Document:

CLOSING ESCROW
AGREEMENT

     

    This
Closing Escrow Agreement dated as of April 30, 2009 (this “Agreement”) is
entered into by and among China New Energy Group Company, a Delaware corporation
(the “Company”), China Hand
Fund I, LLC, a Delaware limited liability company (together with its successors
and assigns, “CHF” or the “Initial Purchaser”),
each of the persons who hereafter become investors in the Company pursuant to
the Purchase Agreement (as defined below) (together with its successors and
assigns, each, an “Additional Purchaser”
and collectively, the “Additional
Purchasers” and together with the Initial Purchasers, the (“Purchasers”), and
Escrow, LLC, with an address at 360 Main Street, P.O. Box 391, Washington,
Virginia 22747 (the “Escrow Agent”).
Capitalized terms used but not defined herein shall have the meanings set forth
in the Purchase Agreement.

     

    WITNESSETH:

     

    WHEREAS,
the Initial Purchaser may purchase from the Company shares of the Company’s
Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred”),
convertible into shares of the Company’s common stock, par value $0.001 per
share (the “Common
Stock”), and certain common stock purchase warrants (the “Warrants” and
together with the Series B Preferred, the “Securities”) pursuant
to a Series B Convertible Preferred Stock Purchase Agreement to be entered into
on the closing date of such agreement (the “Closing Date”) by and
among the Company and the Initial Purchaser (the “Purchase Agreement”).

    

    WHEREAS,
the Company desires to deposit all monies received from the Purchasers pending
the closings under the Purchase Agreement (the “Escrowed Funds”) with
the Escrow Agent, to be held in escrow until joint written instructions are
received by the Escrow Agent from the Company and the Initial Purchaser, from
time to time, at which time the Escrow Agent will disburse the Escrowed Funds in
accordance with the instructions; and

    

    WHEREAS,
Escrow Agent is willing to hold the Escrowed Funds in escrow subject to the
terms and conditions of this Agreement.

    

    NOW,
THEREFORE, in consideration of the mutual promises herein contained and
intending to be legally bound, the parties hereby agree as follows:

    

    1.       
Appointment of Escrow
Agent. The Company hereby appoints the Escrow Agent as escrow agent in
accordance with the terms and conditions set forth herein and the Escrow Agent
hereby accepts such appointment.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2.       
Delivery of the
Escrowed Funds. 

    

    2.1      The
Company will direct Purchasers to deliver the Escrowed Funds to the Escrow
Agent, addressed to the following account of the Escrow Agent:

    Domestic:

    

    Virginia
Commerce Bank

    Leesburg,
VA

    ABA#056005253

    Account
Name: Escrow, LLC

    Account
#: 01194186

    

    International:

    

    Correspondent
Bank: Wells Fargo Bank, San Francisco, CA

    SWIFT#:
WFBIUS6S

    Credit
Account #: 412-11-08146

    Virginia
Commerce Bank

    FBO
Account Name: Escrow, LLC

    Account:
01194186

    

    2.2 (a)       
All Purchasers’ checks shall be made payable to “ESCROW, LLC and shall be
delivered to the Escrow Agent at the address set forth on Exhibit A hereto and
shall be accompanied by a written account of the subscription in the form
attached hereto as Exhibit B (the “Subscription
Information”). The Escrow Agent shall, upon receipt of Escrowed Funds
deposit such funds in escrow and such funds shall constitute the Escrowed
Funds.

    

    2.3       
Any checks which are received by the Escrow Agent that are made payable
to a person other than the Escrow Agent shall be returned directly to the sender
together with any documents delivered therewith.   Simultaneously
with each deposit, the Company shall provide the Escrow Agent with the
Subscription Information to include the name, address and taxpayer
identification number of each Purchaser.  The Escrow Agent is not
obligated, and may refuse, to accept checks that are not accompanied by
Subscription Information.

    

    2.4       
In the event a wire transfer is received by the Escrow Agent and the
Escrow Agent has not received Subscription Information, the Escrow Agent shall
notify the Company. If the Escrow Agent does not receive the Subscription
Information relating to a Purchaser prior to the close of business on the third
business day (days other than a Saturday or Sunday or other day on which the
Escrow Agent is not open for business in the State of Virginia) after notifying
Company of receipt of said wire, the Escrow Agent shall return the funds to the
Purchaser. 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    3.       
Escrow Agent to Hold
and Disburse Escrowed Funds. The Escrow Agent will hold and disburse the
Escrowed Funds received by it pursuant to the terms of this Escrow Agreement, as
follows: 

    

    3.1     
Upon receipt of joint instructions from the Company and the Initial Purchaser in
substantially the form of Exhibit C hereto
which instructions shall be signed by James Li on behalf of the Company (or such
other person as he shall designate in writing via email)  the Escrow
Agent shall release the Escrowed Funds as directed in such
instructions.  The Company and the Initial Purchaser agree that if the
Purchase Agreement is consummated, then on the Closing Date they will deliver
joint written instructions to release to the Company the aggregate amount of the
subscriptions deposited by the Purchasers less (x) payments to be made for
investor legal and due diligence expenses, not exceeding $100,000, and (y)
placement agent fees equal to $540,000 (representing 10% of the aggregate amount
of subscriptions). 

    

    3.2      In the event this
Agreement, the Escrowed Funds or the Escrow Agent becomes the subject of
litigation, or if the Escrow Agent shall desire to do so for any other reason,
the Company authorizes the Escrow Agent, at its option, to deposit the Escrowed
Funds with the clerk of the court in which the litigation is pending, or a court
of competent jurisdiction if no litigation is pending, and thereupon the Escrow
Agent shall be fully relieved and discharged of any further responsibility with
regard thereto. The Company also hereby authorizes the Escrow Agent, if it
receives conflicting claims to the Escrowed Funds, is threatened with litigation
or if the Escrow Agent shall desire to do so for any other reason, to interplead
all interested parties in any court of competent jurisdiction and to deposit the
Escrowed Funds with the clerk of that court and thereupon the Escrow Agent shall
be fully relieved and discharged of any further responsibility hereunder to the
parties from which they were received.

    

    3.3      In
the event that the Escrow Agent does not receive any instructions by a date that
is 90 days from the date of this Agreement (the “Escrow Termination
Date”), all Escrowed Funds shall be returned to the parties from which
they were received, without interest thereon or deduction therefrom. If the
Escrow Agent does receive joint written instructions by the Escrow Termination
Date, then the Escrow Agent shall continue to hold all undisbursed Escrowed
Funds until the Escrow Agent receives joint written instructions from the
Initial Purchaser and the Company covering all remaining Escrowed
Funds.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4.       
Exculpation and
Indemnification of Escrow Agent

    

    4.1    
 The Escrow Agent
shall haven no duties or responsibilities other than those expressly set forth
herein.  The Escrow Agent shall have no duty to enforce any obligation
of any person to make any payment or delivery, or to direct or cause any payment
or delivery to be made, or to enforce any obligation of any person to perform
any other act.  The Escrow Agent shall be under no liability to the
other parties hereto or anyone else, by reason of any failure, on the part of
any party hereto or any maker, guarantor, endorser or other signatory of a
document or any other person, to perform such person’s obligations under any
such document. Except for amendments to this Escrow Agreement referenced below,
and except for joint written instructions given to the Escrow Agent by the
escrowing parties relating to the Escrowed Funds, the Escrow Agent shall not be
obligated to recognize any agreement between or among any of the escrowing
parties, notwithstanding that references hereto may be made herein and whether
or not it has knowledge thereof. 

    

    4.2     
The Escrow Agent shall not be liable to the Company or to anyone else for
any action taken or omitted by it, or any action suffered by it to be taken or
omitted, in good faith and acting upon any order, notice, demand, certificate,
opinion or advice of counsel (including counsel chosen by the Escrow Agent),
statement, instrument, report, or other paper or document (not only as to its
due execution and the validity and effectiveness of its provisions, but also as
to the truth and acceptability of any information therein contained), which is
believed by the Escrow Agent to be genuine and to be signed or presented by the
proper person or persons. The Escrow Agent shall not be bound by any of the
terms thereof, unless evidenced by written notice delivered to the Escrow Agent
signed by the proper party or parties and, if the duties or rights of the Escrow
Agent are affected, unless it shall give its prior written consent
thereto.

    

    4.3     
The Escrow Agent shall not be responsible for the sufficiency or accuracy of the
form, or of the execution, validity, value or genuineness of, any document or
property received, held or delivered to it hereunder, or of any signature or
endorsement thereon, or for any lack of endorsement thereon, or for any
description therein; nor shall the Escrow Agent be responsible or liable to the
Company, the Initial Purchaser, the Additional Purchasers or to anyone else in
any respect on account of the identity, authority or rights, of the person
executing or delivering or purporting to execute or deliver any document or
property or this Escrow Agreement. The Escrow Agent shall have no responsibility
with respect to the use or application of the Escrowed Funds pursuant to the
provisions hereof.

    

    4.4     
The Escrow Agent shall have the right to assume, in the absence of written
notice to the contrary from the proper person or persons, that a fact or an
event, by reason of which an action would or might be taken by the Escrow Agent,
does not exist or has not occurred, without incurring liability to the Company,
the Initial Purchaser, the Additional Purchasers or to anyone else for any
action taken or omitted to be taken or omitted, in good faith and in the
exercise of its own best judgment, in reliance upon such
assumption.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4.5     
To the extent that the Escrow Agent becomes liable for the payment of taxes,
including withholding taxes, in respect of income derived from the investment of
the Escrowed Funds, or any payment made hereunder, the Escrow Agent may pay such
taxes; and the Escrow Agent may withhold from any payment of the Escrowed Funds
such amount as the Escrow Agent estimates to be sufficient to provide for the
payment of such taxes not yet paid, and may use the sum withheld for that
purpose. The Escrow Agent shall be indemnified and held harmless against any
liability for taxes and for any penalties in respect of taxes, on such
investment income or payments in the manner provided in Section
4.6.

    

    4.6     
The Escrow Agent will be indemnified and held harmless by the Company from and
against all expenses, including all counsel fees and disbursements, or loss
suffered by the Escrow Agent in connection with any action, suit or proceedings
involving any claim, or in connection with any claim or demand, which in any
way, directly or indirectly, arises out of or relates to this Escrow Agreement,
the services of the Escrow Agent hereunder, except for claims relating to gross
negligence by Escrow Agent or breach of this Escrow Agreement by the Escrow
Agent, or the monies or other property held by it hereunder. Promptly after the
receipt of the Escrow Agent of notice of any demand or claim or the commencement
of any action, suit or proceeding, the Escrow Agent shall, if a claim in respect
thereof is to be made against a party to this Agreement, notify each of them
thereof in writing, but the failure by the Escrow Agent to give such notice
shall not relieve any such party from any liability which a party may have to
the Escrow Agent hereunder. Notwithstanding any obligation to make payments and
deliveries hereunder, the Escrow Agent may retain and hold for such time as it
deems necessary such amount of monies or property as it shall, from time to
time, in its sole discretion, seem sufficient to indemnify itself for any such
loss or expense and for any amounts due it under Section 7. 

    

    4.7     
For purposes hereof, the term “expense or loss” shall include all amounts paid
or payable to satisfy any claim, demand or liability, or in settlement of any
claim, demand, action, suit or proceeding settled with the express written
consent of the Escrow Agent, and all costs and expenses, including, but not
limited to, counsel fees and disbursements, paid or incurred in investigating or
defending against any such claim, demand, action, suit or proceeding.

    

    5.       
Termination of
Agreement and Resignation of Escrow Agent 

    

    5.1     
This Escrow Agreement shall terminate upon disbursement of all of the Escrowed
Funds, provided that the rights of the Escrow Agent and the obligations of the
Company under Section 4 shall survive the termination hereof.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    5.2     
The Escrow Agent may resign at any time and be discharged from its duties as
Escrow Agent hereunder by giving the Company at least five (5) business days
written notice thereof (the “Notice Period”). As
soon as practicable after its resignation, the Escrow Agent shall, if it
receives notice from the Company within the Notice Period, turn over to a
successor escrow agent appointed by the Company all Escrowed Funds (less such
amount as the Escrow Agent is entitled to retain pursuant to Section 7) upon
presentation of the document appointing the new escrow agent and its acceptance
thereof. If no new agent is so appointed within the Notice Period, the Escrow
Agent shall return the Escrowed Funds to the parties from which they were
received without interest or deduction. 

    

    6.       
Form of Payments by
Escrow Agent

    

    6.1     
Any payments of the Escrowed Funds by the Escrow Agent pursuant to the terms of
this Escrow Agreement shall be made by wire transfer unless directed to be made
by check by the Company and the Initial Purchaser.

    

    6.2     
All amounts referred to herein are expressed in United States Dollars and all
payments by the Escrow Agent shall be made in such dollars.

    

    7.       
Compensation.  The
Escrow Agent shall be entitled to the following compensation from the
Company:

     

    
      
        	
              	
                7.1

              	
                Documentation
      Fee: The
      Company shall pay a documentation fee to the Escrow Agent of $1,500, on
      the Closing Date. 

              

      

      

      
        	
              	
                7.2 
      

              	
                Closing Fee:
      The Company shall pay a fee of $500 to the Escrow Agent at each Closing.
      For purposes of this Section 7.2, a Closing shall mean each time the
      Escrow Agent receives joint instructions from the Company and the Initial
      Purchaser to disburse Escrowed Funds in accordance with the terms of this
      Agreement.

              

      

      

      
        	
              	
                7.3

              	
                 Interest. The
      Company hereby agrees that Escrow Agent shall retain 100% of the interest
      earned during the time the Escrowed Funds are held in escrow
      hereunder.

              

      

    

     

    
      
        8.        Notices. All notices,
requests, demands, and other communications provided herein shall be in writing,
shall be delivered by hand or by first-class mail, shall be deemed given when
received and shall be addressed to parties hereto at their respective addresses
first set forth in the recitals above and on Exhibit A
hereto.

      

    

    

    9.       
Further
Assurances       
From time to time on and after the date hereof, the Company shall deliver
or cause to be delivered to the Escrow Agent such further documents and
instruments and shall do and cause to be done such further acts as the Escrow
Agent shall reasonably request (it being understood that the Escrow Agent shall
have no obligation to make any such request) to carry out more effectively the
provisions and purposes of this Escrow Agreement, to evidence compliance
herewith or to assure itself that it is protected in acting
hereunder.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    10.      Consent to Service of
Process       
The Company hereby irrevocably consents to the jurisdiction of the courts
of the State of Virginia and of any Federal court located in such state in
connection with any action, suit or proceedings arising out of or relating to
this Escrow Agreement or any action taken or omitted hereunder, and waives
personal service of any summons, complaint or other process and agrees that the
service thereof may be made by certified or registered mail directed to it at
the address listed on Exhibit A hereto.

    

    11.      Miscellaneous

    

    11.1    This Escrow
Agreement shall be construed without regard to any presumption or other rule
requiring construction against the party causing such instrument to be drafted.
The terms “hereby,” “hereof,” “hereunder,” and any similar terms, as used in
this Escrow Agreement, refer to the Escrow Agreement in its entirety and not
only to the particular portion of this Escrow Agreement where the term is used.
The word “person” shall mean any natural person, partnership, corporation,
government and any other form of business of legal entity. All words or terms
used in this Escrow Agreement, regardless of the number or gender in which they
were used, shall be deemed to include any other number and any other gender as
the context may require. This Escrow Agreement shall not be admissible in
evidence to construe the provisions of any prior agreement. 

    

    11.2  
 This Escrow Agreement
and the rights and obligations hereunder of the Company may not be assigned.
This Escrow Agreement and the rights and obligations hereunder of the Escrow
Agent may be assigned by the Escrow Agent. This Escrow Agreement shall be
binding upon and inure to the benefit of each party’s respective successors,
heirs and permitted assigns. No other person shall acquire or have any rights
under or by virtue of this Escrow Agreement. This Escrow Agreement may not be
changed orally or modified, amended or supplemented without an express written
agreement executed by the Escrow Agent, the Company and the Initial Purchaser.
This Escrow Agreement is intended to be for the sole benefit of the parties
hereto and the Additional Purchasers and their respective successors, heirs and
permitted assigns, and none of the provisions of this Escrow Agreement are
intended to be, nor shall they be construed to be, for the benefit of any third
person.

    

    11.3    This Escrow
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of Virginia. The representations and warranties contained in
this Escrow Agreement shall survive the execution and delivery hereof and any
investigations made by any party. The headings in this Escrow Agreement are for
purposes of reference only and shall not limit or otherwise affect any of the
terms thereof. 

    

    12.      Execution of
Counterparts This Escrow Agreement may
be executed in a number of counterparts, by facsimile, each of which shall be
deemed to be an original as of those whose signature appears thereon, and all of
which shall together constitute one and the same instrument. This Escrow
Agreement shall become binding when one or more of the counterparts hereof,
individually or taken together, are signed by all the parties.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    [Remainder
of page intentionally left blank

    Signature
pages follow]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties have executed and delivered this Escrow Agreement
on the day and year first above written.

    

    
      
        
          
            
              
                
                  
                    
                      
                        	 
      	
                                ESCROW
      AGENT:

                              
	 
      	 
      	 
      
	 
      	
                                ESCROW,
      LLC

                              
	 
      	 
      	 
      
	 
      	 
      	
                                By: 

                              	
                                 /s/
      Johnnie Zarecor

                              
	 
      	 
      	 
      
	 
      	
                                COMPANY:

                              
	 
      	 
      	 
      
	 
      	
                                CHINA
      NEW ENERGY GROUP COMPANY

                              
	 
      	 
      	 
      
	 
      	 
      	
                                By: 

                              	
                                /s/
      James Li

                              
	 
      	 
      	 
      	
                                Name:
      James Li

                              
	 
      	 
      	 
      	
                                Title:
      Authorized Signatory

                              
	 
      	 
      	 
      
	 
      	
                                INITIAL
      PURCHASER:

                              
	 
      	 
      
	 
      	
                                THE
      CHINA HAND FUND I, LLC

                              
	 
      	 
      	 
      
	 
      	 
      	
                                By: 

                              	
                                /s/
      John D. Kuhns

                              
	 
      	 
      	 
      	
                                Name:
      John D. Kuhns

                              
	 
      	 
      	 
      	
                                Title:
      Member-Manager

                              

                      

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    EXHIBIT
A

    

    PARTIES
TO AGREEMENT

     

    China New
Energy Group Company

    17th
Floor, HongJi Building, JinWei Road

    HeBei
District

    Tianjin,
People’s Republic of China

    Attention:
_________________________

    Tel. No.:
__________________________

    Fax No.:
___________________________

    Email:

     

    ____________________________________

    (Signature)   

    

    Escrow,
LLC

    

    Escrow
Agent:  Escrow, LLC

    

    Contact:
Johnnie L. Zarecor

    20 Rock
Pointe, Suite 204

    Warrenton,
VA 20186

    

    Telephone:
(540) 347-2212

    Fax:
      
       (540) 347-2291

    Email:
jzarecor@escrowllc.net

    ____________________________

    

    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

     

    ____________________________________ 

    (Signature)

    

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
B

      

      SUBCRIPTION
INFORMATION

      

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  	
                                                                          Name
      of Subscriber

                                                                        	 
      	 
      
	 
      	 
      	 
      
	
                                                                          Address
      of Subscriber

                                                                        	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                                                                          Amount
      of Securities Subscribed

                                                                        	 
      	 
      
	
                                                                           

                                                                        	 
      	 
      
	 
      	 
      	 
      
	
                                                                          US
      Dollar Amount Submitted

                                                                        	 
      	 
      
	
                                                                           

                                                                        	 
      	 
      
	 
      	 
      	 
      
	
                                                                          Taxpayer
      ID Number/ Social
      Security Number

                                                                        	 
      	 
      
	
                                                                           

                                                                        	 
      	 
      

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      EXHIBIT
C

      

      DISBURSEMENT
REQUEST

      

      Pursuant
to that certain Escrow Agreement by and among China New Energy Group Company,
The China Hand Fund I, LLC and Escrow, LLC., China New Energy Group Company and
The China Hand Fund I, LLC hereby request disbursement of funds in the amount
and manner described below from Cardinal Bank account number _____________,
styled Escrow, LLC Escrow Account.

      

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            	
                                                                    Please
      disburse to:

                                                                  	 
      	 
      
	 
      	 
      	 
      
	
                                                                    Amount
      to disburse:

                                                                  	 
      	 
      
	 
      	 
      	 
      
	
                                                                    Form
      of distribution:

                                                                  	 
      	 
      
	 
      	 
      	 
      
	
                                                                    Payee:

                                                                  	 
      	 
      
	
                                                                    Name:

                                                                  	 
      	 
      
	
                                                                    Address:

                                                                  	 
      	 
      
	
                                                                    City/State:

                                                                  	 
      	 
      
	
                                                                    Zip:

                                                                  	 
      	 
      
	 
      	 
      	 
      
	
                                                                    Bank:

                                                                  	 
      	 
      
	 	 	 

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

      

      
        
          
            
              
                
                  
                    
                      	 
      	
                              Statement
      of event or condition which calls for this request for
      disbursement:

                            	 
      
	 	 	 
	 	 	 

                    

                  

                

              

            

          

        

      

       

      Disbursement
approved by:

       

      China
New Energy Group Company

      

      
        
          
            
              
                
                  
                    
                      
                        	 	 	 
	
                                (Signature)

                              	 
      	
                                Date

                              

                      

                    

                  

                

              

            

          

        

      

      

      The
China Hand Fund I, LLC

      

      
        
          
            
              
                
                  
                    
                      
                        	 	 	 
	
                                (Signature)

                              	 
      	
                                DateGO
August 2, 2008

    

    AMENDED
AND RESTATED REGISTRATION RIGHTS AGREEMENT

     

    This
Amended and Restated Registration Rights Agreement (this "Agreement") is made and
entered into as of April 30, 2009, by and among China New Energy Group Company,
a Delaware corporation (the "Company"), and China Hand
Fund I, LLC, a Delaware limited liability company (together with successors and
assigns, the “Purchaser”).  This
Agreement is made in connection with the (i) Series A Convertible Preferred
Stock Securities Purchase Agreement, dated as of August 8, 2008, by and between
the Company and the purchaser party thereto (the "Series A Purchase Agreement")
and (ii) Series B Convertible Preferred Stock Securities Purchase Agreement,
dated as of April 30, 2009, by and between the Company and the purchaser party
thereto (the “Series B
Purchase Agreement”;
together with the Series A Purchase Agreement, each a “Purchase Agreement” and,
collectively, the “Purchase
Agreements”). Capitalized terms used herein but not otherwise defined
herein shall have the meanings ascribed to such terms in the applicable Purchase
Agreement.

     

    RECITALS

     

    WHEREAS,
on August 20, 2008, the Company consummated a private financing transaction
contemplated under and pursuant to the following documents:

     

    1. Series
A Convertible Preferred Stock Securities Purchase Agreement, dated as of August
8, 2008, by and between the Company and China Hand (the “Series A Purchase Agreement”),
pursuant to which the Company issued and sold to the Purchaser 1,857,373 shares
of Series A Convertible Preferred Stock of the Company, par value $0.001 per
share and warrants to purchase 13,001,608 shares of its common stock, par value
$0.001 per share, at an initial exercise price of $0.187 per share (subject to
adjustments) for a period of five (5) years following the date of their
issuance, for an aggregate purchase price of Nine Million U.S. Dollars
($9,000,000) (the “Purchase
Price”);

     

    2.
Registration Rights Agreement, dated as of August 8, 2008, by and between the
Company and China Hand (the “Original Registration Rights Agreement”), pursuant
to which the Company agreed to register under the Securities Act of 1933, as
amended (the “Securities Act”), for re-sale by Purchaser securities issued
pursuant to  the Series A Purchase Agreement;

     

    3.
Securities Escrow Agreement, dated as of August 8, 2008, by and between the
Company, and China Hand, for itself and as representative of any additional
investors which may become parties thereto, pursuant to which the Company and
purchasers thereunder each deposited shares of the Company’s securities as
specified thereunder to be held in escrow and to be distributed to the Company
or Purchaser, as applicable, depending on whether the Company shall have
achieved certain financial performance targets for each of fiscal years 2008 and
2009 and whether the Company shall have successfully listed and traded its
Common Stock on a National Stock Exchange by January 31, 2010; and

     

    4.
certain other ancillary agreements and documents entered into by the Company in
connection with the consummation of the foregoing private financing
transaction;

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    WHEREAS,
as of the date hereof, the Company has not filed any registration statement to
register for the re-sale of securities issued pursuant to the Series A Purchase
Agreement under the Securities Act as required under the Original Registration
Rights Agreement, and as a result of the foregoing failure, liquidated damages
have been incurred by the Company and payable to Purchaser under the Original
Registration Rights Agreement (the “Liquidated Damages”);

     

    WHEREAS,
the Company and Purchaser intend to amend and restate the Original Registration
Rights Agreement such that the Original Registration Rights Agreement, so
amended and restated, shall provide for the registration by the Company for
re-sale of the Shares by Purchaser under the Securities Act and such that no
Liquidated Damages shall have been incurred under the Original Purchase
Agreement, so amended and restated.

     

    The
Company and Purchaser hereby agree as follows:

     

    1.           Definitions.  Capitalized
terms used and not otherwise defined herein that are defined in the Purchase
Agreement will have the respective meanings given such terms in the Purchase
Agreement.  As used in this Agreement, the following terms have the
respective meanings set forth in this Section 1:

     

     “Advice” has the meaning
set forth in Section 6(d).

     

    “Commission Comments” means written comments pertaining
solely to Rule 415 which are received by the Company from the Commission to
a filed Registration Statement, a copy of
which shall have been provided by the Company to the Holders, which either (i)
requires the Company to limit the number of Registrable Securities which may be
included therein to a number which is less than the number sought to be included
thereon as filed with the Commission or (ii) requires the Company
to either exclude Registrable Securities held by specified Holders or deem such
Holders to be underwriters with respect to Registrable Securities they seek to
include in such Registration Statement.

     

    “Cut Back Shares” has the
meaning set forth in Section 2(b).

     

    “Delivery Date” means, (i)
with regard to any Make Good Escrow Shares, the date on which such Make Good
Escrow Shares are required to be distributed and delivered to Purchaser pursuant
to the applicable Purchase Agreement and the applicable Share Escrow Agreement
and (ii) with regard to the Listing Shares, the date on which the Listing Shares
are required to be distributed and delivered to Purchaser pursuant to the
applicable Purchase Agreement and the applicable Share Escrow
Agreement.

     

    "Effective Date" means, as to
a Registration Statement, the date on which such Registration Statement is first
declared effective by the Commission.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    “Effectiveness Date” means (A)
with respect to the initial Registration Statement required to be filed pursuant
to Section 2(a), the earlier of: (i) the 150th day
following the Closing Date (or 180th day in
the event of a full review by the SEC) and (ii) the fifth Trading Day following
the date on which the Company is notified by the Commission that the initial
Registration Statement will not be reviewed or is no longer subject to further
review and comments; (B) with respect to any additional Registration Statements
required to be filed pursuant to Section 2(a), the earlier of: (i) the 90th day
following the applicable Filing Date for such additional Registration
Statement(s) and (ii) the fifth Trading Day following the date on which the
Company is notified by the Commission that the such additional Registration
Statement(s) will not be reviewed or is no longer subject to further review; (C)
with respect to any additional Registration Statements required to be filed
solely due to SEC Restrictions, the earlier of: (i) the 90th day
following the applicable Restriction Termination Date and (ii) the fifth Trading
Day following the date on which the Company is notified by the Commission that
such Registration Statement will not be reviewed or is no longer subject to
further review and comments; (D) with respect to a Registration Statement
required to be filed under Section 2(c), the earlier of:  (i) the
60th
day following the date on which the Company becomes eligible to utilize Form S-3
to register the resale of Common Stock; provided, that, if
the Commission reviews and has written comments to such filed Registration
Statement that would require the filing of a pre-effective amendment thereto
with the Commission, then the Effectiveness Date under this clause (d)(i) shall
be the 90th day
following the date on which the Company becomes eligible to utilize Form S-3 to
register the resale of Common Stock, and (ii) the fifth Trading Day following
the date on which the Company is notified by the Commission that the
Registration Statement will not be reviewed or is no longer subject to further
review and comments; and (E) with respect to a Registration Statement required
to be filed under Section 2(d), the earlier of: (i) the 90th day
following the applicable Delivery Date; provided, that, if
the Commission reviews and has written comments to such filed Registration
Statement that would require the filing of a pre-effective amendment thereto
with the Commission, then the Effectiveness Date under this clause (e)(i) shall
be the 120th day
following the applicable Delivery Date, and (ii) the fifth Trading Day following
the date on which the Company is notified by the Commission that the
Registration Statement will not be reviewed or is no longer subject to further
review and comments.

     

    "Effectiveness Period" means,
as to any Registration Statement required to be filed pursuant to this
Agreement, the period commencing on the Effective Date of such Registration
Statement and ending on the earliest to occur of (a) the second anniversary of
such Effective Date, (b) such time as all of the Registrable Securities covered
by such Registration Statement have been publicly sold by the Holders of the
Registrable Securities included therein, or (c) such time as all of the
Registrable Securities covered by such Registration Statement may be sold by the
Holders without volume restrictions pursuant to Rule 144, in each case as
determined by the counsel to the Company pursuant to a written opinion letter to
such effect, addressed and acceptable to the Company's transfer agent and the
affected Holders.

     

    "Exchange Act" means the
Securities Exchange Act of 1934, as amended.

     

    "Filing Date" means (a) with
respect to the initial Registration Statement required to be filed pursuant to
Section 2(a), the 30th day
following the Closing Date; (b) with respect to any additional Registration
Statements required to be filed pursuant to Section 2(a), the 15th day
following the Effective Date for the last Registration Statement filed pursuant
to this Agreement under Section 2(a); (c) with respect to any additional
Registration Statements required to be filed due to SEC Restrictions, the
15th
day following the applicable Restriction Termination Date; (d) with respect to a
Registration Statement required to be filed under Section 2(c), the 30th day
following the date on which the Company becomes eligible to utilize Form S-3 to
register the resale of Common Stock and (e) with respect to the Registration
Statement required to be filed under Section 2(d), the 45th day
following the applicable Delivery Date (provided that if the Company is then
eligible to utilize Form S-3 to register the resale of Common Stock, the Filing
Date under this clause (e) shall be 30 days following the applicable Delivery
Date).

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

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

     

    “Fountainhead’s Shares” the
shares of Common Stock of the Company that are entitled to piggyback
registration rights under the Fountainhead Piggyback Registration Rights
Agreement.

     

    "Holder" or "Holders" means the holder or
holders, as the case may be, from time to time of Registrable
Securities.

     

    “Indemnified Party” has the
meaning set forth in Section 5(c).

     

    “Indemnifying Party” has the
meaning set forth in Section 5(c).

     

    “Losses” has the meaning set
forth in Section 5(a).

     

    “New York Courts” means the
state and federal courts sitting in the City of New York, Borough of
Manhattan.

     

    "Proceeding" means an action,
claim, suit, investigation or proceeding (including, without limitation, an
investigation or partial proceeding, such as a deposition), whether commenced or
threatened.

     

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

     

    “Purchase
Agreement” means each of the Series A Purchase Agreement or the Series B
Purchase Agreement, as applicable.

     

    “Registrable Securities”
means: (i) the Shares, (ii) the shares of Common Stock issuable upon conversion
of the Make Good Escrow Shares that may be acquired by Purchaser upon their
release from escrow on the terms and subject to the conditions set forth in the
applicable Share Escrow Agreement, (iii) the shares of Common Stock issuable
upon conversion of the Listing Shares that may be acquired by Purchaser upon
their release from escrow on the terms and subject to the conditions set forth
in the applicable Share Escrow Agreement, and (iii) any securities issued or
issuable upon any stock split, dividend or other distribution, recapitalization
or similar event, or any price adjustment as a result of such stock splits,
reverse stock splits or similar events with respect to any of the securities
referenced in the foregoing (i) through (iii).

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    "Registration Statement" means
the initial registration statement required to be filed in accordance with
Section 2(a) and any additional registration statements required to be filed
under this Agreement, including in each case the Prospectus, amendments and
supplements to such registration statements or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference therein.

     

    “Restriction Termination Date”
has the meaning set forth in Section 2(b).

     

    "Rule 144" means Rule 144
promulgated by the Commission pursuant to the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.

     

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

     

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

     

    “SEC Restrictions” has the
meaning set forth in Section 2(b).

     

    "Securities Act" means the
Securities Act of 1933, as amended.

     

    "Shares" means (i) the shares
of Common Stock issuable upon conversion of the Series A Preferred Stock issued
under the Series A Purchase Agreement, (ii) shares of Common Stock issuable upon
exercise of the warrants issued pursuant to the Series A Purchase Agreement,
(iii) the shares of Common Stock issuable upon conversion of the Series B
Preferred Stock issued under the Series B Purchase Agreement, (iv) shares of
Common Stock issuable upon exercise of the warrants issued pursuant to the
Series B Purchase Agreement, and (v) shares of Common Stock issuable upon
exercise of the any warrant issued to the placement agent in connection with the
transactions contemplated under the Series A Purchase Agreement or the Series B
Purchase Agreement.

     

    “Share Escrow Agreement” means
each of (i) the Securities Escrow Agreement, dated as of August 20, 2009, by and
between the Company, and China Hand, for itself and as representative of any
additional investors which may become parties thereto, and (ii) the Series B
Convertible Preferred Stock Escrow Agreement, dated as of April 30, 2009, by and
between the Company, and China Hand, for itself and as representative of any
additional investors which may become parties thereto.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    2.           Registration.

     

    (a)           On
or prior to the applicable Filing Date, the Company shall prepare and file with
the Commission a Registration Statement covering the resale of all Registrable
Securities (other than the Make Good Escrow Shares
and Listing Shares, which shares shall be
included and covered by such Registration Statement if the applicable Delivery Date for such shares shall
have occurred) not already covered
by an existing and effective Registration Statement for an offering to be made
on a continuous basis pursuant to Rule 415.  Each Registration
Statement required to be filed under this Agreement shall be filed on Form S-1
(Form S-3 if the Company is then eligible to utilize such Form or on such other
form appropriate for such purpose) and contain (except if otherwise required
pursuant to written comments received from the Commission upon a review of such
Registration Statement, other than as to the characterization of any Holder as
an underwriter, which shall not occur without such Holder’s written consent) the
"Plan of Distribution" attached hereto as Annex
A.  The Company shall cause each Registration Statement
required to be filed under this Agreement to be declared effective under the
Securities Act as soon as possible but, in any event, no later than its
Effectiveness Date, and shall use its reasonable best efforts to keep each such
Registration Statement continuously effective during its entire Effectiveness
Period.  By 5:00 p.m. (New York City time) on the Business Day
immediately following the Effective Date of each Registration Statement, the
Company shall file with the Commission in accordance with Rule 424 under the
Securities Act the final prospectus to be used in connection with sales pursuant
to such Registration Statement (whether or not such filing is technically
required under such Rule).  If for any reason other than due to SEC
Restrictions, a Registration Statement is effective but not all outstanding
Registrable Securities are registered for resale pursuant thereto, then the
Company shall prepare and file by the applicable Filing Date an additional
Registration Statement to register the resale of all such unregistered
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415.

     

    (b)           Notwithstanding
anything to the contrary contained in this Section 2, if the Company receives
Commission Comments, and following discussions with and responses to the
Commission in which the Company uses its reasonable best efforts and time to
cause as many Registrable Securities (other than the Make Good Escrow Shares and Listing Shares
unless the applicable Delivery
Date for such shares shall have
occurred) for as many Holders as
possible to be included in the Registration Statement filed pursuant to Section
2(a) without characterizing any Holder as an underwriter (and in such regard
uses its reasonable best efforts to cause the Commission to permit the affected
Holders or their respective counsel to participate in Commission conversations
on such issue together with Company Counsel, and timely conveys relevant
information concerning such issue with the affected Holders or their respective
counsel), the Company is unable to cause the inclusion of all Registrable
Securities, then the Company may, following not less than three (3) Trading Days
prior written notice to the Holders (i) remove from the Registration Statement
such Registrable Securities (the “Cut Back Shares”) and/or (ii)
agree to such restrictions and limitations on the registration and resale of the
Registrable Securities, in each case as the Commission may require in order for
the Commission to allow such Registration Statement to become effective; provided, that in no
event may the Company name any Holder as an underwriter without such Holder’s
prior written consent (collectively, the “SEC Restrictions”) and provided, further, that before
a cut back of any Registrable Securities, the Company shall cut back all Make
Good Escrow Shares and Listing Shares.  In furtherance of the
foregoing, unless the SEC Restrictions otherwise require,  any
cut-back imposed pursuant to this Section 2(b) shall be allocated among the
Registrable Securities of the Holders on a pro rata basis. No liquidated damages
under Section 2(f) shall accrue on or as to any Cut Back Shares or any
Fountainhead’s Shares, and the required Effectiveness Date for such Registration
Statement will be tolled, until such time as the Company is able to effect the
registration of the Cut Back Shares in accordance with any SEC Restrictions
(such date, the “Restriction
Termination Date”).  From and after the Restriction Termination
Date, all provisions of this Section 2 (including, without limitation, the
liquidated damages provisions, subject to tolling as provided above) shall again
be applicable to the Cut Back Shares (which, for avoidance of doubt, retain
their character as “Registrable
Securities”) so that the Company will be required to file with and cause
to be declared effective by the Commission such additional Registration
Statements in the time frames set forth herein as necessary to ultimately cause
to be covered by effective Registration Statements all Registrable Securities
(if such Registrable Securities cannot at such time be resold by the Holders
thereof without volume limitations pursuant to Rule 144).

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    (c)           Promptly
following any date on which the Company becomes eligible to use a registration
statement on Form S-3 to register Registrable Securities for resale, the Company
shall file a Registration Statement on Form S-3 covering all such Registrable
Securities (or a post-effective amendment on Form S-3 to the then effective
Registration Statement) and shall cause such Registration Statement to be filed
by the Filing Date for such Registration Statement and declared effective under
the Securities Act as soon as possible thereafter, but in any event prior to the
Effectiveness Date therefor.  Such Registration Statement shall
contain (except if otherwise required pursuant to written comments received from
the Commission upon a review of such Registration Statement, other than as to
the characterization of any Holder as an underwriter, which shall not occur
without such Holder’s consent) the “Plan of Distribution” attached hereto as
Annex
A.  The Company shall use its reasonable best efforts to keep
such Registration Statement continuously effective under the Securities Act
during the entire Effectiveness Period.  By 5:00 p.m. (New York City
time) on the Business Day immediately following the Effective Date of such
Registration Statement, the Company shall file with the Commission in accordance
with Rule 424 under the Securities Act the final prospectus to be used in
connection with sales pursuant to such Registration Statement (whether or not
such filing is technically required under such Rule).

     

    (d)           On
or prior to the Filing Date, the Company shall prepare and file with the
Commission a Registration Statement covering the resale of the  Make
Good Escrow Shares and the Listing Shares on Form S-3 if the Company is then
eligible to utilize such Form (or on such other form appropriate for such
purpose) and shall cause such Registration Statement to be filed by the Filing
Date for such Registration Statement and declared effective under the Securities
Act as soon as possible thereafter, but in any event prior to the Effectiveness
Date therefor.  Such Registration Statement shall contain (except if
otherwise required pursuant to written comments received from the Commission
upon a review of such Registration Statement, other than as to the
characterization of any Holder as an underwriter, which shall not occur without
such Holder’s consent) the “Plan of Distribution” attached hereto as Annex
A.  The Company shall use its reasonable best efforts to keep
such Registration Statement continuously effective under the Securities Act
during the entire Effectiveness Period which is applicable to it.  By
5:00 p.m. (New York City time) on the Business Day immediately following the
Effective Date of such Registration Statement, the Company shall file with the
Commission in accordance with Rule 424 under the Securities Act the final
prospectus to be used in connection with sales pursuant to such Registration
Statement (whether or not such filing is technically required under such
Rule).

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    (e)           Notwithstanding
anything to the contrary provided hereunder, the Company may include for
registration in one or more Registration Statement filed pursuant to this
Agreement Fountainhead’s Share to the extent the Company is required to register
such Fountainhead’s Shares under the Fountainhead Piggyback Registration Rights
Agreement; provided that if the Company is unable to cause the inclusion of all
Registrable Securities and Fountainhead’s Shares in a Registration Statement,
then the Company may, following not less than three (3) Trading Days prior
written notice to the holders of Fountainhead’s Shares remove from the
Registration Statement such Fountainhead’s Shares prior to the removal of any
Registrable Securities and/or Additional Registrable Securities.

     

    (f)           Failure to File Registration
Statement and Other Events. The Company and Purchaser agree that the
Holders will suffer damages if a Registration Statement is not filed on or prior
to the applicable Filing Date, or not declared effective by the Commission on or
prior to the applicable Effectiveness Date and maintained in the manner
contemplated herein during the applicable Effectiveness Period or if certain
other events occur. The Company and the Holders further agree that it would not
be feasible to ascertain the extent of such damages with precision.
Accordingly,  if: (i) a Registration Statement is not filed on or
prior to its Filing Date covering the Registrable Securities required under this
Agreement to be included therein (if the Company files a Registration Statement
without affording the Holders the opportunity to review and comment on the same
as required by Section 3(a) hereof, the Company shall not be deemed to have
satisfied this clause (i)), or (ii) a Registration Statement is not declared
effective by the Commission on or prior to its required Effectiveness Date or if
by the Business Day immediately following the Effective Date, the Company shall
not have filed a “final” prospectus for the Registration Statement with the
Commission under Rule 424(b) in accordance with the terms hereof (whether or not
such a prospectus is technically required by such Rule), (iii) after its
Effective Date, without regard for the reason thereunder or efforts therefor,
such Registration Statement ceases for any reason to be effective and available
to the Holders as to all Registrable Securities to which it is required to cover
at any time prior to the expiration of its Effectiveness Period for more than an
aggregate of 30 Trading Days (which need not be consecutive), or (iv) trading in
the Common Stock shall be suspended or if the Common Stock is no longer quoted
on or is delisted from the OTC Bulletin Board (or other principal exchange on
which the Common Stock is listed or traded) for any reason for more than three
(3) Business Days in the aggregate (any such failure or
breach being referred to as an "Event," and for purposes of
clauses (i) or (ii) the date on which such Event occurs, or for purposes of
clause (iii) and (iv) the date which such specified period is exceeded, being
referred to as "Event
Date"), then in addition to any other rights the Holders may have
hereunder or under applicable law, on each such Event Date and on each monthly
anniversary of each such Event Date (if the applicable Event shall not have been
cured by such date) until the applicable Event is cured, the Company shall pay
to each Holder an amount in cash, as partial liquidated damages and not as a
penalty, equal to 1% of the aggregate Investment Amount paid by such Holder for
Shares pursuant to the applicable Purchase Agreement.  The parties agree that in no event
will the Company be liable for liquidated damages under this Agreement in excess
of 1% of the aggregate Purchase Price in any 30-day period and the maximum
aggregate liquidated damages payable to a Holder under this Agreement (which
maximum amount payable shall only be relevant to amounts paid pursuant to this
Section 2(e) and shall expressly not apply to any amounts payable under any
other section of this or any other Transaction Document) shall be fifteen
percent (15%) of the aggregate Purchase Price paid by Purchaser pursuant to the
applicable Purchase Agreement.  The partial liquidated damages
pursuant to the terms hereof shall apply on a daily pro-rata basis for any
portion of a month prior to the cure of an Event (except in the case of the
first Event Date), and shall cease to accrue (unless earlier cured) upon the
expiration of the Effectiveness Period.  The Company will not be
liable for liquidated damages under this Agreement with respect to any
securities issued to a placement agent as compensation or partial compensation
or any Fountainhead’s Shares.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    (g)           Each
Holder agrees to furnish to the Company a completed Questionnaire in the form
attached to this Agreement as Annex B (a “Selling Holder
Questionnaire”).  The Company shall not be required to include
the Registrable Securities of a Holder in a Registration Statement and shall not
be required to pay any liquidated or other damages under Section 2(e) to any
Holder who fails to furnish to the Company a fully completed Selling Holder
Questionnaire at least two Trading Days prior to the Filing Date (subject to the
requirements set forth in Section 3(a)).

     

    3.           Registration
Procedures.

     

    In
connection with the Company's registration obligations hereunder, the Company
shall:

     

    (a)           Not
less than four Trading Days prior to the filing of a Registration Statement or
any related Prospectus or any amendment or supplement thereto, the Company shall
furnish to each Holder copies of the “Selling Stockholders” section of such
document, the “Plan of Distribution” and any risk factor contained in such
document that addresses specifically this transaction or the Selling
Stockholders, as proposed to be filed, which documents will be subject to the
review of such Holder.  The Company shall not file a Registration
Statement, any Prospectus or any amendments or supplements thereto in which the
“Selling Stockholder” section thereof differs from the disclosure received from
a Holder in its Selling Holder Questionnaire (as amended or
supplemented).  The Company shall not file a Registration Statement,
any Prospectus or any amendments or supplements thereto in which it (i)
characterizes any Holder as an underwriter, (ii) excludes a particular
Holder due to such Holder refusing to be named as an underwriter, or (iii)
reduces the number of Registrable Securities being registered on behalf of a
Holder except pursuant to, in the case of subsection (iii), the Commission
Comments, without, in each case, such Holder’s express written
authorization.

     

    (b)           (i)  Prepare
and file with the Commission such amendments, including post-effective
amendments, to each Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep such Registration Statement continuously
effective as to the applicable Registrable Securities for its Effectiveness
Period and prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act all of the
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented or
amended to be filed pursuant to Rule 424; (iii) respond as promptly as
reasonably possible to any comments received from the Commission with respect to
each Registration Statement or any amendment thereto and, as promptly as
reasonably possible provide the Holders true and complete copies of all
correspondence from and to the Commission relating to such Registration
Statement that would not result in the disclosure to the Holders of material and
non-public information concerning the Company; and (iv) comply in all material
respects with the provisions of the Securities Act and the Exchange Act with
respect to the Registration Statement(s) and the disposition of all Registrable
Securities covered by each Registration Statement.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    (c)           Notify
the Holders as promptly as reasonably possible (and, in the case of (i)(A)
below, not less than three Trading Days prior to such filing and, in the case of
(v) below, not less than three Trading Days prior to the financial statements in
any Registration Statement becoming ineligible for inclusion therein) and (if
requested by any such Person) confirm such notice in writing no later than one
Trading Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to a Registration Statement is proposed
to be filed; (B) when the Commission notifies the Company whether there will be
a "review" of such Registration Statement and whenever the Commission comments
in writing on such Registration Statement (the Company shall provide true and
complete copies thereof and all written responses thereto to each of the Holders
that pertain to the Holders as a Selling Stockholder or to the Plan of
Distribution, but not information which the Company believes would constitute
material and non-public information); and (C) with respect to each Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the Commission or any other Federal or state governmental
authority for amendments or supplements to a Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of a Registration
Statement covering any or all of the Registrable Securities or the initiation of
any Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event or passage of time that makes
the financial statements included in a Registration Statement ineligible for
inclusion therein or any statement made in such Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to such
Registration Statement, Prospectus or other documents so that, in the case of
such Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading.

     

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

     

    (e)           Furnish
to each Holder, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto and all exhibits to the extent requested by
such Person (including those previously furnished) promptly after the filing of
such documents with the Commission.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    (f)           Promptly
deliver to each Holder, without charge, as many copies of each Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request.  The
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto.

     

    (g)           Prior
to any public offering of Registrable Securities, register or qualify such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of all jurisdictions within the United States as any Holder may request, to keep
each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the Registration Statement(s).

     

    (h)           Cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee
pursuant to the Registration Statement(s), which certificates shall be free, to
the extent permitted by a Purchase Agreement, of all restrictive legends, and to
enable such Registrable Securities to be in such denominations and registered in
such names as any such Holders may request.

     

    (i)           Upon
the occurrence of any event contemplated by Section 3(c)(v), as promptly as
reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the affected Registration Statements or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, no Registration Statement nor any Prospectus will
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading.

     

    4.           Registration
Expenses.  All fees and expenses incident to the performance of
or compliance with this Agreement by the Company shall be borne by the Company
whether or not any Registrable Securities are sold pursuant to a Registration
Statement.  The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with any Trading Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities or
Blue Sky laws), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement.  In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit and the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    5.           Indemnification.

     

    (a)           Indemnification by the
Company.  The Company shall, notwithstanding any termination of
this Agreement, indemnify and hold harmless each Holder, the officers,
directors, agents, investment advisors, partners, members and employees of each
of them, each Person who controls any such Holder (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable costs of
preparation and reasonable attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising
out of or relating to any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that (1) such
untrue statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto (it being understood that the Holder has
approved Annex A hereto for this purpose) or (2) in the case of an occurrence of
an event of the type specified in Section 3(c)(ii)-(v), the use by such Holder
of an outdated or defective Prospectus after the Company has notified such
Holder in writing that the Prospectus is outdated or defective and prior to the
receipt by such Holder of an Advice or an amended or supplemented Prospectus,
but only if and to the extent that following the receipt of the Advice or the
amended or supplemented Prospectus the misstatement or omission giving rise to
such Loss would have been corrected.  The Company shall notify the
Holders promptly of the institution, threat or assertion of any Proceeding of
which the Company is aware in connection with the transactions contemplated by
this Agreement.

     

    (b)           Indemnification by
Holders. Each Holder shall, severally and not jointly, indemnify and hold
harmless the Company, its directors, officers, agents and employees, each Person
who controls the Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling Persons, to the fullest extent permitted by
applicable law, from and against all Losses, as incurred, arising solely out of
or based solely upon: (x) such Holder's failure to comply with the prospectus
delivery requirements of the Securities Act or (y) any untrue statement of a
material fact contained in any Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or arising solely
out of or based solely upon any omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading to the
extent, but only to the extent that, (1) such untrue statements or omissions are
based solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement (it
being understood that the Holder has approved Annex A hereto for this purpose),
such Prospectus or such form of Prospectus or in any amendment or supplement
thereto or (2) in the case of an occurrence of an event of the type specified in
Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or  defective and prior to the receipt by such
Holder of an Advice or an amended or supplemented Prospectus, but only if and to
the extent that following the receipt of the Advice or the amended or
supplemented Prospectus the misstatement or omission giving rise to such Loss
would have been corrected.  In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

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

     

    An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless:  (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party).  The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld.  No Indemnifying
Party shall, without the prior written consent of the Indemnified Party, effect
any settlement of any pending Proceeding in respect of which any Indemnified
Party is a party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability on claims that are the subject matter
of such Proceeding.

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    All fees
and expenses of the Indemnified Party (including reasonable fees and expenses to
the extent incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten Trading Days of written notice
thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).

     

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

     

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

     

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

     

    6.           Miscellaneous.

     

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

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    (b)           No Registration of Non
Registrable Securities.  Neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in a Registration Statement other than the
Registrable Securities and the Fountainhead’s Shares without the consent of the
remaining Holders of a majority of the then outstanding Registrable Securities,
and the Company shall not during the Effectiveness Period enter into any
agreement providing any such right to any of its security holders except for
agreement(s) providing registration rights with respect to Additional
Registrable Securities under substantially the same terms and conditions
provided hereof.

     

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

     

    (d)           Discontinued
Disposition.  Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Section 3(c), such Holder will
forthwith discontinue disposition of such Registrable Securities under the
Registration Statement until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement or until it is
advised in writing (the "Advice") by the Company that
the use of the applicable Prospectus may be resumed, and, in either case, has
received copies of any additional or supplemental filings that are incorporated
or deemed to be incorporated by reference in such Prospectus or Registration
Statement.  The Company may provide appropriate stop orders to enforce
the provisions of this paragraph.

     

    (e)           Piggy-Back
Registrations.  If at any time during the Effectiveness
Period  there is not an effective Registration Statement covering all
of the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Holder written notice of such
determination and, if within fifteen calendar days after receipt of such notice,
any such Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    (f)           Amendments and
Waivers.  The provisions of this Agreement, including the
provisions of this Section 6(f), may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the Company and the
Holders of no less than a majority in interest of the then outstanding
Registrable Securities.  Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of certain Holders and that does not directly
or indirectly affect the rights of other Holders may be given by Holders of at
least a majority of the Registrable Securities to which such waiver or consent
relates; provided, further
that no amendment or waiver to any provision of this Agreement relating to
naming any Holder or requiring the naming of any Holder as an underwriter may be
effected in any manner without such Holder’s prior written
consent.  Section 2(a) may not be amended or waived except by written
consent of each Holder affected by such amendment or waiver.

     

    (g)           Notices.  Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile (provided the sender receives a
machine-generated confirmation of successful transmission) at the facsimile
number specified in this Section prior to 6:30 p.m. (New York City time) on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day or later than 6:30
p.m. (New York City time) on any Trading Day, (c) the Trading Day following the
date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required
to be given.  The address for such notices and communications shall be
as follows:

     

    
      
        
          
            	
                    If
      to the Company:

                  	
                    China
      New Energy Group Company

                  
	 
      	
                    No.
      1703 and 1704, A Building, No. 1, Hongji Apartment
Jin Wei Road, He Bei
      District

                  
	 
      	
                    Tianjin,
      China

                  
	 
      	 
      
	
                    With
      a copy to:

                  	
                    Pillsbury
      Winthrop Shaw Pittman LLP

                  
	 
      	
                    2300
      N Street, N.W.

                  
	 
      	
                    Washington,
      DC  20037

                  
	 
      	
                    Facsimile:  (202)663-8007

                  
	 
      	
                    Attn:  Louis
      A. Bevilacqua, Esq.

                  
	 
      	 
      
	
                    If
      to a Purchaser:

                  	
                    To
      the address set forth under Purchaser’s name on the signature page
      hereof;

                  
	 	 
	
                    With
      a copy to:

                  	
                    Guzov
      Ofsink, LLC

                  
	 
      	
                    600
      Madison Ave., 14th
      Floor

                  
	 
      	
                    New
      York, New York 10022

                  
	 
      	
                    Facsimile:  (212)688-7273

                  
	 
      	
                    Attn.:  Darren
      L. Ofsink, Esq.

                  
	 
      	 
      
	
                    If
      to any other Person who is then the registered Holder:

                  
	 
	 
      	
                    To
      the address of such Holder as it appears in the stock transfer books of
      the Company

                  

          

        

      

    

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    or such
other address as may be designated in writing hereafter, in the same manner, by
such Person.

     

    (h)           Successors and
Assigns.  This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties and
shall inure to the benefit of each Holder.  The Company may not assign
its rights or obligations hereunder without the prior written consent of each
Holder.  Each Holder may assign their respective rights hereunder in
the manner and to the Persons as permitted under the applicable Purchase
Agreement.

     

    (i)           Execution and
Counterparts.  This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same
Agreement.  In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.

     

    (j)           Governing
Law.  All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all Proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement (whether brought against a party hereto or its respective
Affiliates, employees or agents) will be commenced in the New York
Courts.  Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any Proceeding, any claim that it is not personally subject to the jurisdiction
of any New York Court, or that such Proceeding has been commenced in an improper
or inconvenient forum.  Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in any such
Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way
any right to serve process in any manner permitted by law.  Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any Proceeding arising out of or
relating to this Agreement or the transactions contemplated
hereby.  If either party shall commence a Proceeding to enforce any
provisions of this Agreement, then the prevailing party in such Proceeding shall
be reimbursed by the other party for its attorney’s fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
Proceeding.

     

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

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

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

     

    (m)           Headings.  The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

     

     [REMAINDER OF
PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
PAGES TO FOLLOW]

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as
of the date first written above.

     

    
      
        	 
      	
                CHINA
      NEW ENERGY GROUP COMPANY

              
	 
      	 
      
	 
      	
                By:

              	
                /s/ James Li

              
	 
      	 
      	
                Name:
      James Li

              
	 
      	 
      	
                Title:  Authorized
      Signatory

              

      

    

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
PAGES OF PURCHASER TO FOLLOW]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    IN WITNESS WHEREOF, the parties have
executed this Registration Rights Agreement as of the date first written
above.

     

    
      
        
          
            	 
      	
                    NAME
      OF INVESTING ENTITY

                  
	 
      	 
      
	 
      	
                    CHINA
      HAND FUND I, LLC

                  
	 
      	 
      
	 
      	
                    By:

                  	
                      /s/ John D. Kuhns

                  
	 
      	 
      	
                    Name:
      John D. Kuhns

                  
	 
      	 
      	
                    Title:  Member-Manager

                  
	 
      	 
      
	 
      	
                    ADDRESS
      FOR NOTICE

                  
	 
      	 
      
	 
      	
                    c/o:  
      __________________________________________

                  
	 
      	 
      
	 
      	
                    Street: 
      _________________________________________

                  
	 
      	 
      
	 
      	
                    City/State/Zip: 
      ___________________________________

                  
	 
      	 
      
	 
      	
                    Attention: 
      ______________________________________

                  
	 
      	 
      
	 
      	
                    Tel: 
      ___________________________________________

                  
	 
      	 
      
	 
      	
                    Fax: 
      ___________________________________________

                  
	 
      	 
      
	 
      	
                    Email: 
      __________________________________________

                  

          

        

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Annex
A

     

    Plan of
Distribution

     

    The
Selling Stockholders and any of their pledgees, donees, transferees, assignees
and successors-in-interest may, from time to time, sell any or all of their
shares of Common Stock on any stock exchange, market or trading facility on
which the shares are traded or quoted or in private
transactions.  These sales may be at fixed or negotiated
prices.  The Selling Stockholders may use any one or more of the
following methods when selling shares:

     

    
      	
              ·

            	
              ordinary
      brokerage transactions and transactions in which the broker-dealer
      solicits Investors;

            

    

     

    
      	
              ·

            	
              block
      trades in which the broker-dealer will attempt to sell the shares as agent
      but may position and resell a portion of the block as principal to
      facilitate the transaction;

            

    

     

    
      	
              ·

            	
              purchases
      by a broker-dealer as principal and resale by the broker-dealer for its
      account;

            

    

     

    
      	
              ·

            	
              an
      exchange distribution in accordance with the rules of the applicable
      exchange;

            

    

     

    
      	
              ·

            	
              privately
      negotiated transactions;

            

    

     

    
      	
              ·

            	
              to
      cover short sales made after the date that this Registration Statement is
      declared effective by the
Commission;

            

    

     

    
      	
              ·

            	
              broker-dealers
      may agree with the Selling Stockholders to sell a specified number of such
      shares at a stipulated price per
share;

            

    

     

    
      	
              ·

            	
              a
      combination of any such methods of sale;
and

            

    

     

    
      	
              ·

            	
              any
      other method permitted pursuant to applicable
  law.

            

    

     

    The
Selling Stockholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus.

     

    Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales.  Broker-dealers may receive commissions or
discounts from the Selling Stockholders (or, if any broker-dealer acts as agent
for the purchaser of shares, from the purchaser) in amounts to be
negotiated.  The Selling Stockholders do not expect these commissions
and discounts to exceed what is customary in the types of transactions
involved.

     

    The
Selling Stockholders may from time to time pledge or grant a security interest
in some or all of the Shares owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell shares of Common Stock from time to time under this prospectus,
or under an amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933 amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Upon the
Company being notified in writing by a Selling Stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of Common
Stock through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such Selling Stockholder and of
the participating broker-dealer(s), (ii) the number of shares involved, (iii)
the price at which such the shares of Common Stock were sold, (iv)the
commissions paid or discounts or concessions allowed to such broker-dealer(s),
where applicable, (v) that such broker-dealer(s) did not conduct any
investigation to verify the information set out or incorporated by reference in
this prospectus, and (vi) other facts material to the transaction.  In
addition, upon the Company being notified in writing by a Selling Stockholder
that a donee or pledgee intends to sell more than 500 shares of Common Stock, a
supplement to this prospectus will be filed if then required in accordance with
applicable securities law.

     

    The
Selling Stockholders also may transfer the shares of Common Stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this
prospectus.

     

    The
Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales.  In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.  Discounts,
concessions, commissions and similar selling expenses, if any, that can be
attributed to the sale of Securities will be paid by the Selling Stockholder
and/or the purchasers.  Each Selling Stockholder has represented and
warranted to the Company that it acquired the securities subject to this
Registration Statement in the ordinary course of such Selling Stockholder’s
business and, at the time of its purchase of such securities such Selling
Stockholder had no agreements or understandings, directly or indirectly, with
any person to distribute any such securities.

     

    The
Company has advised each Selling Stockholder that it may not use shares
registered on this Registration Statement to cover short sales of Common Stock
made prior to the date on which this Registration Statement shall have been
declared effective by the Commission.  If a Selling Stockholder uses
this prospectus for any sale of the Common Stock, it will be subject to the
prospectus delivery requirements of the Securities Act.  The Selling
Stockholders will be responsible to comply with the applicable provisions of the
Securities Act and Exchange Act, and the rules and regulations thereunder
promulgated, including, without limitation, Regulation M, as applicable to such
Selling Stockholders in connection with resales of their respective shares under
this Registration Statement.

     

    The
Company is required to pay all fees and expenses incident to the registration of
the shares, but the Company will not receive any proceeds from the sale of the
Common Stock.  The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Annex
B

     

    CHINA
NEW ENERGY GROUP COMPANY

     

    Selling
Securityholder Notice and Questionnaire

     

    The
undersigned beneficial owner of common stock (the “Common Stock”), of China New
Energy Group Company, a Delaware corporation (the “Company”), understands that
the Company has filed or intends to file with the Securities and Exchange
Commission (the “Commission”) a Registration
Statement for the registration and resale of the Registrable Securities, in
accordance with the terms of the Amended and Restated Registration Rights
Agreement, dated as of April __, 2009 (the “Registration Rights
Agreement”), among the Company and the Investors named
therein.  A copy of the Registration Rights Agreement is available
from the Company upon request at the address set forth below.  All
capitalized terms used and not otherwise defined herein shall have the meanings
ascribed thereto in the Registration Rights Agreement.

     

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

     

    QUESTIONNAIRE

     

    
      
        	
                1.

              	
                Name.

              

      

    

     

    
      	
               
      

            	
              (a)

            	
              Full
      Legal Name of Selling
Securityholder

            

    

     

    
      
        	
                 
      

              
	 
      

      

    

     

    
      	
               
      

            	
              (b)

            	
              Full
      Legal Name of Registered Holder (if not the same as (a) above) through
      which Registrable Securities Listed in Item 3 below are
    held:

            

    

     

    
      
        
          	
                   
      

                
	 
      

        

      

       

    

    
      	
               
      

            	
              (c)

            	
              Full
      Legal Name of Natural Control Person (which means a natural person who
      directly or indirectly alone or with others has power to vote or dispose
      of the securities covered by the
questionnaire):

            

    

    
       

      
        
          	
                   
      

                
	 
      

        

      

       

    

    
      	
              2. 

            	
              Address
      for Notices to Selling
Securityholder:

            

    

     

    
      
        
          
            
              	_______________________________________________________________________________________________
	_______________________________________________________________________________________________
	_______________________________________________________________________________________________
	_______________________________________________________________________________________________ 
	
                      Telephone:
      ______________________________________________________________________________________

                    
	
                      Fax: 
      ___________________________________________________________________________________________

                    
	
                      Contact
      Person: 
      __________________________________________________________________________________

                    

            

          

        

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      
        	
                3.

              	
                Beneficial
      Ownership of Registrable
Securities:

              

      

    

     

    
      
        	
                 
      

              	
                Type
      and Principal Amount of Registrable Securities beneficially
      owned:

              
	 	_________________________________________________________________________________
	 	_________________________________________________________________________________
	 	_________________________________________________________________________________ 

      

    

     

    
      
        	
                4.

              	
                Broker-Dealer
      Status:

              

      

    

     

    
      	
               
      

            	
              (a)

            	
              Are
      you a broker-dealer?

            

    

     

    Yes    ̈                      No    ̈

     

    
      	
            	
              Note:

            	
              If
      yes, the Commission’s staff has indicated that you should be identified as
      an underwriter in the Registration
Statement.

            

    

     

    
      	
               
      

            	
              (b)

            	
              Are
      you an affiliate of a
broker-dealer?

            

    

     

    Yes    ̈                      No    ̈

     

    
      	
               
      

            	
              (c)

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

            

    

     

    Yes    ̈                      No    ̈

     

    
      	
            	
              Note:

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

            

    

     

    
      
        	
                5.

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

              

      

    

     

    Except
as set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the Registrable
Securities listed above in Item 3.

     

    
      
        	
                 
      

              	
                Type
      and Amount of Other Securities beneficially owned by the Selling
      Securityholder:

              
	 	 
	 	_________________________________________________________________________________ 
	 	_________________________________________________________________________________ 

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      
        	
                6.

              	
                Relationships
      with the Company:

              

      

    

     

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

     

    
      
        	
                 
      

              	
                State
      any exceptions here:

              
	 	 
	 	_________________________________________________________________________________
	 	_________________________________________________________________________________

      

    

     

    7.  The Company has
advised each Selling Stockholder that it may not use shares registered on the
Registration Statement to cover short sales of Common Stock made prior to the
date on which the Registration Statement is declared effective by the
Commission, in accordance with 1997 Securities and Exchange Commission Manual of
Publicly Available Telephone Interpretations Section A.65.  If a
Selling Stockholder uses the prospectus for any sale of the Common Stock, it
will be subject to the prospectus delivery requirements of the Securities
Act.  The Selling Stockholders will be responsible to comply with the
applicable provisions of the Securities Act and Exchange Act, and the rules and
regulations thereunder promulgated, including, without limitation, Regulation M,
as applicable to such Selling Stockholders in connection with resales of their
respective shares under the Registration Statement.

     

    The
undersigned agrees to promptly notify the Company of any inaccuracies or changes
in the information provided herein that may occur subsequent to the date hereof
and prior to the Effective Date for the Registration Statement.

     

    By
signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 6 and the inclusion of such
information in the Registration Statement and the related
prospectus.  The undersigned understands that such information will be
relied upon by the Company in connection with the preparation or amendment of
the Registration Statement and the related prospectus.

     

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

     

    
      
        	
                Dated:
      _____________________

              	
                Beneficial
      Owner: __________________________________

              
	 
      	 
      	 
      
	 
      	
                By:

              	__________________________________
	 
      	 
      	
                Name:

              
	 
      	 
      	
                Title:

              

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

    

    Darren
Ofsink, Esq.,

    Guzov
Ofsink, LLC

    600
Madison Avenue, 14th
Floor

    New
York, NY 10022

    Fax:
(212) 688-7273

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00158-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00158-of-00352.parquet"}]]