Document:

Unassociated Document

    Exhibit
10.2

       

      SCJ
2010-M003

       

      Credit
001

       

      RMB
Loan Agreement

      

      Contract
NO.: Jian An Gong Liu [2010] 039

       

      Type of
the Loan: Loan for Industrial Working Capital

      

      Debtor
(Party A): Henan Shuncheng Group Coal Coke Co., Ltd.

       

      Address:
Industrial Road, Tongye Town

       

      Postal
Code: 455000

       

      Legal
Representative (or The Principal): Wang Xinshun (王新顺)

       

      Fax:
0372-3237806

       

      Tel:
0372-3237807

      

      Creditor
(Party B): Anyang Branch of China Construction Bank

       

      Address:
Center Zone of Wenfeng Middle Road, Anyang City

       

      Postal
Code: 455000

       

      The
Principal: Wei Jifeng (魏纪风)

       

      Fax:
3995261

       

      Tel:
3995197

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      Party A
wishes to obtain a loan from Party B and Party B agrees to grant the loan to
Party A.  According to relevant laws and regulations and upon
consultations, Party A and Party B hereby conclude this Agreement to bind on
both Parties.

      

      Article
1 Amount of the Loan

      

      Party A
borrows a loan from Party B, equal to RMB Twenty Million
(amount in word).

      

      Article
2 Loan Purpose

      

      Party A
shall use the loan as working capital in its daily
production and operation, and Party A shall not change the loan purpose
without Party B’s written consent.

      

      Article
3 Loan Term

      

      The Loan
Term under this Agreement shall be 12 months, commencing
from July 28, 2010 to
July 27, 2011.

      

      If the
commencement date of the Loan Term under this Agreement is not consistent with
date written on the Loan Transfer Voucher (or the IOU, the same below), the
actual date of loan disbursement written on the Loan Transfer Voucher at the
first time when disbursing the loan shall apply, the due date of the loan as
provided in the first paragraph of Article 3 shall be adjusted
accordingly.

      

      The Loan
Transfer Voucher shall be an integral part of this Agreement, which shall have
the same legal effect with this Agreement.

      

      Article
4 Loan Rate, Penalty Rate, Interest Accrual and Interest Settlement

      

      4.1 Loan
Rate

      

      The Loan
Rate under this Agreement shall be a rate per annum as defined in Article 4.1.2
below:

      

      4.1.1
Fixed Rate: ______%, which shall remain unchanged during the Loan
Term;

      

      4.1.2
Fixed Rate: 10% higher
(please choose “higher” or “lower”) of the benchmark rate on the value
date, which shall remain unchanged during the Loan Term;

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      4.1.3
Floating Rate: ____%_____ (please choose
“higher” or “lower”) of the benchmark rate on the value date, which shall be
adjusted once ____ month(s) based on the benchmark rate on the interest
adjustment date and based on the aforementioned increasing/decreasing percentage
during the period from the value date to the date when all the principal and
interest under this Agreement are fully paid off.  The interest
adjustment date shall refer to a date corresponding to the value date in the
current month of adjustment; if there is no date corresponding to the value date
in the current month, the last date of the current month shall be the interest
adjustment date.

      

      4.2
Penalty Rate

      

      4.2.1 If
Party A fails to use the loan for the loan purpose under this Agreement, the
penalty rate shall be 100% higher of the
loan rate; if the loan rate shall be adjusted according to Article 4.1.3, the
penalty rate shall be adjusted accordingly at the same time based on the loan
rate after the adjustment and the abovementioned increasing
percentage.

      

      4.2.2 The
penalty rate for the overdue loan under this Agreement shall be 50% higher of the
loan rate; if the loan rate shall be adjusted according to Article 4.1.3, the
penalty rate shall be adjusted accordingly at the same time based on the loan
rate after the adjustment and the abovementioned increasing
percentage.

      

      4.2.3 If
the loan is overdue and misappropriated at the same time, the penalty interest
and the compound interest shall accrue based on the higher penalty
rate.

      

      4.3 The
value date herein shall refer to the date when the first installment of the loan
is transferred to Party A’s designated account.

      

      At the
first time when disbursing the loan under this Agreement, the benchmark rate
shall refer to the loan rate of the same period and of the same level published
by the People’s Bank of China on the value date; thereafter, where the loan rate
is adjusted according to the foregoing provisions, the benchmark rate shall
refer to the loan rate of the same period and of the same level published by the
People’s Bank of China on the adjustment date; if the People’s Bank of China
does not publish any loan rate of the same period and of the same level any
longer, unless otherwise agreed by the Parties, the benchmark rate shall be the
loan rate of the same period and of the same level generally recognized by the
banking industry or shall be the customary loan rate of the same period and of
the same level.

      

      4.4 The
loan interest shall accrue commencing from the date when the loan is transferred
to Party A’s designated account.  The loan interest under this
Agreement shall accrue on a daily basis, and daily interest rate = interest rate
per annum/360.  If Party A fails to pay the interest on the interest
settlement date as provided in this Agreement, then the compound interest shall
accrue commencing from the date following the interest settlement
date.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      4.5
Interest Settlement

      

      4.5.1 For
the fixed-rate loan, the interest shall be calculated based on the agreed rate
at the interest settlement.  For the floating-rate loan, the interest
shall be calculated based on the rate of each floating period; if there are
several floating rates during one interest settlement period, first to calculate
the interest of every floating periods, and then sum up the interest of every
floating period to get the interest for such interest settlement
period.

      

      4.5.2 The
loan interest under this Agreement shall be settled according to Option 1 as listed
below:

      

      
        	
                (1)

              	
                On
      monthly basis: the interest settlement date shall be fixed on 20th
      of each month;

              

      

      

      
        	
                (2)

              	
                On
      quarterly basis: the interest settlement date shall be fixed on 20th
      of the last month of each quarter;

              

      

      

      
        	
                (3)

              	
                By
      other method:
_____________________________.

              

      

      

      Article
5 Loan Disbursement and Usage

      

      5.1
Preconditions for Loan Disbursement

      

      Party B
is obliged to disburse the loan provided the following preconditions are
constantly satisfied, unless Party B waives all or part thereof:

      

      5.1.1
Party A has handled and completed all the formalities of approval, registration,
delivery, insurance and other statutory formalities in relation to the loan
under this Agreement;

      

      5.1.2 If
there is any security set up for this Agreement, such security, which is to the
satisfaction of Party B, has come into effect and remain valid;

      

      5.1.3
Party A has already opened the accounts for loan withdrawal and repayment
according to Party B’s requirement;

      

      5.1.4
Party A does not have any breach of contract under this Agreement or there is no
event which may jeopardize the creditor’s rights of Party B under this
Agreement;

      

      5.1.5 The
laws, regulations or the competent authorities do not restrict Party B to
disburse the loan under this Agreement;

      

      5.1.6
Other conditions:
nil.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      5.2 Usage
Plan of the Loan

      

      The fund
use plan of the loan shall be determined according to Article 5.2.1 as
listed below:

      

      5.2.1 The
fund use plan is listed as below:

      

      
        	
                (1)

              	
                July 28, 2010:
      RMB Twenty
      Million

              

      

      

      
        	
                (2)

              	
                ___Day
      ___ Month ___Year:  (Amount)
  _____________

              

      

      

      
        	
                (3)

              	
                ___Day
      ___ Month ___Year:  (Amount)
  _____________

              

      

      

      
        	
                (4)

              	
                ___Day
      ___ Month ___Year:  (Amount)
  _____________

              

      

      

      
        	
                (5)

              	
                ___Day
      ___ Month ___Year:  (Amount)
  _____________

              

      

      

      
        	
                (6)

              	
                ___Day
      ___ Month ___Year:  (Amount)
  _____________

              

      

      

      5.2.2
______________________________.

      

      5.3 Party
A shall use the loan according to the fund use plan as provided in Article 5.2,
and Party A shall not early withdraw the loan or delay or cancel the withdrawal
unless otherwise agreed by Party B in writing.

      

      5. 4 If
Party A withdraws the loan in installment, the due date of the Loan Term shall
be determined according to Article 3 herein as well.

      

      Article
6 Repayment

      

      6.1
Repayment Principle

      

      Party A
shall repay the loan under this Agreement according to the following
principles:

      

      Party B
is entitled to use Party A’s repayment first to pay any and all expenses which
are prepaid by Party B and which shall be borne by Party A and to pay the
expenses for realizing the creditor’s rights of Party B, and the remaining
amount shall be used first to pay the interest and then to repay the
principal in
the form of matching the principal repayment.  However, for the loan
which is overdue for more than 90 days and which is still not collected back, or
for the loan whose interest is overdue for more than 90 days and which is still
not collected back, or for the loan regulated otherwise by the laws or
regulations, after the abovementioned expenses are paid from Party A’s
repayment, Party A’s repayment shall be first used to repay the principal and
then the interest.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      6.2
Interest Payment

      

      Party A
shall pay the matured interest to Party B on the interest settlement
date.  The first interest payment date shall be the first interest
settlement date after the loan disbursement.  For the last repayment
installment of the loan, the interest shall be paid in the form of matching the
principal repayment.

      

      6.3
Principal Repayment Schedule

      

      The
repayment schedule shall be determined according to Article 6.3.1 as
listed below:

      

      6.3.1 The
repayment schedule is listed as below:

      

      
        	
                (1)

              	
                July 27, 2011:
      (Amount) RMB Twenty Million;

              

      

      

      
        	
                (2)

              	
                ___Day
      ___ Month ___Year:  (Amount)
  _____________

              

      

      

      
        	
                (3)

              	
                ___Day
      ___ Month ___Year:  (Amount)
  _____________

              

      

      

      
        	
                (4)

              	
                ___Day
      ___ Month ___Year:  (Amount)
  _____________

              

      

      

      
        	
                (5)

              	
                ___Day
      ___ Month ___Year:  (Amount)
  _____________

              

      

      

      
        	
                (6)

              	
                ___Day
      ___ Month ___Year:  (Amount)
  _____________

              

      

      

      6.3.2
___________________________.

      

      6.4
Repayment Method

      

      Party A
shall deposit adequate amount equal to the payable amount of the current period
to the account opened with Party B before the repayment date provided in this
Agreement and transfer such amount to repay the loan by itself (Party B is
entitled to deduct such amount from the account for the loan repayment as well)
or Party A shall transfer the amount from its other account to repay the loan on
the repayment date provided in this Agreement.

      

      6.5 Early
Repayment

      

      If Party
A wishes to early repay the loan, it shall file a written application with Party
B thirty
working days in advance; and upon Party B’s approval, Party A may early repay
all or part of the principal.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      In the
case of Party A’s early repayment, the interest shall accrue based on the actual
usage days of the loan and the loan rate under this Agreement.

      

      If Party
B agrees Party A to early repay the loan, Party B is entitled to charge a
compensation payment from Party A, which shall be determined according Article
6.5.1 as listed below:

      

      6.5.1
Compensation Payment = Early Repaid Principal * Months of Early Repayment (it
shall be regarded as 1 month if it is not a full month) * 1%.

      

      6.5.2
________________________.

      

      If Party
A repays the loan in installment and if Party A early repays part of the
principal, the loan shall be repaid according to the reverse order of the
repayment schedule.  After the early repayment, the loan rate under
this Agreement shall be applied to the outstanding loan as well.

      

      Article
7 Party A’s Rights and Obligations

      

      7.1 Party
A’s Rights

      

      
        7.1.1
Party A is entitled to require Party B to disburse the loan according to the
terms and conditions of this Agreement;

      

      

      7.1.2
Party A is entitled to use the loan for the loan purpose under this
Agreement;

      

      7.1.3
Party A is entitled to apply for the loan term extension provided satisfying the
conditions raised by Party B;

      

      7.1.4
Unless otherwise provided by the laws and regulations, or otherwise required by
the competent authorities or otherwise agreed by the Parties, Party A is
entitled to require Party B keeping confidential of the financial documents
provided by Party A and the trade secrets in relation to the production and
operation provided by Party A;

      

      7.1.5
Party A is entitled to refuse the seeking of bribery of Party B or Party B’s
working personnel and Party A has the right to denounce to the competent
authorities the aforementioned action or Party B’s violation of national
regulations on loan rate, service charge, etc.

      

      7.2 Party
A’s Obligations

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      7.2.1
Party A shall withdraw the loan according to the terms and conditions of this
Agreement and shall fully pay off the principal and interest and bear all the
expenses under this Agreement;

      

      7.2.2
Party A shall provide relevant financial and accounting documents as well as
documents reflecting its production and operation status according to Party B’s
requirement, including but not limited to, providing the balance sheet of the
end of last quarter to Party B within the first ten working
days of the first month of each quarter, providing the income statement
by the end of last quarter (income and expenditure statement for the public
institution), and providing timely the statement of cash flow of the current
year by the end of year.  Party A shall be fully responsible for the
authenticity, integrity and effectiveness of the documents it provides and shall
not provide false documents or conceal any important operation and financial
facts;

      

      7.2.3
Where there is any change to Party A’s name, legal representative (or the
principal), legal address, business scope, registered capital, company’s
(enterprise’s) articles of association or other registered items with
Administration for Industry and Commerce, Party A shall notify Party B in
writing within thirty working days
after such change and shall provide the documents in relation to such
change.

      

      7.2.4
Party A shall use the loan for the loan purpose under this Agreement, and shall
not occupy, misappropriate or use the bank loan to engage in unlawful and
illegal transactions; Party A shall assist in and accept Party B’s inspection
and supervision on its production, financial activities and the usage of the
loan under this Agreement; Party A shall not surreptitiously withdraw its
capital or transfer its asset; or Party A shall not take advantage of affiliated
transaction to evade the debts toward Party B; shall not take advantage of the
fake contract concluded with its affiliates, to arbitrage banking fund or credit
by means of discount or pledge of such claims as notes or accounts receivables,
etc. without actual trade background in the bank;

      

      7.2.5 If
Party A use the loan under this Agreement to conduct production, manufacturing,
or engineering construction, Party A shall follow relevant state regulations on
environmental protection;

      

      7.2.6
Before the principal and interest are fully repaid or paid to Party B and
without obtaining Party B’s consent, Party A shall not provide a security to any
third party by using the asset formed from the loan under this
Agreement;

      

      7.2.7 If
Party A is a group client, Party A shall timely report to Party B the
information about its affiliated transactions concerning 10% of its net assets
or more, including: (1) the affiliated relationship of all parties to the
transaction; (2) the transaction project and transaction nature; (3) the amount
of transaction or the corresponding proportion; and (4) the pricing policies
(including the pricing policies on transactions with no amount or with symbolic
amount);

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      7.2.8 If
the loan to be granted under this Agreement is a loan for the fixed-asset or the
project, Party A shall warrant that it shall obtain the approvals from the
competent authorities for the proposed project and it shall not have any illegal
and unlawful activities and that the capital or other raising funds shall be
sufficient and be in place according to the prescribed time schedule and
proportion; and Party A shall warrant that the project schedule shall be carried
out and completed on schedule.

      

      Article
8 Party B’s Rights and Obligations

      

      8.1 Party
B is entitled to require Party A repaying and paying the principal, interest and
expenses on time, to exercise its any other rights under this Agreement and to
ask Party A to perform Party A’s any other obligations under this
Agreement;

      

      8.2 Party
B is entitled to disburse the loan according to the terms and conditions of this
Agreement, with exception to the delay caused by Party A’s reason or any other
reasons not ascribed to Party B;

      

      8.3
Unless otherwise provided by the laws and regulations, or otherwise required by
the competent authorities or otherwise agreed by the Parties, Party B shall keep
confidential of the financial documents provided by Party A and the trade
secrets in relation to the production and operation provided by Party
A;

      

      8.4 Party
B shall not bribe or seek bribe from or take bribe from Party A and Party A’s
working personnel;

      

      8.5 Party
B shall not have any activity against the good faith or impairing Party A’s
legitimate rights and interests.

      

      Article
9 Liability for Breach of Contract and Remedies in Events which Jeopardizing
Party B’s Creditor’s Right

      

      9.1 Party
B’s Breach of Contract and its Liability for Breach of Contract

      

      9.1.1 If
Party B fails to disburse the loan under this Agreement without reasonable
reasons, Party A may require Party B disbursing the loan under this
Agreement;

      

      9.1.2 If
Party B charges any interest or expenses from Party A which shall not be charged
and go against the prohibitive
stipulations of the state laws and regulations, Party A is entitled to require
Party B refunding such payment.

      

      9.2 Party
A’s Breach of Contract

      

      9.2.1Party
A breaches any provisions of this Agreement or any statutory
duties;

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      9.2.2
Party A expresses explicitly or indicates by its conduct that it will not
perform any of its obligations under this Agreement.

      

      9.3 The
events which may jeopardize Party B’s creditor’s rights including:

      

      9.3.1Party
B shall regard it will jeopardize the security of the creditor’s rights under
this Agreement where any of the following events arises: Party A has any of
contractual operation, trusteeship (take-over), leasing, shareholding system
reform, reduction of registered capital, investment, joint operation, merger,
acquisition, buy-up and reorganization, split-up, joint venture, filling (or
being called for) for suspending business for rectification, filing for
dissolution, being called for cancelled, filing (or being called for) for
bankruptcy, or controlling shareholder/actual controller change,  or
transfer of material assets, product suspension, business close-down, being
charged of high-rate fines by competent authorities, or the registration being
cancelled, the business licenses being revoked, or being involved in significant
legal disputes, or great difficulties in the production and business, or
financial status deteriorating, or the legal representative or the major
principals incapable of performing duties regularly;

      

      9.3.2
Party B shall regard it will jeopardize the security of the creditor’s rights
under this Agreement where any of the following events arises: Party A fails to
perform other due obligations (including the obligations towards the branches of
China Construction Bank of all levels or the due obligations toward other third
parties), Party A transfers the asset at low price or free of charge, abates a
debt of a third party, is remiss in exercising its creditor’s right or other
rights, or Party A provides guarantee to a third party;

      

      9.3.3
Party B shall regard it will jeopardize the security of the creditor’s rights
under this Agreement where Party A’s shareholder abuses the company’s legal
person status or the shareholder’s limited liabilities for the purpose of
evading debts;

      

      9.3.4 Any
of the preconditions for the loan disbursement under this Agreement is not being
satisfied;

      

      9.3.5
Party B shall regard it will jeopardize the security of the creditor’s rights
under this Agreement in case the guarantor has any of the following
events:

      

      
        	
                (1)

              	
                The
      guarantor breaches any provisions of the guarantee agreement or any of its
      representation and warranty is false, incorrect or
  omitted;

              

      

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      
        	
                (2)

              	
                The
      guarantor has any of contractual operation, trusteeship (take-over),
      leasing, shareholding system reform, reduction of registered capital,
      investment, joint operation, merger, acquisition, buy-up and
      reorganization, split-up, joint venture, filling (or being called for) for
      suspending business for rectification, filing for dissolution, being
      called for cancelled, filing (or being called for) for bankruptcy, or
      controlling shareholder/actual controller change,  or transfer
      of material assets, product suspension, business close-down, being charged
      of high-rate fines by competent authorities, or the registration being
      cancelled, the business licenses being revoked, or being involved in
      significant legal disputes, or great difficulties in the production and
      business, or financial status deteriorating, or the legal representative
      or the major principals incapable of performing duties regularly, which
      may impair the guarantor’s capability to undertake the guarantee
      liability;

              

      

      

      
        	
                (3)

              	
                It
      is in any other circumstance which will or may cause it to lose its
      guarantee ability;

              

      

      

      9.3.6
Party B shall regard it will jeopardize the security of the creditor’s rights
under this Agreement where the following events arise in respect to the mortgage
and pledge:

      

      
        	
                (1)

              	
                The
      mortgaged property or the pledged property is damaged, lost or the value
      of which decreases caused by the third party’s action, the state
      compulsory purchase, confiscation, expropriation, gratuitous withdrawal,
      demolition, vary of market conditions, or any other
    reasons;

              

      

      

      
        	
                (2)

              	
                The
      mortgaged property or the pledged property is sealed up, withheld, frozen,
      transferred and deducted, liened, auctioned, supervised by the
      administrative authorities, or whose ownership is being in
      dispute;

              

      

      

      
        	
                (3)

              	
                The
      mortgagor or the pledgor breaches any provisions of the mortgage or pledge
      contract or any of its representation and warranty is false, incorrect or
      omitted;

              

      

      

      
        	
                (4)

              	
                Other
      circumstances which may jeopardize the realization of Party B’s mortgage
      right or pledge right;

              

      

      

      9.3.7
Party B shall regard it will jeopardize the security of the creditor’s rights
under this Agreement where the security is not established, or does not come
into effect, becomes invalid, is cancelled, is terminated, or the guarantor
breaches contract or expresses explicitly or indicates by its conduct that it
will not perform its guarantee obligations, or the guarantor losses all or part
of its guarantee capability, or the value of the collateral decreases;
or

      

      9.3.8
Other circumstances which may jeopardize the security of the creditor’s right
under this Agreement regarded by Party B.

      

      9.4 Party
B’s Remedies

      

      Where any
of events provided in Article 9.2 and 9.3 arises, Party B is entitled to
exercise one or more of the following rights:

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      9.4.1 To
stop disbursing the loan;

      

      9.4.2 To
declare the loan is
due and payable immediately and to require Party A immediately paying off all
the due and undue debts under this Agreement, including but not limited to the
principal, interest and expenses;

      

      9.4.3 If
Party A fails to use the loan according to the terms and conditions of this
Agreement, then Party B is entitled to ask Party A to pay a liquidated damages,
equal to 0.5%
of the amount which is not used in accordance with the terms and conditions of
this Agreement and is entitled to refuse Party A to withdraw and use the
un-withdrawn amount under this Agreement;

      

      9.4.4 If
Party A fails to use the loan for the purpose provided in this Agreement, for
the misappropriated portion of the loan, the interest and the compound interest
shall accrue and be collected based on the penalty rate and the interest
settlement method provided in this Agreement commencing from the loan usage date
according to the loan purpose under this Agreement to the date when all the
principal and interest are paid off;

      

      9.4.5 If
the loan is overdue, for the outstanding principal and interest which are not
repaid or paid by Party A on time (including the loan principal and interest,
all or part of which Party B declares to accelerate the maturity), the interest
and the compound interest shall accrue and be collected based on the penalty
rate and the interest settlement method provided in this Agreement commencing
from the date when the loan or interest is overdue to the date when all the
principal and interest are paid off.  The overdue loan refers to the
loan that Party A fails to repay on schedule or according to the installment
repayment schedule as provided in this Agreement.

      

      Before
the loan falls due, for the outstanding interest which is not paid by Party A on
schedule, the interest shall be compounded and accrue based on the loan rate and
the interest settlement method provided in this Agreement.

      

      9.4.6
Other remedies, including but not limited to:

      

      
        	
                (1)

              	
                Party
      B has the right to directly transfer and deduct corresponding amount in
      RMB or other currencies from Party A’s account opened in the system of
      China Construction Bank, without any prior
  notification;

              

      

      

      
        	
                (2)

              	
                To
      exercise its security rights;

              

      

      

      
        	
                (3)

              	
                To
      ask Party A to provide new security for all the debts under this Agreement
      which shall meet Party B’s
requirement;

              

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      
        	
                (4)

              	
                To
      terminate this Agreement.

              

      

      

      Article
10 Miscellaneous

      

      10.1
Expenses

      

      Unless
otherwise agreed by the Parties, the expenses of lawyer’s service, insurance,
appraisal, registration, keeping, identification, notarization, etc. under or in
relation to this Agreement shall be borne by Party A.

      

      All the
expenses for the purpose of realizing Party B’s creditor’s rights (including but
not limited to the litigation cost, arbitration cost, property preservation
cost, traveling expenses, enforcement expenses, appraisal cost, auction cost,
notary cost, delivery cost, announcement cost, attorney cost, etc.) shall all be
borne by Party A.

      

      10.2
Usage of Party A’s Information

      

      Party A
shall agree Party B to check Party A’s credit status from the credit data base
established upon the approval of People’s Bank of China and other competent
credit departments or from other relevant units or departments, and shall agree
Party B to submit Party A’s information to the credit data base established upon
the approval of People’s Bank of China and other competent credit
departments.  Party A shall also agree Party B can use and disclose
Party A’s information reasonably according to its business demand.

      

      10.3
Collection by Announcement

      

      Party B
is entitled to announce to relevant departments or units and to conduct the
collection by announcement through the media against Party A’s default in
repayment or payment of loan principal and interest or against Party A’s other
breach of contract.

      

      10.4
Evidential Effect of Party B’s Record

      

      Unless
there is any reliable and definite evidence to the contrary, Party B’s internal
financial records related to the principal, interest, expenses, repayment, etc.,
and any document, certificate and Party B’s collection record and certificate
made or kept by Party B arising from Party A’s handling of loan withdrawal, the
principal repayment, the interest payment and other transactions, shall
constitute an effective evidence certifying the definite debtor-creditor
relationship between Party A and Party B.  Party A shall not raise any
objection by the excuse that the aforesaid records, recordation, document and
certificate are made unilaterally by Party B.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      10.5
Non-waiver

      

      Party B’s
rights under this Agreement shall not affect and preclude its rights under the
applicable laws and regulations and under other contracts.  Any
tolerance, allowance, preference to any of breach of contract or any delay, or
the delay in exercising any right under this Agreement shall not be regarded as
a waiver to the rights and interests under this Agreement or as a permission or
recognition to any breach of contract, nor shall limit, preclude or impede the
continuing exercise of such right or any other rights, nor shall cause Party B
to undertake obligations and liabilities toward Party A.

      

      10.6 In
addition to the debt under this Agreement, where Party A has any other due debt
toward Party B, Party B has the right forcibly transfer or deduct the fund (in
RMB or other currencies) in the account opened by Party A in the system of China
Construction Bank, which will be firstly used to pay off any due debt, and Party
A shall agree not to raise any objection.

      

      10.7
Party A shall notify Party B immediately in writing upon any change of Party A’s
mail address or contact methods, and any losses arising from untimely
notification shall be borne by Party A on its own.

      

      10.8
Transfer of the Payables

      

      For all
the payables of Party A under this Agreement, Party B is entitled to forcibly
transfer or deduct the fund (in RMB or other currencies) opened by Party A in
the system of China Construction Bank to collect such payables without notifying
Party A in advance.  Where any foreign exchange settlement and
purchase formality or foreign exchange sale and purchase formality is required,
Party A is obliged to assist Party B to handle it and relevant exchange rate
risk shall be borne by Party A.

      

      10.9
Dispute Settlement

      

      Any
dispute arising out from the performance of this Agreement can be settled by
negotiations, if no agreement can be reached after the negotiation, the said
dispute shall be settled through Option 1 provided
below:

      

      (1) File
a lawsuit to the People’s Court where Party B is located.

      

      (2) Submit
the dispute to ______ Arbitration Committee (Place of Arbitration: _____) for
arbitration in accordance with its applicable rules.  The arbitration
award is final and binding on the Parties.

      

      During
the litigation or arbitration proceedings, other provisions of this Agreement
which is not being disputed shall be performed as well.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      10.10
Effectiveness

      

      This
Agreement shall come into effect after it is signed and stamped by Party A’s
legal representative (or the principal) or authorized representative and is
signed and stamped by Party B’s principal or authorized
representative.

      

      10.11
This Agreement is in quadruplicate.

      

      10.12
Other Provisions

      

      10.12.1
Under one of following events in regard to the payment of the loan under this
Agreement, Party A must entrust Party B to make the payment out of the loan
principal to the counterpart to the transaction and Party A shall not make such
payment by itself directly to the counterpart of the transaction.

      

      
        	
                (1)

              	
                The amount of one
      single payment (usage) exceeds RMB One
  Million;

              

      

      

      
        	
                (2)

              	
                ____________________;

              

      

      

      
        	
                (3)

              	
                ____________________.

              

      

      

      Under one
of the abovementioned events, Party A shall provide to Party B the following
documents:

      

      
        	
                (1)

              	
                Goods Purchase
      Agreement;

              

      

      

      
        	
                (2)

              	
                ______________________;

              

      

      

      
        	
                (3)

              	
                ______________________;

              

      

      

      
        	
                (4)

              	
                Other
      documents required by Party B.

              

      

      

      In the
mode of the entrusted payment by Party B, Party B shall transfer the loan
principal to Party A’s designated account, and then pay the loan principal in
Party A’s designated account directly to Party A’s counterpart to the
transaction.  Party A shall not dispose of the loan principal by any
means (including but not limited to the transfer, usage, etc.).

      

      Party B
shall conduct a formal examination on the amount, time, payee, and method of the
payment as well as on the operation account according to the documents provided
by Party A.  After Party B completes the formal examination on the
abovementioned elements, which is to Party B’s satisfaction, Party B shall
disburse and pay the loan principal to Party A’s counterpart to the
transaction.

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Party B’s
formal examination on the abovementioned elements shall neither constitute Party
B’s confirmation to the authenticity and the legality of the transaction nor
represent Party B’s intervention in the disputes between Party A and its
counterpart to the transaction or any third party, which causes Party B to
assume the obligations and liabilities of Party A.  Party A shall
compensate any and all losses incurred to Party B arising out of the entrusted
payment.

      

      In the
mode of the entrusted payment by Party B, if the loan principal is not
successfully paid to the bank account of Party A’s counterpart to the
transaction due to the false information provided by Party A or the similar
reasons, then it shall be treated according to the following
stipulations:

      

      ___________________________________________________________________________________________________

      

      ___________________________________________________________________________________________________

      

      The
failure, mistake, delay and other risks and liabilities in or for the
disbursement or payment of the loan principal which are not caused by Party B’s
fault, shall be fully borne by Party A.  Party A shall compensate any
and all losses incurred to Party B arising therefrom.

      

      After the
loan principal goes into Party A’s designated account, if the loan principal is
frozen, or deducted and transferred by the competent authorities, the risks,
liabilities and losses thereof shall be borne by Party A.  Party A
shall compensate any and all losses incurred to Party B arising
therefrom.

      

      10.12.2
Except the events provided in Article 10. 12.1, Party A shall provide to Party B
a usage plan for the loan to be granted and other documents required by Party B
before the loan disbursement.

      

      In the
same time, during Party A’s payment by itself, if any of the following events
occurs, then Party A must entrust Party B to make the payment out of the loan
principal according to Article 10.12.1 as of the occurrence date of such
event:

      

      
        	
                (1)

              	
                Party A’s credit
      deteriorates, Party A’s profitability in its primary business
      weakens,  and there is abnormality in Party A’s use of the loan
      principal;

              

      

      

      
        	
                (2)

              	
                _______________________________________________________________________________________________;

              

      

      

      
        	
                (3)

              	
                _______________________________________________________________________________________________.

              

      

      

      10.12.3
Opening and Supervision of Fund Collection Account

      

      Within
ten working
days after this Agreement comes into effect, Party A shall open a fund
collection account with Party B or use the existing account (Account
No.:                    )
opened with Party B as the fund collection account.  The fund
collection account shall meet the following requirements:

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      
        	
                (1)

              	
                ______________________________

              

      

      

      
        	
                (2)

              	
                ______________________________

              

      

      

      
        	
                (3)

              	
                ______________________________

              

      

      

      
        	
                (4)

              	
                Without Party B’s
      consent, Party A shall not dispose of the fund in the fund collection
      account by any means (including but not limited to the transfer, usage,
      etc.).

              

      

      

      Party B
is entitled to conduct supervision over the fund collection account, which shall
be further elaborated in an account management agreement separately concluded by
Party A and Party B.

      

      10.12.4
Party A’s Covenants

      

      
        	
                (1)

              	
                Party
      A shall not use the loan to invest in, including but not limited to, the
      fixed asset, the equity, etc. and shall not use the loan to invest in any
      production and operation field or for the purpose prohibited by the
      state;

              

      

      

      
        	
                (2)

              	
                Party
      A shall provide lawful, true, integral, accurate and valid documents to
      Party B;

              

      

      

      
        	
                (3)

              	
                Party
      A shall assist Party B to conduct the loan disbursement management, the
      post management after the loan disbursement, and other relevant
      inspections;

              

      

      

      
        	
                (4)

              	
                Party
      A shall obtain the Party B’s approval prior to conducting any significant
      actions, including external investment, materially increasing the debt
      financing, merger, split-up, transfer of equity interests,
      etc.;

              

      

      

      
        	
                (5)

              	
                Party
      B is entitled to accelerate the loan repayment according to the fund
      collection status of Party A;

              

      

      

      
        	
                (6)

              	
                Party
      A shall timely notify Party B of any event which may have significantly
      adverse impact on the repayment
capability;

              

      

      

      
        	
                (7)

              	
                Party
      A shall regularly report to Party B its withdrawal and usage of the loan
      on a (2)
      basis [Alternative Options: (1) monthly (2) quarterly].  Party A
      shall report to Party B its loan withdrawal and usage status of the
      previous (2)
      [Alternative Options: (1) month (2) quarter] within the first fifteen working
      days of each (2)
      [Alternative Options: (1) month (2)
quarter].

              

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      
        	
                (8)

              	
                During
      the effective term of this Agreement, Party A’s financial indexes shall
      keep meeting the following
requirements:

              

      

      

      
        	
                 
      

              	
                (i)

              	
                The asset-liability
      ratio shall not exceed 65%;

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                The liquidity ratio
      shall be no less than 1.0;

              

      

      

      
        	
                 
      

              	
                (iii)

              	
                The balance of the
      contingent liability shall be no more than RMB 0.5 billion and the ratio
      of the contingent liability shall be no more than
    70%;

              

      

      

      
        	
                 
      

              	
                (iv)

              	
                The accumulated
      amounts of the long-term investment shall not exceed 40% of its total net
      asset amount.

              

      

      

      10.12.5
If Party A has any of the following events, Party B is entitled to take the
remedial measures according to Article 9.4 herein:

      

      
        	
                (1)

              	
                Party A’s credit
      deteriorates, Party A’s profitability in its primary business weakens, and
      there is abnormality in Party A’s usage of the loan
      principal;

              

      

      

      
        	
                (2)

              	
                Party A fails to make
      the payment out of the loan principal according to the methods provided in
      this Agreement;

              

      

      

      
        	
                (3)

              	
                Party A fails to
      comply with to its
covenants;

              

      

      

      
        	
                (4)

              	
                The agreed financial
      indexes are broken through;

              

      

      

      
        	
                (5)

              	
                Any serious
      cross-default event occurs;

              

      

      

      
        	
                (5)

              	
                ______________________________

              

      

      

      
        	
                (6)

              	
                ______________________________

              

      

      

      Article
11 Representation

      

      11.1
Party A is clearly aware of Party B’s business scope and
authorizations.

      

      11.2
Party A has already read all the provisions of this Agreement.  Upon
Party A’s request, Party B has already provided explanations to this Agreement
accordingly.  Party A has being clearly aware of and fully understand
all the provisions of this Agreement and the correspondent legal consequences
thereof.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      11.3
Party A’s execution and performance of this Agreement is in compliance with the
applicable laws, administrative regulations and rules and Party A’s articles of
association or internal organization documents; and Party A has obtained
relevant approvals from Party A’s internal authority and/or national competent
authorities.

      

      Party A
(Stamp):

      Henan
Shuncheng Group Coal Coke Co., Ltd.

      Signed by
the Legal Representative (or the Principal) or Authorized Representatives: /s/ Wang Jian Kai

      Date:
July 28,
2010

      

      Party B
(Stamp):

      Anyang
Branch of China Construction Bank

      Signed by
the Principal or Authorized Representative: /s/ illegible

      Date:
July 28,
2010AMENDMENT
NO. 1

     

    TO

     

    RESERVE
EQUITY FINANCING AGREEMENT

    

    This
AMENDMENT NO. 1 TO the Amended and Restated RESERVE EQUITY FINANCING AGREEMENT,
dated as of January 18, 2010 (this "Amendment"),
is entered into by and between Neah
Power Systems, Inc., a Nevada corporation (the “Company”),
and AGS
Capital Group, LLC, a New York limited liability corporation (“AGS”
or the “Investor”).
Capitalized terms used but not otherwise defined herein shall have the meanings
set forth in the SPA (as defined below).

    

    WITNESSETH:

     

    WHEREAS,
the Company and the Investors entered into the Amended and Restated Securities
Purchase Agreement dated as of January 18, 2010 (the “SPA”),
pursuant to which, among other things, AGS agreed to purchase up to $5,000,000
shares of the Company’s registered and freely tradable common stock; and

    

    WHEREAS,
AGS and the Company desire to amend the SPA.

    

    NOW,
THEREFORE, in consideration of the foregoing and the mutual promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Parties, the Parties
covenant and agree as follows: 

    

    Section
1. Paragraph 1.16 of the Agreement is hereby amended and restated in its
entirety as follows:

    

    Section 1.16. “Market
Price” shall mean the average of the two lowest Closing
Prices of the Common Stock during the Pricing Period.

    

    Section 2. Paragraph 1.30 of the
Agreement is hereby amended and restated in its entirety as
follows:

    

    Section 1.30. “Weighted
Average Closing Price” means, for the pricing period, the average of the
closing share price for each trading day weighted for the share daily trading
volume.

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    Section 3. Section 2.3(b)(ii) of the
Agreement is hereby amended and restated in its entirety as
follows:

    

    Section 2.3(b)(ii). Registration
of the Common Stock with the SEC. The Registration Statement filed
pursuant to the Registration Rights Agreement shall be effective and available
for the resale of all applicable shares of Common Stock to be issued in
connection with the Advance and certificates evidencing such
shares shall be free of restrictive legends; provided, however, that the
foregoing condition shall apply only to Advance Notices delivered after the
commitment fee of 1,015,000 shares of the Company’s unregistered stock issued to the Investor upon signing this
Agreement and after the commitment fee of 1,500,000 shares of the
Company’s unregistered stock issued as of the
date of the Second Amendment has been exhausted by prior purchases of Common
Stock under Section 2.1;

    

    Section
4. Section 7.2 of the Agreement is hereby amended and restated in its entirety
as follows: 

    

    Section
7.2. (g) Maximum
Advance Amount. The amount of an Advance corresponding to the Advance
Notice shall not exceed the Maximum Advance Amount. In addition, the Advance
amount shall be automatically reduced by 50%, unless, if on any day during the
Pricing Period, the Weighted Average Closing Price for that day does not meet or
exceed the Floor Price. The Floor Price shall be 85% of the Weighted Average
Closing Price of the Common Stock for the five (5) Trading Days prior to the
Advance Notice Date, or any other price mutually agreed upon by the Company and
the Investor in writing. In addition, in no event shall the number of shares
issuable to the Investor pursuant to an Advance cause the aggregate number
of shares of Common Stock beneficially owned by the Investor and its affiliates
to exceed 9.99% of the then outstanding shares of Common Stock of the Company
(“Ownership
Limitation”). Any portion of an Advance that would cause the Investor to
exceed the Ownership Limitation shall automatically be withdrawn. For the
purposes of this section, beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act. 

    

    Section
5. Section 12.4 of the Agreement is hereby amended and restated in its entirety
as follows: 

    

    Section
12.4. Fees, Expenses
and Restricted Shares. Each of the parties shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby, except that the Company shall pay a Due Diligence fee of
Three Thousand Three hundred and Fifty Dollars ($3,350) to Investor upon signing
this Agreement and Forty One Thousand Dollars ($41,000) which the Company
shall deliver to investor five days after signing

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    this
Agreement or such amount may be realized by Investor selling the Company’s
common stock which it has in its possession. 30 days after the signing of the
Agreement, the Company shall pay to Investor 1% of the value of 950,000 shares
valued at the volume weighted average price (VWAP), calculated based upon the
ratio of the average value of the common stock of Company traded on the Trading
Market to the average volume of such stock traded on such market for such
date (or the nearest preceding date), for the 10 trading days immediately
preceding the Agreement date. The Company shall also pay a commitment fee of
1,015,000 shares of the Company’s unregistered stock upon signing this
Agreement. 500,000 of these shares shall be used as credit towards shares for
the Advance Notices which the Company shall include in the Registration
Statement. 450,000 shall be used for stock loan purposes where the Company shall
receive 65% Loan To Value less any and all fees and expenses. In addition, the
Company shall pay a commitment fee of in 1,545,000 shares of the Company’s
unregistered stock to investor upon the signing of the Second Amendment, of
which 1,500,000 will be used as credit towards shares for Advance Notices which
the Company shall include in the Registration Statement. Also, pertaining to the
Second Amendment, the Company will pay up to $8000, with a minimum of $5800, to
be paid to the investor from the proceeds issued after the date of the
Second Amendment.

    

    Section
6. Effect of
Amendment. Except as amended hereby, the Agreement shall continue in full
force and effect and is hereby incorporated herein by this reference.

    

    Section
7. Governing
Law. This Amendment shall be governed by and construed under the laws of
the State of New York.

    

    Section
8. Titles and
Subtitles. The titles of the sections and subsections of this Amendment
are for convenience of reference only and are not to be considered in construing
this Amendment. 

    

    Section
9. Counterparts. This
Amendment may be executed in counterparts, each of which shall be deemed an
original, and all of which shall constitute one and the same instrument.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, each of the undersigned has caused this Amendment to
Securities Purchase Agreement to be executed by their respective duly authorized
officer as of the date first above written. 

    

    
      
        
          
            
              
                
                  
                    
                      	 
      	
                              NEAH
      POWER SYSTEMS, INC.

                            
	 
      	
                               

                            
	 
      	 
      
	 	
                              By:

                            	  
      
	 
      	 
      	
                              Name: 
      Chris D’Couto

                            
	 
      	 
      	
                              Title:   
      CEO

                            
	 
      	 
      	
                              Address:
      

                            
	 
      	 
      	
                              22118
      20th
      Avenue SE, Suite 142 

                            
	 
      	 
      	
                              Bothell,
      WA 98021

                            
	 
      	 
      
	 
      	
                              AGS
      CAPITAL GROUP, LLC

                            
	 
      	 
      
	 
      	
                              By:

                            	 
      
	 
      	 
      	
                              Name:
      Allen G. Silberstein

                            
	 
      	 
      	
                              Title: 
       CEO

                            
	 
      	 
      	
                              Address:

                            
	 
      	 
      	
                              2
      Water Street, 17th Floor

                            
	 
      	 
      	
                              New
      York, New York
10004

                            

                    

                  

                

              

            

          

        

      

    

     

    
      
         

      

      
        4

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