CONTENTS

Instructions for Subscription

Exhibit A:                     Wiring and Check Instructions

Exhibit B:                      Subscription Agreement

Exhibit C:                      Confidential Purchaser Questionnaire

Signature Page for Individuals:

IN WITNESS WHEREOF, Subscriber has caused this Subscription Agreement to be executed as of the date indicated below.

$		/
Aggregate Amount of Investment		Number of Series B Preferred Shares/ Warrant Shares
Print or Type Name		Print or Type Name (Joint-owner)
Signature		Signature (Joint-owner)
Date		Date (Joint-owner)
Social Security Number		Social Security Number (Joint-owner)
Address		Address (Joint-owner)
_______ Joint Tenancy		______ Tenants in Common

                                                               

S-1

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Signature Page for Partnerships, Corporations or Other Entities:

IN WITNESS WHEREOF, Subscriber has caused this Subscription Agreement to be executed as of the date indicated below.

 

$
Aggregate Amount of Investment
Number of Series B Preferred Shares
Number of Warrant Shares
Print or Type Name of Entity
Address
Taxpayer I.D. No. (if applicable)		Date
Signature		Print or Type Name and Indicate Title or Position with Entity
Signature (other authorized signatory)		Print or Type Name and Indicate Title or Position with Entity

 

 

 

S-2

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Acceptance:

IN WITNESS WHEREOF, the Company has caused this Subscription Agreement to be executed, and the foregoing subscription accepted, as of the date indicated below, as to   Units (an aggregate investment of $_______).

CHINA CARBON GRAPHITE GROUP, INC.

 

 

 

By:  __________________________________

Name:

Title:

Date: __________________________, 2009

 

 

S-3

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 EXHIBIT I

 

 

Registration Rights Agreement

 

[attached hereto]

 

 

 

 

 

 

 

 

 

 

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EXHIBIT C

 

CONFIDENTIAL PURCHASER QUESTIONNAIRE

Please fill in the information and sign on page S-1, and return to the placement agent

at the address below:

Maxim Group LLC

405 Lexington Avenue

New York, New York 10174

Attention: Shunda Cannon

Phone: (212) 895-3500

Fax: (212) 895-3555

 

 
 

 

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CONFIDENTIAL PURCHASER QUESTIONNAIRE

CHINA CARBON GRAPHITE GROUP, INC.

THIS QUESTIONNAIRE MUST BE ANSWERED FULLY AND RETURNED ALONG WITH YOUR COMPLETED SUBSCRIPTION AGREEMENT IN CONNECTION WITH YOUR PROSPECTIVE PURCHASE OF SECURITIES FROM CHINA CARBON GRAPHITE GROUP, INC. (THE “ COMPANY ”).

THE INFORMATION SUPPLIED IN THIS QUESTIONNAIRE WILL BE HELD IN STRICT CONFIDENCE.  NO INFORMATION WILL BE DISCLOSED EXCEPT TO THE EXTENT THAT SUCH DISCLOSURE IS REQUIRED BY LAW OR REGULATION, OTHERWISE DEMANDED BY PROPER LEGAL PROCESS OR IN LITIGATION INVOLVING THE COMPANY.

Capitalized terms used herein without definition shall have the respective meanings given such terms as set forth in the Subscription Agreement between CHINA CARBON GRAPHITE GROUP, INC. and the subscriber signatory thereto (the “ Subscription Agreement ”).

(1)           The undersigned represents and warrants that he, she or it comes within at least one category marked below, and that for any category marked, he, she or it has truthfully set forth, where applicable, the factual basis or reason the undersigned comes within that category.  The undersigned agrees to furnish any additional information which the Company deems neces­sary in order to verify the answers set forth below.

Category A

The undersigned is an individual (not a partnership, corporation, etc.) whose individual net worth, or joint net worth with his or her spouse, presently exceeds $1,000,000.

Explanation.  In calculating net worth you may include equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities.  Equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property.

Category B

The undersigned is an individual (not a partnership, corporation, etc.) who had an income in excess of $200,000 in each of the two most recent years, or joint income with his or her spouse in excess of $300,000 in each of those years (in each case including foreign income, tax exempt income and full amount of capital gains and losses but excluding any income of other family members and any unrealized capital appreciation) and has a reasonable expectation of reaching the same income level in the current year.

Category C

The undersigned is a director or executive officer of the Company which is issuing and selling the Securities.

 

 

C-1

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Category D

The undersigned is a bank, as defined in Section 3(a)(2) of the Securities Act of 1933, as amended (the “Act”); a savings and loan associa­tion or other institution as defined in Section 3(a)(5)(A) of the Act, whether acting in its individual or fiduciary capacity; any insurance company as defined in Section 2(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors (describe entity).

 

Category E

The undersigned is a private business development company as defined in section 202(a) (22) of the Investment Advisors Act of 1940 (describe entity).

 

Category F

The undersigned is either a corporation, partnership, Massachusetts business trust, or non-profit organization within the meaning of Section 501(c)(3) of the Internal Revenue Code, in each case not formed for the specific purpose of acquiring the Securities and with total assets in excess of $5,000,000 (describe entity).

 

Category G

The undersigned is a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, where the purchase is directed by a “sophisticated investor” as defined in Regulation  506(b)(2)(ii) under the Act.

 

 

C-2

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Category H

The undersigned is an entity (other than a trust) in which all of the equity owners are “accredited investors” within one or more of the above categories.  If relying upon this Category alone, each equity owner must complete a separate copy of this Purchaser Questionnaire (describe entity).

                                                                                                                                                                                                                          

                                                                                                                                                                                                                            

The undersigned agrees that the undersigned will notify the Company at any time on or prior to the applicable Closing (as defined in the Memorandum) in the event that the representations and warranties in this Purchaser Questionnaire shall cease to be true, accurate and complete.

(2)            Suitability (please answer each question)

(a)

For individuals, do you expect your current level of income to significantly decrease in the foreseeable future?

 

YES

NO

(b)

For trust, corporate, partnership and other institutional subscribers, do you expect your total assets to significantly decrease in the foreseeable future?

 

YES

NO

(c)

For all subscribers, do you have any other investments or contingent liabilities which you reasonably anticipate could cause you to need sudden cash requirements in excess of cash readily available to you?

 

YES

NO

(d)

For all subscribers, are you familiar with the risk aspects and the non-liquidity of investments such as the Securities for which you seek to purchase?

 

YES

NO

(e)

For all subscribers, do you understand that there is no guarantee of financial return on this investment and that you run the risk of losing your entire investment?

YES

NO

 

 

C-3

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(3)           Manner in which title is to be held: (circle one)

(a)           Individual Ownership

(b)           Community Property

(c)           Joint Tenant with Right of Survivorship (both parties must sign)

(d)           Partnership

(e)           Tenants in Common

(f)           Company

(g)           Trust

(h)           Other

(4)           FINRA Affiliation.

Are you affiliated or associated with an FINRA member firm (please check one):

YES

NO

If Yes, please describe how you are affiliated/associated:

_________________________________________________________

_________________________________________________________

_________________________________________________________

*If subscriber is a Registered Representative with a FINRA member firm, have the following acknowledgment signed by the appropriate party:

The undersigned FINRA member firm acknowledges receipt of the notice required by the FINRA Conduct Rules.

 

_________________________________

Name of FINRA Member Firm

By: ______________________________

Authorized Officer

Date: ____________________________

(5)           For Trust Subscribers

 

 

C-4

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A. Certain trusts generally may not qualify as accredited investors except under special circumstances.  Therefore, if you intend to purchase the shares of the Company’s stock in whole or in part through a trust, please answer each of the following questions.

Is the trustee of the trust a national or state bank that is acting in its fiduciary capacity in making the investment on behalf of the trust?

Yes o                                          No o

Does this investment in the Company exceed 10% of the trust assets?

Yes o                                          No o

B. If the trust is a revocable trust, please complete Question 1 below.  If the trust is an irrevocable trust, please complete Question 2 below.

1.            REVOCABLE TRUSTS

Can the trust be amended or revoked at any time by its grantors:

Yes o                                          No o

If yes, please answer the following questions relating to each grantor (please add sheets if necessary):

Grantor Name:                                                                                                                     

Net worth of grantor (including spouse, if applicable), including home, home furnishings and automobiles exceeds $1,000,000?

Yes o                                          No o

OR

Income (exclusive of any income attributable to spouse) was in excess of $200,000 for 2007 and 2008 and is reasonably expected to be in excess of $200,000 for 2009?

Yes o                                          No o

 

OR

Income (including income attributable to spouse) was in excess of $300,000 for 2007 and 2008 and is reasonably expected to be in excess of $300,000 for 2009?

Yes o                                          No o

 

 

C-5

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2.            IRREVOCABLE TRUSTS

If the trust is an irrevocable trust, please answer the following questions:

Please provide the name of each trustee:

Trustee Name:                                                                                                                   

Trustee Name:                                                                                                                   

Does the trust have assets greater than $5 million?

Yes o                                          No o

Do you have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Company?

Yes o                                          No o

Indicate how often you invest in:

Marketable Securities

Often o                       Occasionally o                                 Seldom o                       Never o

 

Restricted Securities

Often o                       Occasionally o                                 Seldom o                       Never o

Venture Capital Companies

Often o                       Occasionally o                                 Seldom o                       Never o

[Signature Page follows]

 

 

C-6

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The undersigned has been informed of the significance to the Company of the foregoing representations and answers contained in this Confidential Purchaser Questionnaire and such representations and answers have been provided with the understanding that the Company and the Placement Agent will rely on them.

		Individual
Date:
		Name of Individual
		(Please type or print)
		Signature of Individual
		Name of Joint Owner
		(Please type or print)
		Signature (Joint Owner)
Date:		Partnership, Corporation or Other Entity
		Print entity name
		By:
		(Signature)
		Name:
		(Print signer’s name)
		Title:
		Signature (other authorized signatory)

 

 

  S-1

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Exhibit 99.2

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”) is made and entered into as of December 22, 2009 among China Carbon Graphite Group, Inc., a Nevada corporation (the “ Company ”), and the several purchasers signatory hereto (each such purchaser is a “ Purchaser ” and collectively, the “ Purchasers ”).

This Agreement is made pursuant to separate Subscription Agreements, dated as of the date hereof, between the Company and each Purchaser (the “ Subscription Agreements ”).

The Company and each Purchaser hereby agrees as follows:

1.            Definitions .                      Capitalized terms used and not otherwise defined herein that are defined in the Subscription Agreements shall have the meanings given such terms in the Subscription Agreements.  In addition to the other capitalized terms defined herein, the following terms shall have the following meanings:

“ Common Stock ” means the common stock, par value $0.001 per share, of the Company.

“ Effectiveness Date ” means no later than the 180 th calendar day following the final closing of the Offering; provided , however , that in the event the Company is notified by the Commission that the Registration Statement will not be reviewed or is no longer subject to further review and comments, the Effectiveness Date shall be the fifth Trading Day following the date on which the Company is so notified if such date precedes the date required above.

“ Filing Date ” means no later than the 45 th calendar day following the closing at which the Minimum Amount has been raised.

“ Holder(s) ” means each Purchaser and the holder or holders, as the case may be, from time to time of Registrable Securities.

“ Person(s) ” shall mean a natural person, corporation, trust, estate, partnership, incorporated or unincorporated association or any other legal entity, and also includes any department, agency, authority, or instrumentality of any state or its political subdivisions.

“ Prospectus ” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

 

 

“ Registrable Securities ” means the Common Stock underlying the shares of Series B Convertible Preferred Stock of the Company issued as part of the Units (the “ Unit Shares ”), the Common Stock issuable upon exercise of the Warrants included as part of the Units (the “ Warrant Shares ”) and the Common Stock issuable upon exercise of the warrant to be issued to the Placement Agent (the “ Placement Agent Shares ”); provided, however, that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another Registration Statement hereunder with respect thereto) for so long as (a) a Registration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by the Holder in accordance with such effective Registration Statement, (b) such Registrable Securities have been previously sold in accordance with Rule 144, or (c) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Transfer Agent and the affected Holders (assuming that such securities and any securities issuable upon exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any affiliate of the Company).

“ Registration Statement ” means any registration statement required to be filed hereunder, including the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

“ SEC Guidance ” means (i) any publicly-available written or oral guidance of the Commission staff, or any comments, requirements or requests of the Commission staff and (ii) the Securities Act.

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“ Rule 415 ” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

“ Rule 424 ” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

 

2.            Registration Rights .

 

(a)   On or prior to the Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all or the maximum portion of the Registrable Securities as permitted by SEC Guidance for an offering to be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith) and shall contain a customary “Selling Stockholders” and “Plan of Distribution” sections reasonably satisfactory to the Placement Agent and its counsel.  Subject to the terms of this Agreement, the Company shall use its commercially reasonable best efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event prior to the applicable Effectiveness Date, and shall use its commercially reasonable best efforts to keep the Registration Statement continuously effective under the Securities Act until sooner of the second anniversary of the date of such effectiveness or the date that all Registrable Securities covered by the Registration Statement have been sold, or may be sold without volume restrictions pursuant to Rule 144(k), as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the affected Holders (the “ Effectiveness Period ”).  The Company shall telephonically request effectiveness of the Registration Statement no later than 5:00 pm Eastern time on a Trading Day.   The Company shall immediately notify the Holders via facsimile or by e-mail of the effectiveness of the Registration Statement on the same Trading Day that the Company telephonically confirms effectiveness with the Commission, which shall be the date requested for effectiveness of the Registration Statement.  The Company shall, by 9:30 am Eastern time on the second Trading Day after the Effective Date, file a final Prospectus with the Commission as required by Rule 424.  All selling shareholders included on the applicable Registration Statement shall be given notice of the effectiveness of such Registration Statement substantially at the same time.

 

(b)   Notwithstanding any other provision of this Agreement, if any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater portion of Registrable Securities), then the Company shall include in such Registration Statement: (a) first, the Registrable Securities represented by the Warrant Shares (applied to the Holders on a pro rata basis based on the total number of unregistered Warrant Shares held by such Holders), (b) second, the Unit Shares (applied to the Holders on a pro rata basis based on the total number of unregistered Unit Shares held by such Holders) and (c) third, the Registrable Securities represented by the Placement Agent Shares; provided, however, that, prior to any reduction in the number of Registrable Securities included in a Registration Statement as set forth in this sentence, all shares of Common Stock set forth on Schedule 6(b) hereto shall be reduced first. In the event of a cutback hereunder, the Company shall give the Holder at least five (5) Trading Days prior written notice along with the calculations as to such Holder’s allotment.

 

3.            Registration Procedures .

 

In connection with each of the Company’s registration obligations hereunder, the Company shall:

 

 

(a)   Not less than five (5) Trading Days prior to the filing of the Registration Statement and not less than one Trading Day prior to the filing of the related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall: (i) furnish to each Holder copies of such Registration or Prospectus or any amendment or supplement thereto, as applicable, proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of such Holders, and (ii) cause its officers and directors, counsel and independent certified public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to each Holder to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file the Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority of the Registrable Securities shall reasonably object in good faith, provided that, the Company is notified of such objection in writing no later than five (5) Trading Days after the Holders have been so furnished copies of the Registration Statement or one (1) Trading Day after the Holders have been so furnished copies of the related Prospectus or amendment or supplement thereto. Each Holder agrees to furnish to the Company a completed Questionnaire in the form attached to this Agreement as Annex B (a “ Selling Shareholder Questionnaire ”) not less than two (2) Trading Days prior to the Filing Date or by the end of the fourth (4th) Trading Day following the date on which such Holder receives draft materials in accordance with this Section.  The Company shall have the right to exclude any Holder that does not comply with the preceding sentence from the Registration Statement.

(b)   (i) Prepare and file with the Commission such amendments, including post-effective amendments, to the Registration Statement and the Prospectus used in connection therewith as may be necessary to keep the Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and as so supplemented or amended to be filed pursuant to Rule 424; (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to the Registration Statement or any amendment thereto and as promptly as reasonably possible provide the Holders true and complete copies of all correspondence from and to the Commission relating to the Registration Statement (provided that the Company may excise any information contained therein which would constitute material non-public information as to any Holder which has not executed a confidentiality agreement with the Company); and (iv) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the Effectiveness Period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in the Registration Statement as so amended or in such Prospectus as so supplemented.

 

 

(c)   Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, shall also be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in the case of (i)(A) below, not less than one (1) Trading Day prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement is filed; (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement; and (C) with respect to the Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to the Registration Statement or Prospectus; (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement covering the Registrable Securities or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose; (v) of the occurrence of any event not in the ordinary course that makes the financial statements included in the Registration Statement ineligible for inclusion therein or any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to the Registration Statement, Prospectus or other documents so that, in the case of the Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and (vi) the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of the Registration Statement or Prospectus; provided that any and all of such information shall remain confidential to each Holder until such information otherwise becomes public, unless disclosure by a Holder is required by law; provided , further , that notwithstanding each Holder’s agreement to keep such information confidential, the Holders make no acknowledgement that any such information is material, non-public information.

(d)   Use its commercially reasonable best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of the Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

(e)   Furnish to each Holder, without charge, at least one (1) conformed copy of the Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference (other than material to which the Commission has granted confidential treatment and thus not publicly filed) to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission; provided, that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form.

(f)   Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(c).

 

 

(g)   The Company shall cooperate with any broker-dealer through which a Holder proposes to resell its Registrable Securities in effecting a filing with the Corporate Financing Department of the Financial Industry Regulatory, Inc. (“ FINRA ”) pursuant to FINRA Rule 5110 and the Company shall pay the filing fee required by such filing within two (2) Trading Days of request therefor.

(h)   Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable best efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement; provided , that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.

(i)   If requested by a Holder, cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to the Registration Statement, which certificates shall be free, to the extent permitted by the Subscription Agreements, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holders may request.

(j)   Upon the occurrence of any event contemplated by this Section 3, as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(c) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus.  The Company will use its commercially reasonable best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.  The Company shall be entitled to exercise its right under this Section 3(j) to suspend the availability of the Registration Statement and Prospectus for a period not to exceed thirty (30) calendar days (which need not be consecutive days) in any twelve (12) month period.

(k)   Comply with all applicable rules and regulations of the Commission.

 

 

(l)   The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the Common Stock.

4.            Registration Expenses . All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to the Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation: (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with any trading market on which the Common Stock is then listed for trading, (B) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities) and (C) if not previously paid by the Company in connection with an Issuer Filing, with respect to any filing that may be required to be made by any broker through which a Holder intends to make sales of Registrable Securities pursuant to FINRA Rule 5110, so long as the broker is receiving no more than a customary brokerage commission in connection with such sale, (ii) printing expenses of the Company (including, without limitation, expenses of printing certificates for Registrable Securities, (iii) messenger, telephone and delivery expenses of the Company, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement.  In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder.  In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.

5.            Indemnification

(a)   Indemnification by the Company . The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, shareholders, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “ Losses ”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of

 

 

a material fact contained in the Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, or (2) any violation or alleged violation by the Company of the Securities Act, Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of the Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex B hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 3(c)(iii)-(vi), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(d).  The Company shall notify the Holders promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware.

(b)   Indemnification by Holders . Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: (x) such Holder’s failure to comply with the prospectus delivery requirements of the Securities Act or (y) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company specifically for inclusion in such Registration Statement or such Prospectus or (ii) to the extent that such information relates to such Holder’s proposed method of distribution of the Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in the Registration Statement (it being understood that the Holder has approved Annex B hereto for this purpose), such Prospectus or such form of Prospectus or in any amendment or supplement thereto or (iii) in the case of an occurrence of an event of the type specified in Section 3(c)(iii)-(vi), the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of the Advice contemplated in Section 6(d). In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

 

 

(c)   Conduct of Indemnification Proceedings . If any proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “ Indemnified Party ”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “ Indemnifying Party ”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have prejudiced the Indemnifying Party.

An Indemnified Party shall have the right to employ separate counsel in any such proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless:  (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to assume the defense of such proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such proceeding; or (3) the named parties to any such proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party, regardless of whether the Losses relate to one or more Registration Statements so long as they arise from the same claim).  The Indemnifying Party shall not be liable for any settlement of any such proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed.  No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such proceeding.

Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written notice thereof to the Indemnifying Party; provided, that the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is judicially determined to be not entitled to indemnification hereunder.

 

(d)   Contribution . If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission.  The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph.  Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Holder from the sale of the Registrable Securities subject to the proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, except in the case of fraud by such Holder.

The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

6.            Miscellaneous

(a)   Remedies .  In the event of a breach by the Company or by a Holder, of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement.  The Company and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.

 

 

(b)   No Piggyback on Registrations; Prohibition on Filing Other Registration Statements . Except as set forth on Schedule 6(b) attached hereto, neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in any Registration Statement filed pursuant to Section 2 other than the Registrable Securities.  The Company shall not file any other Registration Statements (except Registration Statements on Form S-4 or Form S-8, each as promulgated under the Securities Act, or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company’s stock option, equity incentive or other employee benefit plans) until all Registrable Securities are registered pursuant to a Registration Statement that is declared effective by the Commission, provided that this Section 6(b) shall not prohibit the Company from filing amendments to registration statements filed prior to the date of this Agreement.

(c)   Compliance . Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement.

(d)   Piggy-Back Registrations . If at any time during the Effectiveness Period there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a Registration Statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the stock option or other employee benefit plans, then the Company shall send to each Holder a written notice of such determination and, if within fifteen days after the date of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such Holder requests to be registered; provided , however , that, the Company shall not be required to register any Registrable Securities pursuant to this Section 6(d) that are eligible for resale without restriction or limitation pursuant to Rule 144 promulgated under the Securities Act or that are the subject of a then effective Registration Statement. If an underwriter advises the Company that the dollar amount or number of shares of Registrable Securities which the Holders desire to sell, taken together with all other shares of Common Stock or other securities which the Company desires to sell and the shares of Common Stock, if any, as to which registration has been requested pursuant to written contractual piggy-back registration rights held by other stockholders of the Company who desire to sell, exceeds the maximum dollar amount or maximum number of shares that can be sold in such offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of shares, as applicable, the “ Maximum Number of Shares ”), then the Company shall include in such registration: (i) first, the Registrable Securities as to which registration has been requested by the Holders (in the order set forth in Section 2(b)) that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the shares of Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; (iii) third, to the extent that the Maximum Number of Shares have not been reached under the foregoing clauses (i) and (ii), the shares of Common Stock or other securities for the account of other persons that the Company is obligated to register pursuant to written contractual arrangements with such persons, pro rata, and that can be sold without exceeding the Maximum Number of Shares; and (iv) fourth, to the extent that the Maximum Number of Shares have not been reached under the foregoing clauses (i), (ii), and (iii), securities that other security holders of the Company desire to sell, pro rata, that can be sold without exceeding the Maximum Number of Shares.

 

 

(e)   Amendments and Waivers . The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and Holders holding at least 67% of the then outstanding Registrable Securities.  Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of all of the Registrable Securities to which such waiver or consent relates; provided , however , that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence.

(f)   Notices . Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Subscription Agreements.

(g)   Successors and Assigns . This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of all of the Holders of the then-outstanding Registrable Securities. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under the Subscription Agreements; provided, however, that no such transfer or assignment shall be binding upon or obligate the Company to any such assignee unless and until the Company shall have received written notice of such transfer or assignment as herein provided and a written agreement of the assignee to be bound by the provisions of this Agreement.

(h)   No Inconsistent Agreements . Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.  Neither the Company nor any of its subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been satisfied in full.

(i)   Execution and Counterparts .  This Agreement may be executed in two or more counterparts, all of which when taken together 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, it being understood that both parties need not sign the same counterpart.  In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

 

(j)   Governing Law .  All questions concerning the construction, validity, enforcement and interpretation of this Agreement and the venue for resolution of disputes hereunder shall be determined in accordance with the provisions of the Subscription Agreements.

(k)   Cumulative Remedies . The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.

(l)   Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(m)   Headings . The headings in this Agreement are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

(n)   Independent Nature of Holders’ Obligations and Rights .  The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Holders are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose.

[Signature Page Follows]

 

 

IN WITNESS WHEREOF , the parties hereto have caused this Registration Rights Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

COMPANY:

CHINA CARBON GRAPHITE GROUP, INC.

By:    /s/ Donghai Yu ________________________

      Name: Donghai Yu

      Title:   Chief Executive Officer

PURCHASERS:

The Purchasers executing the Signature Page in the form attached hereto as Annex A and delivering the same to the Company or its agents shall be deemed to have executed this Agreement and agreed to the terms hereof.

 

Annex A

Registration Rights Agreement

Purchaser Counterpart Signature Page

The undersigned, desiring to: (i) enter into this Registration Rights Agreement, dated as of _________________, 2009 (the “ Agreement ”), between the undersigned, China Carbon Graphite Group, Inc., a Nevada corporation (the “ Company ”), and the other parties thereto, in or substantially in the form furnished to the undersigned and (ii) purchase the securities of the Company appearing below, hereby agrees to purchase such securities from the Company as of the Closing and further agrees to join the Agreement as a party thereto, with all the rights and privileges appertaining thereto, and to be bound in all respects by the terms and conditions thereof.

IN WITNESS WHEREOF , the undersigned has executed the Agreement as of _____________________, 2009.

Name and Address, Fax No. and Social Security No./EIN of Investor:

________________________________________________   ________________________________________________   ________________________________________________   Fax No.: _________________________________________   Soc. Sec. No./EIN: _________________________________

If a partnership, corporation, trust or other business entity:

By: _________________________________________

Name:

Title:

If an individual:

_________________________________________ Signature

 

 

Annex B

 

CHINA CARBON GRAPHITE GROUP, INC.

 

Selling Securityholder Notice and Questionnaire

 

The undersigned beneficial owner of common stock (the “ Registrable Securities ”) of CHINA CARBON GRAPHITE GROUP, INC., a Delaware corporation (the “ Company ”), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “ Commission ”) the Registration Statement (the “ Registration Statement ”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “ Securities Act ”), of the Registrable Securities, in accordance with the terms of the Registration Rights Agreement (the “ Registration Rights Agreement ”) to which this document is annexed.  A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below.  All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.

 

Certain legal consequences arise from being named as a selling securityholder in the Registration Statement and the related prospectus.  Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Registration Statement and the related prospectus.

 

NOTICE

 

The undersigned beneficial owner (the “ Selling Securityholder ”) of Registrable Securities hereby elects to include the Registrable Securities owned by it in the Registration Statement.

 

The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate:

 

QUESTIONNAIRE

 

1.

Name.

 

(a)

Full Legal Name of Selling Securityholder

 

(b)

Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities are held:

 

(c)

If the Selling Securityholder is not an individual, please provide the full legal name of the Natural Control Person(s) (which means the natural person(s) who directly or indirectly, alone or with others, has power to vote or dispose of the securities covered by the questionnaire):

 

2.  Address for Notices to Selling Securityholder:

 

Telephone:
Fax:
E-mail address:
Contact Person:

 

3.  Broker-Dealer Status:

 

(a)

Are you a broker-dealer?

 

Yes    o                       No    o

 

(b)

If “yes” to Section 3(a), did you receive your Registrable Securities as compensation for investment banking services to the Company.

 

Yes    o                       No    o

 

Note:

If no, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

 

(c)

Are you an affiliate of a broker-dealer?

 

Yes    o                       No    o

 

(d)

If you are an affiliate of a broker-dealer, do you certify that you bought the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities?

 

Yes    o                       No    o

 

Note:

If no, the Commission’s staff has indicated that you should be identified as an underwriter in the Registration Statement.

 

 

4.  Beneficial Ownership of Other Securities of the Company Owned by the Selling Securityholder.

 

Except as set forth below in this Item 4, the undersigned is not the beneficial or registered owner of any securities of the Company other than the securities issuable pursuant to the Subscription Agreements.

 

(a)

Type and Amount of other securities beneficially owned by the Selling Securityholder:

 

5.  Relationships with the Company:

 

Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.

 

State any exceptions here:

 

 

The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Registration Statement remains effective.

 

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 5 and the inclusion of such information in the Registration Statement and the related prospectus and any amendments or supplements thereto.  The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus.

 

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.

 

Dated :                                                       Beneficial Owner :                                                                             

By :                                                                             

Name:

Title:

 

 

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

 

[                      ]

 

Exhibit 99.3

 

MAKE GOOD ESCROW AND PLEDGE AGREEMENT

This MAKE GOOD ESCROW AND PLEDGE AGREEMENT (this “ Agreement ”), dated as of December 22, 2009, is entered into by and among China Carbon Graphite Group, Inc., a Nevada corporation (the “ Company ”), the persons or entities signatory (each, an “ Investors ” and collectively, the “ Investors ”), and Continental Stock Transfer & Trust Company (the “ Escrow Agent ”).

WHEREAS , concurrently with the execution hereof, the Company is consummating a private placement transaction (the “ Financing Transaction ”) with the Investors whereby the Company will issue investment units comprised of shares of Series B Convertible Preferred Stock of the Company (the “ Preferred Shares ”) and warrants (the “ Warrants ”) to purchase common stock, par value $0.001 per share, of the Company (together with any securities into which such shares may be reclassified, the “ Common Stock ”);

WHEREAS , in order to provide security to the Investors in the event that Company fails to meet certain future financial performance thresholds, the Company has agreed to issue, pledge and deposit a stock certificate representing 50% of the number of shares of Series B Preferred Stock issued in the Financing Transaction shares of Common Stock (the “ Escrow Shares ”) into escrow for the benefit of the Investors; and

WHEREAS , the Company and the Investors have requested that the Escrow Agent hold the Escrow Shares on the terms and conditions set forth in this Agreement and the Escrow Agent has agreed to act as escrow agent pursuant to the terms and conditions of this Agreement.

NOW, THEREFORE , in consideration of the covenants and mutual promises contained herein and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged and intending to be legally bound hereby, the parties agree as follows:

ARTICLE I.

TERMS OF THE ESCROW

Section 1.01   Appointment of Escrow Agent .  The parties hereby agree to appoint the Escrow Agent as escrow agent to act in accordance with the terms and conditions set forth in this Agreement, and Escrow Agent hereby accepts such appointment and agrees to act in accordance with such terms and conditions.

Section 1.02   Establishment of Escrow Account .

(a)   Upon the execution of this Agreement, the Company shall, as a pledge of securities, deposit the Escrow Agent a certificate or certificates representing the Escrow Shares, together with duly executed stock powers or other appropriate transfer documents executed in blank by the Company (such certificates and such transfer documents, collectively, the “ Escrow Materials ”).  The Escrow Agent shall hold the Escrow Materials and distribute the same as contemplated by this Agreement.

 

 

(b)   The Company and the Investors hereby agree that the deposit by the Company of the Escrow Materials with the Escrow Agent on the terms and conditions set forth herein is intended to be a bona fide pledge of securities by the Company for the benefit of the Investors (as pledgees), in each case within the meaning of and as contemplated by Rule 144(d)(3)(iv) promulgated by the Securities and Exchange Commission (the “ Commission ”).  In addition the Escrow Shares, if released to the Investors pursuant to the terms hereof, shall be considered “Registrable Securities” for purposes of Section 6(d) of that certain Registration Rights Agreement between the Company and the Investors.

Section 1.03   Performance Threholds .  The distribution of the Escrow Shares shall be based upon the following financial performance thresholds of the Company (the “ Performance Thresholds ”) for the fiscal years ended December 31, 2010 (“ Fiscal Year 2010 ”) and December 31, 2011 (“ Fiscal Year 2011 ”):

(a)   The Fiscal Year 2010 Performance Threshold shall be audited Net Income equal to or greater than $5,100,000 (the “ 2010 PT ”).

(b)   The Fiscal Year 2011 Performance Threshold shall be audited Net Income equal to or greater than $10,000,000 (the “ 2011 PT ”); provided, however , that if the Company completes an equity underwritten financing with gross proceeds in excess of $15,000,000 prior to August 31, 2010, the 2010 PT shall be increased to $20,000,000.

(c)   For the purposes of this Agreement, the term “ Net Income ” shall be defined in accordance with U.S. generally accepted accounting principles, consistently applied (“ U.S. GAAP ”) and reported by the Company in its audited financial statements for each of the Fiscal Year 2010 and Fiscal Year 2011; provided, however , that Net Income for each of Fiscal Year 2010 and Fiscal Year 2011 shall be increased by any non-cash charges incurred: (i) as a result of the Financing Transaction, including without limitation, as a result of the issuance and/or conversion of the Preferred Shares, and the issuance and/or exercise of the Warrants, (ii) any income tax, enterprise tax or similar tax in excess of 25% of income before income taxes.

Section 1.04   Determination of 2010 PT and 2011 PT; Investor Representative .

(a)   The 2010 PT and 2011 PT shall be determined as of the date of the Company’s audited financial statements for the corresponding fiscal year are required to be filed with the Commission pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and, if the Company is not required to file reports pursuant to Section 13(a) or Section 15(d) of the Exchange Act, and therefore prepares and furnishes the documents required by Section 6 of the Registration Rights Agreement, the 2010 PT and 2011 PT shall be determined in accordance with such prepared documents at such time.

(b)   The Company will provide the Investors with the Company’s audited financial statements for the appropriate fiscal year, prepared in accordance with U.S. GAAP, no later than the date for filing the Company’s Annual Report on Form 10-K for the corresponding fiscal year, including any extension for filing the Annual Report which may be requested under Rule 12b-25 of the Securities Exchange Act of 1934, as amended (the “ Annual Report ”), with the Commission so as to allow the Investors the opportunity to evaluate whether each of the 2010 PT and 2011 PT were attained.  Taylor Asset Management, Inc., as representative of the Investors (the “ Investor Representative ”) shall, promptly upon receipt of such financial statements provide each of the Investors with copies of such financial statements and proposed Disbursement Instructions (as defined below) (collectively, the “ Proposed Disbursement Materials ”).  Each of the Investors hereby irrevocably appoints the Investor Representative to act in such capacity on their behalf as provided for herein.

 

 

Section 1.05   Distribution of the Escrow Shares .  The parties hereby agree that the Escrow Shares shall be distributed for the 2010 PT and the 2011 PT based on the following formula:

 

(a)   In the event the Company achieves no less than 100% of the applicable Performance Threshold, all of the Escrow Shares for the corresponding fiscal year shall be returned to the Company and cancelled.

(b)   If the Company achieves less than 100% of the applicable Performance Threshold, the Investors shall receive in the aggregate, on a pro rata basis (based upon the number of Preferred Shares or shares of Common Stock underlying the Preferred Shares (the “ Conversion Shares ”) then owned by each such Investor as of the date of distribution of the Escrow Shares), an aggregate of 1,080,250 shares of the Escrow Shares for each percentage by which the applicable Performance Threshold was not achieved up to the total number of Escrow Shares for the applicable fiscal year.  The number of Escrow Shares payable to each Investor shall be equal to a fraction of the total number of Escrow Shares potentially issuable pursuant to the terms hereof, the numerator of which shall be the amount by which (i) the number of Conversion Shares issued or issuable upon Preferred Shares which was initially issued to the Investor exceeds (ii) the sum of (x) the number of Conversion Shares sold or otherwise transferred by the Investor plus (y) the number of shares of Conversion Shares issued or issuable sold or otherwise transferred by the Investor, and the denominator of which is the number of Conversion Shares issued or issuable by the Company in the Offering.  Any Escrow Shares for either Fiscal Year 2010 or Fiscal Year 2011 which are not transferred to the Investors pursuant to this paragraph shall be returned to the Company for cancellation.

(c)   No earlier than five (5) and no later than ten (10) business days after the Investor Representative’s delivery to each of the Investors of the Proposed Disbursement Materials pursuant to Section 1.04 hereof, the Company and the Investor Representative shall provide joint written instructions to the Escrow Agent (the “ Disbursement Instructions ”) instructing the Escrow Agent to issue and deliver the applicable Escrow Shares in accordance with the calculations set forth herein.  Notwithstanding anything to the contrary set forth in this Agreement: (i) if Escrow Shares are distributed pursuant to Section 1.05(b) above, only those Investors who own Preferred Shares or Conversion Shares of the Company at the time that the Escrow Shares are distributed hereunder shall be entitled to receive the applicable Escrow Shares calculated based on their ownership interest on the distribution date and (ii) the Investor Representative shall have no authority to provide or to cause to be provided the Disbursement Instructions to the Escrow Agent if Investors holding at least a majority of the Preferred Shares or Conversion Shares on the distribution date (based on the aggregate number of Preferred Shares and Conversion Shares held by all of the Investors on the distribution date), by notice given to the Investor Representative no later than five (5) business days after their receipt of the Proposed Disbursement Materials pursuant to Section 1.04 hereof, dispute the calculation of the 2010 PT, the 20101PT and/or the Escrow Shares to be distributed to the Investors or returned to the Company, as the case may be.  Any Escrow Shares not delivered to any Investor because such Investor no longer holds Preferred Shares or Conversion Shares shall be returned to the Company for cancellation.

 

 

(d)   If the Company does not achieve the 2010 PT or the 2011 PT, the Company shall use its best efforts to promptly cause the applicable Escrow Shares to be delivered to the Investors, including causing its transfer agent to promptly, but in no event longer than five (5) business days after delivery of the Disbursement Instructions, transfer the certificates into the names of the Investors.  The Company shall also instruct its securities counsel to provide any written instruction required by the Escrow Agent or the transfer agent in a timely manner so that the issuances and delivery contemplated above can be achieved within seven (7) business days following delivery of the Fiscal Year 2010 Annual Report or the Fiscal Year 2011 Annual Report, as applicable, to the Investor Representative.

Section 1.06   Compensation .  For services rendered pursuant to this Agreement, the Company shall pay a documentation fee to the Escrow Agent of $2,500.00 out of the proceeds of the Financing Transaction.  If the Escrow Shares are held longer than January 1, 2012, then thereafter, the Company shall pay a fee of $100 per month until the Escrow Shares are disbursed.

ARTICLE II.

REPRESENTATIONS OF THE COMPANY

 

Section 2.01   Representations and Warranties .  The Company hereby represents and warrants to the Investors as follows:

 

(a)   The Escrow Shares when issued will be free and clear of all pledges, liens, claims and encumbrances, except encumbrances created by this Agreement.  There are no restrictions on the ability of the Company to issue, deposit and transfer the Escrow Shares, other than transfer restrictions under applicable federal and state securities laws.

(b)   The performance of this Agreement and compliance with the provisions hereof will not violate any provision of any law applicable to the Company and will not conflict with or result in any material breach of any of the terms, conditions or provisions of, or constitute a default under the terms of the amended and restated articles of incorporation or by-laws of the Company, or any indenture, mortgage, deed of trust or other agreement or instrument binding upon the Company or affecting the Escrow Shares or result in the creation or imposition of any lien, charge or encumbrance upon, any of the properties or assets of the Company, the creation of which would have a material adverse effect on the business and operations of the Company.  No notice to, filing with, or authorization, registration, consent or approval of any governmental authority or other person is necessary for the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby by the Company, other than those already obtained.  Upon the transfer of the Escrow Shares to the Investors pursuant to this Agreement, the Investors will be the record and beneficial owners of all of such shares and have good and valid title to all of such shares, free and clear of all encumbrances.

 

 

ARTICLE III.

ESCROW AGENT

Section 3.01   The Escrow Agent’s duties hereunder may be altered, amended, modified or revoked only by a writing signed by the Company, the Investor Representative and the Escrow Agent.

Section 3.02   The Escrow Agent shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by the Escrow Agent to be genuine and to have been signed or presented by the proper party or parties. The Escrow Agent shall not be personally liable for any act the Escrow Agent may do or omit to do hereunder as the Escrow Agent while acting in good faith and in the absence of gross negligence, fraud or willful misconduct, and any act done or omitted by the Escrow Agent pursuant to the advice of the Escrow Agent’s attorneys-at-law shall be conclusive evidence of such good faith, in the absence of gross negligence, fraud or willful misconduct.

Section 3.03   The Escrow Agent is hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law and is hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case the Escrow Agent obeys or complies with any such order, judgment or decree, the Escrow Agent shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.

Section 3.04   The Escrow Agent shall not be liable in any respect on account of the identity, authorization or rights of the parties executing or delivering or purporting to execute or deliver any documents or papers deposited or called for thereunder in the absence of gross negligence, fraud or willful misconduct.

Section 3.05   The Escrow Agent shall be entitled to employ such legal counsel and other experts as the Escrow Agent may deem necessary to properly advise the Escrow Agent in connection with the Escrow Agent’s duties hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor which shall be paid by the Escrow Agent.

Section 3.06   The Escrow Agent’s responsibilities as escrow agent hereunder shall terminate if the Escrow Agent shall resign by giving written notice to the Company and the Investors. In the event of any such resignation, the Investors and the Company shall appoint a successor Escrow Agent and the Escrow Agent shall deliver to such successor Escrow Agent any escrow funds and other documents held by the Escrow Agent.

Section 3.07   If the Escrow Agent reasonably requires other or further instruments in connection with this Escrow Agreement or obligations in respect hereto, the necessary parties hereto shall use its best efforts to join in furnishing such instruments.

 

 

Section 3.08   It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the Escrow Shares, the Escrow Materials or the Disbursement Instructions held or reeived by the Escrow Agent hereunder, the Escrow Agent is authorized and directed in the Escrow Agent’s sole discretion (1) to retain in the Escrow Agent’s possession without liability to anyone all or any part of said documents or the Escrow Shares until such disputes shall have been settled either by mutual written agreement of the parties concerned by a final order, decree or judgment or a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but the Escrow Agent shall be under no duty whatsoever to institute or defend any such proceedings or (2) to deliver the Escrow Shares and any other property and documents held by the Escrow Agent hereunder to a state or Federal court having competent subject matter jurisdiction and located in the City of New York, Borough of Manhattan, in accordance with the applicable procedure therefor.

Section 3.09   The Company agrees to indemnify and hold harmless the Escrow Agent and its partners, employees, agents and representatives from any and all claims, liabilities, costs or expenses in any way arising from or relating to the duties or performance of the Escrow Agent hereunder or the transactions contemplated hereby other than any such claim, liability, cost or expense to the extent the same shall have been determined by final, unappealable judgment of a court of competent jurisdiction to have resulted from the gross negligence, fraud or willful misconduct of the Escrow Agent.

ARTICLE IV.

MISCELLANEOUS

 

Section 4.01   Waiver .  No waiver of, or any breach of any covenant or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof, or of any other covenant or provision herein contained. No extension of time for performance of any obligation or act shall be deemed an extension of the time for performance of any other obligation or act.

Section 4.02   Notices .  All notices, demands, consents, requests, instructions and other communications to be given or delivered or permitted under or by reason of the provisions of this Agreement or in connection with the transactions contemplated hereby shall be in writing and shall be deemed to be delivered and received by the intended recipient as follows: (i) if personally delivered, on the business day of such delivery (as evidenced by the receipt of the personal delivery service), (ii) if mailed certified or registered mail return receipt requested, two (2) business days after being mailed, (iii) if delivered by overnight courier (with all charges having been prepaid), on the business day of such delivery (as evidenced by the receipt of the overnight courier service of recognized standing), or (iv) if delivered by facsimile transmission, on the business day of such delivery if sent by 6:00 p.m. in the time zone of the recipient, or if sent after that time, on the next succeeding business day (as evidenced by the printed confirmation of delivery generated by the sending party’s fax machine).  If any notice, demand, consent, request, instruction or other communication cannot be delivered because of a changed address of which no notice was given (in accordance with this Section 4.02), or the refusal to accept same, the notice, demand, consent, request, instruction or other communication shall be deemed received on the second business day the notice is sent (as evidenced by a sworn affidavit of the sender).  All such notices, demands, consents, requests, instructions and other communications will be sent to the following addresses or facsimile numbers as applicable.

 

 

If to Escrow Agent:

Continental Stock Transfer & Trust Company

17 Battery Place, 8 th Floor

New York, NY 10004

Attention: Frank A. Di Paolo

Fax Number: (212) 616-7620

If to the Company:

c/o Xinghe Yongle Carbon Co., Ltd.

787 Xicheng Wai

Chengguantown

Xinghe County

Inner Mongolia, China

Attention: Ting Chen

Fax Number: (718)-661-9959

If to an Investor, to the information indicated on the signature page of each Investor hereto.

or to such other address and to the attention of such other person as any of the above may have furnished to the other parties in writing and delivered in accordance with the provisions set forth above.

 

Section 4.03   Successors and Assigns .  This Agreement shall be binding upon and shall inure to the benefit of the permitted successors and permitted assigns of the parties hereto.

Section 4.04   Entire Agreement; Amendment .  This Agreement contains the entire understanding and agreement of the parties relating to the subject matter hereof and supersedes all prior and/or contemporaneous understandings and agreements of any kind and nature (whether written or oral) among the parties with respect to such subject matter.  This Agreement may not be modified, changed, supplemented, amended or terminated, nor may any obligations hereunder be waived, except by written instrument signed by the parties to be charged or by its agent duly authorized in writing or as otherwise expressly permitted herein.  Notwithstanding anything to the contrary in this Agreement, this Agreement may not be modified, changed, supplemented, amended or terminated, nor may any such provision be waived, without the prior written consent of the Investors holding a majority of the Preferred Shares as of the date of such modification, change, supplement, amendment, termination or waiver (based on the aggregate number of Preferred Shares held by all of the Investors as of the date of such modification, change, supplement, amendment, termination or waiver).

 

 

Section 4.05   Headings .  The section headings contained in this Agreement are inserted for reference purposes only and shall not affect in any way the meaning, construction or interpretation of this Agreement. Any reference to the masculine, feminine, or neuter gender shall be a reference to such other gender as is appropriate. References to the singular shall include the plural and vice versa.

Section 4.06   Governing Law .  This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction. This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted.

[Signature Page Follows]

 

 

IN WITNESS WHEREOF , the parties hereto have executed this Make Good Escrow and Pledge Agreement as of date first written above.

COMPANY:

CHINA CARBON GRAPHITE GROUP, INC.

By: _ /s/ Donghai Yu _________________

      Name: Donghai Yu

      Title:   Chief Executive Officer

CONTINENTAL STOCK TRANSFER

& TRUST COMPANY

By:  _ /s/ Cynthia Jordan _______________

        Name:

        Title:

INVESTORS:

The Investors executing the Signature Page in the form attached hereto as Annex A and delivering the same to the Company or its agents shall be deemed to have executed this Agreement and agreed to the terms hereof.

 

Annex A

Make Good Escrow and Pledge Agreement

Investor Counterpart Signature Page

The undersigned, desiring to enter into this Make Good Escrow and Pledge Agreement, dated as of December 22, 2009 (the “ Agreement ”), between the undersigned, China Carbon Graphite Group, Inc., a Nevada corporation (the “ Company ”), and Continental Stock Transfer & Trust Company, in or substantially in the form furnished to the undersigned hereby agrees to join the Agreement as a party thereto, with all the rights and privileges appertaining thereto, and to be bound in all respects by the terms and conditions thereof.

IN WITNESS WHEREOF , the undersigned has executed the Agreement as of _____________________, 2009.

Name and Address, Fax No. and Social Security No./EIN of Investor:

________________________________________________   ________________________________________________   ________________________________________________   Fax No.: _________________________________________   Soc. Sec. No./EIN: _________________________________

If a partnership, corporation, trust or other business entity:

By: _________________________________________

Name:

Title:

If an individual:

________________________________________ Signature

 

 

 

10

Exhibit 99.4

 

 

ESCROW AGREEMENT

This ESCROW AGREEMENT (this “ Agreement ”) made as of December 17, 2009 by and among China Carbon Graphite Group, Inc., (the “ Issuer ”) and Maxim Group LLC (the “ Placement Agent ”), whose addresses and other information appear on the Information Sheet (as defined herein) attached to this Agreement, and Continental Stock Transfer & Trust Company, 17 Battery Place, 8 th Floor, New York, NY 10004 (the “ Escrow Agent ”).

 

WITNESSETH:

WHEREAS, the Issuer proposes to sell a minimum of $2,040,000 (the “ Offering Amount ”) of the Issuer’s Units comprised of Series B Convertible Preferred Stock and warrants to purchase common stock of the Issuer (the “ Securities ”) to investors (the subscribers of the Securities pursuant to this offering are hereinafter referred to as “ Investors ”), in a private offering to accredited investors on a “best efforts” basis through the Placement Agent (the “ Offering ”);

 

WHEREAS, the Issuer and the Placement Agent propose to establish an escrow account (the “ Escrow Account ”), to which subscription monies which are received by the Escrow Agent from the Placement Agent in connection with such private offering are to be credited, and the Escrow Agent is willing to establish the Escrow Account on the terms and subject to the conditions hereinafter set forth; and

 

WHEREAS, the Escrow Agent has agreed to establish a special bank account at J.P. Morgan Chase Bank (the “ Bank ”) into which the subscription monies, which are received by the Escrow Agent from the Placement Agent and credited to the Escrow Account, are to be deposited.

 

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto hereby agree as follows:

 

1.            Information Sheet .  Each capitalized term not otherwise defined in this Agreement shall have the meaning set forth for such term on the information sheet which is attached to this Agreement as Exhibit A and is incorporated by reference herein and made a part hereof (the “ Information Sheet ”).

 

2.            Establishment of the Bank Account .

2.1           The Escrow Agent shall establish a non-interest-bearing bank account at the branch of Bank selected by the Escrow Agent, and bearing the designation set forth on the Information Sheet (heretofore defined as the “ Bank Account ”).  The purpose of the Bank Account is for (a) the deposit of all subscription monies (checks or wire transfers) which are received by the Placement Agent from prospective purchasers of the Securities and are delivered by the Placement Agent to the Escrow Agent, (b) the holding of amounts of subscription monies which are collected through the banking system and (c) the disbursement of collected funds, all as described herein.

 

 

2.2           On or before the date of the initial deposit in the Bank Account pursuant to this Agreement, the Placement Agent shall notify the Escrow Agent in writing of the date of the commencement of the Offering (the “ Effective Date ”), and the Escrow Agent shall not be required to accept any amounts for credit to the Escrow Account or for deposit in the Bank Account prior to its receipt of such notification.

 

2.3           The “ Offering Period ,” which shall be deemed to commence on the Effective Date, shall consist of the number of calendar days or business days set forth on the Information Sheet.  The Offering Period shall be extended at the discretion of the Placement Agent and the Issuer (an “ Extension Period ”) only if the Escrow Agent shall have received written notice thereof prior to the expiration of the Offering Period.  The Extension Period, which shall be deemed to commence on the next calendar day following the expiration of the Offering Period, shall consist of the number of calendar days or business days set forth on the Information Sheet.  The last day of the Offering Period, or the last day of the Extension Period (if the Escrow Agent has received written notice thereof as herein above provided), is referred to herein as the “ Termination Date ”.  Except as provided in Section 4.3 hereof, after the Termination Date, the Placement Agent shall not deposit, and the Escrow Agent shall not accept, any additional amounts representing payments by prospective purchasers.

 

3.            Deposits to the Bank Account .

3.1           The Placement Agent shall promptly deliver to the Escrow Agent all monies which it receives from prospective purchasers of the Securities, which monies shall be in the form of checks or wire transfers, provided however that "Cashiers" checks and "Money Orders" must be in amounts greater than $10,000; Cashiers checks or Money Orders in amounts less than $10,000 shall be rejected by the Escrow Agent.  Upon the Escrow Agent’s receipt of such monies, they shall be credited to the Escrow Account. All checks delivered to the Escrow Agent shall be made payable to “Continental Stock Transfer & Trust Company AAF China Carbon Graphite Group, Inc.”  Any check payable other than to the Escrow Agent as required hereby shall be returned to the prospective purchaser, or if the Escrow Agent has insufficient information to do so, then to the Placement Agent (together with any Subscription Information, as defined below or other documents delivered therewith) by noon of the next business day following receipt of such check by the Escrow Agent, and such check shall be deemed not to have been delivered to the Escrow Agent pursuant to the terms of this Agreement.

 

3.2           Promptly after receiving subscription monies as described in Section 3.1, the Escrow Agent shall deposit the same into the Bank Account.  Amounts of monies so deposited are hereinafter referred to as “ Escrow Amounts ”.  The Escrow Agent shall cause the Bank to process all Escrow Amounts for collection through the banking system.  Simultaneously with each deposit to the Escrow Account, the Placement Agent (or the Issuer, if such deposit is made by the Issuer) shall inform the Escrow Agent in writing of the name, address, and the tax identification number of the purchaser, the amount of Securities subscribed for by such purchase, and the aggregate dollar amount of such subscription (collectively, the “ Subscription Information ”).

 

 

3.3           The Escrow Agent shall not be required to accept for credit to the Escrow Account or for deposit into the Bank Account checks which are not accompanied by the appropriate Subscription Information, which at minimum shall include the name address, tax identification number and the number of Units subscribed for.  Wire transfers representing payments by prospective purchasers shall not be deemed deposited in the Escrow Account until the Escrow Agent has received in writing the Subscription Information required with respect to such payments.

 

3.4           The Escrow Agent shall not be required to accept in the Escrow Account any amounts representing payments by prospective purchasers, whether by check or wire, except during the Escrow Agent’s regular business hours.

 

3.5           Only those Escrow Amounts, which have been deposited in the Bank Account and which have cleared the banking system and have been collected by the Escrow Agent, are herein referred to as the “ Fund .”

 

3.6           If the Offering is terminated before the Termination Date, the Escrow Agent shall refund any portion of the Fund prior to disbursement of the Fund in accordance with Article 4 hereof upon instructions in writing signed by both the Issuer and the Placement Agent.

 

4.            Disbursement from the Bank Account .

4.1           Subject to Section 4.3 below, if by the close of regular banking hours on the Termination Date the Escrow Agent determines that the amount in the Fund is less than the Offering Amount, as indicated by the Subscription Information submitted to the Escrow Agent, then in either such case, the Escrow Agent shall promptly refund to each prospective purchaser the amount of payment received from such purchaser which is then held in the Fund or which thereafter clears the banking system, without interest thereon or deduction there from, by drawing checks on the Bank Account for the amounts of such payments and transmitting them to the purchasers. In such event, the Escrow Agent shall promptly notify the Issuer and the Placement Agent of its distribution of the Fund.

 

4.2           Subject to Section 4.3 below, if at any time up to the close of regular banking hours on the Termination Date, the Escrow Agent determines that the amount in the Fund represents the sale of the Offering Amount, the Escrow Agent shall promptly notify the Issuer and the Placement Agent of such fact in writing.  Upon written notification from the Issuer and the Placement Agent that the closing of the Offering has occurred, the Escrow Agent shall promptly disburse the Fund, by drawing checks on the Bank Account in accordance with instructions in writing signed by both the Issuer and the Placement Agent as to the disbursement of the Fund, promptly after it receives such instructions.

 

 

4.3           This Section 4.3 applies only if a Collection Period has been provided for by the appropriate indication on the Information Sheet.  If the Escrow Agent or the Placement Agent has on hand at the close of business on the Termination Date any uncollected amounts which when added to the Fund would raise the amount in the Fund to the Offering Amount and result in the Fund representing the sale of the Offering Amount, the Collection Period (consisting of the number of business days set forth on the Information Sheet) shall be utilized to allow such uncollected amounts to clear the banking system.  During the Collection Period, the Placement Agent (and the Issuer) shall not deposit, and the Escrow Agent shall not accept, any additional amounts; provided , however , that such amounts as were received by the Placement Agent (or the Issuer) by the close of business on the Termination Date may be deposited with the Escrow Agent by noon of the next business day following the Termination Date.  If at the close of business on the last day of the Collection Period an amount sufficient to raise the amount in the Fund to represent the sale of the Offering Amount shall not have cleared the banking system, the Escrow Agent shall promptly notify the Issuer and the Placement Agent in writing of such fact and shall promptly return all amounts then in the Fund, and any amounts which thereafter clear the banking system, to the prospective purchasers as provided in Section 4.2 hereof.

 

4.4           Upon disbursement of the Fund pursuant to the terms of this Article 4, the Escrow Agent shall be relieved of further obligations and released from all liability under this Agreement.  It is expressly agreed and understood that in no event shall the aggregate amount of payments made by the Escrow Agent exceed the amount of the Fund.

 

5.            Rights, Duties and Responsibilities of Escrow Agent . It is understood and agreed that the duties of the Escrow Agent are purely ministerial in nature, and that:

 

5.1           The Escrow Agent shall notify the Placement Agent, on a daily basis, of the Escrow Amounts which have been deposited in the Bank Account and of the amounts, constituting the Fund, which have cleared the banking system and have been collected by the Escrow Agent.

 

5.2           The Escrow Agent shall not be responsible for or be required to enforce any of the terms or conditions of the selling agreement or any other agreement between the Placement Agent and the Issuer nor shall the Escrow Agent be responsible for the performance by the Placement Agent or the Issuer of their respective obligations under this Agreement.

 

5.3           The Escrow Agent shall not be required to accept from the Placement Agent (or the Issuer) any Subscription Information pertaining to prospective purchasers unless such Subscription Information is accompanied by checks or wire transfers meeting the requirements of Section 3.1, nor shall the Escrow Agent be required to keep records of any information with respect to payments deposited by the Placement Agent (or the Issuer) except as to the amount of such payments; however, the Escrow Agent shall notify the Placement Agent within a reasonable time of any discrepancy between the amount set forth in any Subscription Information and the amount delivered to the Escrow Agent therewith.  Such amount need not be accepted for deposit in the Escrow Account until such discrepancy has been resolved.

 

5.4           The Escrow Agent shall be under no duty or responsibility to enforce collection of any check delivered to it hereunder.  The Escrow Agent, within a reasonable time, shall return to the Placement Agent any check received which is dishonored, together with the Subscription Information, if any, which accompanied such check.

 

 

5.5           The Escrow Agent shall be entitled to rely upon the accuracy, act in reliance upon the contents, and assume the genuineness of any notice, instruction, certificate, signature, instrument or other document which is given to the Escrow Agent pursuant to this Agreement without the necessity of the Escrow Agent verifying the truth or accuracy thereof.  The Escrow Agent shall not be obligated to make any inquiry as to the authority, capacity, existence or identity of any person purporting to give any such notice or instructions or to execute any such certificate, instrument or other document.

5.6           If the Escrow Agent is uncertain as to its duties or rights hereunder or shall receive instructions with respect to the Bank Account, the Escrow Amounts or the Fund which, in its sole determination, are in conflict either with other instructions received by it or with any provision of this Agreement, it shall be entitled to hold the Escrow Amounts, the Fund, or a portion thereof, in the Bank Account pending the resolution of such uncertainty to the Escrow Agent’s sole satisfaction, by final judgment of a court or courts of competent jurisdiction or otherwise.

 

5.7           The Escrow Agent shall not be liable for any action taken or omitted hereunder, or for the misconduct of any employee, agent or attorney appointed by it, except in the case of willful misconduct or gross negligence.  The Escrow Agent shall be entitled to consult with counsel of its own choosing and shall not be liable for any action taken, suffered or omitted by it in accordance with the advice of such counsel.

 

5.8           The Escrow Agent shall have no responsibility at any time to ascertain whether or not any security interest exists in the Escrow Amounts, the Fund or any part thereof or to file any financing statement under the Uniform Commercial Code with respect to the Fund or any part thereof.

 

6.            Amendment; Resignation or Removal of Escrow Agent .  This Agreement may be altered or amended only with the written consent of the Issuer, the Placement Agent and the Escrow Agent.  The Escrow Agent may resign and be discharged from its duties hereunder at any time by giving written notice of such resignation to the Issuer and the Placement Agent specifying a date when such resignation shall take effect and upon delivery of the Fund to the successor escrow agent designated by the Issuer or the Placement Agent in writing.  Such successor Escrow Agent shall become the Escrow Agent hereunder upon the resignation date specified in such notice.  If the Company fails to designate a successor Escrow Agent within thirty (30) days after such notice, then the resigning Escrow Agent shall promptly refund the amount in the Fund to each prospective purchaser, without interest thereon or deduction.  The Escrow Agent shall continue to serve until its successor accepts the escrow and receives the Fund.  The Company shall have the right at any time to remove the Escrow Agent and substitute a new escrow agent by giving notice thereof to the Escrow Agent then acting.  Upon its resignation and delivery of the Fund as set forth in this Section 6, the Escrow Agent shall be discharged of and from any and all further obligations arising in connection with the escrow contemplated by this Agreement.  Without limiting the provisions of Section 8 hereof, the resigning Escrow Agent shall be entitled to be reimbursed by the Issuer and the Placement Agent for any expenses incurred in connection with its resignation, transfer of the Fund to a successor escrow agent or distribution of the Fund pursuant to this Section 6.

 

 

7.            Representations and Warranties . The Issuer and the Placement Agent hereby severally represent and warrant to the Escrow Agent that:

 

7.1           No party other than the parties hereto and the prospective purchasers have, or shall have, any lien, claim or security interest in the Escrow Amounts or the Fund or any part thereof.

 

7.2           No financing statement under the Uniform Commercial Code is on file in any jurisdiction claiming a security interest in or describing (whether specifically or generally) the Escrow Amounts or the Fund or any part thereof.

 

7.3           The Subscription Information submitted with each deposit shall, at the time of submission and at the time of the disbursement of the Fund, be deemed a representation and warranty that such deposit represents a bona fide payment by the purchaser described therein for the amount of Securities set forth in such Subscription Information.

 

7.4           All of the information contained in the Information Sheet is, as of the date hereof, and will be, at the time of any disbursement of the Fund, true and correct.

 

7.5           Reasonable controls have been established and required due diligence performed to comply with "Know Your Customer" regulations, USA Patriot Act, Office of Foreign Asset Control (OFAC) regulations and the Bank Secrecy Act.

 

8.            Fees and Expenses .  The Escrow Agent shall be entitled to the Escrow Agent Fees set forth on the Information Sheet, payable as and when stated therein.  In addition, the Issuer and the Placement Agent jointly and severally agree to reimburse the Escrow Agent for any reasonable expenses incurred in connection with this Agreement, including, but not limited to, reasonable counsel fees.

 

9.            Indemnification and Contribution .

9.1           The Issuer and the Placement Agent (collectively referred to as the “ Indemnitors ”) jointly and severally agree to indemnify the Escrow Agent and its officers, directors, employees, agents and shareholders (collectively referred to as the “ Indemnitees ”) against, and hold them harmless of and from, any and all loss, liability, cost, damage and expense, including without limitation, reasonable counsel fees, which the Indemnitees may suffer or incur by reason of any action, claim or proceeding brought against the Indemnitees arising out of or relating in any way to this Agreement or any transaction to which this Agreement relates, unless such action, claim or proceeding is the result of the willful misconduct or gross negligence of the Indemnitees.

 

9.2           If the indemnification provided for in Section 9.1 is applicable, but for any reason is held to be unavailable, the Indemnitors shall contribute such amounts as are just and equitable to pay, or to reimburse the Indemnitees for, the aggregate of any and all losses, liabilities, costs, damages and expenses, including counsel fees, actually incurred by the Indemnitees as a result of or in connection with, and any amount paid in settlement of, any action, claim or proceeding arising out of or relating in any way to any actions or omissions of the Indemnitors.

 

 

9.3           The provisions of this Article 9 shall survive any termination of this Agreement, whether by disbursement of the Fund, resignation of the Escrow Agent or otherwise.

 

10.            Termination of Agreement .  This Agreement shall terminate on the final disposition of the Fund pursuant to Section 4, provided that the rights of the Escrow Agent and the obligations of the other parties hereto under Section 9 shall survive the termination hereof and the resignation or removal of the Escrow Agent.

 

11.            Governing Law and Assignment .  This Agreement shall be construed in accordance with and governed by the laws of the State of New York, without regard to the conflicts of laws principles thereof, and shall be binding, upon the parties hereto and their respective successors and assigns; provided , however , that any assignment or transfer by any party of its rights under this Agreement or with respect to the Escrow Amounts or the Fund shall be void as against the Escrow Agent unless (a) written notice thereof shall be given to the Escrow Agent; and (b) the Escrow Agent shall have consented in writing to such assignment or transfer.

 

12.            Notices . All notices required to be given in connection with this Agreement shall be sent by registered or certified mail, return receipt requested, or by hand delivery with receipt acknowledged, or by the Express Mail service offered by the United States Postal Service, and addressed, if to the Issuer or the Placement Agent, at their respective addresses set forth on the Information Sheet, and if to the Escrow Agent, at its address set forth above, to the attention of the Trust Department.

13.            Severability .  If any provision of this Agreement or the application thereof to any person or circumstance shall be determined to be invalid or unenforceable, the remaining provisions of this Agreement or the application of such provision to persons or circumstances other than those to which it is held invalid or unenforceable shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by law.

 

14.            Execution in Several Counterparts . This Agreement may be executed in several counterparts or by separate instruments and by facsimile transmission, and all of such counterparts and instruments shall constitute one agreement, binding on all of the parties hereto.

 

15.            Entire Agreement .  This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings (written or oral) of the parties in connection therewith.

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first above written.

 

 

CONTINENTAL STOCK TRANSFER

& TRUST COMPANY

 

 

 

By:     /s/ Cynthia Jordan               

        Name:

        Title:

 

 

 

CHINA CARBON GRAPHITE GROUP, INC.

 

 

By:     /s/ Ting Chen                

        Name:  Ting Chen

        Title:  CFO

 

 

 

  MAXIM GROUP LLC

 

By:     /s/   Clifford Teller               

        Name: Clifford A. Teller

        Title:  Executive Director, Investment Banking

 

 

 

EXHIBIT A

 

ESCROW AGREEMENT INFORMATION SHEET

 

1.            The Issuer

Name:  China Carbon Graphite Group, Inc.

Address: c/o Xinghe Yongle Carbon Co., Ltd.

787 Xicheng Wai

Chengguantown

Xinghe County

Inner Mongolia, China

Tax Identification Number: 98-0550699

 

    New York, New York 10174

 

3.            The Securities

Description of the Securities to be offered: Issuer’s Units, which are comprised of Issuer’s Series B Convertible Preferred Stock and a warrant to purchase common stock of the Issuer.

 

4.            Minimum Amounts and Conditions Required for Disbursement of the Escrow Account

Aggregate dollar amount which must be collected before the Escrow Account may be disbursed to the Issuer: $ 2,040,000 million

 

5.            Plan of Distribution of the Securities

Initial Offering Period: Through December 31, 2009.

Extension Period, if any: No later than 45 days subsequent to the Initial Offering Period.

 

6.            Title of Escrow Account

“Continental Stock Transfer & Trust Company AAF China Carbon Graphite Group, Inc .”

 

7.            Escrow Agent Fees and Charges

$2,500: $1250.00 payable at signing of the Escrow Agreement, plus $1250.00 payable prior to the Closing.  A $250.00 will be assessed to review and process a term extension request and a fee of $500 will be payable for document review services related to each amendment to the Escrow Agreement. In addition, the Escrow Agent shall be paid a fee of $500.00 for each additional closing.  Should the Escrow Agent continue for more than one year, the Escrow Agent shall receive a fee of $500.00 per month, or any portion thereof, payable in advance or the first business day of each month.

 

 

Distribution charges:

$15.00 per check

$35.00 per wire

$100.00 per check returned (NSF) check

$100.00 lost check replacement fee

Exhibit 99.5

 

 

China Carbon Graphite Group, Inc., a Nevada corporation (the “ Company ”), hereby certifies that, for value received, the Initial Holder shown above, or its permitted registered assigns (the “ Holder ”), is entitled to purchase from the Company up to the number of shares of its common stock shown above (the “ Common Stock ”) (each such share, a “ Warrant Share ” and all such shares, the “ Warrant Shares ”) at the exercise price shown above (as may be adjusted from time to time as provided herein, the “Exercise Price ”), at any time and from time to time on or after the Original Issue Date shown above and through and including the expiration time shown above (the “ Expiration Time ”), and subject to the following terms and conditions:

This Warrant is being issued pursuant to a Subscription Agreement, dated December 22, 2009 (the “ Subscription Agreement ”), by and between the Company and the Initial Holder, and is part of the Units described in the Subscription Agreement. 

1.           Definitions . In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Subscription Agreement.

 

 

2.           List of Warrant Holders .  The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “ Warrant Register ”), in the name of the record Holder (which shall include the Initial Holder or, as the case may be, any registered assignee to which this Warrant is permissibly assigned hereunder from time to time).  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

3.           List of Transfers; Restrictions on Transfer . Subject to the restrictions on transfer contained herein, the Company shall register any transfer of all or any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Company at its address specified herein. Upon any such registration or transfer, a new Warrant to purchase Common Stock, in substantially the form of this Warrant (any such new Warrant, a “ New Warrant ”), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder.  The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations in respect of the New Warrant that the Holder has in respect of this Warrant.

4.           Exercise and Duration of Warrant .

(a)          All or any part of this Warrant shall be exercisable by the registered Holder in the manner permitted by Section 10 of this Warrant and as set for the below at any time and from time to time on or after the Original Issue Date and through and including the Expiration Time. At the Expiration Time, the portion of this Warrant not exercised prior thereto shall be and become void and of no value and this Warrant shall be terminated and shall no longer be outstanding.

(b)           The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached hereto (the “ Exercise Notice ”), completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised.  The date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an “ Exercise Date .”  The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder, but if it is not so delivered, then such exercise shall constitute an undertaking by the Holder to deliver the original Warrant to the Company as soon as practicable thereafter.  Execution and delivery of the Exercise Notice with respect to less than all of the Warrant Shares hereof 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.

(c)           The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant pursuant to the terms hereof.

 

 

5.             Delivery of Warrant Shares .

(a)           Upon exercise of this Warrant, the Company shall promptly (but in no event later than three (3) Business Days after the Exercise Date) issue or cause to be issued and cause to be delivered to and in such name or names as the Holder may designate (subject to the restrictions on transfer contained herein), a certificate for the Warrant Shares issuable upon such exercise.  “ Business Day ” shall mean any day other than a week-end or United States national holiday or other day on which banks in New York City are not open to the public for the regular conduct of business. The Holder, or any person or entity permissibly so designated by the Holder to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the Exercise Date.  The Company shall, upon the written request of the Holder, use its best efforts to deliver, or cause to be delivered, Warrant Shares hereunder electronically through the Depository Trust and Clearing Corporation or another established clearing corporation performing similar functions, if available; provided, that, the Company may, but will not be required to, change its transfer agent if its current transfer agent cannot deliver Warrant Shares electronically through the Depository Trust and Clearing Corporation.  If as of the time of exercise the Warrant Shares constitute restricted or control securities, the Holder, by exercising, agrees not to resell them except in compliance with all applicable securities laws.

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

(c)           If the Company fails to cause its transfer agent to transmit to the Holder a certificate or the certificates (either physical or electronic) representing the Warrant Shares pursuant to the terms hereof by the applicable delivery date, then, the Holder will have the right to rescind such exercise prior to the issuance of the Warrant Shares and provided that the Holder or transferee did not receive any benefit as a holder of the Warrant Shares.

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

 

 

7.             Replacement of Warrant .  If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs, including the cost of an indemnity bond as the transfer agent may require. If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder shall deliver such mutilated Warrant, to the extent reasonably practicable, to the Company as a condition precedent to the Company’s obligation to issue the New Warrant.

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

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

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

 

 

(b)           Pro Rata Distributions .  If the Company, at any time while this Warrant is outstanding, distributes to all holders of Common Stock for no consideration: (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset besides cash (in each case, “ Distributed Property ”), then either upon any exercise of this Warrant that occurs after the record date fixed for determination of stockholders entitled to receive such distribution or, at the option of the Company, concurrently with such distribution, the Holder shall be entitled to receive, in addition to the Warrant Shares otherwise issuable upon such exercise (if applicable), the Distributed Property that such Holder would have been entitled to receive in respect of such number of Warrant Shares had the Holder been the record holder of such Warrant Shares immediately prior to such record date.

(c)           Fundamental Transactions . As used herein, “ Fundamental Transaction ” means at any time while this Warrant is outstanding: (i) the Company effects any merger or consolidation of the Company into another person or entity, in which the shareholders of the Company immediately prior to the transaction own immediately after the transaction less than a majority of the outstanding stock of the successor entity, or its parent if applicable, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer approved or authorized by the Company’s Board of Directors is completed pursuant to which holders of at least a majority of the outstanding Common Stock tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification or recombination or similar action of or with respect to the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property.  In the event of a Fundamental Transaction pursuant to which the securities, cash or property issuable with respect to the outstanding Common Stock consist solely of cash and/or securities traded on a national securities exchange or an established over-the-counter market (the “ Alternate Consideration ”), this Warrant shall expire immediately prior to the closing or effective time of the Fundamental Transaction and the Holder of this Warrant shall receive the amount by which the Alternate Consideration per share of Common Stock exceeds the Exercise Price per share (the “ Warrant Buyout Payment ”). The Company shall not effect any such Fundamental Transaction unless prior to or simultaneously with the consummation thereof, any successor to the Company, surviving entity or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Holder, the Warrant Buyout Payment in accordance with the foregoing provisions.  If the value of the Alternate Consideration shall be less than the Exercise Price, the Warrants shall terminate on the closing date or the effective time of the Fundamental Transaction and no payment shall be due to the Holder in respect of this Warrant. In the event of a Fundamental Transaction in which the consideration does not entirely consist of the Alternate Consideration, the Company (or the successor entity) shall purchase this Warrant from the Holder by paying to the Holder, within ten (10) Business Days after the closing of such 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 determined as of the day immediately following the public announcement of the applicable Fundamental Transaction.  For purposes hereof, the term “ Black Scholes Value ” means value of this Warrant based on the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“ Bloomberg ”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) if applicable, 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 such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Expiration Time.

 

 

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

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

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

(g)           Notice of Corporate Events . If, while this Warrant is outstanding, the Company (i) declares a dividend or any other distribution of cash (other than a dividend payable out of current earnings), securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary to all holders of Common Stock, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then, except if such notice and the contents thereof shall be deemed to constitute material non-public information, the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction at least ten (10) Business Days prior to the applicable record or effective date on which a person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will take all reasonable steps to give Holder the practical opportunity to exercise this Warrant prior to such time; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice.

 

 

   10.           Payment of Exercise Price . The Holder shall pay the Exercise Price by delivery to the Company (to an account of the Company specified in writing to the Holder promptly following the Company’s receipt of an Exercise Notice) of immediately available funds by wire transfer.

11.           No Fractional Shares . No fractional Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of any fractional shares that would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the closing price of one Warrant Share as reported by the applicable trading market on the Exercise Date.

12.           Notices .  Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice) shall be delivered in accordance with the procedures set forth in Section 6(f) of the Subscription Agreement, including by e-mail.

13.           Miscellaneous .

(a)           This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any person or entity other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant.  This Warrant may be amended only in writing signed by the Company and the Holder, or their successors and assigns.

(b)           All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of this Warrant and the transactions herein contemplated (whether brought against a party hereto or its respective affiliates, employees or agents) shall be adjudicated in accordance with the provisions set forth in Section 6 of the Subscription Agreement.

(c)           The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

(d)           In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

 

 

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

(f)          This Warrant may be redeemed by the Company for $0.01 per Warrant Share (the “ Redemption Price ”) if, for 20 trading days during any 30 trading day period, the price of the Common Stock exceeds $2.60.  The Company shall provide the Holder with written notice given not less than 20 trading days.  Such notice shall state that the Company has exercised its right of redemption pursuant to this Section 13(f) and shall set forth the date (the “ Redemption Date ”) as of which the Warrant shall be redeemed and the address to which this Warrant should be delivered.  This Warrant, to the extent not exercised by 5:30 PM, New York City time, on the Redemption Date shall terminate, and the Holder of this Warrant shall have no right under this Warrant other than to receive the Redemption Price upon presentation of this Warrant to the Company or its transfer agent.

(g)           No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

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

	CHINA CARBON GRAPHITE GROUP, INC.
	By:
	Name:
	Title

 

 

CHINA CARBON GRAPHITE GROUP, INC.

EXERCISE NOTICE

WARRANT ORIGINALLY ISSUED DECEMBER 22, 2009

Ladies and Gentlemen:

(1)           The undersigned hereby elects to exercise the above-referenced Warrant with respect to shares of Common Stock.  Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.

(2)           The Holder shall pay the sum of $ ______________ to the Company in accordance with the terms of the Warrant.

(4)           Pursuant to this Exercise Notice, the Company shall deliver to the Holder the number of Warrant Shares determined in accordance with the terms of the Warrant.

Dated:			HOLDER:
			Print name ↑
			By:
			Title:

 

 

Exhibit 99.6

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SECURITIES UNDER THE SECURITIES ACT AND ANY OTHER APPLICABLE SECURITIES LAWS, OR (2) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

IN ADDITION, THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED, OR BE THE SUBJECT OF ANY HEDGING, SHORT SALE, DERIVATIVE, PUT, OR CALL TRANSACTION THAT WOULD RESULT IN THE EFFECTIVE ECONOMIC DISPOSITION OF SUCH SECURITIES BY ANY PERSON, UNTIL JUNE 22, 2010, EXCEPT IN ACCORDANCE WITH FINRA RULE 5110(G)(2).

 

China Carbon Graphite Group, Inc., a Nevada corporation (the “ Company ”), hereby certifies that, for value received, the Initial Holder shown above, or its permitted registered assigns (the “ Holder ”), is entitled to purchase from the Company up to the number of shares of its common stock shown above (the “ Common Stock ”) (each such share, a “ Warrant Share ” and all such shares, the “ Warrant Shares ”) at the exercise price shown above (as may be adjusted from time to time as provided herein, the “Exercise Price ”), at any time and from time to time on or after the Original Issue Date shown above and through and including the expiration time shown above (the “ Expiration Time ”), and subject to the following terms and conditions:

This Warrant is being issued pursuant to that certain Placement Agent Agreement between the Initial Holder and the Company dated October 9, 2009 and in connection with a Subscription Agreement, dated December 22, 2009 (the “ Subscription Agreement ”), by and between the Company and certain investors. 

1.           Definitions . In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Subscription Agreement.

 

 

2.           List of Warrant Holders .  The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “ Warrant Register ”), in the name of the record Holder (which shall include the Initial Holder or, as the case may be, any registered assignee to which this Warrant is permissibly assigned hereunder from time to time).  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

3.           List of Transfers; Restrictions on Transfer . Subject to the restrictions on transfer contained herein, the Company shall register any transfer of all or any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Company at its address specified herein. Upon any such registration or transfer, a new Warrant to purchase Common Stock, in substantially the form of this Warrant (any such new Warrant, a “ New Warrant ”), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder.  The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations in respect of the New Warrant that the Holder has in respect of this Warrant.

4.           Exercise and Duration of Warrant .

(a)          All or any part of this Warrant shall be exercisable by the registered Holder in the manner permitted by Section 10 of this Warrant and as set for the below at any time and from time to time on or after June 22, 2010, which is six months from the Original Issue Date, and through and including the Expiration Time. At the Expiration Time, the portion of this Warrant not exercised prior thereto shall be and become void and of no value and this Warrant shall be terminated and shall no longer be outstanding.

(b)          The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached hereto (the “ Exercise Notice ”), completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised, except as provided in Section 4(e).  The date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an “ Exercise Date .”  The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder, but if it is not so delivered, then such exercise shall constitute an undertaking by the Holder to deliver the original Warrant to the Company as soon as practicable thereafter.  Execution and delivery of the Exercise Notice with respect to less than all of the Warrant Shares hereof 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.

(c)           The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant pursuant to the terms hereof.

 

 

(d)    E xcept as provided for in Section 4(e) below, each exercise of this Warrant must be accompanied by payment in full of the aggregate Exercise Price in cash by check or wire transfer in immediately available funds for the number of Warrant Shares being purchased by the Holder upon such exercise.

 

(e)         The aggregate Exercise Price for the number of Warrant Shares being purchased may also, in the sole discretion of the Holder, be paid in full or in part on a “cashless basis” at the election of the Holder:

 

(i)           in the form of Common Stock owned by the Holder (based on the Fair Market Value (as defined below) of such Common Stock on the date of exercise);

 

(ii)           in the form of Warrant Shares withheld by the Company from the Warrant Shares otherwise to be received upon exercise of this Warrant having an aggregate Fair Market Value on the date of exercise equal to the aggregate Exercise Price of the Warrant Shares being purchased by the Holder; or

 

(iii)           by a combination of the foregoing, provided that the combined value of all cash and the Fair Market Value of any shares surrendered to the Company is at least equal to the aggregate Exercise Price for the number of Warrant Shares being purchased by the Holder.

 

For purposes of this Warrant, the term “ Fair Market Value ” means with respect to a particular date, the average closing price of the Common Stock for the five (5) trading days immediately preceding the applicable exercise herein as officially reported by the principal securities exchange on which the Common Stock is then listed or admitted to trading, or, if the Common Stock is not listed or admitted to trading on any securities exchange as determined in good faith by resolution of the Board of Directors of the Company or a designated committee thereof, based on the best information available to it, within no greater than five (5) Business Days from the date that the notice of exercise is tendered to the Company by the Holder.

 

For purposes of illustration of a cashless exercise of this Warrant under Section 3.1(c)(ii) (or for a portion thereof for which cashless exercise treatment is requested as contemplated by Section 3.1(c)(iii) hereof), the calculation of such exercise shall be as follows:

 

 

X = Y (A-B)/A

where:

X =

the number of Warrant Shares to be issued to the Holder (rounded to the nearest whole share).

Y =

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

A =

the Fair Market Value of the Common Stock.

B =

the Exercise Price.

 

   (f)           For purposes of Rule 144 promulgated under the Securities Act and sub-section (d)(3)(ii) thereof, it is intended, understood, and acknowledged that the Common Stock issuable upon exercise of this Warrant in a cashless exercise transaction as described in Section 3.1(c) above shall be deemed to have been acquired at the time this Warrant was issued.  Moreover, it is intended, understood, and acknowledged that the holding period for the Common Stock issuable upon exercise of this Warrant in a cashless exercise transaction as described in Section 3.1(c) above shall be deemed to have commenced on the date this Warrant was issued.

 

5.             Delivery of Warrant Shares .

(a)          Upon exercise of this Warrant, the Company shall promptly (but in no event later than three (3) Business Days after the Exercise Date) issue or cause to be issued and cause to be delivered to and in such name or names as the Holder may designate (subject to the restrictions on transfer contained herein), a certificate for the Warrant Shares issuable upon such exercise.  “ Business Day ” shall mean any day other than a week-end or United States national holiday or other day on which banks in New York City are not open to the public for the regular conduct of business. The Holder, or any person or entity permissibly so designated by the Holder to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the Exercise Date.  The Company shall, upon the written request of the Holder, use its best efforts to deliver, or cause to be delivered, Warrant Shares hereunder electronically through the Depository Trust and Clearing Corporation or another established clearing corporation performing similar functions, if available; provided, that, the Company may, but will not be required to, change its transfer agent if its current transfer agent cannot deliver Warrant Shares electronically through the Depository Trust and Clearing Corporation.  If as of the time of exercise the Warrant Shares constitute restricted or control securities, the Holder, by exercising, agrees not to resell them except in compliance with all applicable securities laws.

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

 

 

(c)           If the Company fails to cause its transfer agent to transmit to the Holder a certificate or the certificates (either physical or electronic) representing the Warrant Shares pursuant to the terms hereof by the applicable delivery date, then, the Holder will have the right to rescind such exercise prior to the issuance of the Warrant Shares and provided that the Holder or transferee did not receive any benefit as a holder of the Warrant Shares.

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

7.             Replacement of Warrant .  If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs, including the cost of an indemnity bond as the transfer agent may require. If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder shall deliver such mutilated Warrant, to the extent reasonably practicable, to the Company as a condition precedent to the Company’s obligation to issue the New Warrant.

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

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

 

 

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

(b)           Pro Rata Distributions .  If the Company, at any time while this Warrant is outstanding, distributes to all holders of Common Stock for no consideration: (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset besides cash (in each case, “ Distributed Property ”), then either upon any exercise of this Warrant that occurs after the record date fixed for determination of stockholders entitled to receive such distribution or, at the option of the Company, concurrently with such distribution, the Holder shall be entitled to receive, in addition to the Warrant Shares otherwise issuable upon such exercise (if applicable), the Distributed Property that such Holder would have been entitled to receive in respect of such number of Warrant Shares had the Holder been the record holder of such Warrant Shares immediately prior to such record date.

(c)           Fundamental Transactions . As used herein, “ Fundamental Transaction ” means at any time while this Warrant is outstanding: (i) the Company effects any merger or consolidation of the Company into another person or entity, in which the shareholders of the Company immediately prior to the transaction own immediately after the transaction less than a majority of the outstanding stock of the successor entity, or its parent if applicable, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer approved or authorized by the Company’s Board of Directors is completed pursuant to which holders of at least a majority of the outstanding Common Stock tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification or recombination or similar action of or with respect to the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property.  In the event of a Fundamental Transaction pursuant to which the securities, cash or property issuable with respect to the outstanding Common Stock consist solely of cash and/or securities traded on a national securities exchange or an established over-the-counter market (the “ Alternate Consideration ”), this Warrant shall expire immediately prior to the closing or effective time of the Fundamental Transaction and the Holder of this Warrant shall receive the amount by which the Alternate Consideration per share of Common Stock exceeds the Exercise Price per share (the “ Warrant Buyout Payment ”). The Company shall not effect any such Fundamental Transaction unless prior to or simultaneously with the consummation thereof, any successor to the Company, surviving entity or the corporation purchasing or otherwise acquiring such assets or other appropriate corporation or entity shall assume the obligation to deliver to the Holder, the

 

 

Warrant Buyout Payment in accordance with the foregoing provisions.  If the value of the Alternate Consideration shall be less than the Exercise Price, the Warrants shall terminate on the closing date or the effective time of the Fundamental Transaction and no payment shall be due to the Holder in respect of this Warrant. In the event of a Fundamental Transaction in which the consideration does not entirely consist of the Alternate Consideration, the Company (or the successor entity) shall purchase this Warrant from the Holder by paying to the Holder, within ten (10) Business Days after the closing of such 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 determined as of the day immediately following the public announcement of the applicable Fundamental Transaction.  For purposes hereof, the term “ Black Scholes Value ” means value of this Warrant based on the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“ Bloomberg ”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) if applicable, 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 such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Expiration Time.

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

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

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

 

 

(g)           Notice of Corporate Events . If, while this Warrant is outstanding, the Company (i) declares a dividend or any other distribution of cash (other than a dividend payable out of current earnings), securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary to all holders of Common Stock, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then, except if such notice and the contents thereof shall be deemed to constitute material non-public information, the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction at least ten (10) Business Days prior to the applicable record or effective date on which a person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will take all reasonable steps to give Holder the practical opportunity to exercise this Warrant prior to such time; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice.

    10.           Payment of Exercise Price . The Holder shall pay the Exercise Price by delivery to the Company (to an account of the Company specified in writing to the Holder promptly following the Company’s receipt of an Exercise Notice) of immediately available funds by wire transfer.

11.           No Fractional Shares . No fractional Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of any fractional shares that would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the closing price of one Warrant Share as reported by the applicable trading market on the Exercise Date.

12.           Notices .  Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice) shall be delivered in accordance with the procedures set forth in Section 6(f) of the Subscription Agreement, including by e-mail.

13.            Registration . The Company shall file with the Securities and Exchange Commission a registration statement under the Securities Act covering the resale of the Warrant Shares, pursuant to that certain Registration Rights Agreement entered into by the Company and the signatories thereto dated December 22, 2009, the provisions of which are incorporated herein.

14.           Miscellaneous .

(a)           This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any person or entity other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant.  This Warrant may be amended only in writing signed by the Company and the Holder, or their successors and assigns.

 

 

(b)           All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of this Warrant and the transactions herein contemplated (whether brought against a party hereto or its respective affiliates, employees or agents) shall be adjudicated in accordance with the provisions set forth in Section 6 of the Subscription Agreement.

(c)           The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

(d)           In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

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

(g)           No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

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

	CHINA CARBON GRAPHITE GROUP, INC.
	By:	/s/ Donghai Yu
	Name:	Donghai Yu
	Title	Chief Executive Officer

 

CHINA CARBON GRAPHITE GROUP, INC.

EXERCISE NOTICE

WARRANT ORIGINALLY ISSUED DECEMBER 22, 2009

Ladies and Gentlemen:

(1)           The undersigned hereby elects to exercise the above-referenced Warrant with respect to shares of Common Stock.  Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.

(2)           The Holder shall pay the sum of $ ______________ (if a cashless exercise, insert “cashless”) to the Company in accordance with the terms of the Warrant.

(4)           Pursuant to this Exercise Notice, the Company shall deliver to the Holder the number of Warrant Shares determined in accordance with the terms of the Warrant.

Dated:			HOLDER:
			Print name ↑
			By:
			Title:

 

 

Exhibit 99.7