Unassociated Document


    


    NOTE
PURCHASE AGREEMENT

    


    This Note Purchase Agreement (this
“Agreement”)
is made and entered into as of September 14, 2010 by and between China New Energy Group
Company, a Delaware corporation (the “Company”),
and with offices at_______________ (the “Investor”).

    


    WHEREAS, the Company desires
to issue and sell to the Investor, and the Investor desires to purchase from the
Company the promissory note described below pursuant to an exemption from
registration under Section 4(2) and/or Regulation D under the Securities Act of
1933, as amended (the “Securities
Act”), on the terms and conditions set forth in this
Agreement;

    


    WHEREAS, concurrently with
this Agreement, the Company is entering into a Note Purchase Agreement (the
“SLS
Agreement”), dated as of the date hereof, by and between the Company
and _________ (“___”) substantially
in the form of this Agreement pursuant to which the Company desires to issue and
sell to __, and __ desires to purchase from the Company the promissory note
described therein pursuant to an exemption from registration under Section 4(2)
and/or Regulation D under the Securities Act on the terms and conditions set
forth in the SLS Agreement; and

    


    WHEREAS, Investor wishes to
loan to the Company the sum of ______________ (U.S. $_______) on the terms
and conditions set forth in the convertible promissory note annexed hereto as
Exhibit A (the
“Note”).

    


    NOW, THEREFORE, the parties
hereby agree as follows:

    


    1.     LOAN AND NOTE. The Investor
has agreed to loan to the Company the sum of ____________ (U.S. $_______)
on the terms and conditions set forth in the Note (the “Loan”).

    


    2.    CLOSING AND
PAYMENT.

    


    2.1    The Closing. At the
Closing, the Company will issue the Note to the Investor in the form of Exhibit A attached
hereto and subject to the terms and conditions hereof, and in reliance upon the
written representations and warranties of the Company the Investor will make the
Loan.  The closing shall be held on September __, 2010, or such other
date as the parties may agree upon (the “Closing”
and the “Closing
Date”) at the offices of Guzov Ofsink, LLC, 600 Madison Avenue, New York,
New York 10022, U.S.A., at 10:00 a.m., or by such means upon which the parties
may agree.

    


    2.2    Closing Deliveries.
At the Closing, the Loan shall be paid by wire transfer of immediately available
funds to the account designated by the Company in writing prior to the Closing
and the Company will deliver to the Investor a Note in its name and in such
denominations as the Investor may specify prior to the Closing.


    
      
         


      

      
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    3.     REPRESENTATIONS AND WARRANTIES OF THE
COMPANY. The Company hereby represents and warrants to the Investor as
follows:

    


    3.1    Organization and Good
Standing.  The Company (a) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and (b) is duly qualified or registered to do business as a foreign corporation
in each jurisdiction (i) listed on Section 3.1 of the Disclosure Schedules
and (ii) except where the failure to be so qualified or licensed would not
reasonably be expected to result in any change in or effect that, either
individually or in the aggregate with all other changes or effects, (i) is or is
reasonably likely to be materially adverse to the assets, business, prospects,
results of operations, or condition (financial or otherwise) of the Company,
taken as a whole, or (ii) would materially impair the ability of the
Company or Investor to (A) consummate the transactions contemplated by this
Agreement or (B) perform its respective obligations hereunder or thereunder (the
“Material
Adverse Effect”).  The Company has provided to Investor
complete and accurate copies of the Certificate of Incorporation, as amended,
and By-laws, as amended, of the Company.

    


    3.2    Capital
Structure.  

     

    (a)      
Outstanding Capital
Stock.  As of the Closing and after giving effect to the
transactions contemplated hereby, the authorized capital stock of the Company
will consist of the following shares and other rights and
securities:

     

    (i)           Preferred
Stock.  A total of 10,000,000 authorized shares of Preferred
Stock (“Preferred
Stock”), of which (i) 5,500,000 shares are designated as Series A
Preferred Stock, par value $0.001 per share, 2,098,918 of which Series A
Preferred Stock are issued and outstanding, (ii) 2,000,000 shares are designated
as Series B Preferred Stock, of which 1,116,388 shares are issued and
outstanding, (iii) 25 shares will be designated as Series C Preferred Stock,
22.48 of which shares will be issued and outstanding immediately following the
consummation of the transactions contemplated hereby, and (iv) four shares will
be designated as Series D Preferred Stock, all of which shares will be issued
and outstanding immediately following the consummation of the transactions
contemplated hereby.

     

    (ii)           Common
Stock.  A total of 500,000,000 authorized shares of Common
Stock, par value $0.001 per share, of which 107,070,281 shares are issued and
outstanding.


    
      
         


      

      
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    (b)          Options, Warrants, Reserved
Shares, Treasury Stock.  Except as set forth on Section 3.2(b)
of the Disclosure Schedules, there are no outstanding subscriptions, options,
warrants, agreements, arrangements, commitments or rights of any kind (including
conversion rights) for or relating to the issuance by, or purchase or
acquisition from, the Company of any shares of the Company's capital stock or
any securities convertible into or ultimately exchangeable or exercisable for
any shares of the Company's capital stock, or other similar rights, including
stock appreciation and phantom stock rights, nor is the Company obligated in any
manner to issue any shares of its capital stock or other
securities.  Except pursuant to this Agreement, the SLS Agreement,
Series A Financing Transaction Document, Series B Financing Transaction Document
or Series C and Series D Financing Transaction Document, the Company has no
obligation to purchase, redeem or otherwise acquire any of its capital stock or
any securities convertible into or ultimately exchangeable or exercisable for
any shares of the Company’s capital stock, or other similar
rights.  As of the Closing, except as set forth on Section 3.2(b) of
the Disclosure Schedules or as permitted by the SLS Agreement, Series A
Financing Transaction Document, Series B Financing Transaction Document or
Series C and Series D Financing Transaction Document, there are (A) no
preemptive rights, rights of first refusal, put or call rights or obligations or
anti-dilution rights with respect to the issuance, sale or redemption of the
Company’s capital stock, (B) no rights to have the Company’s capital stock
registered for sale to the public in connection with the laws of any
jurisdiction, (C) no documents, instruments or agreements relating to the voting
of the Company’s voting securities or restrictions on the transfer of the
Company’s capital stock, or (D) no agreements, documents or commitments (written
or oral) of the Company providing for the acceleration of vesting (or lapse of a
repurchase right) upon the occurrence of any event with respect to any
outstanding securities, options, warrants or other purchase
rights.  The Company holds no shares of its capital stock in its
treasury.

     

    (c)          Security
Holders.  Section 3.1(c) of the Disclosure Schedules contains a
complete and accurate list of the names of all current stockholders of the
Company and all current holders of outstanding warrants, options, or other
rights ultimately exchangeable, exercisable or convertible for or into capital
stock, segregated by the type of security held by each such holder, the amount
of such security held by such holder, the exercise price, if any, for such
security, and in the case of securities exchangeable, exercisable or convertible
into Common Stock, the amount of Common Stock into which such securities are
exchangeable, exercisable or convertible.

     

    (d)          Compliance with Securities
Laws.  As of the Closing and after giving effect to the
transactions contemplated hereby, all of the issued and outstanding securities
of the Company will have been duly and validly authorized and issued, and will
be fully paid and non-assessable, free and clear of all Liens (other than
restrictions under the SLS Agreement, any Series A Financing Transaction
Document, Series B
Financing Transaction Document or Series C and Series D Financing Transaction
Document, or applicable federal and state securities laws), and will have
been offered, issued, sold and delivered in compliance with applicable federal,
state and foreign securities laws and not subject to any preemptive rights which
have not been waived.

     

    3.3       Power, Authorization and
Validity.  The
Company has the corporate power, legal capacity and corporate authority to carry
on its business as presently conducted, to enter into and perform its
obligations under this Agreement, and to carry out the transactions contemplated
hereby, and to issue, sell and deliver the Note.

     

    (a)          The
execution, delivery and performance by the Company of this Agreement and each of
the other Transaction Documents to which it is a party, the sale, issuance and
delivery of the Note, have been duly and validly approved and authorized by all
necessary corporate action on the part of the Company and its shareholders, if
necessary.


    
      
         


      

      
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    (b)          This
Agreement has been duly executed and delivered by the Company and, assuming due
execution and delivery by the other party hereto, constitutes or will constitute
valid and binding obligations of the Company, enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or similar laws affecting
creditors’ rights generally and general principles of equity.

     

    3.4      Non-contravention.


     

    (a)          The
execution and delivery by the Company of this Agreement, the consummation by the
Company of the transactions contemplated hereby, the performance by the Company
of its obligations hereunder, and the sale, issuance and delivery of the Note,
do not and will not conflict with, or result in any violation or breach of, or
default (with or without notice or lapse of time or both) under, or give rise to
a right of, or result in, termination, cancellation or acceleration of any
obligation or to a loss of a material benefit under, or result in the creation
of any Lien in or upon any of the properties or assets of the Company or its
Subsidiaries under, or give rise to any increased, additional, accelerated or
guaranteed rights or entitlements under, any provision of (i) the Company’s
Certificate of Incorporation, as amended, and as in effect on the date hereof,
or the Bylaws, as amended, and as in effect on the date hereof, of the Company,
(ii) except as set forth in Section 3.4 of the Disclosure Schedules, any
agreement to which the Company or any Subsidiary is a party or otherwise bound
or otherwise under which the Company or any Subsidiary has rights or benefits,
or (iii) any Law or Order; in each case applicable to the Company, its
Subsidiaries or any of their properties or assets; except, in the case of
clauses (ii) and (iii) above where any such conflict, violation, breach,
default, right of termination, cancellation or acceleration, creation of Lien,
or increased, additional, accelerated or guaranteed rights or entitlements,
would not result in a Material Adverse Effect.

     

    (b)          No
consent, approval, order or authorization of, registration, declaration or
filing with, or notice to, any Governmental Authority is required by or with
respect to the Company in connection with the execution and delivery by the
Company of this Agreement, the consummation by the Company of the transactions
contemplated hereby, or the performance by the Company of its obligations
hereunder, or the sale, issuance and delivery of the Note, except for such
consents, approvals, orders, authorizations, registrations, declarations,
filings and notices set forth in Section 3.4(b) of the Disclosure
Schedules.

     

    3.5      Title to Personal Property
and Assets.

     

    (a)          The
Company or one of its Subsidiaries is the true and lawful owner and has good and
valid title to all assets (tangible or intangible) reflected on the audited
consolidated balance sheet of the Company included in the Annual Report on Form
10-K for fiscal year ended December 31, 2009 (the “Balance Sheet”, and
the date of the Balance Sheet, the “Balance Sheet Date”)
or thereafter acquired, except those sold or otherwise disposed of for fair
value in the ordinary course of business consistent with past practice since the
Balance Sheet Date, in each case free and clear of all Liens other than
Permitted Liens; and except where the failure to have good and valid title would
not result in a Material Adverse Effect.


    
      
         


      

      
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    (b)           The
Company and its Subsidiaries collectively own or lease all tangible assets
sufficient for the conduct of its businesses as presently
conducted.  Each tangible asset of the Company or any of its
Subsidiaries is located at one of the Owned Real Properties or Leased
Properties.  The tangible assets of the Company and its Subsidiaries
are free from material defects, have been maintained in accordance with the past
practice of the Company and generally accepted industry practice, are in
satisfactory working order and are suitable for the purposes for which they are
presently used.  All material leased personal property of the Company
and its Subsidiaries is in good working order, ordinary wear and tear excepted,
and is in all material respects in the condition required of such property by
the terms of the lease applicable thereto.

     

    3.6      Subsidiaries.

     

    (a)          Section
3.6(a) of the Disclosure Schedules sets forth, with respect to each Subsidiary
of the Company: (i) the name of such Subsidiary, (ii) the number and type of
outstanding capital stock or other voting or equity interests of such
Subsidiary, (iii) the jurisdiction of organization of such Subsidiary, and (iv)
the jurisdiction in which such Subsidiary is qualified or holds licenses to do
business as a foreign corporation or other entity.

     

    (b)          Each
Subsidiary of the Company (i) is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, (ii) has all
requisite power and authority to carry on its business as now being conducted
and as proposed to be conducted, and (iii) except where failure to be so
qualified or licensed would not reasonably be expected to result in a Material
Adverse Effect, is duly qualified or licensed to do business, and (iv) is in
good standing in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, which jurisdictions are listed in Section 4.6(a) of the
Disclosure Schedules.  The Company has provided to Investor complete
and accurate copies of the certificate of incorporation, as amended, and Bylaws,
as amended (or other similar organizational documents) of each
Subsidiary.

     

    (c)          Except
as set forth in Section 3.6(c) of the Disclosure Schedules, neither the Company
nor any of its Subsidiaries has any written agreement in respect of any
strategic partnership, joint venture, cooperation arrangement or other similar
relationship providing for joint development efforts, nor does the Company or a
Subsidiary have any direct or indirect interest in or control over any
corporation, partnership, joint venture or other entity of any
kind.  The term “control” for purposes
of this Section 3.6 shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.

     

    3.7      Financial
Statements;
GAAP Treatment
of Financial Statements.

     

    (a)          The
financial statements of the Company included in the SEC Documents (as defined
below) (the “Financial
Statements”) comply as to form and substance in all material respects
with applicable accounting requirements and the published rules and regulations
of the Commission or other applicable rules and regulations with respect
thereto.  Such financial statements have been prepared in accordance
with United States generally accepted accounting principles (“GAAP”) consistently
applied during the periods covered thereby, and fairly present in all material
respects the financial position of the Company and its Subsidiaries as of the
dates thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).


    
      
         


      

      
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    (b)          To
the Knowledge of the Company, the Company and its Subsidiaries have no debts,
liabilities, or obligations in a material amount, either individually or in the
aggregate, of any nature, whether accrued, absolute, contingent, or otherwise,
and whether due or to become due, that are not reflected or reserved against in
the Financial Statements, which are required to be disclosed or which would
cause a Material Adverse Change.  To the Knowledge of the Company, the
reserves, if any, reflected on the Financial Statements, are adequate in light
of the contingencies with respect to which they are made.  There has
been no material change in the Company's accounting policies except as described
in the notes to the Financial Statements.

     

    3.8      Absence of Certain Changes
and Events.  Since
the Balance Sheet Date, except as contemplated herein, in the SLS Agreement, in
any Series A Financing Transaction Document, Series B Financing
Transaction Document or Series C and Series D Financing Transaction
Document, or as set forth on Section 3.8 of the Disclosure Schedules, the
Company and its Subsidiaries have not:

    


    (a)          to
the Knowledge of the Company, suffered any Material Adverse Change;

    


    (b)          suffered
any damage, destruction or loss, whether or not covered by insurance, in an
amount in excess of $100,000;

    


    (c)          granted
or agreed to make any increase in the compensation payable or to become payable
by the Company or a Subsidiary to any officer or employee, except for normal
raises for non-executive personnel made in the ordinary course of business that
are usual and normal in amount;

    


    (d)          declared,
set aside or paid any dividend or made any other distribution on or in respect
of the shares of capital stock of the Company or a Subsidiary, or declared or
agreed to any direct or indirect redemption, retirement, purchase or other
acquisition by the Company or a Subsidiary of such shares;

    


    (e)          issued
any shares of capital stock of the Company or a Subsidiary, or any warrants,
rights or options thereof, or entered into any commitment relating to the shares
of capital stock of the Company or a Subsidiary;

    


    (f)          adopted
or proposed the adoption of any change in the Company’s Certificate of
Incorporation or Bylaws;

    


    (g)          made
any change in the accounting methods or practices they follow, whether for
general financial or Tax purposes, or any change in depreciation or amortization
policies or rates adopted therein, or any Tax election;


    
      
         


      

      
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    (h)       
 sold, leased, abandoned or otherwise disposed of any real property or any
machinery, equipment or other operating property other than in the ordinary
course of their business;

    


    (i)          sold,
assigned, transferred, licensed or otherwise disposed of any Company
Intellectual Property or interest thereunder or other intangible asset except in
the ordinary course of their business;

    


    (j)          been
involved in any dispute involving any employee which would reasonably be
expected to result in a Material Adverse Change;

    


    (k)         entered
into, terminated or modified any employment, severance, termination or similar
agreement or arrangement with, or granted any bonuses (or bonus opportunity) to,
or otherwise increased the compensation of any executive officer or Key
Employee;

    


    (l)          entered
into any material commitment or transaction (including without limitation any
borrowing or capital expenditure);

    


    (m)        amended
or modified, or waived any default under, any Material Contract;

     

    (n)         to
the Knowledge of the Company, incurred any material liabilities, contingent or
otherwise, either matured or unmatured (whether or not required to be reflected
in financial statements in accordance with GAAP, and whether due or to become
due), except for accounts payable or accrued salaries that have been incurred by
the Company since the Balance Sheet Date, in the ordinary course of its business
and consistent with the Company’s past practices;

    


    (o)         permitted
or allowed any of their material property or assets to be subjected to any Lien,
except for Permitted Liens;

    


    (p)         settled
any claim, litigation or action, whether now pending or hereafter made or
brought;

    


    (q)         made
any capital expenditure or commitment for additions to property, plant or
equipment individually in excess of $100,000, or in the aggregate, in excess of
$250,000;

    


    (r)          paid,
loaned or advanced any amount to, or sold, transferred or leased any properties
or assets to, or entered into any agreement or arrangement with any of their
Affiliates, officers, directors or stockholders or, to the Company's Knowledge,
any Affiliate or associate of any of the foregoing;

    


    (s)         made
any amendment to, or terminated any agreement that, if not so amended or
terminated, would be material to the business, assets, liabilities, operations
or financial performance of the Company or a Subsidiary;


    
      
         


      

      
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    (t)          compromised
or settled any claims relating to Taxes, any Tax audit or other Tax proceeding,
or filed any amended Tax Returns;

    


    (u)         merged
or consolidated with any other Person, or acquired a material amount of assets
of any other Person;

    


    (v)       
 entered into any agreement in contemplation of the transactions specified
herein other than this Agreement; or

    


    (w)        agreed
to take any action described in this Section 3.8 or which would reasonably be
expected to otherwise constitute a breach of any of the representations or
warranties contained in this Agreement or any other Transaction
Documents.

    


    3.9      Compliance with
Laws.  The
Company and its Subsidiaries are, and since their respective formations have
been, in compliance in all material respects with all applicable Laws of any
Governmental Authority applicable to their business or operations. The Company
and each of its Subsidiaries have all franchises, permits, licenses, consents
and other governmental or regulatory authorizations and approvals necessary for
the conduct of its business in all material respects as now being conducted by
it except where the failure to so comply would not have a Material Adverse
Effect.  Neither the Company nor any of its Subsidiaries has received
a notice or other written communication alleging a possible violation by the
Company or a Subsidiary of any applicable Law of any Governmental Authority
applicable to their business or operations.

    


    3.10
Permits. The
Company and its Subsidiaries validly hold and have in full force and effect all
material Permits necessary for them to own, lease or operate their properties
and assets and to carry on their business as now conducted, and there has
occurred no violation of, or default (with or without notice or lapse of time or
both) under, or event giving to any other Person any right of termination,
amendment or cancellation of, any such Permit.  The Company and its
Subsidiaries have complied in all material respects with the terms and
conditions of all Permits issued to or held by them, and such Permits will not
be subject to suspension, modification, revocation or non-renewal as a result of
the consummation of the transactions set forth in this Agreement, or the
execution and delivery hereof.  No proceeding is pending or, to the
Knowledge of the Company, threatened, seeking the revocation or limitation of
any Permit.  

     

    3.11
Real
Property.

     

    (a)         Owned Real
Property.  Section 3.11(a) of the Disclosure Schedules lists
all real property owned by the Company or its Subsidiaries (each, an “Owned Real Property”
and together, the “Owned Real
Properties”), including the address of such properties.  The
Company or a Subsidiary of the Company has good and marketable title to each
parcel of Owned Real Property (including all buildings, structures, fixtures and
improvements thereon and all rights thereto), free and clear of all Liens,
except Permitted Liens, none of which materially interfere with the use of, or
materially detracts from the value of, or the marketability of, such Owned Real
Property.


    
      
         


      

      
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    (b)         Leased Real
Property.   Section 3.11(b) of the Disclosure Schedules
lists all real property leased by the Company or its Subsidiaries (each, a
“Leased
Property” and together, the “Leased
Properties”).  The Company has delivered to Investor complete
and accurate copies of all such leases, and any operating agreements relating
thereto.  With respect to each Leased Property, (i) the Company
or a Subsidiary of the Company has good and valid title to the leasehold estate
relating thereto, free and clear of all Liens, assignments, subleases,
easements, covenants, rights of way and other similar restrictions of any nature
whatsoever, other than Permitted Liens, (ii) the lease relating to such Leased
Property is in writing and is valid and binding, in full force and effect and
enforceable against the Company or the leasing Subsidiary and, to the Knowledge
of the Company, the other parties thereto, in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium or similar laws affecting creditors’ rights generally and general
principles of equity, and (iii) the Company is not and, to the Knowledge of the
Company, no other party to the lease relating to such Leased Property is, in
breach or violation of, or in default under, such lease. 

     

    (c)         There
are no rights of first refusal, options to purchase, purchase agreements,
contracts for deed or installment sale agreements in effect with respect to all
or any part of the Real Property.

     

    (d)         The
Real Property comprises all of the real property used by the Company in
connection with the operation of the Company Business.

     

    (e)         The
buildings and improvements on the Real Property are in good operating condition
and in a state of good and working maintenance and repair, ordinary wear and
tear excepted, and are adequate and suitable for their current uses and
purposes.

     

    (f)          There
are no physical conditions or defects on any part of the Real Property which
would impair or would reasonably be expected to impair the continued operation
of the Company Business.

     

    3.12
Intellectual
Property.

     

    (a)         All Necessary Rights; Absence
of Actions and Judgments. Section 3.12(a) of the Disclosure Schedules
sets forth all of the Company Intellectual Property.  The Company owns
and has good and exclusive title, or has a valid, subsisting and enforceable
license (sufficient for the conduct of its business) to all Company Intellectual
Property; except where the failure to have good and/or exclusive title or a
valid, subsisting and enforceable license would not have a Material Adverse
Effect.  Except as set forth in Section 3.12(a) of the Disclosure
Schedules, to the Knowledge of the Company, there are no proceedings or actions
currently before any Governmental Authority anywhere in the world relating to
Company Intellectual Property, and no Company Intellectual Property is subject
to any outstanding Order or Contract (including any settlement agreement)
restricting in any manner the Use, transfer, or licensing thereof by the
Company, or which may affect the validity, Use or enforceability
thereof.  To the Knowledge of the Company, the Company has the right
to bring actions for infringement of all Company Intellectual Property owned by
or exclusively licensed to it.


    
      
         


      

      
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    (b)         No
Violation.  The execution, delivery and performance of this
Agreement and each of the other Transaction Documents, and the consummation of
the transactions contemplated hereby or thereby, will not (i) breach,
violate or conflict with, or result in the modification, cancellation, or
suspension of any instrument or other Contract relating to any Company
Intellectual Property, (ii) cause the forfeiture or termination or give rise to
a right of forfeiture or termination of any Company Intellectual Property or any
of the Company’s rights therein or thereto, (iii) in any way impair any existing
right of the Company to Use, or to bring any action for the infringement of, any
Company Intellectual Property, or any portion thereof, or (iv) give rise to any
right or acceleration of any royalties, fees or other payments to any third
party. Immediately following the Closing Date, the Company will be permitted to
exercise all of the Company’s rights under all Contracts relating to Company
Intellectual Property to the same extent the Company was able to in the absence
of the transactions contemplated hereby.

     

    (c)         No
Infringement.  To the Knowledge of the Company, no Use of the
Company Intellectual Property by the Company or any of its Subsidiaries
breaches, has violated or conflicted with, or violates or conflicts with any
license (or sublicense) or other Contract of the Company with any third
party.  To the Knowledge of the Company, the Use of the Company
Intellectual Property and the conduct of the Company Business have not, and do
not, infringe or misappropriate, any common law or statutory rights of any third
party, including, without limitation, rights relating to defamation, contractual
rights, Intellectual Property or other proprietary rights, rights of privacy or
publicity.  To the Knowledge of the Company, no third party has
breached or violated or is breaching or violating any Contract with the Company
or any of its Subsidiaries relating to any Company Intellectual Property, or has
infringed or misappropriated or is infringing or misappropriating any Company
Intellectual Property except as set forth in Section 3.12(c) of the Disclosure
Schedules.  Neither the Company nor any of its Subsidiaries has
received any notice (whether in the form of invitation to license or otherwise)
from any third party that any Company Intellectual Property or the conduct of
the Company Business, has infringed or misappropriated or does or will infringe
or misappropriate any common law or statutory rights of any other third party,
including, without limitation, rights relating to defamation, contractual
rights, Intellectual Property or other proprietary rights, rights of privacy or
publicity, nor, to the Knowledge of the Company, is there any basis for any such
assertion. There is no pending or, to the Knowledge of the Company,
threatened claim, litigation or proceeding contesting or challenging the
ownership of or the validity or enforceability of, or the Company’s right to
Use, any Company Intellectual Property, nor, to the Knowledge of the Company, is
there any basis for any such claim, litigation or proceeding.

     

    3.13
Contracts.

     

    (a)        Except
as disclosed in Section 3.13(a) of the Disclosure Schedules, or as permitted
under the SLS Agreement, the Series A Financing Transaction Documents, Series B
Financing Transaction Document or Series C and Series D Financing Transaction
Document, neither the Company nor any Subsidiary is party or subject to, or
bound by:

     

    (i)          any
agreements, contracts or commitments that call for prospective fixed and/or
contingent payments or expenditures by or to the Company or a Subsidiary of more
than $100,000, or which is otherwise material and not entered into in the
ordinary course of business;


    
      
         


      

      
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    (ii)          any
contract, lease or agreement involving payments in excess of $100,000, which is
not cancelable by the Company or the Subsidiary, as applicable, without penalty
on not less than 60 days notice;

     

    (iii)         any
contract, including any distribution agreements, containing covenants directly
or explicitly limiting the freedom of the Company or a Subsidiary to compete in
any line of business or with any Person or to offer any of its products or
services;

     

    (iv)        any
indenture, mortgage, promissory note, loan agreement, guaranty or other
agreement or commitment for the borrowing of money or pledging or granting a
security interest in any assets;

     

    (v)         any
employment contracts, non-competition agreements, invention assignments,
severance or other agreements with officers, directors, employees, stockholders
or consultants of the Company or a Subsidiary or Persons related to or
affiliated with such Persons;

     

    (vi)        any
stock redemption or purchase agreements or other agreements affecting or
relating to the capital stock of the Company or a Subsidiary, including, without
limitation, any agreement with any stockholder of the Company or a Subsidiary
which includes, without limitation, antidilution rights, voting arrangements or
operating covenants;

     

    (vii)       any
pension, profit sharing, retirement, stock option or stock ownership
plans;

     

    (viii)      any
royalty, dividend or similar arrangement based on the revenues or profits of the
Company or a Subsidiary or based on the revenues or profits derived from any
material contract;

     

    (ix)         any
acquisition, merger, asset purchase or other similar agreement;

     

    (x)          any
sales agreement which entitles any customer to a right of set-off, or right to a
refund after acceptance thereof;

     

    (xi)         any
agreement with any supplier or licensor containing any provision permitting such
supplier or licensor to change the price or other terms upon a breach or failure
by the Company or its Subsidiary, as applicable, to meet its obligations under
such agreement; or

     

    (xii)        any
agreement under which the Company or a Subsidiary has granted any Person
registration rights for securities.


    
      
         


      

      
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    (b)        The
Company has delivered to Investor accurate and complete copies of all written
contracts identified in Section 3.13(b) of the Disclosure Schedules
(collectively, the “Material Contracts”),
including all amendments thereto.  Neither the Company nor any
Subsidiary has entered into any oral contracts which, if written, would be
required to be disclosed in Section 3.13(b) of the Disclosure
Schedules.  Each of the Material Contracts is valid and in full force
and effect, is enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or
similar laws affecting creditors’ rights generally and general principles of
equity, and will continue to be so immediately following the Closing
Date.  

     

    (c)       Actions with Respect to
Material Contracts.

     

    (i)           Neither
the Company nor any Subsidiary has violated or breached, or committed any
default under, any Material Contract in any material respect, and, to the
Company's Knowledge, no other Person has violated or breached, or committed any
default under any Material Contract in any material respect; and

     

    (ii)          To
the Company's Knowledge, no event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or would reasonably
be expected to, (A) result in a material violation or breach of any of the
provisions of any Material Contract, (B) give any Person the right to declare a
default or exercise any remedy under any Material Contract, (C) give any Person
the right to accelerate the maturity or performance of any Material Contract or
(D) give any Person the right to cancel, terminate or modify any Material
Contract.

     

    (d)       No
Consents.  Except as set forth in Section 3.13 of the
Disclosure Schedules, none of the Material Contracts contains any provision
which would require the consent of third parties to the sale, issuance and/or
delivery of the Note, or any of the other transactions as contemplated
hereunder, or which would be altered as a result of such
transactions.

     

    3.14
Taxes.

     

    (a)       The
Company and its Subsidiaries have timely and properly filed all Tax Returns
required to be filed by them for all years and periods (and portions thereof)
for which any such Tax Returns were due.  All such filed Tax Returns
are accurate in all material respects.  The Company has timely paid
all Taxes due and payable (whether or not shown on filed Tax
Returns).  There are no pending assessments, asserted deficiencies or
claims for additional Taxes that have not been paid.  The reserves for
Taxes, if any, reflected on the Financial Statements are adequate, and there are
no Liens for Taxes on any property or assets of the Company and any of its
Subsidiaries (other than Liens for Taxes not yet due and
payable).  There have been no audits or examinations of any Tax
Returns by any Governmental Authority, and the Company or its Subsidiaries have
not received any notice that such audit or examination is pending or
contemplated.  No claim has been made by a Governmental Authority in a
jurisdiction where the Company or any of its Subsidiaries does not file Tax
Returns that it is or may be subject to taxation by that
jurisdiction.  To the Knowledge of the Company, no state of facts
exists or has existed which would constitute grounds for the assessment of any
penalty or any further Tax liability beyond that shown on the respective Tax
Returns.  There are no outstanding agreements or waivers extending the
statutory period of limitation for the assessment or collection of any
Tax.


    
      
         


      

      
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    (b)         All
Taxes that the Company or its Subsidiaries has been required to collect or
withhold have been duly withheld or collected and, to the extent required, have
been paid to the proper Taxing authority.

     

    (c)         Neither
the Company nor any of its Subsidiaries is a party to any Tax-sharing agreement
or similar arrangement with any other Person.

     

    (d)         Neither
the Company nor any of its Subsidiaries is currently under any contractual
obligation to pay to any Governmental Authority any Tax obligations of, or with
respect to any transaction relating to, any other Person, or to indemnify any
other Person with respect to any Tax, other than pursuant to this
Agreement.

     

    (e)         The
Company has made all necessary disclosures required by Treasury Regulation
Section 1.6011-4.  The Company has not been a participant in a “reportable
transaction” within the meaning of Treasury Regulation Section
1.6011-4(b).

     

    (f)          No
payment or benefit paid or provided, or to be paid or provided, to current or
former employees, directors or other service providers of the Company (including
pursuant to this Agreement or the Rights Agreements) will fail to be deductible
for federal income tax purposes under Section 280G of the Code.

    


    3.15
Employees.

    


    (a)         The
Company and its Subsidiaries are not party to any collective bargaining
agreements and, to the Company’s Knowledge, there are no attempts to organize
the employees of the Company or any Subsidiary.

    


    (b)         The
Company and its Subsidiaries are not delinquent in payments to any of their
employees for any wages, salaries, commissions, bonuses or other direct
compensation for any service performed as of the date hereof or amounts required
to be reimbursed to such employees.  The Company has delivered to
Investor copies of all employment agreements to which the Company or a
Subsidiary is a party (collectively, the “Employment
Agreements”) and which have not previously been filed by the Company with
the Commission.  Except as set forth in Section 3.15 of the
Disclosure Schedules, the Company and its Subsidiaries have no policy, practice,
plan or program of paying severance pay or any form of severance compensation in
connection with the termination of employment services.

    


    (c)         Each
Person who performs services for the Company or a Subsidiary has been, and is,
properly classified by the Company or such Subsidiary as an employee or an
independent contractor.



    
      
         


      

      
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    (d)         To
the Company's Knowledge, no employee or advisor of the Company or a Subsidiary
is or is alleged to be in violation of any term of any employment contract,
disclosure agreement, proprietary information and inventions agreement or any
other contract or agreement or any restrictive covenant or any other common law
obligation to a former employer relating to the right of any such employee to be
employed by the Company or such Subsidiary because of the nature of the business
conducted or to be conducted by the Company or such Subsidiary or to the use of
trade secrets or proprietary information of others, and the employment of the
employees of the Company and its Subsidiaries does not subject the Company or
the Company's stockholders to any liability.  There is neither pending
nor, to the Company's Knowledge, threatened any actions, suits, proceedings or
claims, or, to the Company’s Knowledge, any basis therefor or threat thereof
with respect to any contract, agreement, covenant or obligation referred to in
the preceding sentence.

    


    3.16
Employee Benefit
Plans.  No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan (as defined below) by the
Company or any of its Subsidiaries which is or would be materially adverse to
the Company and its Subsidiaries.  The execution and delivery of this
Agreement and the issuance and sale of the Note will not involve any transaction
which is subject to the prohibitions of Section 406 of ERISA or in connection
with which a tax could be imposed pursuant to Section 4975 of the Internal
Revenue Code of 1986, as amended, provided that, if any of the Investors, or any
person or entity that owns a beneficial interest in any of the Investors, is an
“employee pension benefit plan” (within the meaning of Section 3(2) of ERISA)
with respect to which the Company is a “party in interest” (within the meaning
of Section 3(14) of ERISA), the requirements of Sections 407(d)(5) and 408(e) of
ERISA, if applicable, are met.  As used in this Section 4.16, the term
“Plan” shall mean an “employee pension benefit plan” (as defined in Section 3 of
ERISA) which is or has been established or maintained, or to which contributions
are or have been made, by the Company or any subsidiary or by any trade or
business, whether or not incorporated, which, together with the Company or any
subsidiary, is under common control, as described in Section 414(b) or (c) of
the Code.

    


    3.17
Insurance.  The
Company and its Subsidiaries maintain and keep in force with good and
responsible insurance companies insurance in such amounts with such coverage or
risks as are customary for similar businesses that operate in the same
geographic regions as the Company and adequate to the needs of the Company and
its Subsidiaries.  Section 3.17 of the Disclosure Schedules sets forth
a list of such insurance policies, stating the name and address of the insurance
provider and the amount of insurance. Except as set forth in Section 3.17 of the
Disclosure Schedules, there are no claims by the Company or a Subsidiary pending
under any such policies.  Such insurance policies are in full force
and effect; all premiums with respect thereto are currently paid, and the
Company and its Subsidiaries are in compliance with the terms
thereof.  Each insurance policy shall continue to be in full force and
effect immediately following the consummation of the transactions contemplated
by this Agreement and the other Transaction Documents.  To the
Company’s Knowledge, there is no threatened termination of any such insurance
policies.


    
      
         


      

      
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    3.18
Compliance with
Environmental Requirements.  Since their inception, neither the
Company, nor any of its Subsidiaries have been, in violation of any applicable
law relating to the environment or occupational health and safety, where such
violation would have a Material Adverse Effect.  Each of Company and
its Subsidiaries has operated all facilities and properties owned, leased or
operated by it in material compliance with the Environmental Laws.

    


    3.19
Litigation.  There
is no action, suit, proceeding or investigation pending or, to the Company’s
Knowledge, currently threatened against the Company, any Subsidiary or any of
their properties or assets (a) that may impair the right or ability of the
Company to carry on the Company Business; (b) that questions the validity
of this Agreement or the other Transaction Documents or the Company’s ability to
consummate the transactions contemplated hereby and thereby, or (c) that,
if adversely determined, would reasonably be expected to have a Material Adverse
Effect, and there is no basis for any of the foregoing.  Neither the
Company nor any Subsidiary is a party to, named in, or subject to any
Order.  There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.

    


    3.20
No
Brokers.  Except as disclosed in Section 3.20 of the Disclosure
Schedules, neither the Company nor, to the Company's Knowledge, any Company
stockholder is obligated for the payment of fees or expenses of any broker or
finder in connection with the origin, negotiation or execution of this Agreement
or in connection with any transaction contemplated hereby.

    


    3.21
Solvency.  The
Company has not (a) made a general assignment for the benefit of creditors; (b)
filed any voluntary petition in bankruptcy or suffered the filing of any
involuntary petition by its creditors; (c) suffered the appointment of a
receiver to take possession of all, or substantially all, of its assets; (d)
suffered the attachment or other judicial seizure of all, or substantially all,
of its assets; (e) admitted in writing its inability to pay its debts as they
come due; or (f) made an offer of settlement, extension or composition to its
creditors generally.

    


    3.22
Related Party
Transactions. Except as set forth in Section 3.22 of the Disclosure
Schedules, none of the Company or any of its Affiliates, officers, directors,
stockholders or employees, or any Affiliate of any of such Person, has any
material interest in any property, real or personal, tangible or intangible,
including Company Intellectual Property used in or pertaining to the business of
the Company, except for the normal rights of a stockholder, or, to the Knowledge
of the Company, any supplier, distributor or customer of the
Company.

    


    (a)         Except
for the agreements listed in Section 3.22(a) of the Disclosure Schedules, there
are no agreements, understandings or proposed transactions between the Company
and any of its officers, directors, employees, Affiliates, or, to the Company's
Knowledge, any Affiliate thereof.

     

    (b)         To
the Company's Knowledge, except as set forth in Section 3.22(b) of the
Disclosure Schedules, no employee, officer or director of the Company or a
Subsidiary has any direct or indirect ownership interest in any firm or
corporation with which the Company is affiliated or with which the Company has a
business relationship, or any firm or corporation that competes with the
Company.  To the Company's Knowledge, no member of the immediate
family of any officer or director of the Company is directly or indirectly
interested in any Material Contract.


    
      
         


      

      
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    (c)         Except
as set forth in Section 3.22(c) of the Disclosure Schedules, there are no
amounts owed (cash and stock) to officers, director, consultants and Key
Employees (salary, bonuses or other forms of compensation).

    


    3.23   Disclosure. This
Agreement (including exhibits hereto and the financial statements delivered to
Investor), the Disclosure Schedules and the certificates and statements
furnished pursuant to this Agreement by or on behalf of the Company do not
contain any untrue statement of a material fact or omit to state a fact
necessary in order to make the statements contained therein not misleading in
the light of the circumstances under which they were made.  To the
Company’s Knowledge, none of the current executive officers or directors of the
Company during the previous five years have been (i) subject to a voluntary or
involuntary petition under the federal bankruptcy laws or any state insolvency
law or the appointment of a receiver, fiscal agent or similar officer by a court
for his or her business or property or (ii) convicted in a criminal proceeding
or named as a subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses).

     

    3.24
Securities Act.
The Company has filed all forms, reports and documents (the "SEC Documents")
required to be filed by it with the Commission pursuant to the Securities Act
and/or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
the case may be, and the rules and regulations of the Commission thereunder
through the date of this Agreement. As of their respective filing dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act and/or the Exchange Act, as the case may be, and the rules and
regulations of the Commission thereunder applicable to such SEC Documents, and
were complete and correct in all material respects, and none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.  Subject to the accuracy of Investor’s representations
in Article V hereof, the offer, sale and issuance of the Note in conformity with
the terms of this Agreement and the other Transaction Documents, constitute or
will constitute transactions exempt from the registration and prospectus
delivery requirements of the Securities Act, and the qualification or
registration requirements of any applicable state securities laws as such laws
exist on the date hereof, and neither the Company nor any authorized agent
acting on its behalf will take any action hereafter that would cause the loss of
such exemption.

     

    3.25
Use of
Proceeds.  Section 3.25 of the Disclosure Schedule sets forth
the use of the proceeds from the sale of the Note.

    


    4.    REPRESENTATIONS, WARRANTIES AND
CERTAIN AGREEMENTS OF INVESTOR. Investor hereby represents and warrants
to, and agrees with, the Company that:

     

    4.1       Investment for Own
Account.  The Note is being or will be acquired for Investor's
own account, for investment and not with a view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the
Securities Act, or applicable state securities laws.


    
      
         


      

      
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    4.2       No
Registration.  Investor understands that (a) the Note has not
been registered under the Securities Act by reason of their issuance in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act pursuant to Section 4(2) thereof and have not been
qualified under any state securities laws on the grounds that the offering and
sale of securities contemplated by this Agreement are exempt from registration
thereunder, and (b) the Company's reliance on such exemptions is predicated on
Investor's representations set forth herein.  Investor understands
that the resale of the Note may be restricted indefinitely, unless a subsequent
disposition thereof is registered under the Securities Act and registered under
any state securities law or is exempt from such registration.

    


    4.3       Accredited
Investor.  Investor is an “accredited investor” as that term is
defined in Rule 501 of Regulation D promulgated under the Securities Act, and is
able to bear the economic risk of the purchase of the Note pursuant to the terms
of this Agreement and the other Transaction Documents, including a complete loss
of Investor's investment in the Note.  Investor understands that the
purchase of the Note involves substantial risk. Investor: (i) has experience as
an investor in securities of companies in the exploration stage and acknowledges
that Investor is able to fend for itself, can bear the economic risk of
Investor's investment in the Securities and has such knowledge and experience in
financial or business matters that Investor is capable of evaluating the merits
and risks of this investment in the Note and protecting its own interests in
connection with this investment and/or (ii) has a preexisting personal or
business relationship with the Company and certain of its officers, directors or
controlling persons of a nature and duration that enables such Investor to be
aware of the character, business acumen and financial circumstances of such
persons.

    


    4.4       Power and
Authority.  Investor has the full right, power and authority to
enter into and perform its obligations under this Agreement, and this Agreement
constitutes valid and binding obligations of Investor, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium or similar Laws affecting creditors’ rights
generally and general principles of equity.

    


    4.5       No
Approvals.  No consent, approval or authorization of, or
designation, declaration or filing with, any Governmental Authority on the part
of Investor is required in connection with the valid execution and delivery of
this Agreement, the consummation by Investor of the transactions contemplated
hereby, the performance by Investor of its obligations hereunder, or the
purchase of the Note.

    


    4.6       Non-contravention.  The
execution and delivery by Investor of this Agreement, the consummation by
Investor of the transactions contemplated hereby, the performance by Investor of
its obligations hereunder, and the purchase of the Note, do not and will not
conflict with, or result in any violation or breach of, or default (with or
without notice or lapse of time or both) under, or give rise to a right of, or
result in, termination, cancellation or acceleration of any obligation or to a
loss of a material benefit under, or result in the creation of any Lien in or
upon any of the properties or assets of Investor, or give rise to any increased,
additional, accelerated or guaranteed rights or entitlements under, any
provision of (i) Investor’s organizational documents, as amended, and as in
effect on the date hereof, (ii) any agreement to which Investor is a party or
otherwise bound or otherwise under which Investor has rights or benefits, or
(iii) any Law or Order; in each case applicable to Investor or any of its
properties or assets.


    
      
         


      

      
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    4.7       Disclosure of
Information.  Investor has received or has had full access to
all the information it considers necessary or appropriate to make an informed
investment decision with respect to the Note.  The Investor further
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Note and to obtain
additional information (to the extent the Company possessed such information or
could acquire it without unreasonable effort or expense) necessary to verify any
information furnished to Investor or to which Investor had access. The
foregoing, however, does not in any way limit or modify the representations and
warranties made by the Company in Section 3.

    


    5.  
 CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

    


    5.1       Transfer
Restrictions.  The Investor acknowledges that (1) the Note has
not been and is not being registered under the provisions of the Securities Act
or any state securities laws, and that the Note may not be transferred, unless (A) subsequently
registered thereunder or (B) the Investor shall have delivered to the Company an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, to the effect that the Note to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; (2) any sale of the
Note made in reliance on Rule 144 may be made only in accordance with the terms
of said Rule and further, if said Rule is not applicable, any resale of such
Note under circumstances in which the seller, or the Person through whom the
sale is made, may be deemed to be an underwriter, as that term is used in the
Securities Act, may require compliance with some other exemption under the
Securities Act or the rules and regulations of the SEC thereunder; and (3)
neither the Company nor any other Person is under any obligation to register the
Note under the Securities Act or to comply with the terms and conditions of any
exemption thereunder.

    


    5.2       Restrictive
Legend.  The Investor acknowledges and agrees that, until such
time as the Note has been registered under the Securities Act and sold in
accordance with an effective registration statement or in accordance with Rule
144, the certificates and other instruments representing the Note shall bear a
restrictive legend in substantially the following form:

    


    THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR
THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE COMPANY, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER THE ACT OR UNLESS SOLD PURSUANT TO, AND IN ACCORDANCE WITH, RULE 144 OR
RULE 144A UNDER THE ACT OR OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904
OF REGULATION S UNDER THE ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND
REGULATIONS.


    
      
         


      

      
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    6.    CONDITIONS TO INVESTOR’S OBLIGATIONS
AT CLOSING. The obligations of the Investor to purchase the Note and to
make the Loan under this Agreement are subject to the fulfillment or waiver, on
or before the Closing, of each of the following conditions:

    


    6.1       Each
of the representations and warranties of the Company and each subsidiary
contained in Section 3 shall be true and correct in all material respects as of
the date when made and as of the Closing as though made on and as of such
date.

    


    6.2       The
Company and each subsidiary shall have performed and complied in all material
respects with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing and shall have obtained (or will obtain within (10) business days
following the Closing) all approvals, consents and qualifications necessary to
complete the purchase and sale of the Note described herein.

    


    6.3       No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by this Agreement.

    


    6.4       Since
the date of execution of this Agreement, no event or series of events shall have
occurred that reasonably could have or result in a Material Adverse
Effect.

    


    6.5       The
execution and delivery of this Agreement and the Note by the
Company.

    


    7.    CONDITIONS TO THE COMPANY’S
OBLIGATIONS AT CLOSING. The obligations of the Company to the Investor
under this Agreement are subject to the fulfillment or waiver on or before the
Closing of each of the following conditions by the Investor:

    


    7.1       The
representations and warranties of the Investor contained in Section 4 shall be
true and complete in all material respects on the date of the Closing with the
same effect as though such representations and warranties had been made on and
as of the Closing.

    


    7.2       No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any of
the transactions contemplated by this Agreement.

    


    7.3       Delivery
by the Investor to the Company of an amount in readily available funds equal to
the Loan in accordance with this Agreement.


    
      
         


      

      
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    8.    TERMINATION.

     

    8.1      Termination of
Agreement.  The
parties hereto may terminate this Agreement as provided below:

     

    (a)         Investor
and the Company may terminate this Agreement by mutual written consent at any
time prior to the Closing.

     

    (b)         Investor
may terminate this Agreement by giving written notice to the Company at any time
prior to the Closing in the event that (i) the Company is in breach of any
covenant contained in this Agreement and such breach is not cured within 30 days
after receipt by the Company of a written notice from Investor of such breach;
or (ii) the representations and warranties of the Company contained in this
Agreement shall have been untrue on the date when made (or in the case of any
representations or warranties that are made as of a different date or period, as
of such different date or period), but only to the extent that such breach or
inaccuracy of a representation or warranty is not cured within 30 days after
receipt of the applicable notice by the Company.

     

    (c)         The
Company may terminate this Agreement by giving written notice to Investor at any
time prior to the Closing in the event (i) Investor is in breach of any
covenant contained in this Agreement and such breach is not cured within 30 days
after receipt by Investor of a written notice from the Company of such breach
unless such breach involves the failure to deliver the Purchase Price, in which
case, the Investor shall only have five days to cure such breach; or
(ii) the representations and warranties of Investor contained in this
Agreement shall have been untrue on the date when made (or in the case of any
representations or warranties that are made as of a different date or period, as
of such different date or period), but only to the extent that such breach or
inaccuracy of a representation or warranty is not cured within 30 days after
receipt of the applicable notice by Investor.

     

    8.2      Effect of
Termination.  If any party terminates this Agreement pursuant
to Section 8, all obligations of the parties hereunder will terminate without
liability of any party to the other party; provided, that the provisions of
Section 9 will survive termination and remain in full force and effect; and
provided, further, that no such termination shall release any party of liability
to any other party for damages or otherwise by reason of the breach of any of
the provisions of this Agreement.


    
      
         


      

      
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    9.      POST-CLOSING
COVENANTS.  Each party acknowledges that the other could be
irreparably damaged if confidential information concerning the business and
affairs of the other were disclosed to or utilized on behalf of any
person.  Each party covenants and agrees with the other that, except
as otherwise provided in this Agreement, such party will not, at any time,
directly or indirectly, without the prior written consent of the other, divulge,
or permit any of its partners, employees, agents or affiliates to divulge to any
person any non–public information concerning the business or financial or other
affairs, or any of the methods of doing business used by the other, nor release
any information provided pursuant to or concerning this Agreement or the
transaction contemplated by this Agreement if such release is intended for, or
may result in, its public dissemination. The foregoing requirements of
confidentiality shall not apply to information:  (i) that is now or in
the future becomes freely available to the public through no fault of or action
by the using or disclosing party; (ii) that is in the possession of, or was used
by, the disclosing party prior to the time such information was obtained from
the Company or that is independently acquired by the using or disclosing party
without the aid, application or use of such other information; (iii) that is
obtained or used by the disclosing party in good faith without knowledge of any
breach of a secrecy arrangement from a third party; (iv) that is required to be
disclosed by applicable law or order of government agency or self-regulatory
body; or (v) that is disclosed in connection with any bona-fide offer to
purchase any shares in the Company; provided that the proposed transferor
obtains an undertaking from the proposed transferee to keep such information
confidential in accordance with the provision of this Section
9.1  prior to such disclosure. The Investor and the Company agree to
consult with each other (and to take into consideration any comments reasonably
raised by any such party) prior to the dissemination of any press release or
public communication concerning this Agreement or the transaction contemplated
by this Agreement.  Any such press release or public communication
shall be subject to the approval of both the Company and Investor. This Section
9 will survive termination of this Agreement.

    


    10.   GENERAL
PROVISIONS.

    


    10.1     Survival of Warranties;
Investigation. The representations, warranties and covenants of the
Company and Investor contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the
Closing.  It shall be no defense to an action for breach of this
Agreement that Investor or its agents have (or have not) made investigations
into the affairs of the Company or that the Company could not have known of the
misrepresentation or breach of warranty.  Damages for breach of a
representation or warranty or other provision of this Agreement shall not be
diminished by alleged tax savings resulting to the complaining party as a result
of the loss complained of.

    


    10.2
Successors and
Assigns. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties.



    
      
         


      

      
        21

        
          

        

      

      
         


      

    


    10.3 Governing Law;
Jurisdiction. Any dispute, disagreement, conflict of interpretation or
claim arising out of or relating to this Agreement, or its enforcement, shall be
governed by the laws of the State of New York.  The Company and
Investor hereby irrevocably and unconditionally submit, for themselves and their
property, to the nonexclusive jurisdiction of the Supreme Court of the State of
New York sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court.  Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Each party hereby irrevocably
and unconditionally waives, to the fullest extent it may legally and effectively
do so, any objection which it may now or hereafter have to the laying of venue
of any suit, action or proceeding arising out of or relating to this Agreement
in any court referred to above.  Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.  Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices below.  Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.   EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

    


    10.4     Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
agreement.  A telefaxed copy of this Agreement shall be deemed an
original.

    


    10.5     Headings. The
headings and captions used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.  All references in this Agreement to sections, paragraphs,
exhibits and schedules shall, unless otherwise provided, refer to sections and
paragraphs hereof and exhibits and schedules attached hereto, all of which
exhibits and schedules are incorporated herein by this reference.

    


    10.6     Notices. All notices and other
communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or
sent by facsimile, to the addresses set forth below:

    


    If  to
the Company:

    


    China New
Energy Group Company

    Block B1,
18/F, No. 85, Nanjing Road

    Tianjin
Emperor Place

    Heping
District, Tianjin 300040

    People's
Republic of China

    Facsimile:
______________

    


    with a
copy to, which shall not constitute notice hereunder,



    
      
         


      

      
        22

        
          

        

      

      
         


      

    


    Guzov
Ofsink, LLC

    600
Madison Avenue, 14th
Floor

    New York,
NY 10022

    


    Attention:
Darren L. Ofsink, Esq.

    Facsimile
No: 212-688-7273

    


    If to
Investor:

    


    ____________

    ____________

    ____________

    ____________

    ____________

    


    Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telecopier or personally delivered or,
in the case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.  Any party hereto may change its address or facsimile
number for notices and other communications hereunder by notice to the other
parties hereto.

    


    10.7     Costs, Expenses. Each
party hereto shall bear their own costs in connection with the preparation,
execution and delivery of this Agreement.

    


    10.8     Amendments and
Waivers. Any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Investor.   No delay or omission
to exercise any right, power, or remedy accruing to the Investor, upon any
breach, default or noncompliance of the Company under this Agreement shall
impair any such right, power, or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring.  All remedies, either under this Agreement, by law, or
otherwise afforded to the Investor, shall be cumulative and not
alternative.

    


    10.9     Severability.   If
one or more provisions of this Agreement are held to be unenforceable under
applicable law, such provision(s) shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such provision(s) were so
excluded and shall be enforceable in accordance with its terms.

    


    10.10
Entire
Agreement.  This Agreement, together with all exhibits and
schedules hereto, constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings duties or
obligations between the parties with respect to the subject matter
hereof.


    
      
         


      

      
        23

        
          

        

      

      
         


      

    

    


    10.11
Further
Assurances. From and after the date of this Agreement, upon the request
of the Investor or the Company, the Company and the Investor shall execute and
deliver such instruments, documents or other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.

    


    [Signature
Pages Follow]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    In Witness
Whereof, the parties hereto have executed this Agreement as of the date
first written above.

    


    
      	 
      	
              THE
      COMPANY:

            
	 
      	 
      
	 
      	
              CHINA
      NEW ENERGY COMPANY

            
	 
      	 
      
	 
      	
              By:

            	 
      
	 
      	
              Name:
      Yang Kan Chong

            
	 
      	
              Title:
      Chief Executive Officer

            
	 
      	 
      
	 
      	
              THE
      INVESTOR:

            
	 
      	 
      
	 
      	
            
	 
      	 
      
	 
      	
              By:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            


    


    
      
         


      

      
        24

        
          

        

      

      
         


      

    


    Exhibit
A

    


    Form
of Note

     

    (SEE EXHIBIT 10.5 TO THIS 8-K)

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    

      CHINA
NEW ENERGY GROUP COMPANY

      


      DISCLOSURE
SCHEDULES

      


      These Disclosure Schedules (“Disclosure Schedules”) are
being delivered by China New Energy Group Company, a Delaware corporation (the
“Company”), in
connection with the Note Purchase Agreement (the
“Agreement”), dated as of
September 14, 2010, by and among the Company and Vicis Capital Master Fund (the
“Investor”). 
Unless the context otherwise requires, all capitalized terms used in these
Disclosure Schedules shall have the respective meanings assigned to them in the
Agreement.  Any information disclosed herein under the heading of a
particular section or subsection of the Agreement shall be deemed to apply to
any other section or subsection of these Disclosure Schedules to the extent such
disclosure reasonably relates.

       

      The representations, warranties,
covenants and agreements made by the Company set forth in the Agreement are
hereby excepted to the extent disclosed hereafter.  The sections in these
Disclosure Schedules correspond to the section numbers in the Agreement which
are modified by the disclosures.  The disclosures in these Disclosure
Schedules shall modify and relate to the representations, warranties, covenants
and agreements in the Section of the Agreement to which they expressly refer
(whether or not specific cross-references are made in the Agreement). 
Unless otherwise stated, all statements made herein are made as of the date of
the execution of the Agreement.  These Disclosure Schedules are
incorporated by reference to the Agreement and should be considered an integral
part of the Agreement.

       

      No reference to or disclosure of any
item or other matter in these Disclosure Schedules shall be construed as an
admission or indication that such item or other matter is material or that such
item or other matter is required to be referred to or disclosed in these
Disclosure Schedules.  No disclosure in these Disclosure Schedules relating
to any possible breach or violation of any agreement, law or regulation shall be
construed as an admission or indication that any such breach or violation exists
or has actually occurred, and nothing in these Disclosure Schedules constitutes
an admission of any liability or obligation of the Company to any third party,
nor an admission against the Company’s interests.


      
        
           


        

        
          
          

          
            

          

        

        
           


        

      


      Schedule
3.1

      


      Organization
and Good Standing

      


      Delaware.

      


      Our
subsidiaries are set forth in the diagram below:


       

      



      
        
           


        

        
          - 2
-

          
            

          

        

        
           


        

      


      Schedule
3.2(b)

      


      Options,
Warrants, Reserved Shares, Treasury Stock

      


      On March
28, 2008, the Company issued common stock purchase warrants to each of
Fountainhead Capital Management Limited (“Fountainhead”) and La Pergola
Investments Limited (“La Pergola”) for the purchase of a number of
shares of its common stock equal to an aggregate of two percent (2%) of the
Company’s issued and outstanding common stock as of immediately after the
closing of the Company’s next private placement transaction in which it receives
gross proceeds of at least $8 million. Following the closing of the Series
A Financing, the aggregate number of shares issuable to Fountainhead and La
Pergola is 3,560,194. The term of the warrants is 5 years and each has an
exercise price equal to 150% of the purchase price per share paid by the
investors in such private placement transaction, provided that if securities
other than the shares of common stock are issued in such private placement
transaction, then the exercise price shall be 150% of the price attributable to
a share of common stock at the valuation attributable to the Company in the
transaction on “post-money” basis.

      


      In
connection with the Series A Financing, the Company issued warrants to purchase
an aggregate of 13,001,608 shares of its common stock to China Hand’s designees
and warrants to purchase an aggregate of 6,460,805 shares of its common stock to
Kuhns Brothers, Inc. and its designees, at an initial exercise price of $0.187
per share (subject to adjustments).  The term of these warrants is 5
years.

      


      On March
28, 2008, the Company entered into the Registration Rights Agreement with
Fountainhead and La Pergola pursuant to which the Company granted piggyback
registration rights to each of Fountainhead and La Pergola to include all shares
of the Company’s common stock held by each of Fountainhead and La Pergola,
including all shares of our common stock issuable to each of Fountainhead and La
Pergola upon the exercise, conversion or exchange of other securities held by
Fountainhead and La Pergola, including the warrants.  .

      


      On August
8, 2008, in connection with the Series A Financing, the Company, Fountainhead,
La Pergola and China Hand entered into a Letter Agreement whereby the parties
agreed that the securities of the Company held by Fountainhead and La Pergola
will be included in the Registration Statement filed in connection with Series A
Securities Purchase Agreement, provided, however, that if the SEC issues a
comment pursuant to Rule 415 of the Securities Act of 1933, as amended, and
requires that the Company amend the Registration Statement to reduce the size of
the offering covered by the Registration Statement, the securities of the
Company held by China Hand will have priority over the securities held by the
Fountainhead parties with respect to removing securities from the Registration
Statement, such that so long as any securities held by the Fountainhead parties
remain in the Registration Statement, all of the securities held by China Hand
will remain in the Registration Statement.


      


      On April
30, 2009, China New Energy Group Company (the “Company”) entered into a Series B
Convertible Preferred Stock Securities Purchase Agreement (the “SPA”) with China
Hand Fund I L.P. (“China Hand”).

      


      Pursuant
to the SPA, on May 1, 2009, the Company issued and sold to China Hand, and China
Hand purchased from the Company, 1,116,388 shares of the Company’s Series B
Convertible Preferred Stock (“Series B Preferred Stock”) and warrants (the
“Warrants”) to purchase 7,814,719 shares of its Common Stock at an initial
exercise price of $0.187 per share (subject to adjustments) for a period of five
(5) years following the date of issuance for an aggregate purchase price of
$5,400,000 (the “Private Placement”).


      
        
           


        

        
          - 3
-

          
            

          

        

        
           


        

      

      


      Additionally,
the Company agreed to make good provisions that will require the Company to
issue to China Hand up to 334,916 additional shares (the “Make Good Shares”) of
its Series B Preferred Stock if it does not achieve an audited after-tax net
income of $5.0 million for the year ending December 31, 2009 (the “2009 Income
Target”); if the Company is successful in achieving the 2009 Income Target,
China Hand will transfer 22,327 shares of its Series B Preferred Stock to
certain members of the Company’s management, which shares have been deposited
into an escrow account. The Company also agreed to issue to China Hand
27,910 shares of Series B Preferred Stock if the Company’s Common Stock is not
listed for trading on a national securities exchange on or before January 31,
2010 (the “Listing Shares”).

      


      In
connection with the signing of the SPA, on April 30, 2009, the Company also
entered into a Closing Escrow Agreement by and among the Company, China Hand and
Escrow LLC (the “Escrow Agent”), pursuant to which China Hand agreed to deposit
all funds due to the Company under the SPA in escrow until such time as all
closing conditions of the SPA have been satisfied and the Escrow Agent shall
have received notice, executed by both the Company and China Hand, instructing
the Escrow Agent to release such funds to the Company. The Closing Escrow
Agreement terminates upon the release of all funds from escrow as described
above, or upon the 90th day following the date of the Closing Escrow Agreement
if no such instructions to disburse funds is received by the Escrow Agent, on
which date all such funds will be returned to China Hand.

      


      On May 1,
2009, the company and China Hand consummated the Private Placement and all of
the Series B Preferred Stock and the Warrants were sold to China Hand and
payment was received for such securities by the Company. Kuhns Brothers
Securities Corporation (“Kuhns Brothers”) acted as placement agent in connection
with the Private Placement. As compensation for its services, Kuhns Brothers
received a cash fee equal to $540,000, representing 10% of the gross proceeds
received from the Private Placement, as well as warrants to purchase 3,907,358
shares of the Company’s Common Stock (the “Agent Warrants”), representing 10%
the aggregate number of shares of common stock issuable to China Hand in the
Private Placement upon conversion of the Preferred Stock.

      


      In
connection with the closing of the Private Placement, the Company and China Hand
amended and restated that certain registration rights agreement between the
Company and China Hand dated August 20, 2008. Pursuant to the Amended and
Restated Registration Rights Agreement (the “Amended and Restated Registration
Rights Agreement”), among other things, the Company agreed to register all
of the shares of common stock underlying the securities issued to China Hand in
the Private Placement, as well as the private placement that was consummated on
August 20, 2008 (collectively, the “Shares”) within a pre-defined period. Under
the terms of the Amended and Restated Registration Rights Agreement, the Company
is obligated to file a registration statement (the “Registration Statement”)
under the Securities Act of 1933 covering the resale of the Shares by May 30,
2009. The Company is subject to registration delay payments in amounts
prescribed by the Amended and Restated Registration Rights Agreement if it is
unable to file the Registration Statement, cause it to become effective or
maintain its effectiveness as required by the Amended and Restated Registration
Rights Agreement. Registration delay payments will accrue at a rate of
$54,000 per month or one percent (1%) of the gross proceeds of the Private
Placement; provided that the maximum aggregate amount of the registration delay
payments pursuant to the Amended and Restated Registration Rights Agreement is
$810,000, or fifteen percent (15%) of the gross proceeds of the Private
Placement.



      
        
           


        

        
          - 4
-

          
            

          

        

        
           


        

      


      Schedule
3.2(c)

      


      Security
Holders

      


      Following
is a copy of the Company’s current Series A&B Preferred Stock Ledger and
Warrant Register.  Attached is a list of registered stockholders as
of  September 14, 2010 from the Company’s transfer
agent.


      
        
           


        

        
          - 5
-

          
            

          

        

        
           


        

      


      CHINA
NEW ENERGY GROUP COMPANY


      


      Series
A Preferred Stock Ledger

      


      
        
          
            
              
                
                  
                    
                      
                        	
                                Name of Holder

                              	 	
                                Number of

                                Shares

                              	 	
                                From Whom

                                Transferred

                              	 	
                                Balance

                              	 
	
                                New
      World Power, LLC

                              	 	 	321,213	 	
                                Original
      Issue

                              	 	 	321,213	 
	
                                Mary
      E. Fellows

                              	 	 	107,071	 	
                                Original
      Issue

                              	 	 	107,071	 
	
                                Dr.
      You-Su Lin

                              	 	 	107,071	 	
                                Original
      Issue

                              	 	 	107,071	 
	
                                Fang
      Chen

                              	 	 	13,903	 	
                                Original
      Issue

                              	 	 	13,903	 
	
                                Vicis
      Capital Master Fund

                              	 	 	1,546,184	 	
                                Original
      Issue

                              	 	 	1,546,184	 
	
                                Tie
      Li

                              	 	 	3,476	 	
                                Reissued from James Li

                              	 	 	3,476	 
	 
      	 	 	 	 	 
      	 	 	 	 
	 
      	 	 	 	 	 
      	 	 	2,098,918	 


                      

                    

                  

                

              

            

          

        

      

      


      Series
B Preferred Stock Ledger

      


      
        
          
            
              
                
                  
                    
                      
                        
                          
                            	
                                    Name of Holder

                                  	 	
                                    Number of

                                    Shares

                                  	 	
                                    Date

                                    Issued

                                  	 	
                                    From Whom

                                    Transferred

                                  	 	
                                    Balance

                                  	 
	
                                    Vicis
      Capital Master Fund

                                  	 	 	1,116,388	 	
                                    08/20/08

                                  	 	
                                    Original
      Issue

                                  	 	 	1,116,388	 
	 
      	 	 	 	 	 
      	 	 
      	 	 	 	 
	 
      	 	 	 	 	 
      	 	 
      	 	 	1,116,388	 


                          

                        

                      

                    

                  

                

              

            

          

        

      

       

      
        
           


        

        
          - 6
-

          
            

          

        

        
           


        

      


      CHINA
NEW ENERGY GROUP COMPANY

      Warrant
Register


      


      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      	
                                                              Warrant

                                                              No.

                                                            	 
      	
                                                              Name of Warrant

                                                              Holder

                                                            	 
      	
                                                              No. of 

                                                              Shares

                                                              Underlying

                                                              Warrant

                                                            	 
      	
                                                              Date

                                                              Issued

                                                            	 
      	
                                                              Expiration

                                                              Date

                                                            	 
      	
                                                              Exercise

                                                              Price

                                                            	 
      	
                                                              Event

                                                              (exercise;

                                                              transfer;

                                                              cancellation)

                                                            	 
      	
                                                              Event

                                                              Date

                                                            	 
      	
                                                              New

                                                                Warrant  

                                                              No.

                                                            	 
      	
                                                              No. of

                                                              Underlying

                                                              Shares

                                                              Transferred/

                                                              Cancelled

                                                            	 
      	
                                                              Number of

                                                              Shares issued

                                                              upon

                                                              Exercise

                                                            	 
      	
                                                              Consideration

                                                              Paid 

                                                              (cash exercise

                                                              or cashless

                                                              exercise)

                                                            	 
      	
                                                              No. of

                                                              outstanding

                                                              shares

                                                              underlying

                                                              Warrant

                                                            
	 
      	 
      	
                                                              Fountainhead
      Capital Management Limited

                                                            	 
      	
                                                              3,026,165

                                                            	 
      	
                                                              03/28/08

                                                            	 
      	
                                                              03/27/13

                                                            	 
      	 
      	
                                                              *

                                                            	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                              3,026,165

                                                            
	 
      	 
      	
                                                              La
      Pergola Investments Limited

                                                            	 
      	
                                                              534,029

                                                            	 
      	
                                                              03/28/08

                                                            	 
      	
                                                              03/27/13

                                                            	 
      	 
      	
                                                              *

                                                            	
                                                               
      

                                                            	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                              534,029

                                                            
	
                                                              W-A-08-1

                                                            	 
      	
                                                              Kuhns
      Brothers, Inc.

                                                            	 
      	
                                                              2,351,846

                                                            	 
      	
                                                              08/20/08

                                                            	 
      	
                                                              08/19/13

                                                            	 
      	
                                                              $

                                                            	
                                                              0.187

                                                            	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                              2,351,846

                                                            
	
                                                              W-A-08-2

                                                            	 
      	
                                                              Gregory
      Dryer

                                                            	 
      	
                                                              1,115,698

                                                            	 
      	
                                                              08/20/08

                                                            	 
      	
                                                              08/19/13

                                                            	 
      	
                                                              $

                                                            	
                                                              0.187

                                                            	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                              1,115,698

                                                            
	
                                                              W-A-08-3

                                                            	 
      	
                                                              John
      D. Kuhns

                                                            	 
      	
                                                              1,763,885

                                                            	 
      	
                                                              08/20/08

                                                            	 
      	
                                                              08/19/13

                                                            	 
      	
                                                              $

                                                            	
                                                              0.187

                                                            	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                              1,763,885

                                                            
	
                                                              W-A-08-4

                                                            	 
      	
                                                              Mary
      E. Fellows

                                                            	 
      	
                                                              587,962

                                                            	 
      	
                                                              08/20/08

                                                            	 
      	
                                                              08/19/13

                                                            	 
      	
                                                              $

                                                            	
                                                              0.187

                                                            	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                              587,962

                                                            
	
                                                              W-A-08-5

                                                            	 
      	
                                                              Samuel
      Shoen

                                                            	 
      	
                                                              534,511

                                                            	 
      	
                                                              08/20/08

                                                            	 
      	
                                                              08/19/13

                                                            	 
      	
                                                              $

                                                            	
                                                              0.187

                                                            	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                              534,511

                                                            
	
                                                              W-A-08-6

                                                            	 
      	
                                                              Paul
      Kuhns

                                                            	 
      	
                                                              106,902

                                                            	 
      	
                                                              08/20/08

                                                            	 
      	
                                                              08/19/13

                                                            	 
      	
                                                              $

                                                            	
                                                              0.187

                                                            	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                              106,902

                                                            
	
                                                              W-A-08-7

                                                            	 
      	
                                                              New
      World Power, LLC

                                                            	 
      	
                                                              1,989,737

                                                            	 
      	
                                                              08/20/08

                                                            	 
      	
                                                              08/19/13

                                                            	 
      	
                                                              $

                                                            	
                                                              0.187

                                                            	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                              1,989,737

                                                            
	
                                                              W-A-08-8

                                                            	 
      	
                                                              Mary
      E. Fellows

                                                            	 
      	
                                                              663,246

                                                            	 
      	
                                                              08/20/08

                                                            	 
      	
                                                              08/19/13

                                                            	 
      	
                                                              $

                                                            	
                                                              0.187

                                                            	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                              663,246

                                                            
	
                                                              W-A-08-9

                                                            	 
      	
                                                              You-Su
      Lin

                                                            	 
      	
                                                              663,246

                                                            	 
      	
                                                              08/20/08

                                                            	 
      	
                                                              08/19/13

                                                            	 
      	
                                                              $

                                                            	
                                                              0.187

                                                            	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                              663,246

                                                            
	
                                                              W-A-08-10

                                                            	 
      	
                                                              Fang
      Chen

                                                            	 
      	
                                                              86,122

                                                            	 
      	
                                                              08/20/08

                                                            	 
      	
                                                              08/19/13

                                                            	 
      	
                                                              $

                                                            	
                                                              0.187

                                                            	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                              86,122

                                                            
	
                                                              W-A-08-11

                                                            	 
      	
                                                              James
      Li

                                                            	 
      	
                                                              21,531

                                                            	 
      	
                                                              08/20/08

                                                            	 
      	
                                                              08/19/13

                                                            	 
      	
                                                              $

                                                            	
                                                              0.187

                                                            	 
      	
                                                              Reissued
      in new name

                                                            	 
      	
                                                              10/08/08

                                                            	 
      	
                                                              W-A-08-13

                                                            	 
      	
                                                              21,531

                                                            	 
      	
                                                              N/A

                                                            	 
      	
                                                              N/A

                                                            	 
      	
                                                              0

                                                            
	
                                                              W-A-08-12

                                                            	 
      	
                                                              Vicis
      Capital Master Fund

                                                            	 
      	
                                                              9,577,727

                                                            	 
      	
                                                              08/20/08

                                                            	 
      	
                                                              08/19/13

                                                            	 
      	
                                                              $

                                                            	
                                                              0.187

                                                            	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                              9,577,727

                                                            
	
                                                              W-A-08-13

                                                            	 
      	
                                                              Tie
      Li

                                                            	 
      	
                                                              21,531

                                                            	 
      	
                                                              08/20/08

                                                            	 
      	
                                                              08/19/13

                                                            	 
      	
                                                              $

                                                            	
                                                              0.187

                                                            	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                              21,531

                                                            
	 
      	
                                                                

                                                            	 
      	
                                                                

                                                            	 
      	
                                                                

                                                            	 
      	
                                                                

                                                            	 
      	
                                                                

                                                            	
                                                                

                                                            	 
      	
                                                                

                                                            	 
      	
                                                                

                                                            	 
      	
                                                                

                                                            	 
      	
                                                                

                                                            	 
      	
                                                                

                                                            	
                                                              0

                                                            	
                                                                

                                                            	
                                                              $

                                                            	
                                                              0.00

                                                            	
                                                                

                                                            	
                                                              23,022,607

                                                            


                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

      
 

      * On
March 28, 2008, the Company issued common stock purchase warrants to each of
Fountainhead Capital Management Limited and La Pergola Investments Limited for
the purchase of a number of shares of its common stock equal to an aggregate of
two percent (2%) of the Company’s issued and outstanding common stock as of
immediately after the closing of the Company's next private placement
transaction in which it receives gross proceeds of at least $8 million. 
Each has an exercise price equal to 150% of the purchase price per share paid by
the investors in such private placement transaction, provided that if securities
other than the shares of common stock are issued in such private placement
transaction, then the exercise price shall be 150% of the price attributable to
a share of common stock at the valuation attributable to the Company in the
transaction on “post-money” basis.


      
        
           


        

        
          - 7
-

          
            

          

        

        
           


        

      

      


      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    	
                                                                Warrant    

                                                            No.

                                                          	 
      	
                                                            Name of Warrant

                                                            Holder

                                                          	 
      	
                                                            No. of 

                                                            Shares

                                                            Underlying

                                                            Warrant

                                                          	 
      	
                                                            Date

                                                            Issued

                                                          	 
      	
                                                            Expiration

                                                            Date

                                                          	 
      	
                                                            Exercise

                                                            Price

                                                          	 
      	
                                                            Event

                                                            (exercise;

                                                            transfer;

                                                            cancellation)

                                                          	 
      	
                                                            Event

                                                            Date

                                                          	 
      	
                                                            New

                                                            Warrant

                                                            No.

                                                          	 
      	
                                                            No. of

                                                            Underlying

                                                            Shares

                                                            Transferred/

                                                            Cancelled

                                                          	 
      	
                                                            Number of

                                                            Shares issued

                                                            upon

                                                            Exercise

                                                          	 
      	
                                                            Consideration

                                                            Paid 

                                                            (cash exercise

                                                            or cashless

                                                            exercise)

                                                          	 
      	
                                                            No. of

                                                            outstanding

                                                            shares

                                                            underlying

                                                            Warrant

                                                          
	
                                                            W-A-09-001

                                                          	 
      	
                                                            Vicis
      Capital Master Fund

                                                          	 
      	
                                                            7,814,719

                                                          	 
      	
                                                            05/2009

                                                          	 
      	
                                                            05/01/14

                                                          	 
      	
                                                            $

                                                          	
                                                            0.187

                                                          	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                            7,814,719

                                                          
	
                                                            W-A-09-002

                                                          	 
      	
                                                            Kuhns
      Brothers, Inc.

                                                          	 
      	
                                                            1,587,239

                                                          	 
      	
                                                            05/20/09

                                                          	 
      	
                                                            05/01/14

                                                          	 
      	
                                                            $

                                                          	
                                                            0.187

                                                          	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                            1,587,239

                                                          
	
                                                            W-A-09-003

                                                          	 
      	
                                                            John
      D. Kuhns

                                                          	 
      	
                                                            793,619

                                                          	 
      	
                                                            05/20/09

                                                          	 
      	
                                                            05/01/14

                                                          	 
      	
                                                            $

                                                          	
                                                            0.187

                                                          	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                            793,619

                                                          
	
                                                            W-A-09-004

                                                          	 
      	
                                                            Mary
      E. Fellows

                                                          	 
      	
                                                            571,406

                                                          	 
      	
                                                            05/20/09

                                                          	 
      	
                                                            05/01/14

                                                          	 
      	
                                                            $

                                                          	
                                                            0.187

                                                          	
                                                             
      

                                                          	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                            571,406

                                                          
	
                                                            W-A-09-005

                                                          	 
      	
                                                            Samuel
      Shoen

                                                          	 
      	
                                                            360,736

                                                          	 
      	
                                                            05/20/09

                                                          	 
      	
                                                            05/01/14

                                                          	 
      	
                                                            $

                                                          	
                                                            0.187

                                                          	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                            360,736

                                                          
	
                                                            W-A-09-006

                                                          	 
      	
                                                            Paul
      Kuhns

                                                          	 
      	
                                                            72,147

                                                          	 
      	
                                                            05/20/09

                                                          	 
      	
                                                            05/01/14

                                                          	 
      	
                                                            $

                                                          	
                                                            0.187

                                                          	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                            72,147

                                                          
	
                                                            W-A-09-007

                                                          	 
      	
                                                            Tie
      Li

                                                          	 
      	
                                                            300,000

                                                          	 
      	
                                                            05/01/09

                                                          	 
      	
                                                            05/01/14

                                                          	 
      	
                                                            $

                                                          	
                                                            0.187

                                                          	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                            300,000

                                                          
	
                                                            W-A-09-008

                                                          	 
      	
                                                            Judith
      Chang

                                                          	 
      	
                                                            222,211

                                                          	 
      	
                                                            05/20/09

                                                          	 
      	
                                                            05/01/14

                                                          	 
      	
                                                            $

                                                          	
                                                            0.187

                                                          	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	
                                                            222,211

                                                          
	 
      	
                                                              

                                                          	 
      	
                                                              

                                                          	 
      	
                                                              

                                                          	 
      	
                                                              

                                                          	 
      	
                                                              

                                                          	
                                                             

                                                          	 
      	
                                                              

                                                          	 
      	
                                                              

                                                          	 
      	
                                                              

                                                          	 
      	
                                                              

                                                          	 
      	
                                                              

                                                          	
                                                            0

                                                          	
                                                              

                                                          	
                                                            $

                                                          	
                                                            0.00

                                                          	
                                                              

                                                          	
                                                            11,722,077

                                                          


                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      


      
        
           


        

        
          - 8
-

          
            

          

        

        
           


        

      


      Schedule
3.4

      


      Noncontravention

      


      None.


      
        
           


        

        
          - 9
-

          
            

          

        

        
           


        

      


      Schedule
3.6(a)

      


      Subsidiaries

      


      
        
          
            
              
                
                  
                    
                      
                        	
                                Subsidiary

                              	 
      	
                                Jurisdiction of

                                Organization

                              	 
      	
                                Capital Stock

                              	 
      	
                                Foreign

                                Business

                                Licenses

                              
	
                                Willsky
      Development, Ltd.

                              	 
      	
                                BVI

                              	 
      	 
      	 
      	
                                N/A

                              
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                                Tianjin
      SingOcean Public Utility Development Co., Ltd.

                              	 
      	
                                PRC

                              	 
      	 
      	 
      	
                                N/A

                              
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                                Qinhuangdao
      Chensheng Gas Co. Ltd.

                              	 
      	
                                PRC

                              	 
      	 
      	 
      	
                                N/A

                              
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                                Tianjin
      SingOcean Public Utility Development Co., Ltd. – Acheng
      Division

                              	 
      	
                                PRC

                              	 
      	
                                Division
      of SingOcean.  Not separate legal entity.

                              	 
      	
                                N/A

                              
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                                Tianjin
      SingOcean Public Utility Development Co., Ltd. – Daishiquiao
      Division

                              	
                                  

                              	
                                PRC

                              	
                                  

                              	
                                Division
      of SingOcean.  Not separate legal entity.

                              	
                                  

                              	
                                N/A

                              


                      

                    

                  

                

              

            

          

        

      

      


      Below is
the Company’s organizational chart.

      


      


      
        
           


        

        
          - 10
-

          
            

          

        

        
           


        

      


      Schedule
3.6(c)

      


      Subsidiaries;
Cooperation Agreements

      


      None.


      
        
           


        

        
          - 11
-

          
            

          

        

        
           


        

      


      Schedule
3.8

      


      Absence
of Certain Changes and Events

      


      None.


      
        
           


        

        
          - 12
-

          
            

          

        

        
           


        

      


      Schedule
3.11(a)

      


      Owned
Real Property

      


      There is
no private land ownership in China. Individuals and companies are permitted to
acquire land use rights for specific purposes.

      


      The
Company has rights to 10,000 square meters of land in Dashiqiao city.  The
land use right was granted by the Dashiqiao government on August 29th, 2005,
and such grant expires on March, 12, 2045.

      


      The
Company has rights to 20,731 square meters of land in Acheng city.  The
land use right was granted by the Acheng government on August 20, 2003, and such
grant expires on August 20, 2053.

      


      The
Company has ownership rights to 283.77 square meters of building which is
located at Jianshe Road West, Nandai He, Funing county. The number for the
Building Ownership Certificate is Q8684. The Company also has rights to 4911.16
square meters of land in Jianshe Road West, Nandai He, Funing county. The land
use right was granted by the Funing government, and such grant will expire on
February 25, 2057. These two properties have been mortgaged to Qinhuangdao
Branch of Transportation Bank Co. Ltd (the “Qinhuangdao”). The value of these
two properties will provide ceiling guarantee for all the major contracts
entered between the Company and Qinhuangdao from June 10th, 2010 through June
10th 2013.The maximum credit that is under this ceiling guarantee is RMB
1,500,000.

      


      Wuyuan
County Zhongran Gas Co., Ltd. has right to a parcel of land in Wuyuan County for
which a Land Use License Certificate is just in process. This land is not
mortgaged to any party.

      


      The
Company also owns natural gas pipelines in three cities, with a total length of
approximately 112km, including 40km in Acheng, 60km in Dashiqiao and 12km in
Nandaihe.  The Company also has 10,000 square meters of land in Acheng,
20,731 square meters of land in Dashiqiao and 4,611 square meters which may
potentially contain natural gas reserves.


      
        
           


        

        
          - 13
-

          
            

          

        

        
           


        

      


      Schedule
3.11(b)

      


      Leased
Real Property

      


      The
Company’s office in Tianjin, which has 1076.95 square meters, is located at
level 18, building B1, Junlong Square, Nanjing Road South, Heping District,
Tianjin, China. The office is owned by Tianjin Singhai Gangtong Physical
Distribution Co., Ltd. Pursuant to the terms of the lease, the Company may use
the office space during the period from May 10, 2010 through May 9, 2012 at a
monthly rental charge of RMB 77,540 and a monthly maintenance charge of RMB
25,846.8.



      
        
           


        

        
          - 14
-

          
            

          

        

        
           


        

      


      Schedule
3.12(a)

      


      Intellectual
Property

      


      None.


      
        
           


        

        
          - 15
-

          
            

          

        

        
           


        

      


      Schedule
3.12(c)

      


      Intellectual
Property Infringement

      


      None.


      
        
           


        

        
          - 16
-

          
            

          

        

        
           


        

      


       Schedule
3.13(a)

      


      Contracts

      


      
        
          	
                  1.

                	
                  Equity
      Transfer Agreement , dated March 17, 2010, between Tianjin Xinhai Public Utilities
      Development Co., Ltd., and Hunan Zhongyouzhiyuan Gas Co.,
      Ltd..

                
	 
      	 
      
	
                  2.

                	
                  Equity
      Transfer Agreement , dated March 8, 2010, between the Company and Mr. Tang
      Zhixiang

                
	 
      	 
      
	
                  3.

                	
                  Agreement,
      dated February 1, 2010, among Willsky Development, Ltd.,  Flying Dragon Investment
      Management Limited, Flying Dragon Resource Development Limited and China
      New Energy Group Company.

                
	 
      	 
      
	
                  4.

                	
                  Supplementary
      Agreement, dated February 2, 2010, among Willsky Development, Ltd. and
      Zhanhua Jiutai Gas Co..

                
	 
      	 
      
	
                  5.

                	
                  Supplementary
      Agreement, dated January 31, 2010, among Willsky Development, Ltd., Flying Dragon Resource
      Development Limited and Flying Dragon Investment Management
      Limited.

                
	 
      	 
      
	
                  6.

                	
                  Equity
      Interest Purchase Agreement, dated January 5, 2010,
      among  Willsky Development, Ltd. , Flying Dragon Resource
      Development Limited and Flying Dragon Investment
      Management Limited to acquire all of the outstanding equity
      interest of Fuzhou Flying Dragon Zhongran Gas Inc..

                
	 
      	 
      
	
                  7.

                	
                  Asset
      Purchase Agreement, dated December 22, 2009, between Tianjin SingOcean
      Public Utilities Development Co., Ltd.and Harbin Hengsheng Real Estate
      Development Co., Ltd.

                
	 
      	 
      
	
                  8.

                	
                  Equity
      Interest Purchase Agreement, dated December 16, 2009, between Willsky
      Development, Ltd. and Flying Dragon Investment Management Limited to
      acquire all of the outstanding equity interest of Wuyuan County Zhongran
      Gas Inc.

                
	 
      	 
      
	
                  9.

                	
                  Equity
      Interest Purchase Agreement, dated December 16, 2009, between Willsky
      Development, Ltd. and Flying Dragon Resource Development Limited to
      acquire all of the outstanding equity interest of Fuzhou City Lean
      Zhongran Gas Inc.

                
	 
      	 
      
	
                  10.

                	
                  Equity
      Interest Purchase Agreement, dated December 12, 2009, between Qinhuangdao
      Chensheng Gas Co., Ltd. and Zhanhua Jiutai Gas Co..  Qinhuangdao subsequently assigned
      its rights under the Jiutai agreement to Willsky Development,
      Ltd.

                
	 
      	 
      
	
                  11.

                	
                  Employment
      Agreement, dated September 25, 2009, between the Company and
      Mr.Yu.

                
	 
      	 
      
	
                  12.

                	
                  Employment
      Agreement, dated May 11,2009 by and between the Company and Yangkan
      Chong

                
	 
      	 
      
	
                  13.

                	
                  Waiver,
      dated April 30, 2009, among the Company and China Hand Fund I,
      LLC.

                
	 
      	 
      
	
                  14.

                	
                  Series
      B Convertible Preferred Stock Securities Escrow Agreement, dated April 30,
      2009, among the Company, China Hand Fund I, LLC and Escrow,
      LLC.

                
	 
      	 
      
	
                  15.

                	
                  Amended
      and Restated Registration Rights Agreement, dated April 30, 2009, among
      the Company and China Hand Fund I, LLC.

                
	 
      	 
      
	
                  16.

                	
                  Closing
      Escrow Agreement, dated April 30, 2009, among the Company, China Hand Fund
      I,LLC and Escrow LLC.

                
	 
      	 
      
	
                  17.

                	
                  Series
      B Convertible Preferred Stock Securities Purchase Agreement (the “SPA”),
      dated April 30, 2009, between the Company and China Hand Fund I,
      LLC

                
	 
      	 
      
	
                  18.

                	
                  Letter
      Agreement between the Company and China Hand Fund I, L.P., dated August
      20, 2008.

                
	 
      	 
      
	
                  19.

                	
                  Shareholders
      Agreement, among the Company, China Hand Fund I, L.P., Quick Rise
      Investments Limited, Waterpower Investments Limited and Eternal
      International Holding Group Limited, dated August 20,
  2008.

                


        

      

       

      
        
           


        

        
          - 17
-

          
            

          

        

        
           


        

      

      


      
        
          	
                  20.

                	
                  Securities
      Escrow Agreement, among the Company, China Hand Fund I, L.P. and Escrow
      LLC, dated August 20, 2008.

                
	 
      	 
      
	
                  21.

                	
                  Registration
      Rights Agreement, between the Company and China Hand Fund I, L.P., dated
      August 20, 2008.

                
	 
      	 
      
	
                  22.

                	
                  Closing
      Escrow Agreement, among the Company, China Hand Fund I, L.P. and Escrow
      LLC, dated August 8, 2008.

                
	 
      	 
      
	
                  23.

                	
                  Series
      A Convertible Preferred Stock Securities Purchase Agreement, between the
      Company and China Hand Fund I, L.P., dated August 8,
  2008.

                
	 
      	 
      
	
                  24.

                	
                  Share
      Exchange Agreement, dated March 28, 2008, among the Company, Willsky
      Development, Ltd. and its shareholder.

                
	 
      	 
      
	
                  25.

                	
                  Redemption
      Agreement, dated March 28, 2008, among the Company, Fountainhead Capital
      Management Limited and La Pergola Investments Limited.

                
	 
      	 
      
	
                  26.

                	
                  Convertible
      Promissory Note, dated March 28, 2008, by the Company in favor of
      Fountainhead Capital Management Limited.

                
	 
      	 
      
	
                  27.

                	
                  Convertible
      Promissory Note, dated March 28, 2008, by the Company in favor of La
      Pergola Investments Limited.

                
	 
      	 
      
	
                  28.

                	
                  Anti-Dilution
      Agreement, dated March 28, 2008, among the Company and Fountainhead
      Capital Management Limited.

                
	 
      	 
      
	
                  29.

                	
                  Anti-Dilution
      Agreement, dated March 28, 2008, among the Company and La Pergola
      Investments Limited.

                
	 
      	 
      
	
                  30.

                	
                  Common
      Stock Purchase Warrant issued to Fountainhead Capital Management Limited,
      dated March 28, 2008.

                
	 
      	 
      
	
                  31.

                	
                  Common
      Stock Purchase Warrant issued to La Pergola Investments Limited, dated
      March 28, 2008.

                
	 
      	 
      
	
                  32.

                	
                  Piggyback
      Registration Rights Agreement, dated March 28, 2008, by and among the
      Company, Fountainhead Capital Management Limited and La Pergola
      Investments Limited.

                
	 
      	 
      
	
                  33.

                	
                  Contract
      of the Gas Pipeline Installment Project in Tiancheng Community in Acheng
      City, dated August 8, 2007, between Tianjin Singocean Public Utility
      Development Co., Ltd. and China North Industry Installment
      Company.

                
	 
      	 
      
	
                  34.

                	
                  Contract
      of the Gas Pipeline Installment Project in Saiside Community in Dashiqiao
      City, dated July 5, 2007, between Tianjin Singocean Public Utility
      Development Co., Ltd. and No.1 Branch of Tianjin Quanzhou Construction
      Project Co., Ltd.

                
	 
      	 
      
	
                  35.

                	
                  Contract
      of the Gas Pipeline Installment Project in Communities in Hunchun City,
      dated March 2, 2007, between Hunchun Singocean Gas Project Co., Ltd. and
      Tianjin Lianyi Gas Related Project Co., Ltd.

                
	 
      	 
      
	
                  36.

                	
                  Investment
      Agreement of Gas Pipe Project Construction in A Cheng, dated June 10,
      2005,  between Construction Bureau of A Cheng and Tianjin
      Singocean Public Utilities Development Co. Ltd.

                
	 
      	 
      
	
                  37.

                	
                  Methane
      Supply Agreement, dated March 4, 2004, between Fuxin Hongdi New Energy Co.
      Ltd. and Tianjin Singocean Gas Engineering Co. Ltd.

                
	 
      	 
      
	
                  38.

                	
                  Agreement,
      dated February 9, 2004, between Municipal Government of Hunchun City and
      Tianjin Singocean Gas Co.
Ltd.

                


        

      

       

      
        
           


        

        
          - 18
-

          
            

          

        

        
           


        

      

      


      
        
          	
                  39.

                	
                  Da
      Shi Qiao Gas Pipeline Construction Project Investment Agreement between Da
      Shi Qiao Urban and Rural construction Bureau and TianJin Singocean Gas Co
      Ltd.

                
	 
      	 
      
	
                  40.

                	
                  Gas
      Pipeline Project Agreement between Hunchun Real Estate Bureau and Hunchun
      SingOcean.

                
	 
      	 
      
	
                  41.

                	
                  Gas
      Pipeline Project Agreement between Dashiqiao Gas Management Office and
      Tianjin SingOcean.

                
	 
      	 
      
	
                  42.

                	
                  Gas
      supply pipeline construction contract between Dalian LuBo Real Estate
      Development Co., Ltd. and Tianjin Sing Ocean Public Utility Development
      Co., Ltd.

                
	 
      	 
      
	
                  43.

                	
                  Compressed
      Coal Bed Methane Supply Agreement between Fuxin Dali Gas Co., Ltd. and
      Tianjin Singocean Public Utility Development Co., Ltd.

                
	 
      	 
      
	
                  44.

                	
                  Compressed
      Coal Bed Methane Supply Agreement between Fuxin Dali Gas Co. Ltd and
      Tianjin Singocean Public Utilities Development Co.
  Ltd.

                


        

      


      
        
           


        

        
          - 19
-

          
            

          

        

        
           


        

      

      


      Schedule
3.14(d)

      


      Consents

      


      None.


      
        
           


        

        
          - 20
-

          
            

          

        

        
           


        

      


      Schedule
3.15(b)

      


      Employees

      


      None.


      
        
           


        

        
          - 21
-

          
            

          

        

        
           


        

      


      Schedule
3.17

      


      Insurance

      


      The
Company has the following insurance.

      


      
        
          
            
              
                
                  
                    
                      	
                              Type of Insurance

                              保险种类(保险名称)

                            	 
      	
                              Insurance Company

                              保险公司名称

                            	 
      	
                              Premium

                              保费

                            	 
      	
                              Amount of

                              Insurance

                              保险金额

                            
	
                              机动车商业保险

                              Motor
      Vehicle Commercial Insurance

                            	 
      	
                              安邦财产保险股份有限公司

                              Anbang
      Property Insurance Co., Ltd.

                            	 
      	
                              6222.26元

                              RMB
      6222.26 yuan

                            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                              机动车商业保险

                              Motor
      Vehicle Commercial Insurance

                            	 
      	
                              安邦财产保险股份有限公司

                              Anbang
      Property Insurance Co., Ltd.

                            	 
      	
                              11111.50

                              RMB11111.50
      yuan

                            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                              机动车商业保险

                              Motor
      Vehicle

                              Commercial
      Insurance

                            	 
      	
                              中国太平洋财产保险股份有限公司

                              China
      Pacific Property Insurance Co., Ltd.

                            	 
      	
                              6664.33元

                              RMB
      6664.33 yuan

                            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                              机动车交通事故责任强制保险单

                              Compulsory
      Insurance for Traffic Accident of Motor –Driven Vehicle

                            	 
      	
                              太平财产保险有限公司

                              China
      Pacific Property Insurance Co., Ltd.

                            	 
      	
                              1000元

                              RMB
      1000 yuan

                            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                              机动车交通事故责任强制保险单

                              Compulsory
      Insurance for Traffic Accident of Motor –Driven Vehicle

                            	 
      	
                              太平洋保险

                              China
      Pacific Property Insurance Co., Ltd.

                            	 
      	
                              950元

                              RMB
      950 yuan

                            	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                              机动车交通事故责任强制保险单

                              Compulsory
      Insurance for Traffic Accident of Motor –Driven Vehicle

                            	
                                

                            	
                              安邦财产保险股份有限公司

                              Anbang
      Property Insurance Co., Ltd.

                            	
                                

                            	
                              1017元

                              RMB
      1017 yuan

                            	
                                

                            	 
      


                    

                  

                

              

            

          

        

      


      
        
           


        

        
          - 22
-

          
            

          

        

        
           


        

      


      Schedule
3.20

      


      No
Brokers

      


      None.



      
        
           


        

        
          - 23
-

          
            

          

        

        
           


        

      


      Schedule
3.22

      


      Related
Party Transactions

      


      None.



      
        
           


        

        
          - 24
-

          
            

          

        

        
           


        

      


      Schedule
3.25

      


      Use
of Proceeds

      


      The
proceeds will be used for the Company’s acquisition of at least 70% of the
equity interests in Beijing Century Dadi Gas Engineering Co., Ltd. and/or its
Affiliates.


      
        
           


        

        
          - 25
-