EVIDENCED OR CONSTITUTED HEREBY, AND THE SHARES ISSUABLE HEREUNDER, HAVE NOT
BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE ACT
) AND MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT UNLESS
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO
THE COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION.
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SHARES ISSUABLE UNDER THIS WARRANT
TO THE TERMS AND CONDITIONS OF THE SHAREHOLDERS AGREEMENT BY AND AMONG THE HOLDER HEREOF, THE
COMPANY AND CERTAIN OTHER PARTIES NAMED THEREIN. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.
EASTERN WELL HOLDINGS LIMITED
WARRANT TO PURCHASE SERIES A PREFERRED SHARES
(Subject to Adjustment)
Date: June 24, 2009
THIS CERTIFIES THAT,
for value received, CHINA ENVIRONMENT FUND III, L.P. (the Holder
is entitled, subject to the terms and conditions of this Warrant
, at any time and from time to time
during the Exercise Period (as defined below), to purchase from EASTERN WELL HOLDINGS LIMITED
, a company duly incorporated and validly
existing under the Laws of Hong Kong (the
), up to 2,453,240 Series A convertible and redeemable preferred shares of the Company,
par value US$0.001 per share (the Warrant Shares
), at the Exercise Price Per Share (as defined
below). The Exercise Price Per Share and number of Warrant
Shares are subject to adjustment and
change as provided herein. This Warrant
is issued pursuant to the Series A Preferred Share Purchase
Agreement dated June 18, 2009 (the Purchase Agreement
), among the Company, the Holder and certain
other parties named therein.
1. Certain Definitions.
Capitalized terms used and not otherwise defined
herein shall have the meanings ascribed thereto in the Purchase Agreement. As used in this Warrant
the following terms shall have the following respective meanings:
Board shall mean the board of directors of the Company.
means EASTERN WELL HOLDINGS LIMITED
, a company duly incorporated and
validly existing under the Laws of Hong Kong.
Encumbrances shall have the meaning ascribed to it in Section 7.
shall mean the date of effective exercise of this Warrant
by the Holder
during the Exercise Period.
Exercise Period shall mean the twelve-month period commencing on the date of this
Exercise Price Per Share means the per share exercise price of the Warrant Shares which
shall initially be US$4.076 (which is subject to the adjustment stated in Section 4 herein and the
adjustment of the purchase price of Series A Preferred Shares pursuant to the Purchase Agreement),
amounting to an aggregate exercise price of all the Warrant Shares of US$10,000,000.
Exercise Price shall have the meaning ascribed to it in Section 2.1.
Notice of Exercise shall have the meaning ascribed to it in Section 2.1.
Permitted Transferee means an Affiliate of the Holder.
Person means any individual, sole proprietorship, partnership, firm, joint venture, estate,
trust, unincorporated organization, association, corporation, institution, public benefit
corporation, entity or governmental authority or other entity of any kind or nature.
Securities Act means the United States Securities Act of 1933, as amended, and the rules and
regulations of the United States Securities and Exchange Commission promulgated thereunder, all as
from time to time in effect.
Series A Director means a director appointed by the Holder to the Company.
Series A Preferred Shares means the Series A convertible and redeemable preferred shares,
par value US$0.001 per share, of the Company.
Ordinary Shares means the ordinary shares, par value US$0.001 per share, of the Company.
Purchase Agreement means the Series A Preferred Share Purchase Agreement dated June 18, 2009
by and among the Company, the Holder and certain other parties named therein.
Shares means the shares of the Company.
Shareholders Agreement means that certain Shareholders Agreement dated June 24, 2009 by and
among the Company, the Holder and certain other parties named therein.
Warrant as used herein, shall include this Warrant and any warrant delivered in substitution
or exchange therefor as provided herein.
Warrant Shares shall have the meaning ascribed to it in the first paragraph of this Warrant
(which is subject to the adjustment stated in Section 4 herein and the adjustment set forth in the
2. Exercise of Warrant
2.1. Exercise and Payment. Subject to compliance with the terms and conditions of this
Warrant and applicable securities laws, this Warrant may be exercised, in whole or in part, at any
time during the Exercise Period by the delivery of notice of exercise
Series A Warrant
in the form attached hereto as Exhibit A (the Notice of Exercise), duly
executed by the Holder, to the Company at the address provided for notice to the Company under the
Purchase Agreement, and within thirty (30) days thereafter, the Holder shall (a) surrender this
Warrant to the Company at such address, and (b) effect payment to the Company, (i) in cash (by
check) or by wire transfer, (ii) by cancellation of indebtedness of the Company owed to the Holder,
or (iii) by a combination of (i) and (ii), of an amount equal to the product obtained by
multiplying the number of Warrant Shares being purchased upon such exercise by the then effective
Exercise Price Per Share (the Exercise Price). The Warrant will expire if not exercised within
the Exercise Period.
2.2. Share Certificates; Fractional Shares. Upon surrender of this Warrant and payment of the
Exercise Price by the Holder, the Company shall register the Holder as a member of the Company in
the Companys share register in respect of the number of Warrant Shares issuable upon such
exercise, and issue and deliver to the Holder or person(s) entitled to receive the same a
certificate or certificates for such number of Warrant Shares issuable upon such exercise at the
Companys expense, together with cash in lieu of any fraction of a Warrant Share equal to the
Exercise Price Per Share multiplied by such fraction. No fractional Warrant Share or scrip
representing a fractional Warrant Share shall be issued upon an exercise of this Warrant.
2.3 Effective Date of Exercise. This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for exercise and payment by
the Holder of the Exercise Price as provided in Clause 2.1 above. The person entitled to receive
the Warrant Shares issuable upon exercise of this Warrant shall be treated for all purposes as the
holder of record of such Warrant Shares from the close of business on the date the Holder is deemed
to have exercised this Warrant.
3. Valid Issuance; Taxes. All Warrant Shares issued upon the exercise of this
Warrant shall be validly issued, fully paid and non-assessable, and the Company shall pay all taxes
and other governmental charges that may be imposed in respect of the issue or delivery thereof.
4. Adjustment of Exercise Price Per Share and Number of Warrant Shares. The
Exercise Price Per Share and number of Warrant Shares issuable upon exercise of this Warrant is
subject to the adjustment upon occurrence of the following events before the Exercise Date:
4.1. Subdivision, Combination or Reclassification of Series A Preferred Shares. If the Company
shall, at any time or from time to time, (i) subdivide the outstanding Series A Preferred Shares,
(ii) combine the outstanding Series A Preferred
Shares into a smaller number of shares, or (iii) issue any shares of its capital stock in a
reclassification of the Series A Preferred Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing corporation), then
in each such case, the Exercise Price Per Share in effect at the time of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares of capital stock
issuable on such date shall be proportionately adjusted so that the holder of any Warrant exercised
after such date shall be entitled to receive, upon payment of the same aggregate amount as would
have been payable before such date, the aggregate number and kind of shares of capital stock which,
if such Warrant had been exercised immediately prior to such date, such Holder would have owned
upon such exercise and been entitled to receive
Series A Warrant
by virtue of such subdivision, combination or reclassification. Any such adjustment shall
become effective immediately after the effective date of such subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any event listed above shall
4.2. Other Changes, etc. If the Company at any time or from time to time, after the issuance
of this Warrant but prior to the exercise hereof, shall take any action affecting its Series A
Preferred Shares similar to or having an effect similar to any of the actions described in Section
4.1 or 4.4 (but not including any action described in such Sections) then, and in each such case,
the Exercise Price Per Share and number of Warrant Shares shall be adjusted in such manner and at
such time as the Board of Directors in good faith determines would be equitable under the
circumstances (such determination to be evidenced in a resolution, a certified copy of which shall
be mailed to the Holder).
4.3. Adjustments to Other Shares. In the event that at any time, as a result of an adjustment
made pursuant to this Section 4, the Holder shall become entitled to receive, upon exercise of this
Warrant, any shares of capital stock of the Company other than Series A Preferred Shares, the
number of such other shares so receivable upon exercise of this Warrant and the Exercise Price Per
Share shall be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Series A Preferred Shares contained
in this Section 4 herein.
4.4. Adjustment for Capital Reorganization, Merger or Consolidation. In case of any
reorganization of the capital shares of the Company (other than a combination, reclassification or
subdivision of shares otherwise provided for herein), or any merger or consolidation of the Company
with or into another corporation, or the sale of all or substantially all the assets of the Company
then, and in each such case, as a part of such reorganization, merger, consolidation, sale or
transfer, lawful provision shall be made so that the Holder of this Warrant shall thereafter be
entitled to receive, upon exercise of this Warrant, and upon payment of the Exercise Price then in
effect, the number of shares or other securities or property of the successor corporation resulting
from such reorganization, merger, consolidation, sale or transfer that a holder of the shares
deliverable upon exercise of this Warrant would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this Warrant had been exercised
immediately before such reorganization, merger, consolidation, sale or transfer, all subject to
further adjustment as provided in this Section 4. The foregoing provisions of this Section 4.4
shall similarly apply to successive reorganizations, consolidations, mergers, sales and transfers
and to the shares or securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. If the per-share consideration payable to the Holder hereof for shares in
connection with any such transaction is in a form other than cash or marketable securities, then
the value of such consideration shall be determined in good faith by the Companys Board of
Directors (including the affirmative vote of Series A Director). In all events, appropriate
adjustment (as determined in good faith by the Companys Board of Directors, including the
vote of Series A Director) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction, to the end that the
provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in
relation to any shares or other property deliverable after that event upon exercise of this
Series A Warrant
5. Certificate as to Adjustments. In each case of any adjustment in the Exercise
Price Per Share, or number or type of shares issuable upon exercise of this Warrant, the chief
financial officer (or any person of an equivalent position) of the Company shall compute such
adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth
such adjustment and showing in detail the facts upon which such adjustment is based, including a
statement of the adjusted Exercise Price Per Share. The Company shall promptly send (by facsimile
or electronic mail, and by either first class mail, postage prepaid or overnight delivery) a copy
of each such certificate to the Holder.
6. Loss or Mutilation. Upon receipt of evidence reasonably satisfactory to the
Company of the ownership of and the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to it, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver in lieu thereof a new Warrant of
like tenor as the lost, stolen, destroyed or mutilated Warrant.
7. Reservation of Shares. The Company hereby covenants and agrees that at all times there
shall be reserved in the Companys authorized but unissued shares for issuance and delivery upon
exercise of this Warrant such number of Warrant Shares (or other securities of the Company as are
from time to time issuable upon exercise of this Warrant) and Ordinary Shares for issuance on
conversion of such Warrant Shares, including, amending its Memorandum and Articles of Association
or other constitutional documents from time to time to increase its authorized shares as necessary.
All such shares shall be duly authorized, and when issued by way of registration in the name of the
Holder in the Companys register of members upon such exercise in accordance with the terms herein,
shall be validly issued, fully paid and non-assessable, free and clear of all liens, security
interests, charges and other encumbrances or restrictions on sale and free and clear of all
preemptive and similar rights
(Encumbrances), except such Encumbrances arising under Law or under the Shareholders Agreement.
The Holder acknowledges that reserve, reservation or similar words may have no technical
meaning under the Laws of Hong Kong. For purposes only of this Warrant, reserve, reservation
and similar words shall mean that the Board of Directors of the Company have approved and
authorized an intent by the Company to refrain from issuing a number of Warrant Shares sufficient
to satisfy the exercise rights of the Holder of this Warrant (including Ordinary Shares issuable
upon conversion of such Series A Preferred Shares issued upon exercise of this Warrant) such that
such Warrant Shares (and the Ordinary Shares issuable upon conversion thereof) will remain in the
authorized but unissued shares of the Company until, as applicable, this Warrant is exercised in
accordance with its terms or the Warrant Shares are converted into Ordinary Shares in accordance
with the terms thereof.
8. Transfer and Exchange. Subject to the terms and conditions of this Warrant and the
Shareholders Agreement, and compliance with all applicable securities laws, this Warrant and all
rights hereunder may be transferred to any person, in whole or in part, on the books of the Company
maintained for such purpose at the address provided for notice to the Company under the Purchase
Agreement, by the Holder hereof in person, or by duly authorized attorney, upon surrender of this
Warrant properly endorsed and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. Upon any partial transfer, the Company will issue and deliver to
the Holder a new Warrant or Warrants with respect to the Warrant Shares not so transferred. Each
taker and holder of this Warrant, by taking or holding the same, consents and agrees that when this
Warrant shall have been so endorsed, the person in possession of this Warrant may be treated by the
Company, and all other persons dealing with this Warrant, as the absolute owner hereof for
Series A Warrant
any purpose and as the person entitled to exercise the rights represented hereby, any notice
to the contrary notwithstanding; provided, however, that until a transfer of this Warrant is duly
registered on the books of the Company, the Company may treat the Holder hereof as the owner for
9. Representations and Warranties. The Company covenants that the representations and
warranties contained in Section 3 of the Purchase Agreement shall be true and correct in all
respects as of the date hereof and as of the Exercise Date, provided that if any of the
representation or warranty contained in Section 3 of the Purchase Agreement shall become untrue on
the date of exercise of this Warrant, due to reason of amendment of the applicable Laws by the
competent government authorities or due to the action of any third party, the Company shall notify
the Holder of such situation promptly after it has become aware of the same.
10. Compliance with Securities Laws. By acceptance of this Warrant, the Holder hereby
represents, warrants and covenants that any Warrant Share purchased upon exercise of this Warrant
or any Ordinary Share acquired upon conversion thereof shall be acquired for investment only and
not with a view to, or for sale in connection with, any distribution thereof in the United States;
that the Holder has had such opportunity as such Holder has deemed adequate to obtain from
representatives of the Company such information as is necessary to permit the Holder to evaluate
the merits and risks of its investment in the company; that the Holder is able to bear the economic
risk of holding such Warrant Shares as may be acquired pursuant to the exercise of this Warrant for
an indefinite period; that the Holder understands that the Warrant Shares acquired pursuant to the
exercise of this Warrant or Ordinary Shares acquired upon conversion thereof will not be registered
under the Securities Act (unless otherwise required pursuant to exercise by the Holder of the
registration rights, if any, previously granted to the Holder) and will be restricted securities
within the meaning of Rule 144 under the Securities Act.
11. No Rights or Liabilities as Shareholders. This Warrant shall not entitle the Holder to any
voting rights or other rights as a shareholder or member of the Company. In the absence of
affirmative action by such Holder to purchase Warrant Shares by exercise of this Warrant or
Ordinary Shares upon conversion thereof, no provisions of this Warrant, and no enumeration herein
of the rights or privileges of the Holder hereof shall cause such Holder hereof to be a shareholder
or member of the Company for any purpose.
12. Registration Rights. All Warrant Shares issuable upon exercise of this Warrant and
Ordinary Shares issuable upon conversion of the Warrant Shares shall be Registrable Securities
within the meaning of the relevant provisions of the Shareholders Agreement, and are entitled,
subject to the terms and conditions of that agreement, to all registration rights granted to the
13. Amendments and Waivers. Any term of this Warrant may be amended and the observance of any
term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written consent of
the Company and the Holder.
14. Notices. All notices and other communications from the Company to the Holder shall be
given in accordance with the Purchase Agreement.
Series A Warrant
15. Headings. The headings in this Warrant are for purposes of convenience in reference
only, and shall not be deemed to constitute a part hereof.
16. Law Governing. This Warrant shall be governed in all respects by the Laws of Hong Kong
without regards to conflicts of law principles.
17. Dispute Resolution.
(a) Any dispute, controversy or claim arising out of or relating to this Warrant, or the
interpretation, breach, termination or validity hereof, shall first be subject to resolution
through consultation of the parties to such dispute, controversy or claim. Such consultation shall
begin within seven (7) days after one party hereto has delivered to the other party involved a
written request for such consultation. If within thirty (30) days following the commencement of
such consultation the dispute cannot be resolved, the dispute shall be submitted to arbitration
upon the request of any party with notice to the other party.
(b) The arbitration shall be conducted in Hong Kong under the auspices of the Hong Kong
International Arbitration Centre (the HKIAC). There shall be three arbitrators. The complainant
and the respondent to such dispute shall each select one arbitrator within thirty (30) days after
giving or receiving the demand for arbitration. Such arbitrators shall be freely selected, and the
Parties shall not be limited in their selection to any prescribed list. The Chairman of the HKIAC
shall select the third arbitrator, who shall be qualified to practice Law in Hong Kong and fluent
in English and Mandarin. If either party to the arbitration does not appoint an arbitrator who has
consented to participate within thirty (30) days after selection of the first arbitrator, the
relevant appointment shall be made by the Chairman of the HKIAC.
(c) The arbitration proceedings shall be conducted in English. The arbitration tribunal shall
apply the Arbitration Rules of the HKIAC in effect at the time of the arbitration. However, if
such rules are in conflict with the provisions of this
Section 17, including the provisions
concerning the appointment of arbitrators, the provisions of this
Section 17 shall prevail.
(d) The arbitrators shall decide any dispute submitted by the parties to the arbitration
strictly in accordance with the Laws of Hong Kong and shall not apply any other substantive law.
(e) Each party hereto shall cooperate with any party to the dispute in making full disclosure
of and providing complete access to all information and documents requested by such party in
connection with such arbitration proceedings, subject only to any confidentiality obligations
binding on the party receiving the request; all such requested information and documents can be
provided in English or Chinese with equal legal validity.
(f) The award of the arbitration tribunal shall be final and binding upon the disputing
parties, and any party to the dispute may apply to a court of competent jurisdiction for
enforcement of such award.
(g) Any party to the dispute shall be entitled to seek preliminary injunctive relief, if
possible, from any court of competent jurisdiction pending the constitution of the arbitral
Series A Warrant
18. No Impairment. The Company will not cooperate with or facilitate any amendment of
its Memorandum and Articles of Association or other constitutional documents, or any
reorganization, consolidation, merger, dissolution, issue or sale of shares, sale of assets or any
other voluntary action, so as to avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, but will at all times in good faith assist in the carrying out of all such
terms and in the taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder of this Warrant against impairment. Without limiting the generality of the
foregoing, the Company (a) will use its best efforts to ensure that the par value of any shares
issuable upon the exercise of this Warrant will not be increased above the amount payable therefor
upon such exercise, and (b) will take or procure the taking of all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully paid and
non-assessable Warrant Shares upon exercise of this Warrant and fully paid and non-assessable
Ordinary Shares upon conversion of such Warrant Shares.
19. Notices of Record Date. In the event:
(a) the Company shall take a record of the holders of its Series A Preferred Shares or
Ordinary Shares (or other shares or securities at the time receivable upon the exercise of this
Warrant), for the purpose of entitling them to receive any right to subscribe for or purchase any
shares of any class or any other securities or to receive any other right; or
(b) of any consolidation or merger of the Company with or into another corporation, any
capital reorganization of the Company, any reclassification of the shares of the Company, or any
conveyance of all or substantially all of the assets of the Company to another corporation in which
holders of the Companys shares are to receive shares, securities or property of another
(c) of any voluntary dissolution, liquidation or winding-up of the Company; or
(d) of any redemption or conversion of all outstanding Ordinary Shares or Series A Preferred
then, and in each such case, the Company will mail or cause to be mailed to the Holder of this
Warrant a notice specifying, as the case may be, (i) the date on which a record is to be taken for
the purpose of such right, or (ii) the date on which a record is to be taken for a vote on such
reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion, and the time, if any is to be fixed, as of which the holders
of record of Series A Preferred Shares, Ordinary Shares or such shares or securities as at the time
are receivable upon the exercise of this Warrant, shall be entitled to exchange their Series A
Preferred Shares, Ordinary Shares or such other shares or securities, for securities or other
property deliverable upon such reorganization, reclassification, consolidation, merger, conveyance,
liquidation or winding-up. Such notice shall be delivered at least twenty (20) days prior to the
date therein specified.
20. Severability. If any term, provision, covenant or restriction of this Warrant is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Warrant shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
Series A Warrant
21. Counterparts. For the convenience of the parties, any number of counterparts of this
Warrant may be executed by the parties hereto and each such executed counterpart shall be, and
shall be deemed to be, an original instrument, but all of which together shall constitute one and
the same instrument.
22. Entire Agreement. This Warrant, the Purchase Agreement and the Shareholders Agreement
constitute the entire agreement between the Company and the Holder with respect to the Warrant and
supersedes all prior agreements and understanding with respects to the subject matter of this
23. Binding Effect: Benefits. This Warrant shall inure to the benefit of and shall be binding
upon the Company and the Holder and their respective permitted successors and assigns. Nothing in
this Warrant, expressed or implied, is intended to or shall confer on any person other than the
Company and the Holder, or their respective permitted successors or assigns, any rights, remedies,
obligations or liabilities under or by reason of this Warrant.
24. No Inconsistent Agreements. The Company will not on or after the date of this Warrant
enter into any agreement with respect to its Shares which is inconsistent with the rights granted
to the Holder or otherwise conflicts with the provisions hereof. The rights granted to Holder
hereunder do not in any way conflict with and are not inconsistent with the rights granted to
holders of the Companys Shares under any other agreements, except rights that have been waived.
[The remainder of this page has intentionally been left blank]
Series A Warrant
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the day and year
herein above first written
||SEALED with the Common Seal of
EASTERN WELL HOLDINGS LIMITED
and SIGNED by
||in the presence of
||No 485-487, Gu Yang Road,
Changning District, Shanghai,
Accepted and agreed,
CHINA ENVIRONMENT FUND III, L.P.
Title: Authorized Signatory
Address: A2302, SP Tower, Tsinghua Science
Park, Beijing 100084 China
[Signature page to Series A Warrant]
Series A Warrant
FORM OF NOTICE OF EXERCISE
NOTICE OF EXERCISE
To: EASTERN WELL HOLDINGS LIMITED (the Company)
The undersigned hereby elects to purchase Series A Preferred Shares pursuant to the
terms of the attached Warrant (the Warrant). Payment of the Exercise Price (as defined in the
Warrant) required under the Warrant accompanies this notice or herewith tenders payment by wire
transfer to an account previously designated by the Company.
The undersigned hereby represents and warrants that the undersigned is acquiring such shares
for its own account for investment purposes only, and not for resale or with a view to distribution
of such shares or any part thereof.
Series A Warrant