Document:

Unassociated Document

 

    BACKSTOP
AGREEMENT

    

    This
BACKSTOP AGREEMENT dated
as of September 14, 2010 (this “Agreement”) is by and
between China New Energy Group Company, a Delaware corporation (the “Company”), and China
Hand Fund I, LLC, a Delaware limited liability company (the “Investor”).
Capitalized terms not defined herein shall have the meaning ascribed to them in
the Purchase Agreement (as defined below).

    

    BACKGROUND

     

    WHEREAS, the Company is
entering into that certain Series C and Series D Convertible Preferred Stock
Securities Purchase Agreement (the “Purchase Agreement”),
dated as of the date hereof, by and between the Company and the Investor for the
purpose of raising capital to finance its acquisition of Beijing Century Dadi
Gas Engineering Co., Ltd., and/or its affiliated companies, each a limited
liability company organized under the PRC laws (“Dadi”);

     

    WHEREAS, in order to complete
the acquisition of 70% of Dadi, the Company intends to raise additional capital
in the total amount of $20,100,000 through offer and sale of its securities to
investors (the “Additional
Offering”);

     

    WHEREAS, the Company desires
that the Investor provide, and the Investor has agreed to provide, a Backstop
Commitment (as defined below) to the Additional Offering, on the terms and
subject to the conditions set forth herein;

     

    NOW, THEREFORE, in
consideration of the mutual covenants and agreements contained in this
Agreement, the receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby agree as follows:

    

    Section 1       Backstop
Commitment.

    

    (a)   On
or before April 15, 2011 (the “Backstop Closing
Date”), Investor shall purchase from the Company, and the Company shall
issue and sell to Investor a number of shares (the “Backstop Commitment”)
of its common stock, par value $.001 per share (the “Common Stock”),
determined by dividing (x) $20,100,000 minus all amounts raised by the sale of
securities in the Additional Offering to investors other than the Investor or
its assignees (the “Backstop
Investor(s)”) by (y) $0.14179. As soon as practicable (but not more than
four (4) days) after the completion of the Additional Offering, the Company
shall deliver to Backstop Investor(s) a notice (the “Subscription Notice”)
setting forth the dollar amount subscribed for in the Additional Offering and,
accordingly, the number of shares of Common Stock to be acquired by the Backstop
Investor(s) pursuant to the Backstop Commitment. The shares acquired by the
Backstop Investor(s) pursuant to the Backstop Commitment are referred to as the
“Backstop
Shares.” The Backstop Investor(s) shall have ten (10) days after
receipt of the Subscription Notice to fund the purchase of the Backstop
Shares.

     

    (b)   The
Backstop Commitment shall be subject to the terms and conditions substantially
similar to those set forth in the Purchase Agreement and the purchase of the
Backstop Shares shall be memorialized in a respective securities purchase
agreement (the “Backstop Purchase
Agreement”).

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (c)    If
the Company, at any time before the Backstop Closing Date, shall (a) subdivide outstanding shares of Common
Stock into a larger number of shares, or (b) combine (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares, then the number of Backstop Shares issuable to the Backstop Investor(s)
pursuant to this Agreement shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding before such
event and of which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section 1(c)
shall become effective immediately after the effective date of a subdivision or
combination.

    

    (d)    On
the terms and subject to the conditions set forth in this Agreement, the closing
of the Backstop Commitment (the “Backstop Closing”)
shall occur on or before the Backstop Closing Date, at 10:00 a.m. (New York
time) at the offices of Guzov Ofsink, LLC, 600 Madison Avenue, 14th Floor,
New York, New York 10022 or such other place, time and date as shall be agreed
between the Company and Backstop Investor(s).

    

    (e)    At
the Backstop Closing (i) the Company shall deliver to the Backstop
Investor(s) evidence of the issuance of the Backstop Shares, in the name of the
Backstop Investor(s) against payment by or on behalf of Investor of the purchase
price therefor by wire transfer of immediately available funds to the account
designated by the Company in writing, (ii) the Company shall deliver all
other documents and certificates required to be delivered to the Backstop
Investor(s) pursuant to the Backstop Purchase Agreement, and (iii) the
Backstop Investor(s) shall deliver all documents and certificates required to be
delivered to the Company pursuant to the Backstop Purchase
Agreement.

     

    Section 2       Termination of this
Agreement.

     

    (a)    The
Backstop Investor(s) shall have the right to terminate this Agreement by giving
notice to the Company as hereinafter specified at any time at or prior to the
Backstop Closing Date, if (i) the Company or Dadi has suffered a Material
Adverse Effect, as defined below, or trading in securities generally on the
NASDAQ Global Market, New York Stock Exchange or NYSE Amex shall have been
suspended, (ii) a banking moratorium shall have been declared by federal, state
or the PRC authorities, (iii) there shall have occurred any attack on, outbreak
or escalation of hostilities or act of terrorism involving the United States or
the PRC, any declaration by the United States or the PRC of a national emergency
or war, any change in financial markets, any substantial change or development
involving a prospective substantial change in United States, the PRC or
other international
political, financial or economic conditions or any other calamity or crisis, or
(iv) the Company suffers any loss by strike, fire, flood, earthquake, accident
or other calamity, whether or not covered by insurance, the effect of which, in
each case described in this subsection (a), in the Backstop Investor(s)’
reasonable judgment is material and adverse and makes it impractical or
inadvisable to proceed with the purchase of the Backstop Shares.  Any
such termination shall be without liability of any party to any other
party.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    For the
purposes of this Agreement, “Material Adverse Effect” means any change or effect
which, individually or in the aggregate with all other such changes and effects,
is materially adverse to the business or to the condition (financial or
otherwise), assets, operations, financial condition, results of operations or
prospects of the Company, taken as a whole, including Dadi (the “Company
Condition”), or that would materially and adversely effect the ability of the
Company, taken as a whole, including Dadi, to conduct its business as regularly
conducted.

     

    (b)    If
a Backstop Investor elects to terminate this Agreement as provided in this
Section, the Company shall be notified promptly by such Backstop Investor by
telephone, confirmed by letter and this Agreement shall only be terminated as to
the Backstop Commitment of that Backstop Investor, but not others.

     

     Section 3     Miscellaneous.

    

    (a)    Successors and
Assigns.  Neither this Agreement nor any right or obligation
hereunder is assignable in whole or in part, whether by operation of Law or
otherwise, by any party without the express written consent of the other party
hereto and any such attempted assignment shall be void and
unenforceable.  Notwithstanding the foregoing, Investor may transfer
or assign this Agreement or any right or obligation hereunder to an Affiliate or
Vicis Capital Master Fund (“Vicis”) or any of its
Affiliates, which shall not be deemed an Affiliate of China Hand solely by
virtue of this Section 3(a) and Vicis may assign its rights to any of its
affiliates, at any time prior to or after the Closing.  This Agreement
and the rights and obligations hereunder shall be binding upon, and shall inure
to the benefit of, the parties hereto and their respective successors or
assignees, and no other person shall acquire or have any rights under or by
virtue of this Agreement.

    

    (b)    Notices. All notices
and other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given (a) on the
date of delivery, if delivered personally or by facsimile, upon confirmation of
receipt, (b) on the first Business Day following the date of dispatch if
delivered by a recognized next-day courier services, or (c) on the third
Business Day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid, to the parties to
this Agreement at the following address or to such other address either party to
this Agreement shall specify by notice to the other party:

    

    If to the
Company:

    
 

    China New
Energy Group Company

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

    Tianjin
Emperor Place

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Heping
District, Tianjin 300040

    People's
Republic of China

    Attn:
Y.K. Chong, CEO

    Tel. No.:
(86 22) 2321 0508

    Fax No.:
_______________________

    Email:
ykchong@cner.com

    

    With a
copy to (which shall not constitute notice):

    

    Guzov
Ofsink, LLC

    600
Madison Avenue, 14th Floor

    New York,
New York 10022, USA

    Attn:
Darren L. Ofsink, Esq.

    Tel.:
(212) 371-8008

    Fax No.;
(212) 688-7273

    Email:
dofsink@golawintl.com

     

    If to the
Investor:

    

    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

     

    (c)    Further Assurances.
Each party hereto shall do and perform or cause to be done and performed all
further acts and shall execute and deliver all other agreements, certificates,
instruments and documents as the other party hereto reasonably may request in
order to carry out the intent and accomplish the purposes of this Agreement and
the consummation of the transactions contemplated hereby.

    

    (d)    Amendments and
Waivers. Any provision of this Agreement may be amended or waived if, but
only if, such amendment or waiver is in writing and is duly executed and
delivered by the Company and Investor. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by Law.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (e)    Governing Law. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, without regard to its rule of conflict of laws. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and (whether
brought against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in New York County, New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the New York County, New York 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 suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is improper or is an inconvenient venue for such proceeding. Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or 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 other manner permitted by
law. Each party hereby irrevocably waives, to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in any legal proceeding
directly or indirectly arising out of or relating to this Agreement, any
Ancillary Agreement or the transactions contemplated hereby or thereby. If any
party shall commence an action or proceeding to enforce any provisions of this
Agreement, then the prevailing party in such action or proceeding shall be
reimbursed by the other parties for its reasonable attorneys’ fees and other
costs and expenses incurred with the investigation, preparation and prosecution
of such action or proceeding.

     

    (f)     Entire Agreement.
This Agreement constitutes the entire agreement between the parties with respect
to the subject matter of this Agreement and supersedes all prior agreements and
understandings, both oral and written, between the parties and/or their
Affiliates with respect to the subject matter of this Agreement.

    

    (g)    Severability. If one
or more provisions of this Agreement are held to be unenforceable under
applicable Law, such provision shall be deemed to be excluded from this
Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforced in accordance with its terms to
the maximum extent permitted by Law.

    

    (h)    Expenses and
Fees.  Each
party shall bear its own fees and expenses incurred with respect to this
Agreement.  There shall be no backstop fee or commitment fee payable
to the Investor by the Company under this Agreement.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (h)    Specific Performance.
Each of the Company and Investor acknowledge and agree that, in addition to all
other remedies to which it may be entitled, each of the parties hereto is
entitled to seek a decree of specific performance of their rights under this
Agreement, provided that such party is not in material default hereunder. The
Company and Investor agree that, if for any reason a party shall have failed to
perform its obligations under this Agreement, then the party seeking to enforce
this Agreement against such nonperforming party shall be entitled to specific
performance and injunctive and other equitable relief, and the parties further
agree to waive any requirement for the securing or posting of any bond in
connection with the obtaining of any such injunctive or other equitable relief.
This provision is without prejudice to any other rights that any party may have
against another party for any failure to perform its obligations under this
Agreement, including the right to seek damages for a breach of any provision of
this Agreement, and all rights, powers and remedies available (at law or in
equity) to a party in respect hereof by the other party shall be cumulative and
not alternative or exclusive, and the exercise or beginning of the exercise of
any thereof by a party shall not preclude the simultaneous or later exercise of
any other rights, powers or remedies by such party.

     

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

     

    
      
        
          
            
              
                
                  	
                          THE
      COMPANY:

                        
	 
	
                          CHINA
      NEW ENERGY GROUP 

                        
	
                          COMPANY 

                        
	 
      
	
                          By:

                        	
                          /s/
      Yang Kan Chong 
      

                        
	
                          Name:
      Yang Kan Chong

                        
	
                          Title:
      Chief Executive Officer

                        
	 
      
	
                          THE
      INVESTOR:

                        
	 
	
                          CHINA
      HAND FUND I, LLC

                        
	 
      
	
                          By:

                        	
                          /s/ 
      Authorized Signatory

                        
	
                          Name:

                        
	
                          Title:Unassociated Document

    

    REGISTRATION
RIGHTS AGREEMENT

     

    This
Registration Rights Agreement (this "Agreement") is made and
entered into as of September 14, 2010, 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 C and Series D Convertible
Preferred Stock Securities Purchase Agreement, dated as of September 14, 2010,
by and between the Company and purchaser party thereto (the "Purchase Agreement").
Capitalized terms used herein but not otherwise defined herein shall have the
meanings ascribed to such terms in the Purchase Agreement.

     

    The
Company and the 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).

     

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

     

    "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.

     

    "Holder" or "Holders" means the holder or
holders, as the case may be, from time to time of Registrable Securities, which
shall include all assignees of China Hand Fund I, LLC.

     

    “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.

     

    “Registrable Securities”
means: (i) the Shares, and (ii) 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).

     

    "Registration Statement" means
any registration statement 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.

     

    "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.

     

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

     

    "Shares" means (i) the shares
of Common Stock issuable upon conversion of the Series C Preferred Stock issued
under the Purchase Agreement, and (ii) the shares of Common Stock issuable upon
conversion of the Series D Preferred Stock issued under the Purchase
Agreement.

     

    “Trading Days” means days
during which the New York Stock Exchange is open for trading for three or more
hours.

    
      
         

      

      
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    2.           Registration.

     

    (a)           Piggy-Back
Registration. If at any time after December 31, 2010, when there is not
an effective Registration Statement providing for the resale of all of the
Registrable Securities, and none of the Registrable Securities may be sold
pursuant to Rule 144 under the Securities Act, 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 for an underwritten offering or on
Form S-4 or Form S-8, each as promulgated under the Securities Act, or their
then equivalents), the Company shall send to each Holder of Registrable
Securities written notice of such determination.  If within thirty
(30) days after receipt of such notice, or within such shorter period of time as
may be specified by the Company in such written notice as may be necessary for
the Company to comply with its obligations with respect to the timing of the
filing of such Registration Statement, any such Holder shall so request in
writing, (which request shall specify the Registrable Securities intended to be
registered), the Company will use commercially reasonable efforts to cause the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the Holder.

     

    (b)           Each
Holder agrees to furnish to the Company a completed Questionnaire in the form
attached to this Agreement as Annex A (a “Selling Holder
Questionnaire”).

     

    3.           Registration
Procedures.

     

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

     

    (a)         (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.

    
      
         

      

      
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    (b)        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.

     

    (c)         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.

     

    (d)         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.

     

    (e)          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.

    
      
         

      

      
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    (f)           Upon
the occurrence of any event contemplated by Section 3(b)(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, and (v) 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.

     

    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(b)(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.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    (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(b)(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.

     

    (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.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    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.

     

    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.

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    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.

     

    (b)           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.

     

    (c)           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(b), 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.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    (d)           Amendments and
Waivers.  The provisions of this Agreement, including the
provisions of this Section 6(d), 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.

     

    (e)           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

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

              
	 
      	
                Tianjin
      Emperor Place,Heping District,Tianjin, 300040

              
	 
      	
                People's
      Republic of China

              
	 
      	
                Attn:
      Y.K. Chong, CEO

              
	 
      	
                Tel.
      No.: (86 22) 2321 0508

              
	 
      	
                Fax
      No.: ___________________________

              
	 
      	
                Email:
      ykchong@cner.com

              
	 
      	 
      
	
                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 a Purchaser:

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

              
	 
      	 
      
	
                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

              

      

    

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

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

     

    (f)           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.

     

    (g)           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.

     

    (h)           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.

     

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

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    (j)           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.

     

    (k)           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]

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    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/
      Yang Kan Chong 
      

              
	 
      	 
      	
                Name:
      Yang Kan Chong

              
	 
      	 
      	
                Title:    Chief
      Executive Officer

              

      

    

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
PAGES OF PURCHASER TO FOLLOW]

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

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

    

    
      
        
          
            	 
      	
                    PURCHASER

                  
	 
      	 
      
	 
      	
                    CHINA
      HAND FUND I, LLC

                  
	 
      	 
      
	 
      	
                    By:

                  	      
                    /s/
      Authorized Signatory

                  
	 
      	
                    Name: Authorized
      Signatory

                  
	 
      	
                    Title:

                  

          

        

      

    

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      	 
      	
                                              ADDRESS
      FOR NOTICE

                                            
	 
      	 
      	 
      
	 
      	
                                              c/o:

                                            	 
      
	 
      	 
      	 
      
	 
      	
                                              Street:

                                            	 
      
	 
      	 
      	 
      
	 
      	
                                              City/State/Zip:

                                            	 
      
	 
      	 
      	 
      
	 
      	
                                              Attention:

                                            	 
      
	 
      	 
      	 
      
	 
      	
                                              Tel:

                                            	 
      
	 
      	 
      	 
      
	 
      	
                                              Fax:

                                            	 
      
	 
      	 
      	 
      
	 
      	
                                              Email:

                                            	 
      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    Annex A

     

    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 Registration Rights Agreement, dated as of
September 14, 2010 (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:

    

    Pavel
Seroklinov, Esq.,

    Guzov
Ofsink, LLC

    600
Madison Avenue, 14th
Floor

    New
York, NY 10022

    Fax:
(212) 688-7273

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