exercise Notice and the Aggregate
Exercise Price (or notice of a Cashless Exercise) (the "Exercise Delivery Documents"), the Company
shall transmit by facsimile an acknowledgment of confirmation of receipt of the
Exercise Delivery Documents to the Holder and the Company's transfer agent (the
"Transfer Agent").  On or
before the third (3rd) Trading Day following the date on which the Company has
received all of the Exercise Delivery Documents (the "Share Delivery Date"), the Company shall (X)
provided that the Transfer Agent is participating in The Depository Trust
Company ("DTC") Fast Automated Securities
Transfer Program, and such Common Shares do not require the placement of any
legends restricting transfer of such Common Shares, upon the request of the
Holder, credit such aggregate number of Warrant Shares to which the Holder is
entitled pursuant to such exercise to the Holder's or its designee's balance
account with DTC through its Deposit Withdrawal Agent Commission system, or (Y)
if (I) the Transfer Agent is not participating in the DTC Fast Automated
Securities Transfer Program or (II) such Common Shares require the placement of
legends restricting transfer of such Common Shares as required by Section 2(g)
of the Securities Purchase Agreement, issue and dispatch by overnight courier to
the address as specified in the Exercise Notice, a certificate, registered in
the Company's share register in the name of the Holder or its designee, for the
aggregate number of Common Shares to which the Holder is entitled pursuant to
such exercise, which certificate shall, in the case of clause (II), bear a
legend in accordance with Section 2(g) of the Securities Purchase
Agreement.  Upon delivery of the Exercise Delivery Documents, the
Holder shall be deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has been
exercised, irrespective of the date such Warrant Shares are credited to the
Holder's DTC account or the date of delivery of the certificates evidencing such
Warrant Shares, as the case may be.  If this Warrant is submitted in
connection with any exercise pursuant to this Section 1(a) and the number of
Warrant Shares represented by this Warrant submitted for exercise is greater
than the number of Warrant Shares being acquired upon an exercise, then the
Company shall as soon as practicable and in no event later than three (3)
Trading Days after any exercise and at its own expense, issue a new Warrant (in
accordance with Section 8(d)) representing the right to purchase the number of
Warrant Shares issuable immediately prior to such exercise under this Warrant,
less the number of Warrant Shares with respect to which this Warrant is
exercised.  No fractional Common Shares are to be issued upon the
exercise of this Warrant, but rather the number of Common Shares to be issued
shall be rounded up to the nearest whole number.  The Company shall
pay any and all transfer, stamp and similar taxes (other than income and similar
taxes) that are required to be paid with respect to the issuance and delivery of
Warrant Shares upon exercise of this Warrant.

    

     

    
      
         

      

      
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    (b)  Exercise
Price.  For purposes of this Warrant, "Exercise Price"
means  $10.637, subject to adjustment as provided herein.

     

    (c)  Company's Failure to Timely
Deliver Securities.  If the Company shall fail to issue a
certificate to the Holder or to credit the Holder's balance account with DTC, as
applicable, for such number of Common Shares to which the Holder is entitled
upon the Holder's exercise of this Warrant within three (3) Trading Days of
receipt of the Exercise Delivery Documents (an "Exercise Failure"), and if on or after
such Exercise Failure the Holder purchases (in an open market transaction or
otherwise) Common Shares to deliver in satisfaction of a sale by the Holder of
Common Shares issuable upon such exercise that the Holder anticipated receiving
from the Company (a "Buy-In"), then the Company
shall, within three (3) Trading Days after the Holder's request and in the
Holder's discretion, either (i) pay cash to the Holder in an amount equal to the
Holder's total purchase price (including brokerage commissions and other
reasonable out-of-pocket brokerage expenses, if any) for the Common Shares so
purchased (the "Buy-In
Price"), at which point the Company's obligation to issue and deliver
such certificate to the Holder or credit the Holder's balance account with DTC
for such Common Shares shall terminate, or (ii) promptly honor its obligation to
deliver to the Holder a certificate or certificates representing such Common
Shares or credit such Holder's balance account with DTC and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of Common Shares, times (B) the Closing Bid Price on
the date of exercise.

     

    (d)  Cashless Exercise.
 Notwithstanding
anything contained herein to the contrary, if, after the six month anniversary
of the Issuance Date, a Registration Statement (as defined in the Registration
Rights Agreement) covering the resale of the Warrant Shares that are the subject
of the Exercise Notice (the "Unavailable Warrant Shares")
is not available for the resale of such Unavailable Warrant Shares (other than
as a result of the occurrence of an Allowable Grace Period (as defined in the
Registration Rights Agreement) that occurs prior to the four year anniversary of
the date hereof), the Holder may, in its sole discretion, exercise this Warrant
in whole or in part and, in lieu of making the cash payment otherwise
contemplated to be made to the Company upon such exercise in payment of the
Aggregate Exercise Price, elect instead to receive upon such exercise the "Net
Number" of Common Shares determined according to the following formula (a "Cashless
Exercise"):

    
      
         

      

      
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                            Net
      Number =

                          	
                             (A x B) - (A x C)

                          	 
	 
      	
                             

                            B

                          	 

                  

                

              

            

          

        

      

    

     

    For purposes of the foregoing
formula:

     

    
      	
               
      

            	
              A=

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

            

    

     

    
      	
               
      

            	
              B=

            	
              the
      Weighted Average Price of the Common Shares (as reported by Bloomberg) for
      the five (5) consecutive Trading Days ending on the date immediately
      preceding the date of the Exercise
Notice.

            

    

     

    
      	
               
      

            	
              C=

            	
              the
      Exercise Price then in effect for the applicable Warrant Shares at the
      time of such exercise.

            

    

    

    (e)  Disputes.  In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall promptly issue
to the Holder the number of Warrant Shares that are not disputed and resolve
such dispute in accordance with Section 13.

     

    (f)   Limitations on
Exercises.  The Company shall not effect any exercise of this
Warrant, and the Holder shall not have the right to exercise this Warrant, to
the extent that after giving effect to such exercise, such Holder (together with
the Holder's affiliates) would beneficially own in excess of 4.99% (the "Maximum Percentage") of the
number of Common Shares outstanding immediately after giving effect to such
exercise.  For purposes of the foregoing sentence, the aggregate
number of Common Shares beneficially owned by the Holder and its affiliates
shall include the number of Common Shares issuable upon exercise of this Warrant
with respect to which the determination of such sentence is being made, but
shall exclude the number of Common Shares which would be issuable upon (i)
exercise of the remaining, unexercised portion of this Warrant beneficially
owned by the Holder and any of its affiliates and (ii) exercise or conversion of
the unexercised or nonconverted portion of any other securities of the Company
beneficially owned by such Person and its affiliates (including, without
limitation, any convertible notes or convertible preferred stock or warrants)
subject to a limitation on conversion or exercise analogous to the limitation
contained herein.  Except as set forth in the preceding sentence, for
purposes of this paragraph, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934
Act").  For purposes of this Warrant, in determining the number
of outstanding Common Shares, the Holder may rely on the number of outstanding
Common Shares as reflected in (1) the Company's most recent Form 20-F, Report of
Foreign Private Issuer on Form 6-K of the Company or other public filing with
the Securities and Exchange Commission (the "SEC"), as the case may be, (2)
a more recent public announcement by the Company or (3) any other notice by the
Company or the Transfer Agent setting forth the number of Common Shares
outstanding.  For any reason at any time, upon the written or oral
request of the Holder, the Company shall within two (2) Business Days confirm in
writing to the Holder the number of Common Shares then
outstanding.  In any case, the number of outstanding Common Shares
shall be determined after giving effect to the conversion or exercise of
securities of the Company, including the SPA Warrants, by the Holder and its
affiliates since the date as of which such number of outstanding Common Shares
was reported.  By written notice to the Company, the Holder may from
time to time increase or decrease the Maximum Percentage to any other percentage
not in excess of 9.99% specified in such notice; provided that (i) any such
increase will not be effective until the sixty-first (61st) day
after such notice is delivered to the Company, and (ii) any such increase or
decrease will apply only to the Holder and not to any other holder of SPA
Warrants.  The provisions of this paragraph shall be construed and
implemented in a manner other than in strict conformity with the terms of this
Section 1(f) to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended beneficial ownership limitation
herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation.

    
      
         

      

      
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    (g)  Insufficient Authorized
Shares.  If at any time while this Warrant remains outstanding
the Company does not have a sufficient number of authorized and unreserved
Common Shares to satisfy its obligation to reserve for issuance upon exercise of
this Warrant at least a number of Common Shares equal to 130% (the "Required Reserve Amount") of
the number of Common Shares as shall from time to time be necessary to effect
the exercise of all of this Warrant then outstanding (an "Authorized Share Failure"),
then the Company shall as soon as practicable take all action necessary to
increase the Company's authorized Common Shares to an amount sufficient to allow
the Company to reserve the Required Reserve Amount for this Warrant then
outstanding.  Without limiting the generality of the foregoing
sentence, as soon as practicable after the date of the occurrence of an
Authorized Share Failure, but in no event later than ninety (90) days after the
occurrence of such Authorized Share Failure, the Company shall either (x) obtain
the vote or written consent of its shareholders for the approval of an increase
in the number of authorized Common Shares and provide each shareholder with an
information statement with respect thereto or (y) hold a meeting of its
shareholders for the approval of an increase in the number of authorized Common
Shares.  In connection with such meeting, the Company shall provide
each shareholder with a proxy statement and shall use its reasonable best
efforts to solicit its shareholders' approval of such increase in authorized
Common Shares and to cause its Board of Directors to recommend to the
shareholders that they approve such proposal.

     

    2.   ADJUSTMENT OF EXERCISE PRICE
AND NUMBER OF WARRANT SHARES.  The Exercise Price and the
number of Warrant Shares shall be adjusted from time to time as
follows:

    
      
         

      

      
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    (a)  Adjustment upon Issuance of
Common Shares.  If and whenever on or after the Subscription
Date through the second (2nd) year
anniversary of the Issuance Date, the Company issues or sells, or in accordance
with this Section 2 is deemed to have issued or sold, any Common Shares
(including the issuance or sale of Common Shares owned or held by or for the
account of the Company, but excluding Common Shares deemed to have been issued
by the Company in connection with any Excluded Securities (as defined in the SPA
Securities) for a consideration per share (the "New Issuance Price") less than
a price (the "Applicable
Price") equal to the Exercise Price in effect immediately prior to such
issue or sale or deemed issuance or sale (the foregoing a "Dilutive Issuance"), then
immediately after such Dilutive Issuance, the Exercise Price then in effect
shall be reduced to an amount equal to the New Issuance Price.  In the
event of any Dilutive Issuance after the second (2nd) year
anniversary of the Issuance Date, then immediately after such Dilutive Issuance,
the Exercise Price then in effect shall be reduced to an amount equal to the
product of (A) the Exercise Price in effect immediately prior to such Dilutive
Issuance and (B) the quotient determined by dividing (1) the sum of (I) the
product derived by multiplying the Exercise Price in effect immediately prior to
such Dilutive Issuance and the number of Common Shares Deemed Outstanding
immediately prior to such Dilutive Issuance plus (II) the consideration, if any,
received by the Company upon such Dilutive Issuance, by (2) the product derived
by multiplying (I) the Exercise Price in effect immediately prior to such
Dilutive Issuance by (II) the number of Common Shares Deemed Outstanding
immediately after such Dilutive Issuance. Upon each such adjustment of the
Exercise Price hereunder, the number of Warrant Shares shall be adjusted to the
number of Common Shares determined by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of Warrant Shares acquirable
upon exercise of this Warrant immediately prior to such adjustment and dividing
the product thereof by the Exercise Price resulting from such
adjustment.  For purposes of determining the adjusted Exercise Price
under this Section 2(a), the following shall be applicable:

     

    (i)           Issuance of
Options.  If the Company in any manner grants any Options and
the lowest price per share for which one Common Share is issuable upon the
exercise of any such Option or upon conversion, exercise or exchange of any
Convertible Securities issuable upon exercise of any such Option is less than
the Applicable Price, then such Common Share shall be deemed to be outstanding
and to have been issued and sold by the Company at the time of the granting or
sale of such Option for such price per share.  For purposes of this
Section 2(a)(i), the "lowest price per share for which one Common Share is
issuable upon exercise of such Options or upon conversion, exercise or exchange
of such Convertible Securities issuable upon exercise of any such Option" shall
be equal to the sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one Common Share upon the granting
or sale of the Option, upon exercise of the Option and upon conversion, exercise
or exchange of any Convertible Security issuable upon exercise of such
Option.  No further adjustment of the Exercise Price or number of
Warrant Shares shall be made upon the actual issuance of such Common Shares or
of such Convertible Securities upon the exercise of such Options or upon the
actual issuance of such Common Shares upon conversion, exercise or exchange of
such Convertible Securities.

    
      
         

      

      
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    (ii)           Issuance of Convertible
Securities.  If the Company in any manner issues or sells any
Convertible Securities and the lowest price per share for which one Common Share
is issuable upon the conversion, exercise or exchange thereof is less than the
Applicable Price, then such Common Share shall be deemed to be outstanding and
to have been issued and sold by the Company at the time of the issuance or sale
of such Convertible Securities for such price per share.  For the
purposes of this Section 2(a)(ii), the "lowest price per share for which one
Common Share is issuable upon the conversion, exercise or exchange thereof"
shall be equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to one Common Share upon the
issuance or sale of the Convertible Security and upon conversion, exercise or
exchange of such Convertible Security.  No further adjustment of the
Exercise Price or number of Warrant Shares shall be made upon the actual
issuance of such Common Shares upon conversion, exercise or exchange of such
Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of this
Warrant has been or is to be made pursuant to other provisions of this Section
2(a), no further adjustment of the Exercise Price or number of Warrant Shares
shall be made by reason of such issue or sale.

     

    (iii)           Change in Option Price or
Rate of Conversion.  If the purchase price provided for in any
Options, the additional consideration, if any, payable upon the issue,
conversion, exercise or exchange of any Convertible Securities, or the rate at
which any Convertible Securities are convertible into or exercisable or
exchangeable for Common Shares increases or decreases at any time, the Exercise
Price and the number of Warrant Shares in effect at the time of such increase or
decrease shall be adjusted to the Exercise Price and the number of Warrant
Shares which would have been in effect at such time had such Options or
Convertible Securities provided for such increased or decreased purchase price,
additional consideration or increased or decreased conversion rate, as the case
may be, at the time initially granted, issued or sold.  For purposes
of this Section 2(a)(iii), if the terms of any Option or Convertible Security
that was outstanding as of the date of issuance of this Warrant are increased or
decreased in the manner described in the immediately preceding sentence, then
such Option or Convertible Security and the Common Shares deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such increase or decrease.  No adjustment pursuant to
this Section 2(a) shall be made if such adjustment would result in an increase
of the Exercise Price then in effect or a decrease in the number of Warrant
Shares.

    
      
         

      

      
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    (iv)           Calculation of Consideration
Received.  In case any Option is issued in connection with the
issue or sale of other securities of the Company, together comprising one
integrated transaction, (x) the Options will be deemed to have been issued for a
value determined by use of the Black Scholes Option Pricing Model (the "Option Value") and (y) the
other securities issued or sold in such integrated transaction shall be deemed
to have been issued for the difference of (I) the aggregate consideration
received by the Company, less (II) the Option Value.  If any Common
Shares, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be deemed
to be the net amount received by the Company therefor.  If any Common
Shares, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of such consideration other than cash received by
the Company will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company will be the Closing Sale Price of such securities on the
date of receipt.  If any Common Shares, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection
with any merger in which the Company is the surviving entity, the amount of
consideration therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Shares, Options or Convertible Securities, as the case may
be.  The fair value of any consideration other than cash or securities
will be determined jointly by the Company and the Required
Holders.  If such parties are unable to reach agreement within ten
(10) days after the occurrence of an event requiring valuation (the "Valuation Event"), the fair
value of such consideration will be determined within five (5) Trading Days
after the tenth (10th) day
following the Valuation Event by an independent, reputable appraiser jointly
selected by the Company and the Required Holders.  The determination
of such appraiser shall be final and binding upon all parties absent manifest
error and the fees and expenses of such appraiser shall be borne by the
Company.

    

    (v)           Record
Date.  If the Company takes a record of the holders of Common
Shares for the purpose of entitling them (A) to receive a dividend or other
distribution payable in Common Shares, Options or in Convertible Securities or
(B) to subscribe for or purchase Common Shares, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the Common Shares deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.

     

    (b)  Voluntary Adjustment By
Company.  The Company may at any time during the term of this
Warrant reduce the then current Exercise Price to any amount and for any period
of time deemed appropriate by the Board of Directors of the
Company.

     

    (c)  Adjustment upon Subdivision
or Combination of Common Shares.  If the Company at any time on
or after the Subscription Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding Common
Shares into a greater number of shares, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced and the number of
Warrant Shares will be proportionately increased.  If the Company at
any time on or after the Subscription Date  combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding Common
Shares into a smaller number of shares, the Exercise Price in effect immediately
prior to such combination will be proportionately increased and the number of
Warrant Shares will be proportionately decreased.  Any adjustment
under this Section 2(c) shall become effective at the close of business on the
date the subdivision or combination becomes effective.

    
      
         

      

      
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    (d)  Other
Events.  If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of share appreciation rights,
phantom share rights or other rights with equity features), then the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of Warrant Shares so as to protect the rights of the Holder; provided
that no such adjustment pursuant to this Section 2(d) will increase the Exercise
Price or decrease the number of Warrant Shares as otherwise determined pursuant
to this Section 2.

     

    (e)  De Minimis
Adjustments.  No adjustment in the Exercise Price or number of
issuable Warrant Shares shall be required unless such Exercise Price adjustment
would require an increase or decrease of at least $0.05 in such price; provided, however, that any
adjustment which by reason of this Section 2(e) is not required to be made shall
be carried forward and taken into account in any subsequent adjustments under
this Section 2.  All calculations under this Section 2 shall be made
by the Company in good faith and shall be made to the nearest cent or to the
nearest one hundredth of a share, as applicable.  No adjustment need
be made for a change in the par value or no par value of the Company's Common
Shares.

     

    3.   RIGHTS UPON DISTRIBUTION OF
ASSETS.  If the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets) (other than
Pill Rights) to holders of Common Shares, by way of return of capital or
otherwise (including, without limitation, any distribution of cash, stock or
other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction other than a dividend or distribution payable solely in
Common Shares for which an adjustment is made pursuant to Section 2(c)) (a
"Distribution"), at any
time after the issuance of this Warrant, then, in each such case:

     

    (a)  any
Exercise Price in effect immediately prior to the close of business on the
record date fixed for the determination of holders of Common Shares entitled to
receive the Distribution shall be reduced, effective as of the close of business
on such record date, to a price determined by multiplying such Exercise Price by
a fraction of which (i) the numerator shall be the Closing Bid Price of the
Common Shares on the Trading Day immediately preceding such record date minus
the value of the Distribution (as determined in good faith by the Company's
Board of Directors) applicable to one share of Common Shares, and (ii) the
denominator shall be the Closing Bid Price of the Common Shares on the Trading
Day immediately preceding such record date; and

     

    
      
         

      

      
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    (b)  the
number of Warrant Shares shall be increased to a number of shares equal to the
number of Common Shares obtainable immediately prior to the close of business on
the record date fixed for the determination of holders of Common Shares entitled
to receive the Distribution multiplied by the reciprocal of the fraction set
forth in the immediately preceding paragraph (a); provided that in the event
that the Distribution is of Common Shares (or common shares or common stock)
("Other Common Shares")
of a company whose common shares are traded on a national securities exchange or
a national automated quotation system, then the Holder may elect to receive a
warrant to purchase Other Common Shares in lieu of an increase in the number of
Warrant Shares, the terms of which shall be identical to those of this Warrant,
except that such warrant shall be exercisable into the number of shares of Other
Common Shares that would have been payable to the Holder pursuant to the
Distribution had the Holder exercised this Warrant immediately prior to such
record date and with an aggregate exercise price equal to the product of the
amount by which the exercise price of this Warrant was decreased with respect to
the Distribution pursuant to the terms of the immediately preceding paragraph
(a) and the number of Warrant Shares calculated in accordance with the first
part of this paragraph (b).  The Holder shall notify the Company
within two (2) Business Days of its receipt of notice of the record date for
such Distribution as to its election under this Section 3(b) and, in the absence
of any such notice from the Holder, Holder shall be deemed to have elected to
accept an increase in the number of Warrant Shares.

     

    4.   PURCHASE RIGHTS; FUNDAMENTAL
TRANSACTIONS.

     

    (a)  Purchase
Rights.  In addition to any adjustments pursuant to Section 2
above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase shares, warrants, securities or
other property pro rata to the record holders of any class of Common Shares
(other than Pill Rights) (the "Purchase Rights"), then the
Holder will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which the Holder could have acquired if
the Holder had held the number of Common Shares acquirable upon complete
exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of Common Shares are to be determined
for the grant, issue or sale of such Purchase Rights.

    
      
         

      

      
        - 10
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    (b)  Fundamental
Transactions.  The Company shall not enter into or be party to
a Fundamental Transaction unless (i)  the Successor Entity, if a Person
other than the Company (with the Company being deemed to automatically so
assume), assumes in writing all of the obligations of the Company under this
Warrant and the other Transaction Documents in accordance with the provisions of
this Section (4)(b) pursuant to written agreements in form and substance
reasonably satisfactory to the Required Holders and approved by the Required
Holders prior to such Fundamental Transaction (which approval shall not be
unreasonably withheld), including agreements to deliver to each holder of the
SPA Warrants in exchange for its Warrant a security of the Successor Entity
evidenced by a written instrument substantially similar in form and substance to
the SPA Warrants, including, without limitation, an adjusted exercise price
equal to the value for the Common Shares reflected by the terms of such
Fundamental Transaction, and exercisable for a corresponding number of shares of
capital stock equivalent to the Common Shares acquirable and receivable upon
exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction, and satisfactory to the
Required Holders and (ii) the Successor Entity (or its Parent Entity if
such assumption is effected by the Parent Entity) is a publicly traded
corporation whose common stock is quoted on or listed for trading on an Eligible
Market.  Upon the occurrence of any Fundamental Transaction, the
Successor Entity, if a Person other than the Company (with the Company being
deemed to automatically so succeed), shall succeed to, and be substituted for
(so that from and after the date of such Fundamental Transaction, the provisions
of this Warrant referring to the "Company" shall refer instead to the Successor
Entity), and may exercise every right and power of the Company and shall assume
all of the obligations of the Company under this Warrant with the same effect as
if such Successor Entity had been named as the Company herein.  Upon
consummation of the Fundamental Transaction, the Successor Entity, if a Person
other than the Company (with the Company being deemed to automatically so be
required), shall deliver to the Holder confirmation that there shall be issued
upon exercise of this Warrant at any time after the consummation of the
Fundamental Transaction, in lieu of the Common Shares (or other securities,
cash, assets or other property) issuable upon the exercise of the Warrant prior
to such Fundamental Transaction such shares of the publicly traded common stock
or common shares (or its equivalent) of the Successor Entity (including its
Parent Entity) which the Holder would have been entitled to receive upon the
happening of such Fundamental Transaction had this Warrant been converted
immediately prior to such Fundamental Transaction, as adjusted in accordance
with the provisions of this Warrant.  In addition to and not in
substitution for any other rights hereunder, prior to the consummation of any
Fundamental Transaction pursuant to which holders of Common Shares are entitled
to receive securities or other assets with respect to or in exchange for Common
Shares (a "Corporate
Event"), the Company shall make appropriate provision to insure that the
Holder will thereafter have the right to receive upon an exercise of this
Warrant at any time after the consummation of the Corporate Event but prior to
the Expiration Date, in lieu of Common Shares (or other securities, cash, assets
or other property) purchasable upon the exercise of this Warrant prior to such
Corporate Event, such shares of stock, securities, cash, assets or any other
property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Corporate Event had this Warrant been exercised immediately prior to
such Corporate Event.  Provision made pursuant to the preceding
sentence shall be in a form and substance reasonably satisfactory to the
Required Holders.  The provisions of this Section shall apply
similarly and equally to successive Fundamental Transactions and Corporate
Events and shall be applied without regard to any limitations on the exercise of
this Warrant.

     

    (c)  Notwithstanding
the foregoing, in the event of a Fundamental Transaction, at the request of the
Holder delivered before the ninetieth (90th) day
after the consummation of such Fundamental Transaction, the Company (or the
Successor Entity) shall purchase this Warrant from the Holder by paying to the
Holder, within five (5) Business Days after such request (or, if later, on the
effective date of the Fundamental Transaction), cash in an amount equal to the
Black Scholes Value of the remaining unexercised portion of this Warrant on the
date of such Fundamental Transaction.

    
      
         

      

      
        - 11
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    5.    
 PARTICIPATION.  The
Holder, as the holder of this Warrant, shall be entitled to receive any Pill
Rights (or, at the option of the Holder, to the extent such Pill Rights become
exercisable or have been exercised into equity interests of the Company or any
other distribution is made of equity interests of the Company to holders of such
Pill Rights, such equity interests of the Company) made to the holders of Common
Shares concurrently with any issuance of Common Shares upon exercise of this
Warrant to the same extent as if the Holder had exercised this Warrant into such
Common Shares (without regard to any limitations on conversion herein or
elsewhere) and had held such Common Shares on the record date for such dividend
or distribution of Pill Rights.

     

    6.   NONCIRCUMVENTION.  The
Company hereby covenants and agrees that the Company will not, by amendment of
its Memorandum and Articles of Association or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, dissolution,
issue or sale of securities, or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, and
will at all times in good faith carry out all the provisions of this Warrant and
take all action as may be required to protect the rights of the
Holder.  Without limiting the generality of the foregoing, the Company
(i) shall not increase the par value of any Common Shares receivable upon
the exercise of this Warrant above the Exercise Price then in effect,
(ii) shall take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable Common Shares upon the exercise of this Warrant, and (iii) shall,
so long as any of the SPA Warrants are outstanding, take all action necessary to
reserve and keep available out of its authorized and unissued Common Shares,
solely for the purpose of effecting the exercise of the SPA Warrants, 130% of
the number of Common Shares as shall from time to time be necessary to effect
the exercise of the SPA Warrants then outstanding (without regard to any
limitations on exercise).  For the avoidance of doubt, solicitation by
the Company in accordance with the requirements of the SPA Warrants and the
Securities Purchase Agreement of the consents of the Required Holders to any
amendment, modification or waiver of any provision of the SPA Warrants shall not
be or be deemed an avoidance of performance of the terms of this
Warrant.

     

    7.   WARRANT HOLDER NOT DEEMED A
SHAREHOLDER.  Except as otherwise specifically provided herein,
the Holder, solely in such Person's capacity as a holder of this Warrant, shall
not be entitled to vote or receive dividends or be deemed the holder of share
capital of the Company for any purpose, nor shall anything contained in this
Warrant be construed to confer upon the Holder, solely in such Person's capacity
as the Holder of this Warrant, any of the rights of a shareholder of the Company
or any right to vote, give or withhold consent to any corporate action (whether
any reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of the
Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant.  In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the Holder to purchase
any securities (upon exercise of this Warrant or otherwise) or as a shareholder
of the Company, whether such liabilities are asserted by the Company or by
creditors of the Company.  Notwithstanding this Section 7, to the
extent not available through the EDGAR filing system of the SEC, the Company
shall provide the Holder with copies of the same notices and other information
given to the shareholders of the Company generally, contemporaneously with the
giving thereof to the shareholders.

    
      
         

      

      
        - 12
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    8.   REISSUANCE OF
WARRANTS.

     

    (a)  Transfer of
Warrant.  If this Warrant is to be transferred, the Holder
shall surrender this Warrant to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Warrant (in
accordance with Section 8(d)), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less than the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 8(d)) to the Holder representing the right to purchase the number
of Warrant Shares not being transferred.

     

    (b)  Lost, Stolen or Mutilated
Warrant.  Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Warrant, the
Company shall execute and deliver to the Holder a new Warrant (in accordance
with Section 8(d)) representing the right to purchase the Warrant Shares then
underlying this Warrant.

     

    (c)  Exchangeable for Multiple
Warrants.  This Warrant is exchangeable, upon the surrender
hereof by the Holder at the principal office of the Company, for a new Warrant
or Warrants (in accordance with Section 8(d)) representing in the aggregate the
right to purchase the number of Warrant Shares then underlying this Warrant, and
each such new Warrant will represent the right to purchase such portion of such
Warrant Shares as is designated by the Holder at the time of such surrender;
provided, however, that no Warrants for fractional Common Shares shall be
given.

     

    (d)  Issuance of New
Warrants.  Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of
like tenor with this Warrant, (ii) shall represent, as indicated on the face of
such new Warrant, the right to purchase the Warrant Shares then underlying this
Warrant (or in the case of a new Warrant being issued pursuant to Section 8(a)
or Section 8(c), the Warrant Shares designated by the Holder which, when added
to the number of Common Shares underlying the other new Warrants issued in
connection with such issuance, does not exceed the number of Warrant Shares then
underlying this Warrant), (iii) shall have an issuance date, as indicated on the
face of such new Warrant which is the same as the Issuance Date, and (iv) shall
have the same rights and conditions as this Warrant.

    
      
         

      

      
        - 13
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    9.   NOTICES.  Whenever
notice is required to be given under this Warrant, unless otherwise provided
herein, such notice shall be given in accordance with Section 9(f) of the
Securities  Purchase Agreement.  The Company shall provide
the Holder with prompt written notice of all actions taken pursuant to this
Warrant, including in reasonable detail a description of such action and the
reason therefor.  Without limiting the generality of the foregoing,
the Company will give written notice to the Holder (i) immediately upon any
adjustment of the Exercise Price, setting forth in reasonable detail, and
certifying, the calculation of such adjustment and (ii) at least fifteen (15)
days or such shorter period as may be permitted by the Principal Market for the
public announcement of any such record date prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Shares, (B) with respect to any grants, issuances
or sales of any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property to holders of Common Shares or (C) for
determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall be
made known to the public prior to or in conjunction with such notice being
provided to the Holder.

     

    10. AMENDMENT AND
WAIVER.  Except as otherwise provided herein, the provisions of
this Warrant may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the affirmative vote at a meeting duly called
for such purpose or the written consent without a meeting of the Required
Holders; provided that no such action may increase the exercise price of any SPA
Warrant or decrease the number of shares or class of stock obtainable upon
exercise of any SPA Warrant without the written consent of the
Holder.  No such amendment shall be effective to the extent that it
applies to less than all of the holders of the SPA Warrants then
outstanding.

     

    11. GOVERNING
LAW.  This Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by,
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.

     

    12. CONSTRUCTION;
HEADINGS.  This Warrant shall be deemed to be jointly drafted
by the Company and all the Buyers and shall not be construed against any person
as the drafter hereof.  The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant.

     

    13. DISPUTE
RESOLUTION.  In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile within three (3) Business Days of receipt of the Exercise Notice
giving rise to such dispute, as the case may be, to the Holder.  If
the Holder and the Company are unable to agree upon such determination or
calculation of the Exercise Price or the Warrant Shares within three (3)
Business Days of such disputed determination or arithmetic calculation being
submitted to the Holder, then the Company shall, within two (2) Business Days
submit via facsimile (a) the disputed determination of the Exercise Price to an
independent, reputable investment bank selected by the Company and approved by
the Holder, such approval not to be unreasonably withheld, or (b) the disputed
arithmetic calculation of the Warrant Shares to the Company's independent,
outside accountant.  The Company shall cause at its expense the
investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Holder of the
results no later than ten Business Days from the time it receives the disputed
determinations or calculations.  Such investment bank's or
accountant's determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.

    
      
         

      

      
        - 14
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    14. REMEDIES, OTHER OBLIGATIONS,
BREACHES AND INJUNCTIVE RELIEF.  The remedies provided in this
Warrant shall be cumulative and in addition to all other remedies available
under this Warrant and the other Transaction Documents, at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
nothing herein shall limit the right of the Holder to pursue damages for any
failure by the Company to comply with the terms of this Warrant.  The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate.  The Company therefore agrees that, in the event of
any such breach or threatened breach, the holder of this Warrant shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

     

    15. TRANSFER.    This
Warrant may be offered for sale, sold, transferred or assigned without the
consent of the Company, except as may otherwise be required by Section 2(f) of
the Securities Purchase Agreement.

     

    16. SEVERABILITY. 
If any provision of this Warrant is prohibited by law or otherwise determined to
be invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Warrant so long as this Warrant as
so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties.  The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable provision(s).

     

    17. TAXES.

     

    (a)  Any
and all payments by the Company hereunder, including any amounts received on a
exercise or redemption of the Warrant and any amounts on account of interest or
deemed interest, shall be made free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, imposed under any law,
rule, code or regulation of the People's Republic of China, the British Virgin
Islands or any other non-U.S. governmental authority, including, without
limitation, any federal, state, local, provincial or other similar non-U.S.
governmental authority (collectively referred to as "International
Taxes").  If the Company shall be required to deduct any
International Taxes from or in respect of any sum payable hereunder to the
Holder, (i) the sum payable shall be increased by the amount by which the sum
payable would otherwise have to be increased (the "tax make-whole amount") to
ensure that after making all required deductions (including deductions
applicable to the tax make-whole amount) the Holder would receive an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Company shall make such deductions and (iii) the Company shall pay the full
amount withheld or deducted to the applicable governmental authority within the
time required.

    
      
         

      

      
        - 15
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    (b)  In
addition, the Company agrees to pay to the relevant governmental authority in
accordance with applicable law any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies that arise from
any payment made hereunder or in connection with the execution, delivery,
registration or performance of, or otherwise with respect to, this Warrant
("Other
Taxes").  The Company shall deliver to the Holder official
receipts, if any, in respect of any International Taxes and Other Taxes payable
hereunder promptly after payment of such International Taxes, Other Taxes or
other evidence of payment reasonably acceptable to the Holder.

     

    (c)  The
obligations of the Company under this Section 17(b) shall survive the
termination of this Warrant and the payment of the Warrant and all other amounts
payable hereunder.

     

    18.  CERTAIN
DEFINITIONS.  For purposes of this Warrant, the following terms
shall have the following meanings:

     

    (a)  "Approved Share Plan" means any
employee benefit plan which has been approved by the Board of Directors of the
Company prior or subsequent to the Subscription Date, pursuant to which the
Company's securities may be issued to any employee, officer or director for
services provided to the Company.

     

    (b)  "Black Scholes Value" means the
value of this Warrant based on the Black and Scholes Option Pricing Model
obtained from the "OV" function on Bloomberg determined as of the day of the
closing of the applicable Fundamental Transaction for pricing purposes and
reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate
for a period equal to the remaining term of this Warrant as of such date of
request, (ii) an expected volatility equal to the greater of 100% and the 100
day volatility obtained from the HVT function on Bloomberg as of the day
immediately following the public announcement of the applicable Fundamental
Transaction, (iii) the underlying price per share used in such calculation shall
be the sum of the price per share being offered in cash, if any, plus the value
of any non cash consideration, if any, being offered in the Fundamental
Transaction and (iv) a 365 day annualization factor.

     

    (c)  "Bloomberg" means Bloomberg
Financial Markets.

     

    (d)  "Business Day" means any day
other than Saturday, Sunday or other day on which commercial banks in The City
of New York or Hong Kong are authorized or required by law to remain
closed.

    
      
         

      

      
        - 16
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    (e)  "Closing Bid Price" and "Closing Sale Price" means, for
any security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price,
as the case may be, then the last bid price or the last trade price,
respectively, of such security prior to 4:00:00 p.m., New York time, as reported
by Bloomberg, or, if the Principal Market is not the principal securities
exchange or trading market for such security, the last closing bid price or last
trade price, respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price or last
trade price, respectively, of such security in the over-the-counter market on
the electronic bulletin board for such security as reported by Bloomberg, or, if
no closing bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask prices,
respectively, of any market makers for such security as reported in the "pink
sheets" by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.).  If the Closing Bid Price or the Closing Sale Price cannot be
calculated for a security on a particular date on any of the foregoing bases,
the Closing Bid Price or the Closing Sale Price, as the case may be, of such
security on such date shall be the fair market value as mutually determined by
the Company and the Holder.  If the Company and the Holder are unable
to agree upon the fair market value of such security, then such dispute shall be
resolved pursuant to Section 13.  All such determinations to be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during the applicable calculation period.

     

    (f)   "Common Shares" means
(i) the Company's Common Shares, par value $0.0001 per share, and
(ii) any share capital into which such Common Shares shall have been
changed or any share capital resulting from a reclassification of such Common
Shares.

     

    (g)  "Common Shares Deemed
Outstanding" means, at any given time, the number of Common Shares
actually outstanding at such time, plus the number of Common Shares deemed to be
outstanding pursuant to Sections 2(a)(i) and 2(a)(ii) hereof regardless of
whether the Options or Convertible Securities are actually exercisable at such
time, but excluding any Common Shares owned or held by or for the account of the
Company or issuable upon exercise of the SPA Warrants.

     

    (h)  "Convertible Securities" means
any stock or securities (other than Options) directly or indirectly convertible
into or exercisable or exchangeable for Common Shares.

     

    (i)   "Eligible Market" means the
Principal Market, The NASDAQ Global Market, The NASDAQ Capital Market, The New
York Stock Exchange, Inc., or The NYSE Amex.

     

    (j)   "Expiration Date" means the
date sixty (60) months after the Initial Exercisability Date or, if such date
falls on a day other than a Business Day or on which trading does not take place
on the Principal Market (a "Holiday"), the next day that
is not a Holiday.

    
      
         

      

      
        - 17
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    (k)  "Fundamental Transaction" means
that (A) the Company shall, directly or indirectly, in one or more related
transactions, (i) consolidate or merge with or into (whether or not the Company
is the surviving corporation) another Person or Persons, if the holders of the
Voting Stock of the Company (not including any shares of Voting Stock of the
Company held by the Person or Persons making or party to, or associated or
affiliated with the Persons making or party to, such consolidation or merger)
immediately prior to such consolidation or merger shall hold or have the right
to direct the voting of less than 50% of the Voting Stock of the Company or such
voting securities of such other surviving Person immediately following such
transaction, (ii) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or assets of the Company to another Person,
(iii) allow another Person to make a purchase, tender or exchange offer that is
accepted by the holders of more than the 50% of the outstanding shares of Voting
Stock of the Company (not including any shares of Voting Stock of the Company
held by the Person or Persons making or party to, or associated or affiliated
with the Persons making or party to, such purchase, tender or exchange offer),
(iv) consummate a securities purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person whereby such other Person acquires
more than the 50% of the outstanding shares of Voting Stock of the Company (not
including any shares of Voting Stock of the Company held by the other Person or
other Persons making or party to, or associated or affiliated with the other
Persons making or party to, such securities purchase agreement or other business
combination), or (v) reorganize, recapitalize or reclassify its Common Shares or
(B) any "person" or "group" (as these terms are used for purposes of Sections
13(d) and 14(d) of the Exchange Act) is or shall become the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
50% of the aggregate ordinary voting power represented by issued and outstanding
Common Shares.  Notwithstanding the foregoing, solely for the purpose
of the foregoing calculations, any director, officer or employee of the Company,
acting solely in its capacity as a director, officer or employee of the Company,
shall not be deemed to be making or party to, or associated or affiliated with
the Persons making or party to, such consolidation or merger.

     

    (l)   "Options" means any rights,
warrants or options to subscribe for or purchase Common Shares or Convertible
Securities.

     

    (m) "Parent Entity" of a Person
means an entity that, directly or indirectly, controls the applicable Person and
whose common shares or common stock or equivalent equity security is quoted or
listed on an Eligible Market, or, if there is more than one such Person or
Parent Entity, the Person or Parent Entity with the largest public market
capitalization as of the date of consummation of the Fundamental
Transaction.

     

    (n)  "Person" means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a government or any
department or agency thereof.

     

    (o)  "Pill Rights" means any rights
issued by the Company pursuant to any so-called "poison pill" or similar Company
rights plan entitling all holders of equity interests of the Company to
subscribe for or purchase equity interests of the Company, which rights are not
exercisable until a determination by the Company's Board of Directors that one
or more Persons or "groups" (as defined in Rule 13d-5(b)(1) under the 1934 Act)
has acquired beneficial ownership of Common Shares in excess of the percentage
threshold specified in such plan.

    
      
         

      

      
        - 18
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    (p)  "Principal Market" means The
NASDAQ Global Select Market.

     

    (q)  "Registration Rights Agreement"
means that certain registration rights agreement by and among the Company and
the Buyers.

     

    (r)   "Required Holders" means the
holders of the SPA Warrants representing at least a majority of Common Shares
underlying the SPA Warrants then outstanding, but excluding any Notes
beneficially owned, directly or indirectly, by Mr. Lu (or any of his family
members, affiliates or agents), the Company or any of its
Subsidiaries..

     

    (s)  "SPA Securities" means the
Notes issued pursuant to the Securities Purchase Agreement.

     

    (t)   "Successor Entity" means the
Person, which may be the Company, formed by, resulting from or surviving any
Fundamental Transaction or the Person with which such Fundamental Transaction
shall have been made, provided that if such Person is not a publicly traded
entity whose common stock or equivalent equity security is quoted or listed for
trading on an Eligible Market, Successor Entity shall mean such Person's Parent
Entity.

     

    (u)  "Trading Day" means any day on
which the Common Shares are traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Shares, then on the
principal securities exchange or securities market on which the Common Shares
are then traded; provided that "Trading Day" shall not include any day on which
the Common Shares are scheduled to trade on such exchange or market for less
than 4.5 hours or any day that the Common Shares are suspended from trading
during the final hour of trading on such exchange or market (or if such exchange
or market does not designate in advance the closing time of trading on such
exchange or market, then during the hour ending at 4:00:00 p.m., New York
time).

     

    (v)  "Voting Stock" of a Person
means capital stock of such Person of the class or classes pursuant to which the
holders thereof have the general voting power to elect, or the general power to
appoint, at least a majority of the board of directors, managers or trustees of
such Person (irrespective of whether or not at the time capital stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency).

    
      
         

      

      
        - 19
-

        
          

        

      

      
         

      

    

    (w) "Weighted Average Price" means,
for any security as of any date, the dollar volume-weighted average price for
such security on the Principal Market during the period beginning at 9:30:01
a.m., New York City Time (or such other time as the Principal Market publicly
announces is the official open of trading), and ending at 4:00:00 p.m., New York
City Time (or such other time as the Principal Market publicly announces is the
official close of trading), as reported by Bloomberg through its "Volume at
Price" function or, if the foregoing does not apply, the dollar volume-weighted
average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30:01 a.m.,
New York City Time (or such other time as the Principal Market publicly
announces is the official open of trading), and ending at 4:00:00 p.m., New York
City Time (or such other time as the Principal Market publicly announces is the
official close of trading), as reported by Bloomberg, or, if no dollar
volume-weighted average price is reported for such security by Bloomberg for
such hours, the average of the highest closing bid price and the lowest closing
ask price of any of the market makers for such security as reported in the "pink
sheets" by Pink Sheets LLC (formerly the National Quotation Bureau,
Inc.).  If the Weighted Average Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the Weighted
Average Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder.  If the Company and
the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved pursuant to Section 13 with the term "Weighted
Average Price" being substituted for the term "Exercise Price." All such
determinations shall be appropriately adjusted for any share dividend, share
split, share combination or other similar transaction during the applicable
calculation period.

     

    [Signature
Page Follows]

    
      
         

      

      
        - 20
-

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the
Company has caused this Warrant to Purchase Common Shares to be duly executed as
of the Issuance Date set out above.

    

    
      
        
          
            
              	 
      	
                      A-POWER
      ENERGY GENERATION SYSTEMS, LTD.

                    	 
	 
      	 
      	 
      	 
	 
      	
                      By:

                    	
                          

                    	 
	 
      	
                      Name:

                    	 
      	 
	 
      	
                      Title:

                    	 
      	 

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
A

    

    EXERCISE
NOTICE

     

    TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    WARRANT
TO PURCHASE COMMON STOCK

    

    A-POWER
ENERGY GENERATION SYSTEMS, LTD.

     

    The undersigned holder hereby exercises
the right to purchase _________________ of the Common Shares ("Warrant Shares") of A-Power
Energy Generation Systems, Ltd., a company incorporated under the laws
of the British Virgin Islands (the "Company"), evidenced by the
attached Warrant to Purchase Common Shares (the "Warrant").  Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.

    

    1.  Form of Exercise
Price.  The Holder intends that payment of the Exercise Price shall be
made as:

    

    
      	
               
      

            	
              ____________
      a "Cash
      Exercise" with respect to _________________ Warrant Shares;
      and/or

            

    

    

    
      	
               
      

            	
              ____________
      a "Cashless
      Exercise" with respect to _______________ Warrant
      Shares.

            

    

    

    2.  Payment of Exercise
Price.  In the event that the holder has elected a Cash Exercise with
respect to some or all of the Warrant Shares to be issued pursuant hereto, the
holder shall pay the Aggregate Exercise Price in the sum of $___________________
to the Company in accordance with the terms of the Warrant.

    

    3.  Delivery of Warrant
Shares.  The Company shall deliver to the holder __________ Warrant
Shares in accordance with the terms of the Warrant.

    

    4.  Notwithstanding anything
to the contrary contained herein, this Exercise Notice shall constitute a
representation by the Holder of the Warrant submitting this Exercise Notice
that, after giving effect to the exercise provided for in this Exercise Notice,
such Holder (together with its affiliates) will not have beneficial ownership
(together with the beneficial ownership of such Person's affiliates) of a number
of Common Shares which exceeds the Maximum Percentage (as defined in the
Warrant) of the total outstanding Common Shares of the Company as determined
pursuant to the provisions of Section 1(f) of the Warrant.

    

    Date:
_______________ __, ______

    

    
      
        
          
            
              
                
                  
                    	____________________________	 
	
                            Name
      of Registered Holder

                          	 
	 
      	 
      	 
      	 
	
                            By:

                          	 
      	 
	 
      	
                            Name:

                          	__________________	 
	 
      	
                            Title:

                          	 
      	 

                  

                

              

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ACKNOWLEDGMENT

    

    The Company hereby acknowledges this
Exercise Notice and hereby directs Continental Stock Transfer & Trust
Company to issue
the above indicated number of Common Shares in accordance with the Transfer
Agent Instructions dated June 19, 2009 from the Company and acknowledged and
agreed to Continental Stock Transfer & Trust Company.

    

    
      
        	 	
                A-POWER
      ENERGY GENERATION SYSTEMS, LTD.

              
	 	 
      	 
      	 
      
	 	
                By:

              	
                   

              	 
      
	 	
                Name:

              	 
      	 
      
	 	
                Title:Unassociated Document

    PUT
AGREEMENT

     

    PUT
AGREEMENT (the "Agreement"), dated as of June
19, 2009, by and among Jinxiang Lu, a natural person in his personal capacity
and not in his capacity as an officer, director, employee or agent of the
Company or any of its Subsidiaries (the "Shareholder"), _________ (the
"Investor") and A-Power
Energy Generation Systems, Ltd., a company incorporated under the laws of the
British Virgin Islands, with headquarters located at No. 44 Jingxing Road, Tiexi
District, Shenyang, Liaoning Province, China 110021 (the "Company").

     

    WHEREAS:

     

    A.           In
connection with the Securities Purchase Agreement, by and among the Company, the
Investor and the other investors listed on the Schedule of Investors attached
thereto (each, a "Buyer"
and collectively, the "Buyers") of even date herewith
(the "Securities Purchase
Agreement"), the Company has agreed, upon the terms and subject to the
conditions of the Securities Purchase Agreement, to issue and sell to each Buyer
(i) senior convertible notes (the "Notes") which will be
convertible into the Company's common shares, par value $0.0001 per share (the
"Common Shares") (as
converted, collectively, the "Conversion Shares") and (ii)
warrants (the "Warrants"), which will be
exercisable to purchase Common Shares (as exercised collectively, the "Warrant Shares").

     

    B.           Concurrently
herewith, the Company, the Shareholder and Hudson Bay Fund LP, as collateral
agent for the Buyers (in such capacity, and not in its capacity as a Buyer or a
holder of Notes or Warrants, the "Collateral Agent," which term
includes the successor collateral agent appointed pursuant to Section 4(y) of
the Securities Purchase Agreement) have entered into that certain Pledge
Agreement, pursuant to which the Shareholder has agreed to pledge certain Common
Shares owned by the Shareholder (the "Pledged Shares") to the
Collateral Agent including shares deliverable pursuant to this
Agreement.

     

    C.           As
a condition to the Investor's extending credit to the Company pursuant to the
Note, the Shareholder and the Investor desire, at the option of the Investor,
from time to time, to exchange any Notes of the Investor and/or Warrants of the
Investor, in whole or in part, for the Pledged Shares and/or, under certain
circumstances, the Investor's right to forgo Additional Conversion Obligations
(as defined below) in exchange for Pledged Shares (as exchanged, collectively,
the "Exchange Shares")
in accordance with the terms and conditions set forth herein.

     

    D.           Concurrently
herewith the Buyers (other than the Investor) (the "Other Buyers") are also entering into
agreements identical to this Agreement (the "Other Agreements") with the
Company.

     

    E.           Capitalized
terms not defined herein shall have the meaning as set forth in the Securities
Purchase Agreement.

     

    NOW, THEREFORE, the
Shareholder, the Investor and the Company hereby agree as
follows:

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    1.           EXCHANGE OF NOTES AND
WARRANTS.  Subject to the terms of this Agreement, each Note
and each Warrant of the Investor shall be exchangeable into Exchange Shares from
time to time, on the terms and conditions set forth in this Agreement and shall
not be limited by any event or circumstance affecting the Company or whether or
not the Company is in compliance with its obligations under the Notes and/or
Warrants, except as expressly set forth herein.

     

    (a)           Exchange
Right.  Subject to the limitations set forth in Section 1(h)
below and in accordance with the applicable provisions of Section 1(b) below,
during the Exchange Period (as defined below), each holder of a Note or Warrant
subject to this Agreement (each, a "Holder") shall be entitled to
(i) exchange any portion of the outstanding and unpaid Conversion Amount (as
defined in the Note) of such Holder's Note into such number of fully paid and
nonassessable Exchange Shares equal to the Note Exchange Amount (as defined
below) (each, a "Note
Exchange"), (ii) exchange any unexercised portion of such Holder's
Warrants into such number of fully paid and nonassessable Exchange Shares equal
to the applicable Warrant Exchange Amount (as defined below) (each, a "Warrant Exchange"), and/or
(iii) forgo such Holder's right to receive Additional Conversion Obligations in
exchange for such number of fully paid and nonassessable Exchange Shares equal
to the Payment Default Exchange Amount (as defined below).  The
Shareholder shall not deliver any fraction of a share of Exchange Shares upon
any exchange.  If the delivery would result in the transfer of a
fraction of a share of Exchange Shares, the Shareholder shall round such
fraction of a share of Exchange Shares up to the nearest whole
share.  The Company shall pay any and all transfer, stamp and similar
taxes (other than income and similar taxes) that are required to be paid with
respect to the transfer and delivery of Exchange Shares upon any exchange
hereunder.  For purposes hereof, "Exchange Period" means the
period beginning on the first day immediately after the six month anniversary of
the Closing Date and ending on the earlier of (I) forty-five (45) days after the
later of (A) the Adjustment Date (as defined in the Note) and (B) the
Shareholder Approval Date and (II) the date when (i) all obligations of the
Company to deliver Conversion Shares (as defined in the Note) pursuant to the
Note have been satisfied and the Note is no longer held by an Unaffiliated
Holder (as defined below), (ii) all obligations of the Shareholder to deliver
Exchange Shares hereunder in connection with any Note Exchange, Warrant Exchange
or Payment Default Exchange have been satisfied, (iii) all payment obligations
of the Company hereunder owed to the Holder have been satisfied and (iv) all
obligations of the Company to deliver Warrant Shares (as defined in the Warrant)
pursuant to the Warrant have been satisfied and the Warrant is no longer
outstanding.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    (b)           Mechanics of
Exchange.

     

    (i)           Optional
Exchange.  To (A) exchange any Note or Warrant, in whole or in
part, into Exchange Shares or (B) forgo the Holder's right to receive Additional
Conversion Obligations in exchange for Exchange Shares pursuant to a Payment
Default Exchange as contemplated in Section 1(b)(iii) below, on any date (the
date of the delivery of the applicable notice set forth below, each an "Exchange Date"), a Holder
shall (A) transmit by facsimile (or otherwise deliver in accordance with Section
15(f)), for receipt on or prior to 11:59 p.m., New York Time, on such date, a
copy of an executed notice of exchange in the form attached hereto as Exhibit I (the "Exchange Notice") and a copy of the Written
Direction in the form attached hereto as Schedule I to Exhibit I to the Company, the
transfer agent of the Company (the "Transfer Agent"), the
Shareholder and the Collateral Agent, and (B) if such Exchange Notice
includes a Warrant Exchange, either (x) pay to the Shareholder an amount equal
to the applicable Exercise Price (as defined in the Warrant) multiplied by the
number of Warrant Shares as to which such Warrant is being exchanged (the "Aggregate Exchange Price") in
cash or by wire transfer of immediately available funds or (y) notify the
Shareholder that such Warrant is being exercised pursuant to a Cashless Exercise
(as defined in Section 1(b)(ii) below) and (C) with respect to an exchange of
any Note or Warrant, if required by Section 1(f) below, surrender the applicable
Note and/or Warrant to a common carrier for delivery to the Shareholder as soon
as practicable on or following such date (or an indemnification undertaking
reasonably acceptable to the Company with respect to the applicable Note and/or
Warrant in the case of its loss, theft or destruction).  On or before
the first (1st)
Trading Day following the date of receipt of an Exchange Notice, the Company and
the Shareholder shall transmit by facsimile a confirmation of receipt of such
Exchange Notice to such Holder, the Collateral Agent and the Transfer
Agent.  On or before the second (2nd)
Trading Day following the date of receipt of an Exchange Notice (the "Share Delivery Date"), the
Shareholder shall request the Collateral Agent to release from the Pledged
Collateral (as defined in the Pledge Agreement) and deliver, and the Company
shall facilitate such release and delivery, (x) provided that the Transfer Agent
is participating in the DTC Fast Automated Securities Transfer Program, and such
Exchange Shares do not require the placement of any legends restricting transfer
of such Exchange Shares, upon the request of such Holder, by crediting such
aggregate number of Exchange Shares to which such Holder shall be entitled to
such Holder's or its designee's balance account with DTC through its Deposit
Withdrawal Agent Commission system, or (y) if (I) the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program or (II) such
Exchange Shares require the placement of legends restricting transfer of such
Exchange Shares as required by Section 1(e) below, by transferring and
delivering to the address as specified in the Exchange Notice, of a certificate,
registered in the name of such Holder or its designee, for the aggregate number
of Exchange Shares to which such Holder shall be entitled, which certificate
shall, in the case of clause (II), bear a legend in accordance with Section
1(e).  Upon any such transfer of any Exchange Shares to such Holder,
such Holder shall have good and marketable title to such shares, free and clear
of any liens, encumbrances, restrictions, rights of first refusal or rights of
any other Person (including, without limitation, the pledge of such Exchange
Shares pursuant to the Pledge Agreement which shall be automatically released
solely with respect to such shares upon the consummation of such exchange),
except with respect to any restrictions on transfer pursuant to applicable
securities laws.  If the applicable Note is physically surrendered for
exchange as required by Section 1(f) and the outstanding Principal (as defined
in the Note) of such Note is greater than the Principal portion of the
Conversion Amount being exchanged, then the Company shall as soon as practicable
and in no event later than Share Delivery Date and at its own expense, issue and
deliver to such Holder a new Note (in accordance with Section 18(d) of such
Note) representing the outstanding Principal not exchanged.  If a
Warrant is physically surrendered for exchange as required by Section 1(f) and
the number of Warrant Shares represented by such Warrant is greater than the
number of Warrant Shares being acquired upon such exchange, then the Company
shall as soon as practicable and in no event later than the Share Delivery Date
and at its own expense, issue a new Warrant (in accordance with Section 8(d) of
such Warrant) representing the right to purchase the number of Warrant Shares
purchasable immediately prior to such exchange under such Warrant, less the
number of Exchange Shares with respect to which such Warrant is
exchanged.  The Company, the Shareholder and the Transfer Agent shall
treat for all purposes the Person or Persons entitled to receive the Exchange
Shares as the transferee or transferees of such Exchange Shares on the Exchange
Date.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    (ii)           Cashless Exchange of a
Warrant.  After the six month
anniversary of the date of this Agreement, if a Registration Statement (as
defined in the Registration Rights Agreement) covering the delivery to the
Holder pursuant to such Registration Statement of the Warrant Shares that are
subject to an applicable Exchange Notice is not available for such registered
delivery by Mr. Lu (the "Unavailable Warrant Shares")
(other than as a result of the occurrence of an Allowable Grace Period (as
defined in the Registration Rights Agreement) that occurs prior to the four year
anniversary of the date hereof), each Holder, in its sole discretion, during the
Exchange Period, may exercise the Warrant in whole or in part and, in lieu of
making the cash payment otherwise contemplated to be made to Mr. Lu upon such
exercise in payment of the Aggregate Exchange Price, elect instead to receive
upon such exercise the "Net Number" of Common Shares determined according to the
following formula (a "Cashless
Exercise"):

     

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

     

    B

     

    For purposes of the foregoing
formula:

     

    
      	
               
      A=  

            	
              the
      total number of shares with respect to which the Warrant is then being
      exercised.

            

    

     

    
      	
               
      B=  

            	
              the
      Weighted Average Price of the Common Shares (as reported by Bloomberg) for
      the five (5) consecutive Trading Days ending on the date immediately
      preceding the date of the Exchange
Notice.

            

    

     

    
      	
               
      C= 

            	
              the
      Exercise Price then in effect for the applicable Warrant Shares at the
      time of such exercise.

            

    

     

    (iii)           Additional Conversion
Obligations Payable in a Note Exchange.

     

    (A)           In
addition to the foregoing, in connection with any Note Exchange, on the
applicable Share Delivery Date, to the extent the Company has not satisfied such
obligation pursuant to the Note, the Company shall pay to the exchanging Holder
in cash the Additional Conversion Obligations. For purposes of this Agreement
(i) "Additional Conversion
Obligations" means the sum of (I) the Exchange Make-Whole Amount (as
defined below) and (II) any accrued and unpaid Interest (as defined in the Note)
on the Conversion Amount of the Holder's Note subject to such Note Exchange and
Late Charges (as defined in the Note), if any on such Conversion Amount and
Interest, and (ii)  "Exchange Make-Whole Amount"
means the amount of any Interest that, but for such Holder's Note Exchange,
would have accrued with respect to the Conversion Amount of the Holder's Note
subject to such Note Exchange at the Interest Rate (as defined in the Note)
(assuming the Interest Adjustment Rate (as defined in the Note) then in effect
as of the applicable Exchange Date is the Interest Adjustment Rate through the
Maturity Date) for the period from the applicable Exchange Date through the
Maturity Date, discounted to present value, using the published yield on two
year notes of the U.S. federal government on the Exchange Date.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    (B) Notwithstanding the foregoing, if
the Company shall fail to pay to such Holder any Additional Conversion
Obligations when due in connection with a Note Exchange (a "Payment Default"), the Holder
shall be entitled to forgo the Holder's right to receive Additional Conversion
Obligations from the Company in exchange for such number of fully paid and
nonassessable Exchange Shares at the Payment Default Exchange Rate (a "Payment Default
Exchange").  The Exchange Shares delivered by Mr. Lu in
satisfaction of the Company's obligation to pay Additional Conversion
Obligations shall be referred to as "Lu Additional Conversion
Shares". To exercise such right, the Holder shall deliver the notices and
follow the procedures set forth in Section 1(b)(i) above.

     

    (c)           Note Exchange Rate; Warrant
Exchange Amount; Payment Default Exchange Rate.

     

    (i)           The
number of Exchange Shares to be delivered pursuant to a Note Exchange shall be
determined by dividing (x) the applicable Conversion Amount subject to the Note
Exchange by (y) the Conversion Price (as defined in the Note) (the "Note Exchange
Amount").

     

    (ii)           The
number of Exchange Shares to be delivered pursuant to a Warrant Exchange shall
equal the number of Warrant Shares issuable upon exercise of the Warrant being
transferred (as adjusted to the extent such Holder elects to effect a cashless
exchange) (the "Warrant
Exchange Amount").

     

    (iii)           The
number of Exchange Shares to be delivered pursuant to a Payment Default Exchange
shall be determined by dividing (x) the amount of the Additional Conversion
Obligations subject to the Payment Default that a Holder has agreed to forgo by
(y) the Payment Default Conversion Price (the "Payment Default Exchange
Amount").  As used herein, "Payment Default Conversion
Price" means the lowest of (i) the then applicable Conversion Price (as
defined in the Note), (ii) that price which shall be computed as 80% of the
Market Price (as defined in the Note) as of the date of delivery of the
applicable Exchange Notice requiring the payment of the Additional Conversion
Obligations that resulted in such Payment Default and (iii) that price which
shall be computed as 80% of the Market Price as of the date of delivery of the
Exchange Notice with respect to the applicable Payment Default
Exchange.  All such prices shall be appropriately adjusted for any
share split, share dividend, share combination or other similar transaction that
proportionately decreases or increases the market price of the Common Shares
either during any period in which a Market Price is determined or prior to the
applicable Exchange Date.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    (d)           Company's Failure to Timely
Exchange.  If the Shareholder shall fail to deliver a
certificate to the Holder or credit the Holder's balance account with DTC, as
applicable, for such number of Common Shares to which the Holder is entitled
upon a Note Exchange, Warrant Exchange and/or Payment Default Exchange on or
prior to the date which is three (3) Trading Days after the Exchange Date (an
"Exchange Failure"), and
if on or after such Exchange Failure the Holder purchases (in an open market
transaction or otherwise) Common Shares to deliver in satisfaction of a sale by
the Holder of Exchange Shares issuable upon such exchange that the Holder
anticipated receiving from the Shareholder (an "Exchange Shares Buy-In"), then
within three (3) Trading Days after the Holder's request and in the Holder's
discretion, either (x) the Company shall pay cash to the Holder in an amount
equal to the Holder's total purchase price (including brokerage commissions and
other reasonable out-of-pocket brokerage expenses, if any) for the Common Shares
so purchased (the "Exchange
Shares Buy-In Price"), at which point the Shareholder's obligation to
deliver a certificate to the Holder (and to deliver such Exchange Shares) or
credit the Holder's balance account with DTC for such Exchange Shares shall
terminate, or (y) the Shareholder shall promptly honor its obligation to deliver
to the Holder a certificate or certificates representing such Exchange Shares or
credit such Holder's balance account with DTC and the Company shall pay cash to
the Holder in an amount equal to the excess (if any) of the Exchange Shares
Buy-In Price over the product of (I) such number of Exchange Shares, times (II)
the Closing Bid Price (as defined in the Note) on the Exchange
Date.

     

    (e)           Legends.  The
Investor understands that, unless the Exchange Shares are transferred to the
Investor by Mr. Lu pursuant to an effective registration statement, until such
time as the delivery of the Exchange Shares has been registered under the
1933 Act as contemplated by the Registration Rights Agreement, the certificates
representing the Exchange Shares, except as set forth below, shall bear any
legend as required by the "blue sky" laws of any state and a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):

     

    THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A, IF APPLICABLE, UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    The
legend set forth above shall be removed and the Shareholder shall deliver, or
the Company shall re-issue, as applicable, a certificate without such legend to
the holder of the Exchange Shares upon which it is stamped or issue to such
holder by electronic delivery at the applicable balance account at DTC if,
unless otherwise required by state securities laws, (i) such Exchange
Shares are registered for resale under the 1933 Act, (ii) in connection
with a sale, assignment or other transfer, such holder provides the Company with
an opinion of counsel to the holder, in a form reasonably satisfactory to the
Company, to the effect that such sale, assignment or transfer of
the Exchange Shares may be made without registration under the
applicable requirements of the 1933 Act, (iii) the Exchange Shares can
be sold, assigned or transferred pursuant to Rule 144 or Rule 144A, if
applicable; provided, that such holder provides the Company with reasonable
assurance that such Exchange Shares can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A, if applicable, or (iv) the
Exchange Shares are transferred to the Investors by Mr. Lu pursuant to an
effective resale registration statement.  The Company shall be
responsible for the fees of its transfer agent and all DTC fees associated with
such issuance or delivery.

     

    (f)           Book-Entry.  Notwithstanding
anything to the contrary set forth herein, upon exchange of any portion of a
Note and/or Warrant in accordance with the terms hereof, a Holder shall not be
required to physically surrender such Note or Warrant to the Company or the
Shareholder, as applicable, unless (A) with respect to any Note, the full
Conversion Amount represented by such Note is being exchanged, (B) with respect
to any Warrant, the entire Warrant is being exchanged or (C) such Holder has
provided the Company and the Shareholder with prior written notice (which notice
may be included in an Exchange Notice) requesting reissuance of such Note and/or
Warrant upon physical surrender of such Note and/or Warrant.  Such
Holder, the Shareholder and the Company shall maintain records showing the
Principal and Interest of any Note exchanged, the number of Warrant Shares
issuable upon any Warrant exchanged and the dates of such exchanges or shall use
such other method, reasonably satisfactory to such Holder and the Shareholder,
so as not to require physical surrender of any Note or Warrant upon
exchange.

     

    (g)           Disputes.  In
the event of a dispute as to the number of Exchange Shares transferable to such
Holder in connection with a Note Exchange, a Warrant Exchange and/or a Payment
Default Exchange, the Shareholder and the Company shall cause the transfer and
delivery to such Holder of the number of Exchange Shares not in dispute and
resolve such dispute in accordance with Section 11.

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    (h)           Limitations on
Exchanges.

     

    (i)           Beneficial
Ownership.  The Shareholder shall not effect, and the Company
shall not recognize, facilitate or effect, any exchange of any Note or Warrant,
and a Holder of any Note or Warrant shall not have the right to exchange any
portion of any Note or Warrant, pursuant to this Section 1 or otherwise, to the
extent that after giving effect to such exchange, such Holder (together with
such Holder's affiliates) would beneficially own in excess of 4.99% ("Maximum Percentage") of the
number of Common Shares outstanding immediately after giving effect to such
exchange.  For purposes of the foregoing sentence, the number of
Common Shares beneficially owned by such Holder and its affiliates shall include
the maximum number of Common Shares deliverable upon exchange of the Note and
Warrant of such Holder with respect to which the determination of such sentence
is being made, but shall exclude the number of Common Shares which would be
deliverable upon (A) exchange of the remaining, nonexchanged portion of the Note
and Warrant beneficially owned by such Holder or any of its affiliates and (B)
exercise, conversion or exchange of the unexercised, unconverted or nonexchanged
portion of any other securities of the Company (including, without limitation,
any Notes or Warrants of any other Holder) subject to a limitation on exchange,
conversion or exercise analogous to the limitation contained herein beneficially
owned by such Holder or any of its affiliates.  Except as set forth in
the preceding sentence, for purposes of this Section 1(h)(i), beneficial
ownership shall be calculated in accordance with Section 13(d) of the 1934
Act.  For purposes of this Section 1(h)(i), in determining the number
of outstanding Common Shares, the Company, the Shareholder and such Holder may
rely on the number of outstanding Common Shares as reflected in (x) the most
recent Annual and Transition report of Foreign Private Issuers on Form 20-F or
Report of Foreign Issuer on Form 6-K of the Company or other public filing with
the SEC, as the case may be, (y) a more recent public announcement by the
Company or (z) any other more recent notice by the Company or the Transfer Agent
setting forth the number of Common Shares outstanding.  For any reason
at any time, upon the written or oral request of such Holder, the Company shall
within two (2) Business Days confirm in writing to such Holder the number of
Common Shares then outstanding.  In any case, the number of
outstanding Exchange Shares shall be determined after giving effect to the
conversion, exchange or exercise of securities of the Shareholder, including any
Note or Warrant, by such Holder or its affiliates since the date as of which
such number of outstanding Common Shares was reported.  By written
notice to the Company, the Holder may increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.99% specified in such
notice; provided that (x) any such increase will not be effective until the
sixty-first (61st) day
after such notice is delivered to the Company and the Shareholder and (y) any
such increase or decrease will apply only to the Holder and not to any other
holder of Notes or Warrants.  The provisions of this paragraph shall
be construed and implemented in a manner other than in strict conformity with
the terms of this Section 1(h)(i) to correct this paragraph (or any portion
hereof) which may be defective or inconsistent with the intended beneficial
ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.

     

    (ii)           Maximum Shareholder
Shares.  The Shareholder shall not deliver any Exchange Shares
upon exchange of any Note or Warrant, whether pursuant to the applicable Section
1, the Pledge Agreement or otherwise, if the delivery of such Exchange Shares
would require the delivery of more than the sum of (x) 6,000,000 and (y) the
number of Additional Pledged Shares (as defined in the Pledge Agreement) pledged
pursuant to the Pledge Agreement, up to a maximum number of 1,000,000 Additional
Pledged Shares, in the aggregate (in each case, as adjusted for any stock
dividend, stock split, stock combination or other similar transaction affecting
the Exchange Shares after the Issuance Date) (the "Maximum Share
Cap").  No Buyer shall have delivered to it, upon exchange of
Notes or Warrants, a number of Exchange Shares in an amount greater than the
product of the Maximum Share Cap multiplied by a fraction, the numerator of
which is the principal amount of Notes issued to such Buyer pursuant to the
Securities Purchase Agreement on the Closing Date and the denominator of which
is the aggregate principal amount of all Notes issued to the Buyers pursuant to
the Securities Purchase Agreement on the Closing Date (with respect to each
Buyer, the "Maximum Share Cap
Allocation").  In the event that any Buyer shall sell or
otherwise transfer any of such Buyer's Notes, the transferee shall be allocated
a pro rata portion of such Buyer's Maximum Share Cap Allocation, and the
restrictions of the prior sentence shall apply to such transferee with respect
to the portion of the Maximum Share Cap Allocation allocated to such
transferee.  In the event that any such holder shall have converted
and exchanged such holder's Notes and Warrants in their entirety (such that such
holder no longer has any Notes or Warrants) and such holder shall have received
a number of Exchange Shares which, in the aggregate, is less than such holder's
Maximum Share Cap Allocation, then the difference between such holder's Maximum
Share Cap Allocation and the number of Exchange Shares actually delivered to
such holder shall be allocated to the respective Maximum Share Cap Allocations
of the remaining holders of Notes on a pro rata basis in proportion to the
aggregate principal amount of the Notes then held by each such
holder.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    2.      PURCHASE
RIGHTS.  If at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase shares, warrants,
securities or other property pro rata to the record holders of any class of
Common Shares  (other than Pill Rights (as defined in the Note)) (the
"Purchase Rights"), then
such Holder will be entitled to receive from the Shareholder, but only to the
extent such Holder has not already received such Purchase Rights from the
Company, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights that the Shareholder is entitled to, which such Holder could
have acquired if such Holder had held the number of Common Shares acquirable
upon complete exchange of the Note of such Holder (without taking into account
any limitations or restrictions on the convertibility or exchange of such Note)
and/or Warrant of such Holder (without taking into account any limitations or
restrictions on the exercisability or exchange of such Warrant) immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Shares are to be determined for the grant, issue or
sale of such Purchase Rights.

     

    3.      OTHER CORPORATE
EVENTS.  In addition to and not in substitution for any other
rights hereunder, prior to the consummation of any Fundamental Transaction
pursuant to which holders of Common Shares are entitled to receive securities or
other assets with respect to or in exchange for Common Shares (a "Corporate Event"), the Company
and the Shareholder shall make appropriate provision to insure that such Holder
will thereafter have the right to receive upon an exchange of any Note or
Warrant, at such Holder's option, (i) in addition to the Common Shares
receivable upon such exchange, such securities or other assets to which such
Holder would have been entitled with respect to such Common Shares had such
Common Shares been held by such Holder upon the consummation of such Corporate
Event (without taking into account any limitations or restrictions on the
convertibility, exercisability or exchange of any Note or Warrant) or (ii) in
lieu of the Common Shares otherwise receivable upon such exchange, such
securities or other assets received by such holders of Common Shares in
connection with the consummation of such Corporate Event in such amounts as such
Holder would have been entitled to receive had this Agreement initially included
exchange rights for the form of such consideration (as opposed to Common Shares)
at a conversion rate for such consideration commensurate with the Note Exchange
Rate, the Warrant Exchange Amount or the Payment Default Amount, as applicable,
but only to the extent such Holder has not already received the securities or
assets contemplated to be received pursuant to such Corporate Event pursuant to
the Notes or Warrants.  Provision made pursuant to the preceding
sentence shall be in a form and substance satisfactory to the holders of a
majority of the Registrable Securities.  The provisions of this
Section shall apply similarly and equally to successive Corporate Events and
shall be applied without regard to any limitations on the conversion, exercise,
exchange or redemption of any Note or Warrant.

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    4.      PARTICIPATION.  Each
Holder, as a Holder of Notes and/or Warrants, shall be entitled to receive upon
a Note Exercise or Warrant Exercise such dividends paid and distributions (other
than Pill Rights) made to the Shareholder in his capacity as a holder of the
Exchange Shares to the same extent as if such Holder had exchanged its Note and
Warrant into Exchange Shares (without regard to any limitations on exchange
herein or elsewhere (other than Section 1(h)(ii) hereof)) and had held such
Exchange Shares on the record date for such dividends and distributions;
provided, that such payments shall be made if and only to the extent such Holder
receives Exchange Shares in a Note Exchange, Warrant Exchange and/or Payment
Default Exchange but only to the extent the Holder does not receive such payment
or distribution from the Company on or prior to the applicable Share Delivery
Date.  Until Exchange Shares are exchanged in a Note Exchange, Warrant
Exchange and/or Payment Default Exchange, any such dividends paid or
distributions made with respect to such Exchange Shares shall be Pledged
Collateral pursuant to, and delivered by the Company to the Collateral Agent to
be held in accordance with the Pledge Agreement.  Each Holder, as a
Holder of Notes and/or Warrants, shall be entitled to receive any Pill Rights
(or, at the option of such Holder, to the extent such Pill Rights become
exercisable or have been exercised into equity interests of the Company or any
other distribution is made of equity interests of the Company to holders of such
Pill Rights, such equity interests of the Company) from the Shareholder, but
only to the extent such Holder has not already received such Pill Rights from
the Company, made to the holders of Common Shares concurrently with any Note
Exchange, Warrant Exchange and/or Payment Default Exchange hereunder to the same
extent as if the Holder had held such Common Shares on the record date for such
dividend or distribution of Pill Rights.

     

    5.      REPRESENTATIONS AND
WARRANTIES.

     

    (a)           The
Shareholder hereby represents and warrants to the Investor as
follows:

     

    (i)           The
Shareholder has the legal capacity and right to execute, deliver, enter into,
consummate and perform this Agreement.

     

    (ii)           The
Shareholder is an "accredited investor" (as that term is defined in Rule 501 of
Regulation D promulgated under the 1933Act) and he is acting for his own account
and will acquire any Notes and Warrants for his own account and not with a view
to, or for sale in connection with, any distribution or resale of the Notes and
Warrants or his or her rights thereunder except pursuant to a registration
statement declared effective under, or an exemption from the registration
requirements of, the 1933 Act.

     

    (iii)           The
Shareholder understands that, except as provided in the Registration Rights
Agreement, the Notes and Warrants have not been and is not being registered
under the 1933 Act or any state securities laws, and may not be offered for
sale, sold, assigned or transferred unless subsequently registered thereunder or
an exemption from such registration is available.

     

    (iv)           The
Shareholder has all requisite power and authority to execute, deliver this
Agreement and to carry out and perform all of its obligations under the terms of
this Agreement.  This Agreement has been duly and validly executed and
delivered by the Shareholder and constitutes the legal, valid and binding
obligation of the Shareholder, enforceable against him in accordance with its
terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and any other laws of general
application affecting enforcement of creditors' rights generally, or (b) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    (v)           The
execution and delivery by the Shareholder of this Agreement does not and the
consummation by the Shareholder of the transactions contemplated hereby will not
(a) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Shareholder is a party, or (b)
result in a violation of any law, rule, regulation, order, judgment or decree
including foreign, federal and state securities laws and regulations and the
rules and regulations of The NASDAQ Global Select Market (the "Principal Market") and
applicable laws of the British Virgin Islands and of the People's Republic of
China ("China"))
applicable to the Shareholder, except for such conflicts, defaults, rights or
violations which would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of the Shareholder to
perform its obligations hereunder.

     

    (vi)           No
consent, approval, permit, order, notification or authorization of, or any
exemption from registration, declaration or filing with, any person
(governmental or private) is required in connection with the execution, delivery
and performance by the Shareholder of this Agreement or the consummation by the
Shareholder of the transactions contemplated hereby, except for the filing of
one or more amendments to the Schedule 13D previously filed by the
Shareholder.

     

    (vii)           There
is no action, suit, proceeding, judgment, claim or investigation pending, or to
the knowledge of the Shareholder, threatened against the Shareholder, which
could reasonably be expected in any manner to challenge or seek to prevent,
enjoin, alter or materially delay any of the transactions contemplated by this
Agreement.

     

    (viii)           The
Shareholder has good and valid title to the Exchange Shares free and clear of
lien, mortgage, security interest, pledge, charge or encumbrance of any kind
("Liens"), other than
restrictions on transfer arising under the 1933 Act.  Delivery of the
Exchange Shares to the Investor will pass to the Investor good and valid title
to the Exchange Shares, free and clear of Liens other than those of the Investor
or under securities laws.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    (ix)           The
Shareholder (i) is a sophisticated person with respect to the Note Exchanges,
the Warrant Exchanges and the Payment Default Exchanges, (ii) has adequate
information concerning the business and financial condition of the Company to
make an informed decision regarding the Note Exchanges, the Warrant Exchanges
and the Payment Default Exchanges; and (iii) has independently and without
reliance upon the Investors or the Buyers, and based on such information as the
Shareholder has deemed appropriate, made its own analysis and decision to enter
into this Agreement.  The Shareholder is acting solely for the
Shareholder's own account, and has made the Shareholder's own independent
decision to enter into this Agreement and as to whether this Agreement is
appropriate or proper for the Shareholder based upon the Shareholder's own
judgment and upon advice of such advisors as the Shareholder deems
necessary.  The Shareholder acknowledges and agrees that the
Shareholder is not relying, and has not relied, upon any communication (written
or oral) of the Investor or any affiliate, employee or agent of the Investor
with respect to the legal, accounting, tax or other implications of this
Agreement and that the Shareholder has conducted the Shareholder's own analyses
of the legal, accounting, tax and other implications hereof and thereof; it
being understood that information and explanations related to the terms and
conditions of this Agreement shall not be considered investment advice or a
recommendation to enter into this Agreement.  The Shareholder
acknowledges that the Investor has not given Shareholder any investment advice,
credit information or opinion on whether to consummate the Note Exchanges, the
Warrant Exchanges and the Payment Default Exchanges.  The Shareholder
acknowledges that neither the Investor nor any affiliate, employee or agent of
the Investor is acting as a fiduciary for or an advisor to the Shareholder in
respect of this Agreement.

     

    (x)           The
Shareholder understands that the Notes and Warrants are being offered and
exchanged to him or her in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws.

     

    (xi)           The
Shareholder understands that the Notes and the Warrants shall bear the legends
set forth in Section 2(g) of the Securities Purchase Agreement and, except as
consented to by the Company, such legends shall not be removed except in
accordance with Section 2(g) of the Securities Purchase Agreement.

     

    (xii)           The
Shareholder is not acquiring the Notes or Warrants as a result of any
advertisement, article, notice or other communication regarding the Notes or
Warrants published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar or any other general
solicitation or general advertisement.

     

    (xiii)          The
Shareholder has not, and to his knowledge no one acting on his or her behalf,
has taken, directly or indirectly, any action designed to cause or to result in
the stabilization or manipulation of the price of any security of the
Company.

     

    (xiv)          The
Shareholder has not taken any action that would give rise to any claim by any
person for brokerage commissions, finder's fees or similar payments relating to
this Agreement or the transactions contemplated hereby.

     

    (xv)           The
Shareholder understands and acknowledges that the Note Exchange Rate, the
Warrant Exchange Amount and the Payment Default Exchange Rate will increase in
certain circumstances.  The Shareholder further acknowledges that its
obligation to exchange the Exchange Shares for the Notes and/or the Warrants in
accordance with this Agreement is absolute and unconditional regardless of the
dilutive effect (subject to the Maximum Share Cap) that such issuance may have
on the ownership interests of the Shareholder or other shareholders of the
Company.

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    (b)           Representations and
Warranties of the Investor.  The Investor hereby represents and
warrants to the Shareholder as follows:

     

    (i)           The
Investor is an entity duly organized and validly existing under the laws of the
jurisdiction of its formation.

     

    (ii)           The
Investor is an "accredited investor" (as that term is defined in Rule 501 of
Regulation D promulgated under the 1933 Act and the Investor will acquire the
Exchange Shares solely for its own account (or in connection with, or pursuant
to, one or more participation agreements by such Buyer with, and for the benefit
of, one or more funds or managed accounts that are "accredited investors" (as
defined in Rule 501(a) of Regulation D) that are managed by the investment
manager of such Buyer)  and not with a view to, or for sale in
connection with, any distribution or resale of the Exchange Shares or its rights
thereunder except pursuant to a registration statement declared effective under,
or an exemption from the registration requirements of, the 1933
Act.

     

    (iii)           The
Investor understands that, except as provided in the Registration Rights
Agreement, the Exchange Shares have not been and is not being registered under
the 1933 Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred unless subsequently registered thereunder or an
exemption from such registration is available.

     

    (iv)           The
Investor has the requisite power and authority to execute and deliver this
Agreement and to carry out and perform all of its obligations under the terms of
this Agreement.  This Agreement has been duly and validly authorized,
executed and delivered by the Investor and shall constitute the legal, valid and
binding obligation of the Investor enforceable against the Investor in
accordance with its terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and any other
laws of general application affecting enforcement of creditors' rights
generally, or (b) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.

     

    (v)           The
execution, delivery and performance by the Investor of this Agreement and the
consummation by the Investor of the transactions contemplated hereby will not
(a) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Investor is a party, or (b)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws) applicable to the Investor, except
for such conflicts, defaults, rights or violations which would not, individually
or in the aggregate, reasonably be expected to have a material adverse effect on
the ability of the Investor to perform its obligations hereunder.

     

    (vi)           No
consent, approval, permit, order, notification or authorization of, or any
exemption from registration, declaration or filing with, any person
(governmental or private) is required in connection with the execution, delivery
and performance by the Investor of this Agreement or the consummation by the
Investor of the transactions contemplated hereby.

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    (vii)         There
is no action, suit, proceeding, judgment, claim or investigation pending, or to
the knowledge of the Investor, threatened against the Investor, which could
reasonably be expected in any manner to challenge or seek to prevent, enjoin,
alter or materially delay any of the transactions contemplated by this
Agreement.

     

    (viii)        The
Investor has good and valid title to the Notes and the Warrants free and clear
of any Liens, other than restrictions on transfers arising under the 1933
Act.  Delivery of the Notes and the Warrants to the Shareholder will
pass to the Shareholder good and valid title to the Notes and the Warrants, free
and clear of Liens other than those of the Shareholder or under securities
laws.

     

    (ix)           The
Investor (i) is a sophisticated person with respect to the Note Exchanges, the
Warrant Exchanges and the Payment Default Exchanges, (ii) has adequate
information concerning the business and financial condition of the Company to
make an informed decision regarding the Note Exchanges, the Warrant Exchanges
and the Payment Default Exchanges; and (iii) has independently and without
reliance upon the Shareholders, and based on such information as the Investor
has deemed appropriate, made its own analysis and decision to enter into this
Agreement.  The Investor has made the Investor's own independent
decision to enter into this Agreement and as to whether this Agreement is
appropriate or proper for the Investor based upon the Investor's own judgment
and upon advice of such advisors as the Investor deems necessary.  The
Investor acknowledges and agrees that the Investor is not relying, and has not
relied, upon any communication (written or oral) of the Shareholder or any
affiliate, employee or agent of the Shareholder with respect to the legal,
accounting, tax or other implications of this Agreement and that the Investor
has conducted the Investor's own analyses of the legal, accounting, tax and
other implications hereof and thereof; it being understood that information and
explanations related to the terms and conditions of this Agreement shall not be
considered investment advice or a recommendation to enter into this
Agreement.  The Investor acknowledges that the Shareholder has not
given Investor any investment advice, credit information or opinion on whether
to consummate the Note Exchanges, the Warrant Exchanges and the Payment Default
Exchanges.  The Investor acknowledges that neither the Shareholder nor
any affiliate, employee or agent of the Shareholder is acting as a fiduciary for
or an advisor to the Investor in respect of this Agreement.

     

    (x)           The
Investor understands that, unless the Exchange Shares are transferred to the
Investor by Mr. Lu pursuant to an effective registration statement, the Exchange
Shares will be offered and exchanged with the Investor in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws.

     

    (xi)           The
Investor is not acquiring the Exchange Shares as a result of any advertisement,
article, notice or other communication regarding the Exchange Shares published
in any newspaper, magazine or similar media or broadcast over television or
radio or presented at any seminar or, to the Investor's knowledge, any other
general solicitation or general advertisement.

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    6.      COVENANTS OF THE
SHAREHOLDER.

     

    (a)           Additional Share
Powers.

     

    (i)           If
at any time the Collateral Agent holds less than ten (10) share powers for the
Pledged Shares, duly executed and delivered by the Shareholder and including a
Medallion Guarantee, except to the extent the Company's Transfer Agent has
agreed in writing to transfer the Pledged Shares without any such Medallion
Guarantee (each, a "Share
Power"), then no later than three (3) Business Days after the Company's
or the Shareholder's receipt of a written request by the Collateral Agent for
additional Share Powers, the Shareholder shall deliver to the Collateral Agent
such number of Share Powers requested.

     

    (ii)           Upon
any Note Exchange, Warrant Exchange or Payment Default Exchange in which a
Holder receives certificated Exchange Shares, the Shareholder shall, no later
than the Share Delivery Date, cause a replacement Share Power to be delivered to
the Collateral Agent.

     

    (b)           Lock-Up Agreement.
The Shareholder shall not amend or waive any provision of any of the Lock-Up
Agreement between the Shareholder and the Company except to extend the term of
the lock-up period.

     

    (c)           Noncircumvention.  The
Company hereby covenants and agrees that the Company will not, by amendment of
its Memorandum and Articles of Association, or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, dissolution,
issue or sale of securities, or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Agreement, and
will at all times in good faith carry out all of the provisions of this
Agreement and take all action as may be required to protect the rights of the
Investor and the Holders of the Notes and Warrants set forth
herein.  The Shareholder hereby covenants and agrees that he will not
avoid or seek to avoid the observance or performance of any of the terms of this
Agreement, and will at all times in good faith carry out all of the provisions
of this Agreement and take all actions as may be reasonably required to protect
the rights of the Investor as the Holder of the Notes and Warrants set forth
herein. For the avoidance of doubt, solicitation by the Company in accordance
with the requirements of the Notes and the Securities Purchase Agreement of the
consents of the Required Noteholders to any amendment, modification or waiver of
any provision of the Notes shall not be deemed an avoidance of performance of
the terms of this Agreement.

     

    7.           REMEDIES, CHARACTERIZATIONS,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The
remedies provided in this Agreement shall be cumulative and in addition to all
other remedies available under this Agreement and any of the other Transaction
Documents at law or in equity (including a decree of specific performance and/or
other injunctive relief), and nothing herein shall limit a Holder's right to
pursue damages for any failure by the Company or the Shareholder to comply with
the terms of this Agreement.  Amounts set forth or provided for herein
with respect to payments, conversion and the like (and the computation thereof)
shall be the amounts to be received by a Holder and shall not, except as
expressly provided herein, be subject to any other obligation of the Company or
the Shareholder(or the performance thereof).  The Company and the
Shareholder each acknowledge that a breach by it of its obligations hereunder
will cause irreparable harm to each Holder and that the remedy at law for any
such breach may be inadequate.  The Company and the Shareholder each
therefore agree that, in the event of any such breach or threatened breach, each
Holder shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    8.           PAYMENT OF COLLECTION,
ENFORCEMENT AND OTHER COSTS.  If (a) this Agreement is placed
in the hands of an attorney for collection or enforcement or is collected or
enforced through any legal proceeding or a Holder otherwise takes action to
collect amounts due under this Agreement or to enforce the provisions of this
Agreement or (b) there occurs any bankruptcy, reorganization, receivership of
the Company or the Shareholder or other proceedings affecting Company or the
Shareholder creditors' rights and involving a claim under this Agreement, then
the Company shall pay the costs incurred by such Holder for such collection,
enforcement or action or in connection with such bankruptcy, reorganization,
receivership or other proceeding, including, but not limited to, attorneys' fees
and disbursements.

     

    9.           CONSTRUCTION;
HEADINGS.  This Agreement shall be deemed to be jointly drafted
by the Shareholder, the Investor and the Company and shall not be construed
against any person as the drafter hereof.  The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement.

     

    10.           FAILURE OR INDULGENCE NOT
WAIVER.  No failure or delay on the part of a Holder in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.

     

    11.           DISPUTE
RESOLUTION.  In the case of a dispute as to the determination
of the Closing Bid Price, the Closing Sale Price or the Weighted Average Price
or the arithmetic calculation of the Note Exchange Rate, any Warrant Exchange
Amount or any Payment Default Exchange Rate, the Shareholder shall submit the
disputed determinations or arithmetic calculations via facsimile within one (1)
Business Day of receipt, or deemed receipt, of the Exchange Notice or other
event giving rise to such dispute, as the case may be, to the applicable
Holder.  If such Holder and the Shareholder are unable to agree upon
such determination or calculation within one (1) Business Day of such disputed
determination or arithmetic calculation being submitted to such Holder, then the
Shareholder shall, within one Business Day submit via facsimile (a) the disputed
determination of the Closing Bid Price, the Closing Sale Price or the Weighted
Average Price to an independent, reputable investment bank selected by such
Shareholder and approved by the Holder, such consent not to be unreasonably
withheld, or (b) the disputed arithmetic calculation of the Note Exchange Rate,
Warrant Exchange Amount or Payment Default Exchange Rate to an independent,
outside accountant, selected by such Shareholder and approved by the Holder,
such consent not to be unreasonably withheld.  The Shareholder, at the
Company's expense, shall cause the investment bank or the accountant, as the
case may be, to perform the determinations or calculations and notify the
Shareholder and such Holder of the results no later than five (5) Business Days
from the time it receives the disputed determinations or
calculations.  Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    12.           TERMINATION.  Upon
the expiration of the Exchange Period, this Agreement, other than the provisions
of Sections 14 and 15 hereof (which shall survive) shall automatically terminate
and shall be null and void.

     

    13.           WAIVER OF
NOTICE.  To the extent permitted by law, the Company and the
Shareholder hereby waives demand, notice, protest and all other demands and
notices in connection with the delivery, acceptance, performance, default or
enforcement of this Agreement.

     

    14.           AGREEMENT TO RESTRICT VOTING
RIGHTS; SUCCESSOR COLLATERAL AGENT.

     

    (a)           Definitions.

     

    (i)           "Bankruptcy Case" means any
proceeding commenced by or against the Company under any provision of the
Bankruptcy Code or under any other federal or state bankruptcy or insolvency
law, including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extensions generally with its creditors, or proceedings
seeking reorganization, arrangement, or other similar relief, and all converted
or succeeding cases in respect thereof.

     

    (ii)           "Bankruptcy Code" means the
United States Bankruptcy Code (11 U.S.C. § 101, et seq.), as amended,
and any successor statute.

     

    (iii)           "Required Unaffiliated Holders"
means holders of a majority of the principal amount of Notes held by
Unaffiliated Holders.

     

    (iv)           "Shareholder Affiliate" means
any of the Shareholder's family members, affiliates or agents, the Company and
any Subsidiary.

     

    (v)           "Shareholder Obligations" means
any and all indebtedness, claims, debts, liabilities, obligations, fees and
expenses of the Company owing to the Shareholder or any Shareholder Affiliates
pursuant to the Notes held or owned, beneficially or of record, by the
Shareholder and all Shareholder Affiliates.

     

    (vi)           "Unaffiliated Holders" means
the holders of Notes, other than those held or owned, beneficially or of record,
by the Shareholder or any Shareholder Affiliates.

     

    (b)           In
any Bankruptcy Case by or against the Company,

     

    (i)           the
Required Unaffiliated Holders of the Notes may, and are hereby irrevocably
authorized and empowered (in the name of the Unaffiliated Holders or in the name
of the Shareholder, a Shareholder Affiliate or otherwise), but shall have no
obligation, to (x) demand, sue for, collect and receive every payment or
distribution referred to in this Section 14 and give acquittance therefor and
(y) file claims and proofs of claim in respect of any Shareholder
Obligations and take such other action (including, without limitation, voting
such Shareholder Obligations or enforcing any security interest or other lien
securing payment of any Shareholder Obligations) as the Unaffiliated Holders may
reasonably deem necessary or advisable for the exercise or enforcement of any of
the rights or interests of the Unaffiliated Holders hereunder;

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    (ii)           the
Shareholder and each Shareholder Affiliate (each, solely in his or its capacity
as a holder of Notes) hereby agrees to (i) file all claims and/or proofs of
claim with respect to the Shareholder Obligations as directed by the Required
Unaffiliated Holders, (ii) vote as directed by the Required Unaffiliated Holders
with respect to any plan of reorganization proposed by the Required Unaffiliated
Holders, the Company or any other party and (iii) promptly take such action as
the Required Unaffiliated Holders may reasonably request (x) to collect the
respective Shareholder Obligations for the account of the Unaffiliated Holders
and to file appropriate claims or proofs of claim with respect thereto and (y)
to execute and deliver to the Required Unaffiliated Holders such powers of
attorney, assignments or other instruments as the Required Unaffiliated Holders
may reasonably request in order to enable them to enforce any and all claims
with respect to such Shareholder Obligations; and

     

    (iii)          no
objection will be raised by the Shareholder or any Shareholder Affiliate (each,
solely in his or its capacity as a holder of Notes) to any motion made by the
Required Unaffiliated Holders in a Bankruptcy Case of the Company, including
without limitation, a motion by the Required Unaffiliated Holders (or any agent
thereof, if applicable) for relief from the automatic stay in any proceeding
under the Bankruptcy Code to foreclose on or sell any collateral of the
Company.

     

    (iv)          Notwithstanding
anything to the contrary contained herein, each Note, whether held by the
Shareholder, a Shareholder Affiliate or an Unaffiliated Holder, shall be parri passu in right of
payment with all other Notes.

     

    (c)           Successor Collateral
Agent.  The Shareholder hereby covenants and agrees to take all
actions reasonably requested by the Collateral Agent to secure a successor
Collateral Agent satisfactory to the Buyers in their sole discretion (it being
acknowledged and agreed by the Buyers that The Bank of New York Mellon is a
satisfactory successor collateral agent), as promptly as practicable, including,
without limitation, by executing a collateral agency agreement or similar
agreement and/or amendment to the Pledge Agreement reasonably requested or
required by the successor Collateral Agent. Any fees in connection therewith
shall be paid by the Company.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

       

    

    15.           MISCELLANEOUS.

     

    (a)        Governing Law; Jurisdiction;
Jury Trial.  All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.  Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof.  Each of the Company and the Shareholder hereby
appoints C T Corporation System, with offices at 111 Eighth Avenue, New York,
New York 10011, as its agent for service of process in New
York.  Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

     

    (b)        Counterparts.  This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if the
signature were an original, not a facsimile signature.

     

    (c)        Headings.  The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.

     

    (d)        Severability.  If
any provision of this Agreement is prohibited by law or otherwise determined to
be invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Agreement so long as this Agreement
as so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties.  The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable provision(s).

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

       

    

    (e)        Entire Agreement;
Amendments.  This Agreement and the other Transaction Documents
supersede all other prior oral or written agreements between the Investor, the
Shareholder, the Company, their affiliates and Persons acting on their behalf
with respect to the matters discussed herein, and this Agreement, the other
Transaction Documents and the instruments referenced herein and therein contain
the entire understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or therein,
neither the Shareholder, the Company nor the Investor makes any representation,
warranty, covenant or undertaking with respect to such matters.  No
provision of this Agreement may be amended other than by an instrument in
writing signed by the Shareholder, the Company and such Holders of at least a
majority of the aggregate number of Registrable Securities issued and issuable
pursuant to the Securities Purchase Agreement and under the Notes, and any
amendment to this Agreement and the Other Agreements made in conformity with the
provisions of this Section 15(e) shall be binding on the Investor and holders of
Securities, as applicable.  No provision hereof may be waived other
than by an instrument in writing signed by the party against whom enforcement is
sought.  No such amendment shall be effective to the extent that it
applies to less than all of such Holders of the applicable Securities then
outstanding.  No consideration shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of this
Agreement or any Other Agreement unless the same consideration also is offered
to all of the parties to this Agreement, any Other Agreement and the Holders of
Notes or Holders of the Warrants, as the case may be.  Neither the
Shareholder nor the Company has, directly or indirectly, made any agreements
with any Buyers relating to the terms or conditions of the transactions
contemplated by the Transaction Documents except as set forth in the Transaction
Documents.

     

    (f)         Notices.  Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered:  (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation of transmission
is mechanically or electronically generated and kept on file by the sending
party); or (iii) one Business Day after deposit with an overnight courier
service, in each case properly addressed to the party to receive the
same.  The addresses and facsimile numbers for such communications
shall be:

     

    If to the
Company:

     

    A-Power
Energy Generation Systems, Ltd.

    No. 44
Jingxing Road

    Tiexi
District

    Shenyang,
Liaoning Province

    China
110021

    Telephone:      86-24-85617888

    Facsimile:       86-24-85830606

    Attention:      
 John Lin

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

       

    

    With a
copy (for informational purposes only) to:

     

    Baker
& McKenzie LLP

    1114
Avenue of the Americas

    New York,
New York 10036

    Telephone:      (212)
626-4965

    Facsimile:       (212)
310-1802

    Attention:       Omer
Ozden, Esq.

     

    If to the
Shareholder:

     

    c/o
A-Power Energy Generation Systems, Ltd.

    No. 44
Jingxing Road

    Tiexi
District

    Shenyang,
Liaoning Province

    China
110021

    Telephone:      86-24-85617888

    Facsimile:       86-24-85830606

     

    With a
copy (for informational purposes only) to:

     

    Baker
& McKenzie LLP

    1114
Avenue of the Americas

    New York,
New York 10036

    Telephone:      (212)
626-4965

    Facsimile:       (212)
310-1802

    Attention:       Omer
Ozden, Esq.

     

    If to the
Transfer Agent:

    

    Continental
Stock Transfer & Trust Company

    17
Battery Place

    New York,
New York 10004

    Telephone:    
 (212) 509-4000

    Facsimile:       (212)
616-7615

    Attention:       Account
Administration: A-Power Energy

                           Generation
Systems, Ltd.

     

    If to the
Investor, to its address and facsimile number set forth on the Schedule of
Investors, with copies to the Investor's representatives as set forth on the
Schedule of Investors,

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    with a
copy (for informational purposes only) to:

     

    Schulte
Roth & Zabel LLP

    919 Third
Avenue

    New York,
New York  10022

    Telephone:     
(212) 756-2000

    Facsimile:       (212)
593-5955

    Attention:       Eleazer
N. Klein, Esq.

    E-mail:           eleazer.klein@srz.com

     

    or to
such other address and/or facsimile number and/or to the attention of such other
Person as the recipient party has specified by written notice given to each
other party five (5) days prior to the effectiveness of such
change.  Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.

     

    Any
document shall be deemed to have been duly served if marked for the attention of
the agent for service of process at its address (as set forth in Section 9(a) of
the Securities Purchase Agreement) or such other address in the United States as
may be notified to the party wishing to serve the document and delivered in
accordance with the notice provisions set forth in this Section
15(f).

    

    If the
Company's or the Shareholder's agent for service of process at any time ceases
for any reason to act as such, the Company or the Shareholder, as applicable,
shall appoint a replacement agent having an address for service in the United
States and shall notify the Investor in writing of the name and address of the
replacement agent.  Failing such appointment and notification, the
Investor shall be entitled by notice to the Company or the Shareholder, as
applicable, to appoint a replacement agent to act on the Company's or the
Shareholder's, as applicable, behalf.  The provisions of this Section
15(f) applying to service on an agent for service of process apply equally to
service on a replacement agent.

    

     (g)        Payments.  Whenever
any payment of cash is to be made by the Company or the Shareholder to any
Person pursuant to this Agreement, such payment shall be made in lawful money of
the United States of America by a check drawn on the account of the Company or
the Shareholder, as applicable, and sent via overnight courier service to such
Person at such address as previously provided to the Company or the Shareholder,
as applicable, in writing (which address, in the case of each of the Purchasers,
shall initially be as set forth on the Schedule of Buyers attached to the
Securities Purchase Agreement); provided that such Holder may elect to receive a
payment of cash via wire transfer of immediately available funds by providing
the Company or the Shareholder, as applicable, with prior written notice setting
out such request and such Holder's wire transfer
instructions.  Whenever any amount expressed to be due by the terms of
this Agreement is due on any day which is not a Business Day, the same shall
instead be due on the next succeeding day which is a Business
Day.  Any amount due by the Company or the Shareholder under this
Agreement which is not paid when due shall result in a late charge being
incurred and payable by the Company in an amount equal to interest on such
amount at the rate of fifteen percent (15%) per annum from the date such amount
was due until the same is paid in full ("Late Charge").

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

       

    

    (h)        Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, including
any purchasers of the Notes and/or the Warrants.  Neither the Company
nor the Shareholder shall assign this Agreement or any rights or obligations
hereunder without the prior written consent of such Holders of at least a
majority of the aggregate number of Registrable Securities issued and issuable
hereunder, including by way of a Fundamental Transaction (as defined in the Note
and the Warrant) (unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the Notes and the
Warrants).  The Investor may assign some or all of its rights
hereunder without the consent of the Company or the Shareholder, in which event
such assignee shall be deemed to be an Investor hereunder with respect to such
assigned rights.

     

    (i)         No Third Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.

     

    (j)         Survival.  The
representations and warranties of the parties hereto, and the agreements and
covenants set forth herein shall survive the Closing.

     

    (k)        Further
Assurances.  Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

     

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

     

    (m)       Remedies.  The
Investor and each Holder shall have all rights and remedies set forth in the
Transaction Documents and all rights and remedies which such holders have been
granted at any time under any other agreement or contract and all of the rights
which such holders have under any law.  Any Person having any rights
under any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.  Furthermore, the Company and the
Shareholder recognizes that in the event that it fails to perform, observe, or
discharge any or all of its obligations under the Transaction Documents, any
remedy at law may prove to be inadequate relief to the Investor and the
Holders.  The Company and the Shareholder each therefore agree that
the Investor and the Holders shall be entitled to seek temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages and without posting a bond or other security.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

       

    

    (n)        Rescission and Withdrawal
Right.  Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction Documents,
whenever the Holder exercises a right, election, demand or option under this
Agreement and the Company or the Shareholder does not timely perform its related
obligations within the periods therein provided, then the Investor may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company and the Shareholder, any relevant notice, demand or election in whole or
in part without prejudice to its future actions and rights.

     

    (o)        Payment Set
Aside.  To the extent that the Company or the Shareholder makes
a payment or payments to the Investor or the Holders hereunder or pursuant to
any of the other Transaction Documents or the Investor or the Holders enforce or
exercise their rights hereunder or thereunder, and such payment or payments or
the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company or the Shareholder, as applicable, a trustee, receiver
or any other Person under any law (including, without limitation, any bankruptcy
law, foreign, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.

     

    (p)        Independent Nature of
Buyers' Obligations and Rights.  The obligations of the
Investor, each Other Buyer and each Holder under any Transaction Document are
several and not joint with the obligations of the Investor, any Other Buyer or
other Holder, and no Investor, Buyer or Holder shall be responsible in any way
for the performance of the obligations of any Investor, Other Buyer or other
Holder under any Transaction Document.  Nothing contained herein or in
any other Transaction Document, and no action taken by any Investor, Other Buyer
or Holder pursuant hereto or thereto, shall be deemed to constitute the
Investor, the Other Buyers or the Holders as, and the Company and the
Shareholder each acknowledge that the Investor, the Other Buyers and the Holders
do not so constitute, a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Investor, the Other
Buyers and Holders are in any way acting in concert or as a group, and neither
the Company nor the Shareholder shall assert any such claim with respect to such
obligations or the transactions contemplated by the Transaction Documents and
the Company and the Shareholder each acknowledge that the Investor, the Other
Buyers and Holders are not acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction
Documents.  The Company and the Shareholder each acknowledge and the
Investor, each Other Buyer and each Holder confirms that it has independently
participated in the negotiation of the transaction contemplated hereby with the
advice of its own counsel and advisors.  The Investor, each Other
Buyer and each Holder shall be entitled to independently protect and enforce its
rights, including, without limitation, the rights arising out of this Agreement
or out of any other Transaction Documents, and it shall not be necessary for any
Investor, Other Buyer or other Holder to be joined as an additional party in any
proceeding for such purpose.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

       

    

    (q)        Currency.  Unless
otherwise indicated, all dollar amounts referred to in this Agreement are in
United States Dollars.  All amounts owing under this Agreement or any
Transaction Document shall be paid in US dollars.  All amounts
denominated in other currencies shall be converted in the US dollar equivalent
amount in accordance with the Currency Exchange Rate on the date of
calculation.  "Currency Exchange Rate" means,
in relation to any amount of currency to be converted into US dollars pursuant
to this Agreement, the US dollar Currency Exchange Rate as published in The Wall
Street Journal on the relevant date of calculation.

     

    (r)         Judgment
Currency.

     

     (i)           If
for the purpose of obtaining or enforcing judgment against the Company or the
Shareholder in any court in any jurisdiction it becomes necessary to convert
into any other currency (such other currency being hereinafter in this Section
15(r) referred to as the "Judgment Currency") an amount
due in US Dollars under this Agreement, the conversion shall be made at the
Currency Exchange Rate prevailing on the Business Day immediately
preceding:

     

    (1)      the
date of actual payment of the amount due, in the case of any proceeding in the
courts of New York or in the courts of any other jurisdiction that will give
effect to such conversion being made on such date: or

     

    (2)      the
date on which the foreign court determines, in the case of any proceeding in the
courts of any other jurisdiction (the date as of which such conversion is made
pursuant to this Section being hereinafter referred to as the "Judgment Conversion
Date").

     

     (ii)          If
in the case of any proceeding in the court of any jurisdiction referred to in
Section 15(r)(i)(2) above, there is a change in the Currency Exchange Rate
prevailing between the Judgment Conversion Date and the date of actual payment
of the amount due, the applicable party shall pay such adjusted amount as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the Currency Exchange Rate prevailing on the date of payment, will
produce the amount of US Dollars which could have been purchased with the amount
of Judgment Currency stipulated in the judgment or judicial order at the
Currency Exchange Rate prevailing on the Judgment Conversion Date.

     

     (iii) 
      Any amount due from the Company or the
Shareholder under this provision shall be due as a separate debt and shall not
be affected by judgment being obtained for any other amounts due under or in
respect of this Agreement.

     

    (s)        MOST FAVORED
NATION.  The Company and the Shareholder each hereby represent
and warrant as of the date hereof and covenant and agree from and after the date
hereof that none of the terms offered to any of the Buyers (or any successor or
assign thereof) with respect to any amendment, settlement or waiver (each a
"Settlement Document")
relating to the terms, conditions and transactions contemplated hereby or under
any Other Agreement, is or will be more favorable to such Person than those of
the Investor and this Agreement shall be, without any further action by the
Investor or the Company or the Shareholder, deemed amended and modified in an
economically and legally equivalent manner such that the Investor shall receive
the benefit of the more favorable terms contained in such Settlement
Document.  Notwithstanding the foregoing, the Company and the
Shareholder agrees, at the Company's expense, to take such other actions (such
as entering into amendments to the Transaction Documents) as the Investor may
reasonably request to further effectuate the foregoing.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

       

    

    (t)         DISCLOSURE. Upon
receipt or delivery by the Company or the Shareholder of any notice in
accordance with the terms of this Agreement, unless the Company has in good
faith determined that the matters relating to such notice do not constitute
material, nonpublic information relating to the Company or its Subsidiaries, the
Company shall within one (1) Business Day after any such receipt or delivery
publicly disclose such material, nonpublic information on a Report of Foreign
Issuer on Form 6-K or otherwise.  In the event that the Company or the
Shareholder believes that a notice contains material, nonpublic information
relating to the Company or its Subsidiaries, the Company or the Shareholder, as
applicable, so shall indicate to such Holder contemporaneously with delivery of
such notice, and in the absence of any such indication, such Holder shall be
allowed to presume that all matters relating to such notice do not constitute
material, nonpublic information relating to the Company or its
Subsidiaries.

     

    [Signature
Page Follows]

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    IN WITNESS WHEREOF, the
Shareholder, the Investor and the Company have caused their respective signature
page to this Agreement to be duly executed as of the date first written
above.

     

    
      
        
          
            
              
                
                  
                    	
                            COMPANY:

                          
	 
	
                            A-POWER
      ENERGY GENERATION SYSTEMS,
      LTD.

                          
	 
      	 
      
	
                            By:    

                          	 	 
      
	 
      	
                            Name:

                          
	 
      	
                            Title:

                          

                  

                

              

            

          

        

      

    

    
       

      [Signature
page to Put Agreement]

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN WITNESS WHEREOF, the
Shareholder, the Investor and the Company have caused their respective signature
page to this Agreement to be duly executed as of the date first written
above.

     

    
      
        
          
            
              
                	 
      	 
	
                        JINXIANG
    LU

                      	 

              

            

          

        

      

    

     

    
      [Signature
page to Put Agreement]

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN WITNESS WHEREOF, the
Shareholder, the Investor and the Company have caused their respective signature
page to this Agreement to be duly executed as of the date first written
above.

     

    
      
        
          
            
              
                
                  
                    	
                            THE
      INVESTOR:

                          
	 
      
	
                            By:   

                          	 	 
      
	 
      	
                            Name:

                          
	 
      	
                            Title:

                          

                  

                

              

            

          

        

      

    

     

    
      [Signature
page to Put Agreement]

       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
I

    

    A-POWER
ENERGY GENERATION SYSTEMS, LTD.

    EXCHANGE
NOTICE

     

    Reference
is made to the Senior Convertible Note (the "Note") and Warrant (the "Warrant") issued to the
undersigned by A-Power Energy Generation Systems, Ltd., a Company organized
under the laws of the British Virgin Islands (the "Company").  In
accordance with and pursuant to that certain Put Agreement, dated as of June 19,
2009 (the "Put
Agreement"), by and among, the undersigned, the Company and Jinxiang Lu
(the "Shareholder"), the
undersigned hereby elects to consummate a Note Exchange, a Warrant Exchange
and/or Payment Default Exchange into Exchange Shares as described
below.  Capitalized terms not defined herein shall have the meaning as
set forth in the Put Agreement.

    

    Date of Exchange:                                                                                                                                

     

    Please
confirm the following information:

     

    Number of Exchange Shares to be
delivered:                                                                                                               

     

    If Exchange includes a Note
Exchange:

     

    Aggregate
Conversion Amount being exchanged____________________

     

    If Exchange includes a Warrant
Exchange:

     

    1.  Form of Exercise
Price.  The Holder intends that payment of the Aggregate
Exchange Price shall be made as:

     

    ____________                                a
"Cash Exercise" with respect to _________________ Warrant

    Shares;
and/or

     

    ____________                                a
"Cashless Exercise" with respect to _______________ Warrant

    Shares.

     

    2.  Payment of Exercise
Price.  In the event that the Holder has elected a Cash
Exercise with respect to some or all of the Exchange Shares to be exchanged
pursuant hereto, the Holder shall pay the Aggregate Exchange Price in the sum of
$___________________ to the Shareholder in accordance with the terms of the Put
Agreement.

     

    If Exchange includes a Payment Default
Exchange:

     

    Additional
Conversion Obligations being forgone ____________________

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Notwithstanding

    anything
to the contrary contained herein, this Exchange Notice shall constitute a
representation by the Holder submitting this Exchange Notice that, after giving
effect to the exchange provided for in this Exchange Notice, such Holder
(together with its affiliates) will not have beneficial ownership (together with
the beneficial ownership of such Person's affiliates) of a number of Common
Shares which exceeds the Maximum Percentage (as defined in the Put Agreement) of
the total outstanding Common Shares of the Company as determined pursuant to the
provisions of Section 1(h)(i) of the Put Agreement.

    

    Please
issue the Exchange Shares in the following name and to the following
address:

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      	
                                                              Issue to:  

                                                            	      
                                                                                                                                                                
      

                                                            
	 	 
	 
      	      
                                                                                                                                                               

                                                            
	 	 
	 
      	 
                                                                    
                                                                                                                                                               

                                                            
	 	 
	
                                                              Facsimile
      Number:

                                                            	                                                                                                 
	 	 
	
                                                              Authorization:

                                                            	                                                                                                 
	 	 
	
                                                              By:

                                                            	                                                                                                 
	 	 
	
                                                              Title:

                                                            	                                                                                                 
	 	 
	
                                                              Dated:

                                                            	                                                                                                 
	 	 
	
                                                              Account
      Number:

                                                            	 
                                                                    
                                                                                                                                                               

                                                            
	
                                                                (if
      electronic book entry transfer)

                                                            
	 	 
	
                                                              Transaction
      Code Number:

                                                            	                                                                                                 
	
                                                                (if
      electronic book entry transfer)

                                                            
	 
      	 
      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	
                                    [INVESTOR]

                                  
	 
	
                                    By:

                                  	                                                                                                 	 
      
	 
	Name:
	Title:

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Schedule
I to Exhibit I

    

    Written
Direction to Collateral Agent and Transfer Agent

     

    This
Written Direction (this "Written Direction"), dated as
of [      __, 200__], refers to (i) that certain
Pledge Agreement, dated June 19, 2009 (the "Pledge Agreement"), by and
among A-Power Energy Generation Systems, Ltd., a company incorporated under the
laws of the British Virgin Islands, with headquarters located at No.44 Jingxing
Road, Tiexi District, Shenyang, Liaoning Province, China, 110021 (the "Company"), Jinxiang Lu, a
natural person in his personal capacity and not in his capacity as an officer,
director, employee or agent of the Company or any of its Subsidiaries (the
"Shareholder") and
Hudson Bay Fund LP, as collateral agent (the "Collateral Agent") and (ii)
that certain Put Agreement, dated June 19, 2009 (the "Put Agreement"), by and among
the undersigned, the Shareholder and the Company.  Capitalized terms
used but not defined herein shall have the meaning given to them in the Put
Agreement.

    
    

    1.           In
accordance with Section 1 of the Put Agreement, the undersigned hereby directs
the Collateral Agent to deliver a certificate (the "Certificate") representing at
least _______ Common Shares (the "Exchange Notice Share Amount")
and a share power, duly executed by the Shareholder with a medallion guarantee,
each of which is held by the Collateral Agent pursuant to the Pledge Agreement,
to the Transfer Agent at the following address:

    

    Continental
Stock Transfer & Trust Company

    17
Battery Place

    New York,
New York 10004

    Telephone:     (212)
509-4000

    Facsimile:   
   (212) 616-7615

    Attention:      Account
Administration: A-Power Energy Generation Systems, Ltd.

     

    2.           In
accordance with Section 1 of the Put Agreement, the undersigned hereby directs
the Transfer Agent, to (i) issue the Exchange Notice Share Amount of such Common
Shares in accordance with the attached Exchange Notice and (ii) if the number of
Common Shares represented by the Certificate exceeds the Exchange Notice Share
Amount, deliver a certificate with respect to such excess number of shares with
an identical legend to any legend set forth on the Certificate to the Collateral
Agent at the following address:

    

    Hudson
Bay Fund LP

    120
Broadway, 40th Floor

    New York,
New York 10271

    Facsimile:     646-214-7946

    Attention:    
 Yoav Roth

                                             George
Antonopolous

    

    Very truly yours,

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    	
                                            [INVESTOR]

                                          
	 	 
	
                                            By:

                                          	      
                                                                                                                                             

                                          	
                                             

                                          
	Name:
	Title:

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ACKNOWLEDGMENT

     

    The
Company and the Shareholder hereby acknowledge this Exchange Notice and Written
Direction and hereby directs Continental Stock Transfer & Trust Company to
issue the above indicated number of Common Shares in accordance with the
Transfer Agent Instructions dated June 19, 2009 from the Shareholder and
the Company and acknowledged and agreed to by Continental Stock Transfer &
Trust Company.

     

    

    
      
        
          
            
              
                
                  
                    	
                            A-POWER
      ENERGY GENERATION SYSTEMS,
      LTD.

                          
	 
	
                            By:   

                          	 
      
	 
      	
                            Name:

                          
	 
      	
                            Title:

                          
	 
      	 
      
	 
      	
                            JINXIANG
    LU

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