Unassociated Document


    


    SERIES
C AND SERIES D CONVERTIBLE PREFERRED STOCK SECURITIES PURCHASE
AGREEMENT

     

    by and
between

     

    CHINA
NEW ENERGY GROUP COMPANY

     

    and

     

    CHINA
HAND FUND I, LLC

     

    September
14, 2010


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Table
of Contents

    


    
      
        
          
            	
                    ARTICLE
      I AUTHORIZATION AND SALE OF SECURITIES

                  	
                    1

                  
	 
      	 
      	 
      
	
                    1.1

                  	
                    Authorization.
      .

                  	
                    1

                  
	
                    1.2

                  	
                    Issuance
      and Sale of Shares and Warrants.

                  	
                    1

                  
	
                    1.3

                  	
                    Payment
      of the Purchase Price.

                  	
                    2

                  
	
                    1.4

                  	
                    Stockholder
      Rights.

                  	
                    2

                  
	 
      	 
      	 
      
	
                    ARTICLE
      II THE CLOSING

                  	
                    2

                  
	 
      	 
      	 
      
	
                    2.1

                  	
                    The
      Closing.

                  	
                    2

                  
	
                    2.2

                  	
                    Deliveries
      at the Closing

                  	
                    2

                  
	 
      	 
      	 
      
	
                    ARTICLE
      III CONDITIONS TO THE CLOSING

                  	
                    3

                  
	 
      	 
      	 
      
	
                    3.1

                  	
                    Conditions
      to Obligation of Purchaser.

                  	
                    3

                  
	
                    3.2

                  	
                    Conditions
      to Obligations of the Company

                  	
                    5

                  
	 
      	 
      	 
      
	
                    ARTICLE
      IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY

                  	
                    6

                  
	 
      	 
      	 
      
	
                    4.1

                  	
                    Organization
      and Good Standing

                  	
                    6

                  
	
                    4.2

                  	
                    Capital
      Structure.

                  	
                    6

                  
	
                    4.3

                  	
                    Power,
      Authorization and Validity.

                  	
                    7

                  
	
                    4.4

                  	
                    Non-contravention.  .

                  	
                    8

                  
	
                    4.5

                  	
                    Title
      to Personal Property and Assets.

                  	
                    8

                  
	
                    4.6

                  	
                    Subsidiaries.

                  	
                    9

                  
	
                    4.7

                  	
                    Financial
      Statements; GAAP Treatment of Financial Statements.

                  	
                    9

                  
	
                    4.8

                  	
                    Absence
      of Certain Changes and Events

                  	
                    10

                  
	
                    4.9

                  	
                    Compliance
      with Laws.

                  	
                    12

                  
	
                    4.10

                  	
                    Permits..

                  	
                    12

                  
	
                    4.11

                  	
                    Real
      Property.

                  	
                    13

                  
	
                    4.12

                  	
                    Intellectual
      Property

                  	
                    13

                  
	
                    4.13

                  	
                    Contracts.

                  	
                    15

                  
	
                    4.14

                  	
                    Taxes.

                  	
                    16

                  
	
                    4.15

                  	
                    Employees.

                  	
                    17

                  
	
                    4.16

                  	
                    Employee
      Benefit Plans.

                  	
                    18

                  
	
                    4.17

                  	
                    Insurance.

                  	
                    18

                  
	
                    4.18

                  	
                    Compliance
      with Environmental Requirements.

                  	
                    19

                  
	
                    4.19

                  	
                    Litigation.

                  	
                    19

                  
	
                    4.20

                  	
                    No
      Brokers.

                  	
                    19

                  
	
                    4.21

                  	
                    Solvency.

                  	
                    19

                  
	
                    4.22

                  	
                    Related
      Party Transactions.

                  	
                    19

                  
	
                    4.23

                  	
                    Disclosure.

                  	
                    20

                  
	
                    4.24

                  	
                    Securities
      Act

                  	
                    20

                  
	
                    4.25

                  	
                    Use
      of Proceeds

                  	
                    21

                  
	
                    4.26

                  	
                    SAFE
      Compliance.

                  	
                    21

                  
	 
      	 
      	 
      
	
                    ARTICLE
      V REPRESENTATIONS AND WARRANTIES OF PURCHASER

                  	
                    21

                  
	 
      	 
      	 
      
	
                    5.1

                  	
                    Investment
      for Own Account.

                  	
                    21

                  
	
                    5.2

                  	
                    No
      Registration.

                  	
                    21

                  
	
                    5.3

                  	
                    Accredited
      Investor.

                  	
                    21

                  
	
                    5.4

                  	
                    Power
      and Authority

                  	
                    21

                  
	
                    5.5

                  	
                    No
      Approvals.

                  	
                    22

                  
	
                    5.6

                  	
                    Non-contravention.

                  	
                    22

                  
	
                    5.7

                  	
                    Disclosure
      of Information

                  	
                    22

                  
	 
      	 
      	 
      
	
                    ARTICLE
      VI CERTAIN COVENANTS

                  	
                    22

                  


          

        

      

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    
      
        
          	
                  6.1

                	
                  Regulatory
      and Other Approvals.

                	
                  22

                
	
                  6.2

                	
                  Information..

                	
                  23

                
	
                  6.3

                	
                  Information
      Updates.

                	
                  23

                
	
                  6.4

                	
                  Confidentiality.

                	
                  23

                
	
                  6.5

                	
                  Reservation
      of Shares.

                	
                  24

                
	
                  6.6

                	
                  Compliance
      with Laws

                	
                  24

                
	
                  6.7

                	
                  Listing,
      Securities Exchange Act of 1934 and Rule 144 Requirements

                	
                  24

                
	
                  6.8

                	
                  Disclosure
      of Transaction

                	
                  25

                
	 
      	 
      	 
      
	
                  ARTICLE
      VII

                	
                  25

                
	 
      	 
      	 
      
	
                  7.1

                	
                  Termination
      of Agreement

                	
                  25

                
	
                  7.2

                	
                  Effect
      of Termination.

                	
                  26

                
	 
      	 
      	 
      
	
                  ARTICLE
      VIII INDEMNITY

                	
                  26

                
	 
      	 
      	 
      
	
                  8.1

                	
                  Survival.

                	
                  26

                
	
                  8.2

                	
                  Indemnity.

                	
                  26

                
	
                  8.3

                	
                  Procedures.

                	
                  27

                
	 
      	
                   
      

                	 
      
	
                  ARTICLE
      IX MISCELLANEOUS

                	
                  28

                
	 
      	 
      	 
      
	
                  9.1

                	
                  Legend

                	
                  28

                
	
                  9.2

                	
                  Removal
      of Legend and Transfer Restrictions

                	
                  28

                
	
                  9.3

                	
                  Waivers
      and Amendments.

                	
                  29

                
	
                  9.4

                	
                  Governing
      Law

                	
                  29

                
	
                  9.5

                	
                  Dispute
      Resolution.

                	
                  29

                
	
                  9.6

                	
                  Successors
      and Assigns

                	
                  30

                
	
                  9.7

                	
                  Entire
      Agreement.

                	
                  30

                
	
                  9.8

                	
                  Notices,
      etc

                	
                  30

                
	
                  9.9

                	
                  Severability

                	
                  31

                
	
                  9.10

                	
                  Expenses.

                	
                  31

                
	
                  9.11

                	
                  Titles
      and Subtitles.

                	
                  31

                
	
                  9.12

                	
                  Counterparts;
      Facsimile Signatures.

                	
                  31

                
	
                  9.13

                	
                  No
      Strict Construction

                	
                  32

                


        

      

    

    


    Exhibits

     

    
      
        	
                Exhibit
      A

              	
                Certain
      Definitions

              
	
                Exhibit
      B

              	
                Series
      C Certificate of Designations

              
	
                Exhibit
      C

              	
                Series
      D Certificate of Designations

              
	
                Exhibit
      D

              	
                Registration
      Rights Agreement

              
	
                Exhibit
      E

              	
                Backstop
      Agreement

              
	
                Exhibit
      F

              	
                Disclosure
      Schedules

              


      

    

     

    
      
         


      

      
        ii

        
          

        

      

      
         


      

    


    SECURITIES
PURCHASE AGREEMENT

     

    THIS
SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as
of September 14, 2010, is entered into by and between China New Energy Group
Company, a Delaware corporation (the “Company”), and China Hand Fund I, LLC, a
limited liability company organized and existing under the laws of the State of
Delaware (together with its successors and assigns, the “Purchaser”). The
Company and the Purchaser are also referred to herein individually as a “Party” and
collectively as the “Parties.” Certain
capitalized terms used in this Agreement are defined in Exhibit A attached
hereto.

     

    WHEREAS,
the Company desires to issue and sell to Purchaser, and Purchaser desires to
acquire, the securities specified herein, all on the terms and subject to the
conditions set forth in this Agreement.

     

    NOW, THEREFORE, in consideration of the
mutual promises, covenants and conditions hereinafter set forth, the parties
hereto mutually agree as follows:

     

    ARTICLE
I

    AUTHORIZATION
AND SALE OF SECURITIES

     

    1.1                 Authorization.  The
Company, on or prior to the Closing, shall have authorized the issuance and sale
of, in one or a series of transactions and closings, pursuant to the terms and
conditions provided herein, (i) an aggregate of 25 shares of its Series C
Convertible Preferred Stock, par value $.001 per share (“Series C Preferred
Stock”), having the rights, restrictions, privileges and preferences set
forth in the Certificate of Designations of Preferences, Rights and Limitations
of Series C Convertible Preferred Stock attached hereto as Exhibit B (the “Series C
Certificate”), and (ii) an aggregate of 4 shares of its Series D
Convertible Preferred Stock, par value $.001 per share (“Series D Preferred
Stock”), having the rights, restrictions, privileges and preferences set
forth in the Certificate of Designations of Preferences, Rights and Limitations
of Series D Convertible Preferred Stock attached hereto as Exhibit C (the “Series D
Certificate”).  Each of the Series C Certificate and Series D
Certificate has been, or prior to the Closing shall have been, adopted by the
Company’s Board of Directors (the “Board of Directors”)
and filed with the Delaware Secretary of State.

     

    1.2                 Issuance and Sale of Shares
and Warrants.  On the terms and subject to the conditions
contained in this Agreement, and in reliance on the representations and
warranties set forth in Article IV of this Agreement, at the Closing, the
Company will issue and sell to Purchaser, and Purchaser will purchase from the
Company, 18.73 shares of Series C Preferred Stock (“Series C Shares”) in
consideration for an aggregate purchase price of Fifteen Million U.S. Dollars
($15,000,000) (the “Cash Purchase Price”)
and four (4) shares of Series D Preferred Stock (“Series D Shares”) in
consideration for entering into that certain Backstop Agreement substantially in
the form attached hereto as Exhibit E (the “Backstop
Agreement”, and together
with the Cash Purchase Price, the “Purchase Price”).


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    1.3                 Payment of the Cash Purchase
Price.  At the Closing, Purchaser shall pay the Cash Purchase
Price in immediately available funds by wire transfer to the Company
Account.

     

    1.4                 Stockholder
Rights.  The Purchaser shall have the rights specified in the
(i) Series C Certificate, (ii) Series D Certificate and (iii) the Registration
Rights Agreement, dated as of the date hereof, by and between the Company and
Purchaser, substantially in the form attached as Exhibit D hereto (the
“Registration Rights
Agreement” and together with this Agreement, the Series C Certificate,
the Series D Certificate, the Registration Rights Agreement, and the
certificates, documents and instrument related to or contemplated by each of the
foregoing agreements, each a “Transaction Document”
and collectively, the “Transaction
Documents”), each of which shall be executed and delivered by the parties
hereto and thereto as of the Closing.

     

    ARTICLE
II

    THE
CLOSING

     

    2.1                 The
Closing.  The Closing shall take place at such time, date and
place as are mutually agreeable to by the Company and Purchaser.  The
date of the Closing is hereinafter referred to as the “Closing
Date.”

     

    2.2                 Deliveries at the
Closing.  At or prior to the Closing:

     

    (a)          the
Company will deliver to Purchaser:

     

    (i)       
    An executed Agreement with all exhibits and schedules
attached hereto;

     

    (ii)           The
stock certificates (in such denominations as Purchaser shall request) for the
Series C Preferred Stock and the Series D Preferred Stock;

     

    (iii)          A
copy of the Series C Certificate, filed with the Delaware Secretary of State, as
amended and in effect as of the Closing Date;

     

    (iv)          A
copy of the Series D Certificate, filed with the Delaware Secretary of State, as
amended and in effect as of the Closing Date;

     

    (v)           Consent
of the holders of Series A Preferred Stock representing at least 75% of the
shares of Series A Preferred Stock outstanding as of the Closing
Date;

     

    (vi)          Consent
of the holders of Series B Preferred Stock representing at least 75% of the
shares of Series B Preferred Stock outstanding as of the Closing
Date;


    
      
         


      

      
        2

        
          

        

      

      
         


      

    

     

    (vii)         Certificates,
as of the most recent practicable dates, as to the corporate good standing of
the Company issued by the relevant office of the Company’s jurisdiction of
incorporation;

     

    (viii)        A
certificate of the Company’s Secretary, dated as of the Closing Date, attesting
to and attaching copies of (A) the Certificate of Incorporation of the Company,
as amended, (B) the By-laws of the Company, as amended, each in effect as of the
date of the Closing Date; and (C) the resolutions of the Board of Directors
of the Company, authorizing and approving all matters in connection with this
Agreement, each of the other Transaction Documents and the transactions
contemplated hereby and thereby, including without limitation the filing of the
Certificates with the Delaware Secretary of State;

     

    (ix)           A
certificate of an executive officer of the Company, dated as of the Closing
Date, attesting to the fact that the conditions set forth in Section 3.1(d) have
been satisfied;

     

    (x)           Each
of the other Transaction Documents to which the Company is a party duly executed
by the Company;

     

    (xi)          An
opinion from the Company’s legal counsel, Guzov Ofsink, LLC, concerning this
Agreement and other Transaction Documents and the transactions contemplated
hereby and thereby that is reasonably satisfactory to Purchaser;

     

    (xii)         such
other supporting documents and certificates as Purchaser may reasonably request
or as may be required pursuant to this Agreement or any Transaction
Documents.

     

    (b)          Purchaser
will deliver to the Company the Cash Purchase Price, by wire transfer to an
account as directed by the Company on the Closing Date, an executed copy of this
Agreement, the Backstop Agreement and each of the other Transaction Documents to
which the Purchaser is a party.

     

    ARTICLE
III

    CONDITIONS
TO THE CLOSING

     

    3.1                 Conditions to Obligation of
Purchaser.  The obligation of Purchaser to purchase the Series
C Shares and the Series D Shares is subject to the fulfillment, on or prior to
the Closing Date, of the following conditions, any of which may be waived by
Purchaser in its sole discretion:

     

    (a)           Deliveries at the
Closing.  Each of the documents and other items set forth in
Section 2.2(a) shall have been delivered to Purchaser.

     

    (b)           Series C Certificate.
The Series C Certificate in the form of Exhibit B attached hereto shall have
been filed with the Secretary of State of Delaware.

     

    
      
         


      

      
        3

        
          

        

      

      
         


      

    

     

    (c)           Series D Certificate.
The Series D Certificate in the form of Exhibit C attached hereto shall have
been filed with the Secretary of State of Delaware.

     

    (d)           Representations and
Warranties.  The representations and warranties made by the
Company on behalf of itself and its Subsidiaries in Article IV hereof shall be
true and correct in all respects as of the date of this Agreement and as of the
Closing Date, with the same effect as though made as of the Closing Date, except
that the accuracy of representations and warranties that by their terms speak as
of a specified date will be determined as of such date.

     

    (e)           Performance of
Obligations.  The Company shall have performed in all material
respects all obligations, covenants and agreements herein required to be
performed by it on or prior to the Closing.

     

    (f)           No Material Adverse
Change/Material Adverse Effect.   There shall not have
been any Material Adverse Effect, as determined by Purchaser in its sole
discretion, and no event shall have occurred that could reasonably be expected
to have a Material Adverse Effect.  The Company and its Subsidiaries
shall have conducted their business and operations in the ordinary course of
business consistent with past practice since December 31, 2009.

     

    (g)           Consents and
Waivers.  The Company shall have made all filings with and
notifications of Governmental Authorities required to be made in connection with
the execution and delivery of this Agreement and each other Transaction
Documents and the performance of the transactions contemplated hereby and
thereby.  The Company and Purchaser shall have received all
authorizations, waivers, consents and permits, in form and substance reasonably
satisfactory to Purchaser (whether or not set forth on Section 4.4(a) of the
Disclosure Schedules), including without limitation applicable Governmental
Authorities, lessors, lenders, employees and contract parties, required to
permit the consummation of the transactions contemplated by this Agreement and
each of the other Transaction Documents, and to avoid a breach, default,
termination, acceleration or modification of any indenture, loan or credit
agreement or any other material agreement, contract, instrument, mortgage, lien,
lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award, as a result of, or in connection with, the
execution and performance of this Agreement and each of the other Transaction
Documents.

     

    (h)           Proceedings
Satisfactory.  All corporate and other proceedings taken prior
to or at the Closing in connection with the transactions contemplated by this
Agreement and each of the other Transaction Documents, and all documents and
instruments related thereto, shall be in form and substance reasonably
satisfactory to Purchaser and its counsel, and the issuance and sale of the
Securities hereunder shall be made in compliance with all applicable federal and
state laws.

     

    (i)      
     No Violation or
Injunction.  No action or proceeding by or before any court or
other Governmental Authority shall have been instituted or threatened by any
Person or Governmental Authority whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement and each
of the other Transaction Documents, or which might affect the right of the
Company to issue and sell the Securities to Purchaser.

     

    
      
         


      

      
        4

        
          

        

      

      
         


      

    

     

    (j)     
      No Suspension,
Etc.  Quotation of the Common Stock shall not have been
suspended by the Commission or the OTC Bulletin Board (except for any suspension
of trading of limited duration agreed to by the Company, which suspension shall
be terminated prior to the Closing), and, at any time prior to the Closing Date,
trading in securities generally as reported by Bloomberg Financial Markets
(“Bloomberg”)
shall not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by Bloomberg, or on the New
York Stock Exchange, nor shall a banking moratorium have been declared either by
the United States or New York State authorities, nor shall there have occurred
any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in any financial market which, in each case, in the
judgment of Purchaser, makes it impracticable or inadvisable to purchase the
Series C Shares.

     

    (k)           The
Company shall have filed all forms, reports and documents set forth on Section
4.24 of the Disclosure Schedules so that the Company is current in its reporting
obligations under the Securities Act and the Exchange Act, and the rules and
regulations of the Commission thereunder.

     

    3.2                 Conditions to Obligations of
the Company.  The Company's obligation to issue and sell the
Series C Shares and the Series D Shares to Purchaser at the Closing is subject
to the fulfillment on or prior to the Closing Date of the following conditions,
any of which may be waived by the Company in its sole discretion:

     

    (a)           Delivery of Purchase
Price.  Purchaser shall have delivered to the Company the
Purchase Price as set forth in Section 2.2(b) including the Backstop Agreement
duly executed by Purchaser.

     

    (b)           Representations and
Warranties.  The representations and warranties made by
Purchaser in Article V hereof shall be true and correct in all respects as of
the date of this Agreement and as of the Closing Date, with the same effect as
though made as of the Closing Date, except that the accuracy of representations
and warranties that by their terms speak as of a specified date will be
determined as of such date.

     

    (c)           Transaction
Documents.  Purchaser shall have executed and delivered each of
the other Transaction Documents to which it is a party, in each case in form and
substance satisfactory to the Company.

     

    (d)           Proceedings
Satisfactory.  All corporate and other proceedings taken prior
to or at the Closing in connection with the transactions contemplated by this
Agreement and each of the other Transaction Documents, and all documents and
instruments related thereto, shall be in form and substance reasonably
satisfactory to the Company and its counsel, and the issuance and sale of the
Series C Shares and the Series D Shares hereunder shall be made in compliance
with all applicable federal and state laws.

     

    (e)           No Violation or
Injunction.  No action or proceeding by or before any court or
other Governmental Authority shall have been instituted or threatened by any
Person or Governmental Authority whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement and each
of the other Transaction Documents, or which might affect the right of the
Company to issue and sell the Securities to Purchaser.

     

    
      
         


      

      
        5

        
          

        

      

      
         


      

    

     

    ARTICLE
IV

    REPRESENTATIONS
AND WARRANTIES OF THE COMPANY

    


    In order
to induce Purchaser to enter into this Agreement and consummate the transactions
contemplated hereby, the Company hereby makes to Purchaser the representations
and warranties contained in this Article IV on behalf of itself and, where
applicable, its Subsidiaries.  Such representations and warranties are
subject to the qualifications and exceptions set forth in the corresponding
Section of the Disclosure Schedules, attached hereto as Exhibit F and delivered
to Purchaser pursuant to this Agreement.  The Disclosure Schedules
make explicit reference to the particular representation or warranty (or Section
of a representation or warranty) as to which exception is taken.

     

    4.1                 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 4.1 of the Disclosure Schedules
and (ii) except where the failure to be so qualified or licensed would not
reasonably be expected to result in a Material Adverse Effect.  The
Company has provided to Purchaser complete and accurate copies of the
Certificate of Incorporation, as amended, and By-laws, as amended, of the
Company.

     

    4.2         
      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, 2,098,917 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,
18.73 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.

     

    
      
         


      

      
        6

        
          

        

      

      
         


      

    


    (b)           Options, Warrants, Reserved
Shares, Treasury Stock.  Except as set forth on Section 4.2(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, a Transaction
Document, Series A Financing Transaction Document or a Series B 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 4.2(b) of the Disclosure Schedules or as permitted by Series A
Financing Transaction Document or a Series B 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 4.2(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 any Transaction Documents, any Series A Financing Transaction
Document or Series B 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.

     

    4.3                 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 each of the
other Transaction Documents to which it is a party, and to carry out the
transactions contemplated hereby and thereby, and to issue, sell and deliver the
Securities.

     

    
      
         


      

      
        7

        
          

        

      

      
         


      

    

     

    (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 Securities, have been duly and validly approved and authorized
by all necessary corporate action on the part of the Company and its
shareholders, if necessary.

     

    (b)           This
Agreement and each of the other Transaction Documents to which it is a party
have been duly executed and delivered by the Company and, assuming due execution
and delivery by the other parties thereto, constitute or will constitute valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms, subject to applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or similar laws affecting
creditors’ rights generally and general principles of equity.

     

    4.4                 Non-contravention.  The
execution and delivery by the Company of this Agreement and each of the other
Transaction Documents to which it is a party, the consummation by the Company of
the transactions contemplated hereby and thereby, the performance by the Company
of its obligations hereunder and thereunder, and the sale, issuance and delivery
of the Securities, 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 4.4
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.

     

    (a)           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 and each of the other Transaction Documents, the
consummation by the Company of the transactions contemplated hereby and thereby,
or the performance by the Company of its obligations hereunder and thereunder,
or the sale, issuance and delivery of the Securities, except for such consents,
approvals, orders, authorizations, registrations, declarations, filings and
notices set forth in Section 4.4(a) of the Disclosure Schedules.

     

    
      
         


      

      
        8

        
          

        

      

      
         


      

    

     

    4.5                 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.

     

    (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.

     

    4.6                 Subsidiaries.

     

    (a)           Section
4.6(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 Purchaser 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 4.6(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 4.6 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.

     

    
      
         


      

      
        9

        
          

        

      

      
         


      

    

     

    4.7                 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).

     

    (b)           No Other Liabilities;
Reserves.  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.

     

    4.8                 Absence of Certain Changes
and Events.  Since the Balance Sheet Date, except as
contemplated herein, in the other Transaction Documents, in any Series A
Financing Transaction Document or Series B Financing Transaction Document, or as
set forth on Section 4.8 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;

     

    
      
         


      

      
        10

        
          

        

      

      
         


      

    

     

    (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;

     

    (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;

     

    
      
         


      

      
        11

        
          

        

      

      
         


      

    

     

    (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;

     

    (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 and the other Transaction Documents; or

     

    (w)          agreed
to take any action described in this Section 4.8 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.

     

    4.9                 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.

     

    4.10                 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 any other
Transaction Documents, or the execution and delivery hereof or
thereof.  No proceeding is pending or, to the Knowledge of the
Company, threatened, seeking the revocation or limitation of any
Permit.

     

    
      
         


      

      
        12

        
          

        

      

      
         


      

    

     

    4.11               Real
Property.

     

    (a)           Owned Real
Property.  Section 4.11(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.

     

    (b)           Leased Real
Property.   Section 4.11(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 Purchaser 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.

     

    
      
         


      

      
        13

        
          

        

      

      
         


      

    


    4.12         Intellectual Property.
(a)        All Necessary Rights; Absence
of Actions and Judgments.  Section  4.12(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 4.12(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.

     

    (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 4.12(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.

     

    
      
         


      

      
        14

        
          

        

      

      
         


      

    

     

    4.13              Contracts.

     

    (a)             Except
as disclosed in Section 4.13(a) of the Disclosure Schedules, or as permitted
under the Series A Financing Transaction Documents or the Series B Financing
Transaction Documents, 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;

     

    (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, anti-dilution 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;


    
      
         


      

      
        15

        
          

        

      

      
         


      

    

     

    (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.

     

    (b)           The
Company has delivered to Purchaser accurate and complete copies of all written
contracts identified in Section 4.13(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 4.13(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 4.13(d) 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 Shares, or any of the other transactions as contemplated hereunder or under
any of the other Transaction Documents, or which would be altered as a result of
such transactions.

     

    
      
         


      

      
        16

        
          

        

      

      
         


      

    

     

    4.14              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.

     

    (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.

     

    4.15              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
Purchaser 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 4.15(b) 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.

     

    
      
         


      

      
        17

        
          

        

      

      
         


      

    

     

    (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.

     

    (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.

     

    4.16              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 Securities 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
Purchasers, or any person or entity that owns a beneficial interest in any of
the Purchasers, 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.

     

    4.17              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 4.17 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 4.17 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.

     

    
      
         


      

      
        18

        
          

        

      

      
         


      

    

     

    4.18              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.

     

    4.19              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.

     

    4.20              No
Brokers.  Except as disclosed in Section 4.20 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.

     

    4.21              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.

     

    4.22              Related Party
Transactions. Except as set forth in Section 4.22 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.


    
      
         


      

      
        19

        
          

        

      

      
         


      

    

     

    (a)           Except
for the agreements listed in Section 4.22(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 4.22(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.

     

    (c)           Except
as set forth in Section 4.22(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).

     

    4.23              Disclosure. This
Agreement (including exhibits hereto and the financial statements delivered to
Purchaser), 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).

     

    4.24              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 Purchaser’s
representations in Article V hereof, the offer, sale and issuance of the
Securities 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.

     

    
      
         


      

      
        20

        
          

        

      

      
         


      

    

     

    4.25              Use of
Proceeds.  Section 4.25 of the Disclosure Schedule sets forth
the use of the proceeds from the sale of the Securities.

     

    ARTICLE
V

    REPRESENTATIONS
AND WARRANTIES OF PURCHASER

    


    Purchaser represents and warrants to
the Company as follows:

     

    5.1                 Investment for Own
Account.  The Securities are being or will be acquired for
Purchaser'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.

     

    5.2                 No
Registration.  Purchaser understands that (a) the Securities
have 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
Purchaser's representations set forth herein.  Purchaser understands
that the resale of the Securities 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.

     

    5.3                 Accredited
Investor.  Purchaser 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
Securities pursuant to the terms of this Agreement and the other Transaction
Documents, including a complete loss of Purchaser's investment in the
Securities.  Purchaser understands that the purchase of the Securities
involves substantial risk. Purchaser: (i) has experience as an investor in
securities of companies in the exploration stage and acknowledges that Purchaser
is able to fend for itself, can bear the economic risk of Purchaser's investment
in the Securities and has such knowledge and experience in financial or business
matters that Purchaser is capable of evaluating the merits and risks of this
investment in the Securities 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 Purchaser to be aware of the
character, business acumen and financial circumstances of such
persons.


    
      
         


      

      
        21

        
          

        

      

      
         


      

    

     

    5.4                 Power and
Authority.  Purchaser has the full right, power and authority
to enter into and perform its obligations under this Agreement and each of the
other Transaction Documents to which it is a party, and this Agreement and each
of the other Transaction Documents to which it is a party constitute valid and
binding obligations of Purchaser, enforceable in accordance with their terms,
subject to applicable bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium or similar Laws affecting creditors’ rights generally and
general principles of equity.

     

    5.5                 No
Approvals.  No consent, approval or authorization of, or
designation, declaration or filing with, any Governmental Authority on the part
of Purchaser is required in connection with the valid execution and delivery of
this Agreement or each of the other Transaction Documents, the consummation by
Purchaser of the transactions contemplated hereby and thereby, the performance
by Purchaser of its obligations hereunder and thereunder, or the purchase of the
Securities.

     

    5.6                 Non-contravention.  The
execution and delivery by Purchaser of this Agreement and each of the other
Transaction Documents to which it is a party, the consummation by Purchaser of
the transactions contemplated hereby and thereby, the performance by Purchaser
of its obligations hereunder and thereunder, and the purchase of the Securities,
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 Purchaser, or give
rise to any increased, additional, accelerated or guaranteed rights or
entitlements under, any provision of (i) Purchaser’s organizational documents,
as amended, and as in effect on the date hereof, (ii) any agreement to which
Purchaser is a party or otherwise bound or otherwise under which Purchaser has
rights or benefits, or (iii) any Law or Order; in each case applicable to
Purchaser or any of its properties or assets.

     

    5.7                 Disclosure of
Information.  Purchaser 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 Securities.  The Purchaser
further has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Securities 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 Purchaser or to which Purchaser
had access. The foregoing, however, does not in any way limit or modify the
representations and warranties made by the Company in Article IV.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    ARTICLE
VI

    CERTAIN
COVENANTS

     

    6.1                 Regulatory and Other
Approvals.  Each party hereto shall, prior to the Closing, (a)
take all commercially reasonable steps necessary or desirable, and proceed
diligently and in good faith use all commercially reasonable efforts, as
promptly as practicable, to obtain any and all consents, approvals or actions
of, to make all filings with and to give all notices to Governmental Authorities
or any other Person required to consummate the transactions contemplated hereby
and by each of the other Transaction Documents, and (b) provide such other
information and communications to such Governmental Authorities or other Persons
as such Governmental Authorities or other Persons may reasonably request in
connection therewith.  The Company shall provide prompt notification
to Purchaser when any such consent, approval, action, filing or notice referred
to in clause (a) above is obtained, taken, made or given, as applicable, and
will advise Purchaser of any material communications (and, unless precluded by
law, provide copies of any such communications that are in writing) with any
Governmental Authority or other Person regarding any of the transactions
contemplated by this Agreement or each of the other Transaction
Documents.

     

    6.2                 Information.  Unless
otherwise restricted by an agreement or arrangement with a third party or by
Law, to the extent commercially reasonable, the Company shall, prior to the
Closing, (a) provide Purchaser and its officers, directors, employees,
agents, counsel, accountants, financial advisors, consultants and other
representatives (collectively, “Representatives”)
with full access, upon reasonable prior notice and during normal business hours,
to the key employees and agents of the Company and to the Company’s assets and
accountants, and (b) furnish Purchaser and its Representatives with all such
information and data concerning the Company’s businesses as Purchaser or any of
such other Persons reasonably may request in connection with such investigation
subject to the Representatives’ being bound by appropriate confidentiality
obligations and restrictions; provided that, if the Company is not able to grant
Purchaser or its Representatives access and furnish information required by this
Section 6.2 due to restrictions imposed by third party agreements or
arrangements, it shall notify Purchaser (which such notice shall describe in
reasonable detail the basis for withholding information and general nature of
such information) and use all reasonable efforts to obtain a waiver of such
restrictions from the relevant third parties.

     

    6.3                 Information
Updates.  The Company shall, prior to the Closing, notify
Purchaser in writing of, and as promptly as practical will provide Purchaser
with true and complete copies of, any and all material information or documents
relating to, any event, transaction or circumstance, as soon as practicable
after it becomes known to the Company, occurring after the date of this
Agreement and prior to the Closing that causes any covenant of the Company under
this Agreement or any other Transaction Documents to be breached or that renders
untrue any representation or warranty of the Company contained in this Agreement
as if the same were made on or as of the date of such event, transaction or
circumstance.


    
      
         


      

      
        23

        
          

        

      

      
         


      

    

     

    6.4                 Confidentiality.  Each
of the parties hereto hereby agrees that any information regarding (i) a party
to this Agreement or such party’s business, assets, management or operating
plans (“Party
Confidential Information”), (ii) the terms and conditions of this
Agreement, (iii) the Purchaser’s acquisition of the Securities or (iv) the
negotiation and execution of this Agreement shall be held in confidence by both
parties, and neither party shall make any disclosure of any such information
unless (a) the release of such information is ordered pursuant to a
subpoena or other order from a court or Governmental Authority of competent
jurisdiction, (b) the release of such information is otherwise required by
applicable law, including, without limitation, the requirement of the Company
under the Exchange Act to file a current report on Form 8-K that discloses the
transactions contemplated hereby and includes copies of this Agreement and the
other Transaction Documents, or (c) such information has been made
generally available to the public other than by disclosure in violation of this
Agreement or any applicable Law or other restriction; provided that disclosure
of such information may be made by Purchaser to any Affiliate, or to any
transferee or assignee of the Securities, so long as such Affiliate, transferee
or assignee is bound by confidentiality obligations reasonably similar in
substance to those set forth in this Section 6.4.  The confidentiality
obligations of each party with respect to the other party’s Party Confidential
Information shall continue for a period of two (2) years following the date
hereof, and during such period neither party shall use the other party’s Party
Confidential Information for any purpose other than in connection with the
transactions contemplated herein or in any of the other Transaction Documents.
Each of the parties hereto hereby further agrees that such party shall obtain no
intellectual property or other rights with respect to any information disclosed
by the other party to such party in any investigation pursuant to Section 6.2,
or during the negotiation and execution of this Agreement or the effectuation of
the transactions contemplated hereby, and all such information shall remain the
property of the disclosing party.  Each party agrees that it shall,
upon learning that disclosure of such information is sought in or by a court or
Governmental Authority of competent jurisdiction or through other means, give
prompt notice to the other party and allow the other party, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the information.

     

    6.5                 Reservation of
Shares.  As of the date hereof, the Company has reserved and
the Company shall continue to reserve and keep available at all times, free of
preemptive rights, the maximum number of shares of Common Stock for the purpose
of enabling the Company to issue the Conversion Shares.

     

    6.6                 Compliance with
Laws.  For so long as any Purchaser owns any Securities, the
Company shall comply in all material respects with the Company’s reporting,
filing and other obligations under the securities Laws.

     

    6.7                Compliance with
Laws.  For so long as any Purchaser owns any Securities, the
Company shall comply in all material respects with the Company’s reporting,
filing and other obligations under the securities Laws.

     

    6.8                 Corporate
Existence; No Conflicting Agreements. For so long as any Purchaser owns
Securities, the Company shall take all steps necessary to preserve and continue
the corporate existence of the Company.  For so long as any Series C
Purchaser owns any Securities, the Company shall not enter into any agreement,
the terms of which agreement would restrict or impair the right or ability of
the Company to perform any of its obligations under this Agreement or any of the
other agreements attached as exhibits hereto.


    
      
         


      

      
        24

        
          

        

      

      
         


      

    

     

    6.8                Listing, Securities Exchange
Act of 1934 and Rule 144 Requirements.  The Company shall
continue its obligation to report to the Commission under Section 12 of the 1934
Act and shall use its best efforts to comply in all material respects with its
reporting and filing obligations under the 1934 Act for so long as any Purchaser
owns any Securities. For so long as any Purchaser owns Securities, the Company
shall not take any action or file any document (whether or not permitted by the
Securities Act or the rules promulgated thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act except as permitted under the
Transaction Documents.  For so long as any Purchaser owns any
Securities, the Company shall take all action necessary to continue the
quotation or listing of its Common Stock on the OTC Bulletin Board or other
exchange or market on which the Common Stock is trading or may be traded in the
future.  Subject to the terms of the Transaction Documents, the
Company further covenants that it shall take such further action as Purchaser
may reasonably request, all to the extent required from time to time to enable
Purchaser to sell the Securities and without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144, including
without limitation the timely filing of the SEC Reports. Upon the request of
Purchaser, the Company shall deliver to Purchaser a written certification of a
duly authorized officer as to whether it has complied with such
requirements.

     

    6.9                Disclosure of
Transaction. The Company shall
issue a press release describing the material terms of the transactions
contemplated hereby (the “Press Release”) as
soon as practicable after the Closing but in no event later than 9:00 A.M.
Eastern Time on the fourth Trading Day following such Closing.  The
Company shall also file with the Commission a Current Report on Form 8-K (the
“Form 8-K”)
describing the material terms of the transactions contemplated hereby as soon as
practicable following the Closing Date but in no event more than four (4)
Trading Days following such Closing Date, which Press Release and Form 8-K shall
be subject to prior review and comment by Purchaser.

    


    ARTICLE
VII

    TERMINATION

     

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

     

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

     

    (b)           Purchaser
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 Purchaser 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.


    
      
         


      

      
        25

        
          

        

      

      
         


      

    

     

    (c)           The
Company may terminate this Agreement by giving written notice to Purchaser at
any time prior to the Closing in the event (i) Purchaser is in breach of
any covenant contained in this Agreement and such breach is not cured within 30
days after receipt by Purchaser 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 Purchaser shall only have five days to cure such breach; or
(ii) the representations and warranties of Purchaser 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 Purchaser.

     

    7.2                 Effect of
Termination.  If any party terminates this Agreement pursuant
to Section 7.1, all obligations of the parties hereunder will terminate without
liability of any party to the other party; provided, that the provisions of
Sections 6.4, 9.4, 9.5, 9.6, 9.7, 9.8, and 9.10 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.

     

    ARTICLE
VIII

    INDEMNITY

     

    8.1                 Survival.  The
representations and warranties of the parties contained in this Agreement shall
survive the Closing for a period of twenty four (24) months; provided, however,
that the representations and warranties contained in Section 4.2 (Capital
Structure), 4.3 (Power, Authorization and Validity), 4.4 (Non-contravention);
and 4.14 (Taxes), shall survive the Closing for a period equal to the applicable
statute of limitations.  The covenants of the parties shall survive
the Closing until such time as they have been fully performed.

     

    8.2                 Indemnity.

     

    (a)           The
Company hereby agrees to indemnify, defend and hold harmless Purchaser, its
respective Affiliates, successors and assigns, and each of their respective
officers, directors, employees and agents (the “Purchaser Indemnified
Parties”), from and against, and agrees to pay or cause to be paid to the
Purchaser Indemnified Parties all amounts equal to the sum of, any and all
claims, demands, costs, expenses, losses and other liabilities of any kind that
the Purchaser Indemnified Parties may incur or suffer (including without
limitation all reasonable legal fees and expenses) which arise or result from
any breach of or failure by the Company to perform any of its representations,
warranties, covenants or agreements in this Agreement.  The rights of
Purchaser hereunder shall be in addition to, and not in lieu of, any other
rights and remedies which may be available to it by Law.


    
      
         


      

      
        26

        
          

        

      

      
         


      

    


    (b)           Purchaser
hereby agrees to indemnify, defend and hold harmless the Company, its respective
Affiliates, successors and assigns, and each of their respective officers,
directors, employees and agents (the “Company Indemnified
Parties” and, together with the Purchaser Indemnified Parties, the “Indemnified
Parties”), from and against, and agrees to pay or cause to be paid to the
Company Indemnified Parties all amounts equal to the sum of, any and all claims,
demands, costs, expenses, losses and other liabilities of any kind that the
Company Indemnified Parties may incur or suffer (including without limitation
all reasonable legal fees and expenses) which arise or result from any breach of
or failure by Purchaser to perform any of its representations, warranties,
covenants or agreements in this Agreement.  The rights of the Company
hereunder shall be in addition to, and not in lieu of, any other rights and
remedies which may be available to it by Law.  Notwithstanding
anything to the contrary provided in the foregoing, the maximum aggregate
liability of Purchaser pursuant to its indemnification obligations under this
Section 8.2(b) shall not exceed the Cash Purchase Price paid by Purchaser
hereunder.

     

    (c)           No
Party shall be entitled to indemnification pursuant to Section 8.2, unless and
until the aggregate amount of all damages to such Party with respect to such
matters for which indemnification is available exceeds $100,000, at which time,
subject to the foregoing cap, it shall be entitled to indemnification for the
total amount of such damages.

     

    8.3                 Procedures.  If
a third party shall notify an Indemnified Party with respect to any matter that
may give rise to a claim for indemnification under the indemnity set forth above
in Section 8.2, the procedure set forth below shall be
followed.

     

    (a)           Notice.  The
Indemnified Party shall give to the party providing indemnification (the “Indemnifying Party”)
written notice of any claim, suit, judgment or matter for which indemnity may be
sought under Section 8.2 promptly but in any event within 30 days after the
Indemnified Party receives notice thereof; provided, however, that failure by
the Indemnified Party to give such notice shall not relieve the Indemnifying
Party from any liability it shall otherwise have pursuant to this Agreement
except to the extent that the Indemnifying Party is actually prejudiced by such
failure.  Such notice shall set forth in reasonable detail, if known,
(i) the basis for such potential claim and (ii) the dollar amount of
such claim.  The Indemnifying Party shall have a period of 20 days
within which to respond thereto.  If the Indemnifying Party does not
respond within such 20-day period, the Indemnifying Party shall be deemed to
have accepted responsibility for such indemnity.

     

    (b)           Defense of
Claim.  With respect to a claim by a third party against an
Indemnified Party for which indemnification may be sought under this Agreement,
the Indemnifying Party shall have the right, at its option, to be represented by
counsel of its choice and to assume the defense or otherwise control the
handling of any claim, suit, judgment or matter for which indemnity is sought,
which is set forth in the notice sent by the Indemnified Party, by notifying the
Indemnified Party in writing to such effect within 20 days of receipt of such
notice; provided, however, that the Indemnified Party shall have the right to
employ counsel to represent it if, in the Indemnified Party's reasonable
judgment based upon the advice of counsel, it is advisable in light of the
separate interests of the Indemnified Party to be represented by separate
counsel, and in that event the fees and expenses of one such separate counsel
shall be paid by the Indemnifying Party.  If the Indemnifying Party
does not give timely notice in accordance with the preceding sentence, the
Indemnifying Party shall be deemed to have given notice that it does not wish to
control the handling of such claim, suit or judgment.  In the event
the Indemnifying Party elects (by notice in writing within such 20-day period)
to assume the defense of or otherwise control the handling of any such claim,
suit, judgment or matter for which indemnity is sought, the Indemnifying Party
shall indemnify and hold harmless the Indemnified Party from and against any and
all fees (including reasonable attorneys' fees, accountants, consultants and
engineering fees) and expenses incurred by the Indemnifying Party prior to such
election.  In the event that the Indemnifying Party does not assume
the defense or otherwise control the handling of such matter, the Indemnified
Party may retain counsel, as an indemnification expense, to defend such claim,
suit, judgment or matter.


    
      
         


      

      
        27

        
          

        

      

      
         


      

    

     

    (c)           Final
Authority.  Each of the parties shall cooperate in the defense
of any such claim or litigation.  In connection with any claim, suit
or other proceeding with respect to which the Indemnifying Party has assumed the
defense or control, the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to any matter which does not
include a provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all liability with respect thereto, without the written
consent of the Indemnified Party.  In connection with any claim, suit
or other proceeding with respect to which the Indemnifying Party has not assumed
the defense or control, the Indemnified Party may not compromise or settle such
claim without the consent of the Indemnifying Party, which shall not be
unreasonably withheld.

     

    ARTICLE
IX

    MISCELLANEOUS

     

    9.1                 Legend.  The
Company and Purchaser acknowledge and agree that each certificate representing
the Securities may be endorsed with the following legends:

     

    (a)           The
securities represented by this certificate have not been registered under the
Securities Act or under the securities laws of certain states. These securities
are subject to restrictions on transferability and resale and may not be
transferred or resold except as permitted under the Securities Act and the
applicable state securities laws, pursuant to registration or exemption
therefrom. Investors should be aware that they may be required to bear the
financial risks of this investment for an indefinite period of time. The issuer
of these securities may require an opinion of counsel in form and substance
satisfactory to the issuer to the effect that any proposed transfer or resale is
in compliance with the Act and any applicable state securities
laws.

     

    (b)           Any
other legends required by applicable Laws.

     

    The
Company may instruct its transfer agent not to register the transfer of the
Securities, unless the conditions specified in the foregoing legends are
satisfied.

     

    9.2                 Removal of Legend and
Transfer Restrictions.  Any legend endorsed on a certificate
pursuant to Section 9.1 and the stop transfer instructions with respect to such
Securities shall be removed and the Company shall issue a certificate without
such legend to the holder thereof (a) if such Securities are registered under
the Securities Act and a prospectus meeting the requirements of Section 10 of
the Securities Act is available, (b) if such legend may be properly removed
under the terms of Rule 144 promulgated under the Securities Act, or (c) if such
holder provides the Company with an opinion of counsel for such holder,
reasonably satisfactory to legal counsel for the Company to the effect that a
sale, transfer or assignment of such Securities may be made without
registration.


    
      
         


      

      
        28

        
          

        

      

      
         


      

    

     

    9.3                 Waivers and
Amendments.  All waivers and amendments hereunder must be made
in writing, and failure of any party at any time to require another party's
performance of any obligation under this Agreement shall not affect the right
subsequently to require performance of that obligation.  Any waiver of
any breach of any provision of this Agreement shall not be construed as a waiver
of any continuing or succeeding breach of such provision or a waiver or
modification of any other provision.

     

    9.4                 Governing
Law.  This Agreement shall be governed in all respects by the
laws of the State of New York without regard to the principles of conflicts of
law thereof.

     

    9.5                 Dispute
Resolution.

     

    (a)           Subject
to Section 9.5(b), any dispute, controversy or claim relating to or arising
under, out of or in connection with this Agreement or the validity,
enforceability, construction, performance or breach of this Agreement (“Dispute”) shall be
determined by arbitration administered by the American Arbitration Association
(“AAA”) in
accordance with its International Arbitration Rules (“Rules”) then in force
on the date of commencement of the arbitration.  The arbitration shall
be conducted by a panel of three (3) arbitrators appointed in accordance with
the Rules unless the parties otherwise agree that the arbitration may be
conducted by a single arbitrator appointed in accordance with the
Rules.  The place of arbitration shall be New York, New York, and the
language of the arbitration shall be English.  The arbitrators shall
determine the Dispute and render a final award in accordance with the internal
laws of the State of New York.  The award rendered shall be final and
binding on the parties.  The parties agree that any award shall be
enforceable pursuant to the United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards.  The costs of arbitration,
including administrative fees and fees of arbitrators, shall be shared equally
by the parties unless otherwise specified by the arbitrators.  Each
party shall bear the cost of its own attorneys’ and experts’ fees; provided that
the arbitrators may in their discretion award to the prevailing party the costs
and expenses incurred by the prevailing party in connection with the arbitration
proceeding.

     

    (b)           The
parties recognize that irreparable injury may result from a breach of this
Agreement and that money damages would be inadequate to fully remedy the injury
resulting from such breach.  In order to prevent such injury, the
arbitrators shall have the power to grant temporary or permanent injunctive or
other equitable relief.  Prior to the appointment of the arbitrators a
party may, notwithstanding any other provision of this Agreement, seek temporary
injunctive relief in any court of competent jurisdiction (“Temporary
Relief”).  Any party seeking Temporary Relief shall (if
arbitration has not been commenced) simultaneously commence
arbitration.  Such court ordered Temporary Relief shall not continue
beyond the entry of any temporary or permanent injunctive relief granted by the
arbitrators or any final award by the arbitrators, whichever occurs
first.


    
      
         


      

      
        29

        
          

        

      

      
         


      

    

     

    9.6                 Successors and
Assigns.  Neither this Agreement nor any right or obligation
hereunder is assignable in whole or in part, whether by operation of Law or
otherwise, by any party without the express written consent of the other party
hereto and any such attempted assignment shall be void and
unenforceable.  Notwithstanding the foregoing, Purchaser may transfer
or assign this Agreement or any right or obligation hereunder to an Affiliate or
Vicis Capital Master Fund (“Vicis”), which shall
not be deemed an Affiliate of China Hand solely by virtue of this Section 9.6
and Vicis may assign its rights to any of its affiliates, at any time prior to
or after the Closing.  This Agreement and the rights and obligations
hereunder shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors or assignees, and no other person shall
acquire or have any rights under or by virtue of this Agreement.

     

    9.7                 Entire
Agreement.  This Agreement, the exhibits hereto, each of the
other Transaction Documents, and the other documents delivered pursuant hereto
and thereto, constitute the full and entire understanding and agreement between
the parties with regard to the subjects hereof and thereof.

     

    9.8                 Notices,
etc.  All notices, requests, demands, and other communications
under this Agreement shall be in writing and delivered in person or sent by
facsimile or sent by certified mail, postage prepaid, or by nationally
recognized courier service and properly addressed as follows:

     

    to the
Company:

    


    China New
Energy Group

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

    Tianjin
Emperor Place

    Heping
District,Tianjin, 300040

    People's
Republic of China

    Attn:
Yang Kan Chong, CEO

    Tel. No.:
(86 22) 2321 0508

    Fax No.:
___________________________

    Email:
ykchong@cner.com

    


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

    


    Guzov
Ofsink, LLC

    600
Madison Avenue, 14th Floor

    New York,
New York  10022 USA

    Attn:
Darren L. Ofsink, Esq.


    
      
         


      

      
        30

        
          

        

      

      
         


      

    

    


    Tel.:
(212) 371-8008

    Fax No.;
(212) 688-7273

    Email:
dofsink@golawintl.com

    


    to
Purchaser:

    


    China
Hand Fund I, LLC

    558 Lime
Rock Road

    Lakeville,
CT  06039

    Attn:
Mary Fellows

    Tel. No.:
860-435-7000

    Fax No.:
860-435-6540

    Email:
mfellows@kuhnsbrothers.com

    


    Any party
hereto may from time to time change its address for the purpose of notices to
that party by a similar notice specifying a new address, but no such change
shall be deemed to have been given until it is actually received by the party
sought to be charged with its contents.  All notices and other
communications required or permitted under this Agreement which are addressed as
provided in this Section 9.8 if delivered personally, by facsimile or by
nationally recognized courier service, shall be effective upon delivery; and, if
delivered by mail, shall be effective three days following deposit in the United
States mail, postage prepaid.

     

    9.9                 Severability.  In
case any provision of this Agreement shall be declared invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.

     

    9.10              Expenses.  The
legal fees and other expenses incurred by the parties with respect to this
Agreement and the other Transaction Documents, and the transactions contemplated
hereby and thereby, shall be paid for by the Company.  At the Closing,
Purchaser may deduct from the Cash Purchase Price the aggregate amount of such
fees and expenses incurred by Purchaser in accordance with Section
3.1(j).  In the event that this Agreement is terminated pursuant to
Sections 7.1(b), the Company will promptly pay to Purchaser, upon demand
therefor, the amount of such fees and expenses incurred by
Purchaser.  Notwithstanding the foregoing, in no event shall the fees
and expenses payable by the Company pursuant to this Section 9.10 exceed
$100,000.

     

    9.11              Titles and
Subtitles.  The titles of the paragraphs and subparagraphs of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

     

    9.12              Counterparts; Facsimile
Signatures.  This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.  This Agreement may be executed and
delivered by facsimile signatures.


    
      
         


      

      
        31

        
          

        

      

      
         


      

    

     

    9.13              No Strict
Construction.  The parties hereto have participated jointly in
the negotiation and drafting of this Agreement.  In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.

     

     [Signatures follow on the next
page]


    
      
         


      

      
        32

        
          

        

      

      
         


      

    


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

     

    
      
        	
                THE
      COMPANY:

              
	 
      
	
                CHINA
      NEW ENERGY GROUP COMPANY

              
	 
      
	
                By:

              	
                /s/ Yang Kan Chong

              
	
                Name:
      Yang Kan Chong

              
	
                Title:
      Chairman and Chief Executive Officer

              
	 
      	 
      
	
                PURCHASER:

              
	 
      
	
                CHINA
      HAND FUND I, LLC

              
	 
      
	
                By:

              	
                /s/ Authorized
    Signatory

              
	
                Name:
      Authorized Signatory

              
	
                Title:

              


      

    

    


    [Signature
Page to Securities Purchase Agreement]

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
A

     

    CERTAIN
DEFINITIONS

     

    For
purposes of the Agreement to which this Exhibit A is attached, and for
purposes of the other Transaction Documents, unless otherwise specifically
defined therein, the following terms have the following meanings:

     

    “AAA” has the meaning
set forth in Section 9.5(a).

     

    “Affiliate” means,
with respect to any Person, any other Person directly or indirectly controlling,
directly or indirectly controlled by, or under direct or indirect common control
with, such Person or a member of such Person's immediate family; or if such
Person is a partnership, any general partner of such Person or a Person
controlling any such general partner.  For purposes of this
definition, "control" (including "controlled by" and "under common control
with") shall mean the power, directly or indirectly, to direct or cause the
direction of the management and policies of such Person whether through the
ownership of voting securities, by contract or otherwise.

     

     “Agreement” has the
meaning set forth in the Preamble.

     

    “Balance Sheet” has
the meaning set forth in Section 4.5.

     

    “Balance Sheet Date”
has the meaning set forth in Section 4.5.

     

    “Business Day” means
any day other than a Saturday, Sunday or other day on which the national or
state banks located in the State of New York are authorized to be
closed.

     

    “CERCLA” means the
Comprehensive Environmental Response Compensation and Liability Act
of 1980, as amended, 42 U.S.C. § 9601 et seq.

     

    “Certificates” has the
meaning set forth in Section 1.1.

     

    “Closing” has the
meaning set forth in Section 2.1.

     

    “Closing Date” has the
meaning set forth in Section 2.1.

     

    “Code” means the
Internal Revenue Code of 1986, as amended.

     

    “Commission” means the
Securities and Exchange Commission of the United States of America.

     

    “Common Stock” has the
meaning set forth in Section 4.2(a).

     

    “Company” has the
meaning set forth in the Preamble.

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    “Company Account”
means an account of the Company designated in a written notice delivered to
Purchaser at least one Business Day prior to the date of any required payment by
Purchaser to the Company under this Agreement.

     

    “Company Business”
means the business of the Company and its Subsidiaries as currently conducted
and as proposed to be conducted.

     

    “Company Indemnified
Parties” has the meaning set forth in Section 8.2(b).

     

    "Company Intellectual
Property” means all Intellectual Property in existence as of the Closing
Date that is owned by or exclusively licensed to the Company or any of its
Subsidiaries and all other Intellectual Property in existence as of the Closing
Date that is Used in or, to the Knowledge of the Company, necessary for the
conduct of the Company Business, excluding commercially available off-the-shelf
software licenses and any Intellectual Property necessary in connection with any
equipment, machinery or other asset that the Company or any of its Subsidiaries
must purchase from third parties.

     

    “Contracts” means all
contracts, agreements, commitments and understandings relating to the Company
Business or to which the Company is a party or has an interest, whether oral or
written, including, but not limited to, purchase, sale or other commitments,
distributorship, franchise or similar agreements, patent or trademark licensing
agreements (either as licensor or licensee), lease or sublease agreements
(either as lessor or lessee), equipment or vehicle leases, employment agreements
(including, but not limited to, agreements entered into by employees of the
Company relating to the transfer and/or safeguarding of Intellectual Property
rights), consulting agreements, union or collective bargaining agreements,
guarantees, loan agreements, non-competition agreements, severance agreements,
letters of credit, joint venture, limited liability company or partnership
agreements, and supply or requirements contracts.

     

    “Conversion Shares”
means collectively the shares of Common Stock issued or issuable upon conversion
of the Series C Preferred Stock and Series D Preferred Stock issued or issuable
hereunder.

     

    “Disclosure Schedules”
means the exceptions to the Company’s representations and warranties made in
Article IV of this Agreement, set forth on the schedules attached hereto as
Exhibit ___.

     

    “Dispute” has the
meaning set forth in Section 9.5.

     

     “Employment
Agreements” has the meaning set forth in Section 4.16(b).

     

    “Environmental Law”
means all applicable laws (whether imposed by federal, state, local or foreign
statutes, regulation, rules, codes, licenses, permits, administrative orders,
ordinances, judicial orders or otherwise) relating to protection of the
environment, prevention, minimization or remediation of pollution, or control
and tracking of any hazardous substance, hazardous waste or other
waste.  Environmental Law shall include without limitation CERCLA; the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901 et seq.; the Clean Water Act,
33 U.S.C. § 1311, et
seq.; the Clean Air Act, 42 U.S.C. § 7401-7642; the Toxic
Substances Control Act, 15 U.S.C. § 2601 et seq.; the Federal
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. § 136-136y, the
Oil Pollution Act; the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. § 1101, et seq. and similar or
related state, local or foreign laws including without limitation any applicable
national, provincial and local environmental laws and regulations in the
People’s Republic of China.

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    “ERISA” means the
Employee Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder.

     

    “Exchange Act” has the
meaning set forth in Section 4.25(a).

     

    “Financial Statements”
has the meaning set forth in Section 4.7.

     

    “GAAP” means United
States generally accepted accounting principles, consistently
applied.

     

    “Governmental
Authority” means any: (i) nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(ii) federal, state, local, municipal, foreign or other government; or (iii)
governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or entity and any court or other
tribunal).

     

    “Indemnified Parties”
has the meaning set forth in Section 8.2(b).

     

    “Indemnifying Party”
has the meaning set forth in Section 8.3(a).

     

    "Intellectual
Property" means any and all of the following and all rights in, arising
out of or associated therewith:  (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or
not), invention disclosures, and improvements, all other rights corresponding
thereto throughout the world, (iii) trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iv) all copyrights, copyright
registrations and applications therefor, and all other rights corresponding
thereto throughout the world; (v) all industrial designs and any
registrations and applications therefor throughout the world; (vi) all
domain names, uniform resource locators (“URLs”) and other names and locators
associated with the Internet; (vii) all trade names, logos, common law
trademarks and service marks, trademark and service mark registrations and
applications therefor throughout the world; (viii) all databases and data
collections and all rights therein throughout the world; (ix) all moral and
economic rights of authors and inventors, however denominated, throughout the
world; (x) all software; (xi) all content, text, graphics, images, audio, video,
data, and software included on or used to operate and maintain the Company’s
websites, including all data, documentation, ASP, HTML, DHTML, SHTML, and XML
files, cgi and other scripts, all programming code (source and object),
subscriber and other data, archives, and server and traffic logs relating to the
Company’s websites; (xii) all historical or archived data relating to any of the
Company’s websites and (xiii) any similar or equivalent rights to any of the
foregoing anywhere in the world.

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    “IRS” means the
Internal Revenue Service.

     

     “Knowledge,” when used
to refer to the Company, means the actual knowledge of any director of the Board
of Directors of the Company or any Subsidiary of the Company and any officers of
the Company or any Subsidiary of the Company, as well as any other knowledge
which such persons would have possessed had they made reasonable inquiry of
appropriate employees, agents, or books and records of the Company with respect
to the matter in question.

     

    “Law” means any law,
statute, code, ordinance, regulation, rule, Permit, rules of common law,
standards, directives, guidelines and the like, including any judicial and
administrative interpretations thereof, of any Governmental Authority, including
all judicial and administrative Orders.

     

    “Leased Property” or
“Leased
Properties” has the meaning set forth in Section 4.12(b).

     

    “Liens” in respect of
any property or assets, shall mean any encumbrance or title defect of whatever
kind or nature, regardless of form, whether or not registered or registrable and
whether or not consensual or arising by Law, including, but not limited to, any
lien, mortgage, charge, pledge, security interest, assignment, lease, option,
easement, servitude, right-of-way, conditional sales contract, encroachment,
restrictive covenant, right of first refusal, right of use or any other right or
claim of any kind or nature whatsoever (or any agreement to grant or furnish any
of the foregoing) which affects ownership or possession of, or title to, or any
interest in, or the right to use or occupy such property or assets.

     

    “Material Adverse
Change” means a change which would have a Material Adverse
Effect.

     

    “Material Adverse
Effect” means 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 Purchaser to (A)
consummate the transactions contemplated by this Agreement or any Transaction
Documents or (B) perform its respective obligations hereunder or
thereunder.

     

    “Material Contract”
has the meaning set forth in Section 4.13(b).

     

    “Order” means any
order, judgment, ruling, injunction, assessment, award, decree or writ of any
Governmental Authority.

     

    “Owned Real Property”
or “Owned Real
Properties” has the meaning set forth in Section 4.12(a).

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    “Party Confidential
Information” has the meaning set forth in Section 6.4.

     

    “PBGC” means the
Pension Benefit Guaranty Corporation.

     

    “Permit” means any
license, permit, authorization, certificate of authority, qualification or
similar document or authority that has been issued or granted by any
Governmental Authority.

     

    “Permitted Liens”
means (i) Liens imposed by Law, such as carrier's, warehousemen's and
mechanic's liens and other similar liens, which arise in the ordinary course of
business with respect to obligations not yet due or being diligently contested
in good faith by appropriate proceedings and for which the Company shall have
set aside adequate reserves on its books as required by GAAP, (ii) Liens for
Taxes that are not yet due, or that are described in the Disclosure Schedules
and are being diligently contested in good faith by appropriate proceedings and
for which the Company shall have set aside adequate reserves on its books as
required by GAAP, (iii) applicable Laws regulating the use or occupancy of real
property or the character, dimensions or locations of the improvements thereon,
including, without limitation, building restrictions and zoning laws, so long as
the same do not materially impair the value of such property or the operation of
the Company’s business as currently conducted, and (iv) covenants, consents,
reservations, servitudes, restrictions, easements, rights of way and other
similar rights for utilities, public streets and roadways, so long as the same
do not materially impair the value of such property or the operation of the
Company’s business as currently conducted.

     

    “Person” means any
individual, corporation, partnership, joint venture, limited liability company,
trust, unincorporated organization or Governmental Authority.

     

    “Plan” has the meaning
set forth in Section 4.2(b).

     

    “Preferred Stock” has
the meaning set forth in Section 4.2(a).

     

    “Purchase Price” has
the meaning set forth in Section 1.2.

     

    “Purchaser” has the
meaning set forth in the Preamble.

     

    “Purchaser Indemnified
Parties” has the meaning set forth in Section 8.2(a).

     

    “Real Property” means
the Leased Properties and the Owned Real Properties.

     

    “Registration Rights
Agreement” has the meaning set forth in Section 1.4.

     

    “Representatives” has
the meaning set forth in Section 6.2.

     

    “Rights Agreements”
has the meaning set forth in Section 1.4.

     

    “Rules” has the
meaning set forth in Section 9.5(a).

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    “SEC Documents” has
the meaning set forth in Section 4.25(a).

     

    “Securities” means
collectively Series C Shares, Series D Shares and Conversion
Shares.

     

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

     

    “Series A Preferred
Stock” means Series A Convertible Preferred Stock, par value $.001 per
share, having the rights, preferences and designations as set forth in the
Certificate of Designations of Preferences, Rights and Limitations of Series A
Convertible Preferred Stock dated as of September 20, 2008.

     

    “Series B Preferred
Stock” means Series B Convertible Preferred Stock, par value $.001 per
share, having the rights, preferences and designations as set forth in the
Certificate of Designations of Preferences, Rights and Limitations of Series B
Convertible Preferred Stock dated as of April 28, 2009.

     

    “Series C Certificate”
has the meaning set forth in Section 1.1.

     

    “Series D Certificate”
has the meaning set forth in Section 1.1.

     

    “Series C Shares” has
the meaning set forth in Section 1.2.

     

    “Series D Shares” has
the meaning set forth in Section 1.2.

     

    “Subsidiary” means,
with respect to the Company, any other Person with respect to which the Company
possesses direct or indirect power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, by contract, or otherwise; provided, that, for purposes of this
Agreement and each of the other Transaction Documents, as of the date of this
Agreement, Willsky and its Subsidiary should be deemed direct and indirect
Subsidiaries of the Company.

     

    “Tax” or “Taxes” means all
federal, state, local, foreign or other governmental taxes, assessments, duties,
fees, levies or similar charges of any kind imposed by a Governmental Authority,
including, but not limited to, all income, profit, gross receipts, franchise,
excise, property, use, intangibles, sales, payroll, social security, employment,
value added, withholding and other taxes, and including all interest, penalties
and additional amounts imposed with respect to such amounts, whether as a
primary obligor or as a result of being a “transferee” (within the meaning of
Section 6901 of the Code or any other applicable Law) of another Person or as a
result of being a member of an affiliated, consolidated, unitary or combined
group.

     

    “Tax Return” means any
return, declaration, report, information return, statement, notice or other
document filed, or required to be filed, with any Governmental Authority
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    “Temporary Relief” has
the meaning set forth in Section 9.5(b).

     

    “Trading Day” means
any day during which the OTC Bulletin Board (or other quotation venue or
principal exchange on which the Common Stock is traded) shall be open for
trading.

     

    “Transaction
Documents” means collectively, this Agreement, the Amended and Restated
Registration Rights Agreement, the Series C Securities Escrow Agreement, the
Closing Escrow Agreement and the Series C Certificate and the certificates,
documents and instrument related to or contemplated by each of the foregoing
agreements.

     

    “Use” or “Used” means to use,
make, have made, develop, market, sell, offer to sell, import, transfer,
practice, license (or sublicense), transmit, broadcast, reproduce, perform,
display, modify, create derivative works based upon, distribute (electronically
or otherwise) and disclose.

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
B

     

    CERTIFICATE
OF DESIGNATION FOR

     

    SERIES
C CONVERTIBLE PREFERRED STOCK

     

    (SEE EXHIBIT 4.1 TO THIS 8-K)

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
C

     

    CERTIFICATE
OF DESIGNATION FOR

     

    SERIES
D CONVERTIBLE PREFERRED STOCK

     

    
      (SEE EXHIBIT 4.2 TO THIS 8-K)

    

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
D

     

    REGISTRATION
RIGHTS AGREEMENT

     

    
      (SEE EXHIBIT 10.3 TO THIS 8-K)

    

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
E

     

    BACKSTOP
AGREEMENT

     

    
      (SEE EXHIBIT 10.2 TO THIS 8-K)

    

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
F

     

    DISCLOSURE
SCHEDULES

     

    

      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 Series C and Series D Convertible
Preferred Stock Securities Purchase Agreement (the “Agreement”), dated as of September 14, 2010, by and
among the Company and China Hand Fund I, LLC (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
4.1

      


      Organization
and Good Standing

      


      Delaware.

      


      Our
subsidiaries are set forth in the diagram below:


       

      



      
        
           


        

        
          - 2
-

          
            

          

        

        
           


        

      


      Schedule
4.2(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
4.2(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
4.4

      


      Noncontravention

      


      None.


      
        
           


        

        
          - 9
-

          
            

          

        

        
           


        

      


      Schedule
4.6(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
4.6(c)

      


      Subsidiaries;
Cooperation Agreements

      


      None.


      
        
           


        

        
          - 11
-

          
            

          

        

        
           


        

      


      Schedule
4.8

      


      Absence
of Certain Changes and Events

      


      None.


      
        
           


        

        
          - 12
-

          
            

          

        

        
           


        

      


      Schedule
4.11(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
4.11(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
4.12(a)

      


      Intellectual
Property

      


      None.


      
        
           


        

        
          - 15
-

          
            

          

        

        
           


        

      


      Schedule
4.12(c)

      


      Intellectual
Property Infringement

      


      None.


      
        
           


        

        
          - 16
-

          
            

          

        

        
           


        

      


       Schedule
4.13(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
4.14(d)

      


      Consents

      


      None.


      
        
           


        

        
          - 20
-

          
            

          

        

        
           


        

      


      Schedule
4.15(b)

      


      Employees

      


      None.


      
        
           


        

        
          - 21
-

          
            

          

        

        
           


        

      


      Schedule
4.17

      


      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
4.20

      


      No
Brokers

      


      None.



      
        
           


        

        
          - 23
-

          
            

          

        

        
           


        

      


      Schedule
4.22

      


      Related
Party Transactions

      


      None.



      
        
           


        

        
          - 24
-

          
            

          

        

        
           


        

      


      Schedule
4.25

      


      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
-