Document:

Unassociated Document

    EXHIBIT
10.1

    

    SUBSCRIPTION
AGREEMENT

    

    THIS
SUBSCRIPTION AGREEMENT (this “Agreement”), dated as of April 23, 2009, is by and
among American DG Energy Inc., a Delaware corporation (the “Company”), and the
subscribers identified on the signature pages hereto (each a “Subscriber” and
collectively the “Subscribers”).

    

    WHEREAS,
the Company and the Subscribers are executing and delivering this Agreement in
reliance upon an exemption from securities registration afforded by the
provisions of Section 4(2), Section 4(6) and/or Regulation D (“Reg. D”) as
promulgated by the United States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “Securities Act”);
and

     

    WHEREAS,
the parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Subscribers, as provided herein,
and the Subscribers shall purchase, in the aggregate, at the Closing (as defined
below), $2,260,000 (the “Purchase Price”) of shares of the Company’s Common
Stock (such shares, the “Shares”) at a purchase price per Share of U.S. $2.10
(“Per Share Purchase Price”).  The Purchase Price shall be payable to
the Company at the Closing.

    

    NOW,
THEREFORE, in consideration of the mutual covenants and other agreements
contained in this Agreement, the Company and the Subscribers hereby agree as
follows:

    

    1.  Purchase and Sale of
Shares.  Subject to the satisfaction (or waiver) of the
conditions to Closing set forth in this Agreement, at the Closing, each
Subscriber shall purchase Shares for the portion of the Purchase Price indicated
on such Subscriber’s signature page hereto (the “Subscriber’s Purchase Price”),
and the Company shall sell such Shares to the Subscriber.

    

    2.  Closing; Deliveries
Etc.

    

    (a)  Closing. The
consummation of the transactions contemplated herein (the “Closing”) shall take
place remotely via the electronic exchange of documents and signatures, at 10:00
a.m., Eastern U.S. Time, on Monday, April 27, 2009 (the “Closing Date”),
provided that the conditions to Closing set forth herein have been satisfied or
waived.

    

    (b)  Company’s Deliveries.
At the Closing, the Company shall deliver or cause to be delivered to each
Subscriber a copy of duly executed irrevocable instructions, in customary form,
to the Company’s transfer agent instructing the transfer agent to deliver, on an
expedited basis, a certificate evidencing a number of Shares equal to such
Subscriber’s Purchase Price divided by the Per Share Purchase Price, registered
in the name of such Subscriber.

    

    (c)  Subscribers’
Deliveries. At the Closing, each Subscriber shall deliver or cause to be
delivered to the Company such Subscriber’s Purchase Price by wire transfer to an
account specified in writing by the Company prior to the Closing.

    

    (d)  Subscribers’ Closing
Conditions. The obligation of each Subscriber to consummate the
transactions contemplated by this Agreement at the Closing shall be subject to
the satisfaction, prior to or at the Closing, of the following
conditions:  (i) the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects
on and as of the Closing Date as though such warranties and representations were
made at and as of such date; (ii) the Company shall have performed and complied
in all material respects with all agreements, covenants and conditions contained
in this Agreement which are required to be performed or complied with by the
Company prior to or at the Closing; and (iii) there shall be no effective
injunction, writ, preliminary restraining order or any order of any nature
issued by a court of competent jurisdiction directing that the transactions
provided for herein or any of them not be consummated as herein
provided.

     

    
      American
DG Energy Inc.

      Subscription
Agreement Offering 2009

    

    
      
        
        

      

      
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    (e)  Company’s Closing
Conditions. The obligation of the Company to consummate the transactions
contemplated by this Agreement at the Closing, shall be subject, in the absence
of a written waiver by the Company, to the satisfaction, prior or at the
Closing, of the following conditions: (i)  the representations and
warranties of each of the Subscribers contained in this Agreement shall be true
on and as of the Closing Date in all material respects as though such warranties
and representations were made at and as of such date; (ii) each Subscriber shall
have performed and complied in all material respects with all agreements,
covenants and conditions contained in this Agreement which are required to be
performed or complied with by it prior to or at the Closing; and (iii) there
shall be no effective injunction, writ, preliminary restraining order or any
order of any nature issued by a court of competent jurisdiction directing that
the transactions provided for herein or any of them not be consummated as herein
provided.

    

    3.  Subscribers’ Representations
and Warranties.  Each Subscriber hereby represents and warrants
to and agrees with the Company, only as to such Subscriber, that:

    

    (a)  Information on
Company.   The Subscriber has been furnished with or has
had access at the EDGAR website of the SEC to the Company’s Form 10-K for the
year ended December 31, 2008, and all filings subsequently made by the Company
with the SEC (hereinafter referred to collectively as the
“Reports”).  In addition, the Subscriber has received in writing from
the Company such other information concerning its operations, financial
condition and other matters as the Subscriber has requested in writing and
considered all factors the Subscriber deems material in deciding on the
advisability of investing in the Shares.

    

    (b)  Information on
Subscriber.  The Subscriber was at the time it was offered the
Shares, is on the date hereof and will be on the Closing Date an “accredited
investor”, as such term is defined in Reg. D promulgated by the SEC under the
Securities Act, is experienced in investments and business matters, has made
investments of a speculative or high risk nature and has purchased securities of
publicly-owned companies in private placements in the past and, together with
its representatives and/or trustee, as applicable, has such knowledge and
experience in financial, tax and other business matters as to enable the
Subscriber to utilize the information made available by the Company to evaluate
the merits and risks of and to make an informed investment decision with respect
to the proposed purchase.  The Subscriber has the authority and is
duly and legally qualified to purchase and own the Shares.  The
Subscriber is able to bear the risk of such investment for an indefinite period
and to afford a complete loss thereof.  The information set forth on
the signature page hereto regarding the Subscriber is accurate. Such Subscriber
does not currently hold or beneficially own any shares of the Company’s Common
Stock. The Subscriber was not formed for the specific purpose of acquiring the
Shares and is not a registered broker-dealer or an affiliate of a registered
broker-dealer.

    

    (c)  Purchase for
Investment.  On the Closing Date, the Subscriber will purchase
the Shares as principal for its own account for investment and not with a view
to any sale of other transfer thereof in contravention of the Securities
Act.

    

    (d)  Compliance with the
Securities Act.  The Subscriber understands and agrees that the
Shares have not been registered under the Securities Act or any applicable state
securities laws by reason of their issuance in a transaction that does not
require registration under the Securities Act (based in part on the accuracy of
the representations and warranties of Subscriber contained herein), and that
such Shares must be held indefinitely unless a subsequent disposition is
registered under the Securities Act or any applicable state securities laws or
is exempt from such registration.

     

    
      American
DG Energy Inc.

      Subscription
Agreement Offering 2009

    

    
      
        
        

      

      
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    (e)  Restrictive
Legend.  The Shares may bear a customary restrictive Securities
Act legend in the form specified by the Company.

    

     (f)  Communication of
Offer.  The offer to sell the Shares was directly communicated
to the Subscriber by the Company.  At no time was the Subscriber
presented with or solicited by any leaflet, newspaper or magazine article, radio
or television advertisement, or any other form of general advertising or
solicited or invited to attend a promotional meeting otherwise than in
connection and concurrently with such communicated offer.

    

    (g)  Organization; Authority;
Enforceability.  Such Subscriber, if an entity, is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization (if such “good standing” concept is recognized
in such jurisdiction) with full right, corporate,  partnership or
trust power and authority to enter into and to consummate the transactions
contemplated by this Agreement. This Agreement and other agreements delivered
together with this Agreement or in connection herewith have been duly
authorized, executed and delivered by the Subscriber and are valid and binding
agreements enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’ rights generally and
to general principles of equity; and Subscriber has full corporate, partnership,
trust or similar power and authority necessary to enter into this Agreement and
such other agreements and to perform its obligations hereunder and under all
other agreements entered into by the Subscriber relating hereto.

    

    (h)  Correctness of
Representations.  Each Subscriber represents as to such
Subscriber that the foregoing representations and warranties are true and
correct as of the date hereof and, unless a Subscriber otherwise notifies the
Company prior to the Closing, shall be true and correct as of the Closing
Date.

    

    (i)  Survival.  The
foregoing representations and warranties shall survive the Closing Date for
three years.

    

    (j)  Restriction on Short
Sales.  Each Subscriber agrees that, to the extent required by
law, it will not enter into or effect any short sale or other hedging
transaction with respect to the Company’s Common Stock.

    

    (k)  Disclosure. Each
Subscriber acknowledges and agrees that the Company does not make nor has made
any representations or warranties with respect to the Shares or the transactions
contemplated hereby other than those specifically set forth in Section 4
hereof.

    

    4.  Company Representations and
Warranties.  The Company represents and warrants to and agrees
with each Subscriber that on the date hereof:

    

    (a)  Due
Incorporation.  The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate power to own its properties and to carry on its
business as now being conducted.

    

    (b)  Outstanding
Stock.  All issued and outstanding shares of capital stock of
the Company has been duly authorized and validly issued and are fully paid and
non-assessable.

    

    (c)  Authority;
Enforceability.  The Company has full corporate power and
authority necessary to enter into and deliver this Agreement and to perform its
obligations thereunder. This Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement enforceable
against the Company in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’ rights generally and
to general principles of equity.

     

    
      American
DG Energy Inc.

      Subscription
Agreement Offering 2009

    

    
      
        
        

      

      
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     (d)  Consents.  No
consent, approval, authorization or order of any court or governmental agency or
body having jurisdiction over the Company is required for the execution by the
Company of this Agreement and compliance and performance by the Company of its
obligations hereunder, including, without limitation, the issuance and sale of
the Shares.

    

    (e)  No Violation or
Conflict.  Assuming the representations and warranties of the
Subscribers in Section 3 are true and correct, neither the issuance and sale of
the Shares nor the performance of the Company’s obligations under this Agreement
and all other agreements entered into by the Company relating thereto by the
Company will:

    

    (i)  violate,
conflict with, result in a breach of, or constitute a default (or an event which
with the giving of notice or the lapse of time or both would be reasonably
likely to constitute a default) under (A) the certificate of incorporation of
the Company, (B) to the Company’s knowledge, any decree, judgment, order, law,
treaty, rule, regulation or determination applicable to the Company of any court
or governmental agency or body having jurisdiction over the Company or over the
properties or assets of the Company, (C) the terms of any bond, debenture, note
or any other evidence of indebtedness, or any agreement, stock option or other
similar plan, indenture, lease, mortgage, deed of trust or other instrument to
which the Company is a party, by which the Company is bound, or to which any of
the properties of the Company is subject, or (D) the terms of any “lock-up” or
similar provision of any underwriting or similar agreement to which the Company
is a party except the violation, conflict, breach, or default of which would not
have a material adverse effect on the business, operations or financial
condition of the Company and its subsidiaries taken as a whole (a “Material
Adverse Effect”);

    

    (ii)  result
in the activation of any anti-dilution rights or a reset or repricing of any
debt or security instrument of any other creditor or equity holder of the
Company, nor result in the acceleration of the due date of any borrowing of the
Company; or

    

    (iii)  result in the
activation of any piggy-back registration rights of any person or entity holding
securities of the Company or having the right to receive securities of the
Company.

    

    (f)  The
Shares.  The Shares upon issuance in accordance with the terms
of this Agreement:

     

    (i)  are,
or will be, free and clear of any security interests, liens, claims or other
encumbrances, subject to restrictions upon transfer under the Securities Act and
any applicable state securities laws;

    

    (ii)  will
be duly and validly authorized, and on the date of issuance of the Shares, the
Shares will be duly and validly issued, fully paid and nonassessable;
and

    

    (iii)  will
not have been issued or sold in violation of any preemptive or other similar
rights of the holders of any securities of the Company.

    

     (g)  Litigation.  There
is no pending or, to the best knowledge of the Company, threatened action, suit,
proceeding or investigation before any court, governmental agency or body, or
arbitrator having jurisdiction over the Company that would affect the execution
by the Company or the performance by the Company of its obligations under this
Agreement, and all other agreements entered into by the Company relating
hereto.  Except as disclosed in the Reports, there is no pending or,
to the best knowledge of the Company, basis for or threatened action, suit,
proceeding or investigation before any court or governmental agency or body,
which litigation if adversely determined could have a Material Adverse
Effect.

    

    (h)  Reporting
Company.  The Company is a publicly-held company subject to
reporting obligations pursuant to the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) and its shares of Common Stock are registered
pursuant to Section 12(g) of the Exchange Act.  The Company has timely
filed all reports and other materials required to be filed under the Exchange
Act during the preceding twelve months.

     

    
      American
DG Energy Inc.

      Subscription
Agreement Offering 2009

    

    
      
        
        

      

      
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    (i)  Information Concerning the
Company.  The Reports contain all material information relating
to the Company and its operations and financial condition as of their respective
dates that is required by the Exchange Act to be disclosed
therein.  Since the date of the financial statements included in the
Reports, there has been no Material Adverse Effect not disclosed in the
Reports.  The Reports, at the time of filing, did not contain any
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 not misleading in
light of the circumstances when made.

    

     (j)  No Integrated
Offering.  Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf, has directly or indirectly made any
offers or sales of any security or solicited any offers to buy any security
under circumstances that would cause the offer of the Shares pursuant to this
Agreement to be integrated with prior offerings by the Company so as to
invalidate any exemptions under the Securities Act for the offer and sale of the
Shares.

    

    (k)  No General
Solicitation.  Neither the Company, nor any of its affiliates,
nor to its knowledge, any person acting on its or their behalf, has engaged in
any form of general solicitation or general advertising (within the meaning of
Reg. D under the Securities Act) in connection with the offer or sale of the
Shares.

    

    (l)  No Material Undisclosed
Events or Circumstances.  Since the date of the last Report
filed under the Exchange Act, no event or circumstance has occurred or exists
with respect to the Company or its business, operations or financial condition,
that, under applicable law, rule or regulation, requires the filing of a Report
prior to the date hereof that has not been so filed.

    

    (m)  Correctness of
Representations.  The Company represents that the foregoing
representations and warranties are true and correct as of the date hereof in all
material respects, and, unless the Company otherwise notifies the Subscribers
prior to the Closing, shall be true and correct in all material respects as of
the Closing Date.

    

    (n)  Survival.  The
foregoing representations and warranties shall survive the Closing Date for a
period of three years.

    

    5.  Reg. D
Offering.  The offer and issuance of the Shares to the
Subscribers is being made pursuant to the exemption from the registration
provisions of the Securities Act afforded by Section 4(2) or Section 4(6) of the
Securities Act and/or Rule 506 of Reg. D promulgated thereunder.

    

    6.  Covenants of the
Company.  The Company covenants and agrees with the Subscribers
as follows:

    

    (a)  Exchange Act
Filings.  The Company shall file a Form 8-K with the SEC
disclosing the transactions contemplated by this Agreement within the time
period specified therefor by the rules and regulations under the Exchange Act.
The Company agrees to file a Form D with respect to the Shares as required under
Reg. D.

    

    (b)  Reporting
Requirements.  Until all of the Shares have been resold or
transferred by all of the Subscribers, or, if earlier, two years after the
Closing Date, the Company will use commercially reasonable best efforts (i) not
to take any action or file any document (whether or not permitted by the
Securities Act or the Exchange Act or the rules thereunder) to terminate or
suspend the registration of the shares of the Company’s Common Stock under the
Exchange Act and (ii) to continue the listing of the shares of the Company’s
Common stock on the Over-the-Counter Bulletin Board or other established trading
market.

     

    
      American
DG Energy Inc.

      Subscription
Agreement Offering 2009

    

    
      
        
        

      

      
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    7.  Registration Rights.
The Company hereby grants the following registration rights to holders of the
Shares.

    

    (a)  Registration
Statement.  The Company shall file with the SEC not later than
thirty (30) days after the Closing Date a “shelf” registration statement on an
appropriate form (the “Registration Statement”) covering the resale of the
Shares and shall use its commercially reasonable best efforts to cause the
Registration Statement to be declared effective as soon as
practicable.

     

    (b)  Registration
Procedures. In connection with the Registration Statement, the Company
will:

    

    (i)  prepare and file with
the SEC such amendments and supplements to the Registration Statement and the
prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective with respect to each Subscriber until such time
as all of the Shares owned by such Subscriber may be resold without restriction
under the Securities Act; and

     

    (ii)  immediately notify the
Subscribers when the prospectus included in the Registration Statement is
required to be delivered under the Securities Act, of the happening of any event
of which the Company has knowledge as a result of which the prospectus contained
in such Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing. If the Company notifies the Subscribers to
suspend the use of any prospectus until the requisite changes to such prospectus
have been made, then the Subscribers shall suspend use of such
prospectus.  In such event, the Company will use its commercially
reasonable efforts to update such prospectus as promptly as is
practicable.

    

    (c)  Provision of Documents
etc.  In connection with the Registration Statement, each
Subscriber will furnish to the Company in writing such information and
representation letters with respect to itself and the proposed distribution by
it as reasonably shall be necessary in order to assure compliance with federal
and applicable state securities laws. The Company may require each Subscriber,
upon five business days’ notice, to furnish to the Company a certified statement
as to, among other things, the number of  Shares and the number of
other shares of the Company’s Common Stock beneficially owned by such Subscriber
and the person that has voting and dispositive control over such shares. Each
Subscriber covenants and agrees that it will comply with the prospectus delivery
requirements of the Securities Act, if applicable, in connection with sales of
Shares pursuant to the Registration Statement.

    

    (d)  Expenses.  All
expenses incurred by the Company in complying with this section, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel and independent public accountants for the Company,
fees of transfer agents and registrars are called “Registration Expenses.” All
underwriting discounts and selling commissions applicable to the sale of the
Shares, including any fees and disbursements of any counsel to the Subscriber,
are called “Selling Expenses.” The Company will pay all Registration Expenses in
connection with the Registration Statement.  Selling Expenses in
connection with the Registration Statement shall be borne by the applicable
Subscriber.

     

    
      American
DG Energy Inc.

      Subscription
Agreement Offering 2009

    

    
      
        
        

      

      
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    (e)  Indemnification and
Contribution.

    

    (i)  The Company will, to the
extent permitted by law, indemnify and hold harmless each Subscriber, each
officer of such Subscriber, each director of such Subscriber, and each other
person, if any, who controls such Subscriber within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such Subscriber or such other person (a “controlling person”)
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
(“Claims”) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement at the
time of its effectiveness, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances when made, and will, subject to the
limitations herein, reimburse such Subscriber and each such controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Claim; provided, however, that the Company
shall not be liable to a Subscriber to the extent that any Claim arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in conformity with information furnished by such
Subscriber or any such controlling person in writing specifically for use in the
Registration Statement or related prospectus, as amended or
supplemented.

    

    (ii)  Each Subscriber
severally but not jointly will, to the extent permitted by law, indemnify and
hold harmless the Company, and each person, if any, who controls the Company
within the meaning of the Securities Act, each underwriter, each officer of the
Company who signs the Registration Statement and each director of the Company
against all Claims to which the Company or such officer, director, underwriter
or controlling person may become subject under the Securities Act or otherwise,
insofar as such Claims arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Company and each
such officer, director, underwriter and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that such Subscriber will be liable hereunder in any such case if and only to
the extent that any such Claim arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with information pertaining to such Subscriber,
as such, furnished in writing to the Company by such Subscriber specifically for
use in the Registration Statement or related prospectus, as amended or
supplemented.

    

    (iii)  Promptly after receipt
by an indemnified party hereunder of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party hereunder, notify the indemnifying party in
writing thereof, but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to such indemnified party other
than under this section and shall only relieve it from any liability which it
may have to such indemnified party under this section except and only if and to
the extent the indemnifying party is materially prejudiced by such omission. In
case any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this section for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified parties, as a group,
shall have the right to select one separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
reasonable expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party as incurred.
The indemnifying party shall not be liable for any settlement of any such
proceeding affected without its written consent, which consent shall not be
unreasonably withheld.

     

    
      American
DG Energy Inc.

      Subscription
Agreement Offering 2009

    

    
      
        
        

      

      
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    (iv)  In order to provide for
just and equitable contribution in the event of joint liability under the
Securities Act in any case in which either (i) a Subscriber, or any controlling
person of a Subscriber, makes a claim for indemnification pursuant to this
section but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this section provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of the Subscriber or controlling person of the
Subscriber in circumstances for which indemnification is not provided under this
section, then, and in each such case, the Company and the Subscriber will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) in a manner that reflects, as
near as practicable, the economic effect of the foregoing provisions of this
section. Notwithstanding the foregoing, no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 10(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.

    

    (f)  Delivery of Unlegended
Shares.

    

    (i)  Within three business
days (such business day, the “Unlegended Shares Delivery Date”) after the
business day on which the Company has received (i) a notice that Shares have
been sold either pursuant to, and in compliance with, the Registration Statement
or Rule 144 under the Securities Act and (ii) in the case of sales under Rule
144, customary representation letters of the Subscriber and Subscriber’s broker
regarding compliance with the requirements of Rule 144, the Company at its
expense, (A) shall deliver the Shares so sold without any restrictive legends
relating to the Securities Act (the “Unlegended Shares”); and (B) shall cause
the transmission of the certificates representing the Unlegended Shares together
with a legended certificate representing the balance of the unsold Shares, if
any, to the Subscriber at the address specified in the notice of sale, via
express courier, by electronic transfer or otherwise on or before the Unlegended
Shares Delivery Date.  Transfer fees shall be the responsibility of
the Subscriber.

    

    (ii)  In lieu of delivering
physical certificates representing the Unlegended Shares, if the Company’s
transfer agent is participating in the Depository Trust Company (“DTC”) Fast
Automated Securities Transfer program, upon request of a Subscriber, so long as
the certificates therefor do not bear a legend and the Subscriber is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall use its best efforts to cause its transfer agent to electronically
transmit the Unlegended Shares by crediting the account of Subscriber’s broker
with DTC through its Deposit/Withdrawal at Custodian system.  Such
delivery must be made on or before the Unlegended Shares Delivery Date but is
subject to the cooperation of the Subscriber’s broker (the so-called DTC
participant).

    

    (iii)  Each Subscriber,
severally and not jointly, agrees that the removal of the restrictive legend
from certificates representing the Shares as set forth in this section is
predicated upon the Company’s reliance that the Subscriber will sell any Shares
pursuant to either the registration requirements of the Securities Act,
including any applicable prospectus delivery requirements, or an exemption
therefrom.

    

    8.  Miscellaneous.

    

    (a)  Notices.  All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) delivered by reputable
overnight courier service with charges prepaid, or (iii) transmitted by fax,
addressed, if to the Company, to Chief Financial Officer, American DG Energy
Inc., 45 First Avenue, Waltham, MA 02451, fax: (781) 622-1027, and if to a
Subscriber, to such Subscriber at the address set forth on the signature pages
hereto or to such other address as such party shall have specified most recently
by written notice.

     

    
      American
DG Energy Inc.

      Subscription
Agreement Offering 2009

    

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    

    (b)  Amendments;
Waivers.  No
provision of this Agreement may be waived or amended except in a written
instrument signed, in the case of an amendment, by the Company and the
Subscribers.  No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right.

    

    (c)  Legal
Fees.   Each party shall pay its own legal fees and
expenses in connection with the transactions contemplated by this
Agreement.

    

    (d)  Entire Agreement;
Assignment.  This Agreement and other documents delivered in
connection herewith represent the entire agreement between the parties hereto
with respect to the subject matter hereof.  Neither the Company nor
the Subscribers have relied on any representations not contained or referred to
in this Agreement and the documents delivered herewith.  No right or
obligation of either party shall be assigned by that party without prior notice
to and the written consent of the other party.

    

    (e)   Counterparts/Execution.  This
Agreement may be executed in any number of counterparts and by the different
signatories hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but one
and the same instrument.  Signatures to this Agreement may be
delivered by fax or by scan/email.

    

    (f)  Law Governing this
Agreement.  This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to
principles of conflicts of laws.  Any action brought by either party
against the other concerning the transactions contemplated by this Agreement
shall be brought only in the state courts of Massachusetts or in the federal
courts located in Massachusetts.  The parties and the individuals
executing this Agreement and other agreements referred to herein or delivered in
connection herewith on behalf of the Company agree to submit to the jurisdiction
of such courts and waive trial by jury.

    

    (g)  Independent Nature of
Subscribers’ Obligations and Rights.  The obligations of each
Subscriber hereunder are several and not joint with the obligations of any other
Subscriber hereunder, and no such Subscriber shall be responsible in any way for
the performance of the obligations of any other hereunder.

    

    (h)  Equitable
Adjustment.   The Shares and the Purchase Price Per Share
shall be equitably adjusted to offset the effect of stock splits, stock
dividends, and distributions of property or equity interests of the Company to
its shareholders prior to the Closing.

    

    

    [Signature
pages immediately follow]

     

    
      American
DG Energy Inc.

      Subscription
Agreement Offering 2009

    

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    

    American
DG Energy Inc.

    Signature
Page to Subscription Agreement

    dated
April 23, 2009

    

    Please
acknowledge your acceptance of the foregoing Subscription Agreement on the date
set forth above by signing and returning a copy to the undersigned whereupon it
shall become a binding agreement between us.

     

    
      
        	 	AMERICAN DG ENERGY
      INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	 	 
	 	 	Name 	 
	 	 	Title 	 
	 	 	 	 

      

       

    

    AGREED
AND ACCEPTED:

    

    SUBSCRIBER:

    

    
      	
              U.S. $2.10

            	 
      	 
      
	
              Per share purchase price
      é

            	 
      	
              Subscriber’s name é

            
	
               

              $

            	 
      	 
      
	
              Aggregate dollar amount being
      purchased é

            	 
      	 
      
	 
      	 
      	
              Subscriber’s signature
      é

               

               

            
	 
      	 
      	
              Title of signatory, if Subscriber
      is an entity é

            
	 
      	 
      	 
      
	 
      	 
      	
              Address of the Subscriber
      ê

               

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
              Email
      address:  _________________________

            
	 
      	 
      	 
      
	 
      	 
      	
              Fax
      number:     _________________________

               

            
	 
      	 
      	
              U.S. Tax ID # (if any):
      ___________________

            

    

     

    
      American
DG Energy Inc.

      Subscription
Agreement Offering 2009

    

    
      
        
        

      

      
        -10-Name of
Subscriber: ________________________

    

    Zhaoheng
Hydropower Company

     

    SUBSCRIPTION
AGREEMENT

     

    Zhaoheng
Hydropower Company

    F/19,
Unit A, JingFengCheng Building

    5015
Shennan Road

    Shenzhen
PRC 518025

    

    Ladies
and Gentlemen:

    

    1.    Subscription.

     

    (a)  The
undersigned, intending to be legally bound, hereby irrevocably subscribes for
and agrees to purchase from Zhaoheng Hydropower Company, a Nevada corporation
(the “Company”), for the
number of shares of Common Stock (the “Shares”) of the
Company indicated on the signature page hereof, for a purchase price equal to
$[__] per share.  This subscription is made in accordance with and
subject to the terms and conditions described in this Subscription Agreement
(this “Agreement”) and in
the Private Placement Memorandum (the “Memorandum”), dated
August ____, 2008, and any attachments thereto.

     

    The
Shares that are the subject of this Agreement are part of the offering (the
“Offering”) by
the Company of up to $5,689,853
of shares of Common Stock, as described in the Memorandum.

     

    The
closing of the issuance of Shares pursuant to the Offering will occur as soon as
practicable after subscriptions for up to $5,689,853 Shares (the “Purchase
Price”) are received and accepted by the Company but not later than [__], 2008,
unless extended at the Company’s sole election.  Pending the receipt
of subscriptions for the Purchase Price, the subscription proceeds will be held
in one or more special bank accounts.

     

    THE
SECURITIES BEING OFFERED HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR
UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY APPLICABLE STATE OR OTHER REGULATORY
AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THE MEMORANDUM OR ENDORSED THE
MERITS OF THE OFFERING.  ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    THE
SECURITIES ARE OFFERED PURSUANT TO EXEMPTIONS PROVIDED BY THE SECURITIES ACT,
CERTAIN STATE SECURITIES LAWS AND CERTAIN RULES AND REGULATIONS PROMULGATED
PURSUANT THERETO.  THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT (I) OUTSIDE OF THE UNITED STATES IN ACCORDANCE WITH
THE PROVISIONS OF REGULATION S (RULE 901 THROUGH 905, AND PRELIMINARY NOTES)
PROMULGATED UNDER THE SECURITIES ACT, (II) WITHIN THE UNITED STATES PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND IN COMPLIANCE
WITH ALL APPLICABLE STATE AND OTHER SECURITIES LAWS, OR (III) WITHIN THE UNITED
STATES PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND
IN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES LAWS.  HEDGING
TRANSACTIONS INVOLVING THE SHARES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH
THE SECURITIES ACT.

     

    The
undersigned understands that the Shares are being offered and issued pursuant to
exemptions from the registration requirements of the Securities
Act.  As such, the Shares are only being offered and sold to investors
who qualify as “accredited investors” (as described in Exhibit A) and/or
persons who are not “U.S. Persons” (as described in Exhibit B) and the
Company is relying on the representations made by the undersigned in this
Agreement that the undersigned qualifies as such.  The Shares will be
“restricted securities” for purposes of the United States securities laws and
cannot be transferred except as permitted under these laws.

     

    (b)           The
undersigned is delivering (1) two executed copies of the signature page of and
Exhibit A to
this Agreement and/or two executed copies of the signature page of and Exhibit B to this
Agreement, as applicable, (2) two executed copies of the signature page to any
other agreement or other document required by the Company in connection herewith
and (3) the subscription payment in the full amount of the purchase price for
the Shares subscribed for, in the form of:

     

    
      	
               
      

            	
              (i)

            	
              a
      check payable to “Zhaoheng Hydropower Company” delivered to the address of
      the Company listed in Section 8(b)(i) of this Agreement;
      or

            

    

     

    
      	
               
      

            	
              (ii)

            	
              a
      wire transfer to “Zhaoheng Hydropower Company” in accordance with the
      following instructions:

            

    

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    Wire Transfer Instructions
to Zhaoheng Hydropower Company

     

    
      
        
          
            
              
                
                  	
                          Bank:

                        	
                          ___________

                        	
                          Account
      Name:

                        
	 
      	
                          ____________

                        	 
      
	 
      	 
      	
                          Zhaoheng
      Hydropower Company

                        
	 
      	
                          ______________

                        	
                          ______
      Account

                        
	 
      	 
      	 
      
	
                          ABA
      No.:

                        	 
      	 
      
	 
      	 
      	 
      
	
                          Account
      No.:

                        	 
      	 
      
	 
      	 
      	 
      
	
                          Attention:

                        	 
      	 
      
	
                          Phone
      No.:

                        	 
      	 
      

                

              

            

          

        

      

    

    

    If this
subscription is accepted by the Company in whole or in part, then, as soon as
practicable, the Company will deliver to the undersigned the Shares subscribed
for by the undersigned, as well as a fully executed copy of this
Agreement.

     

    In the
event of an oversubscription for Shares, or for any other reason determined by
the Company in its discretion, the Company may determine to accept a
subscription for only a portion of the Shares for which the undersigned has
subscribed pursuant to this Agreement.  In such a case (i) the Company
will deliver the portion of the Shares that the Company has determined to sell
to the undersigned and retain the purchase price therefor and (ii) the balance
of the purchase price delivered to the Company by the undersigned will be repaid
to the undersigned without interest.

     

    (c)           The
undersigned may not withdraw this subscription or any amount paid pursuant
thereto except as otherwise provided below.

     

    2.    Conditions.  It
is understood and agreed that this subscription is made subject to the following
terms and conditions:

     

    (a)           The
subscription is subject to all terms and conditions set forth in this Agreement,
including those set forth in Section 1 above, and the representations and
warranties of the Company and the undersigned contained in Section 3 and Section
4 hereof, respectively, shall be true and correct in all material respects as of
the acceptance hereof by the Company;

     

    (b)           In
addition, the undersigned acknowledges and agrees that this subscription and the
Shares are subject to the terms of any other agreement or other document
required by the Company in connection herewith, furnished to and agreed to and
accepted by the undersigned, which the undersigned is executing concurrently
herewith.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    3.    Representations and
Warranties of the Company.  The Company represents and warrants
to, and agrees with, the undersigned as follows, in each case as of the date
hereof and in all material respects as of the date of any acceptance of this
subscription by the Company, except for any changes resulting solely from the
Offering:

     

    (a)           The
Company is duly organized, validly existing and in good standing under the laws
of the state of its incorporation with full corporate power and authority to
own, lease, license and use its properties and assets and to carry out the
business in which it is engaged as described in the Memorandum, and is duly
qualified to do business and is in good standing as a foreign corporation in all
states in which it owns or leases property or in which the conduct of its
business requires it to be so qualified or licensed, except, in each case, where
the absence of any of the foregoing would not have a material adverse effect on
the Company and its subsidiaries, taken as a whole.

     

    (b)           The
Company has all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement and to issue and sell the
Shares.  All necessary corporate proceedings of the Company have been
duly taken to authorize the execution, delivery, and performance of this
Agreement.  This Agreement has been duly authorized by the Company
and, when executed and delivered by the Company, will constitute the legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms.

     

    (c)           The
Shares, when issued and paid for in accordance herewith, shall be binding
obligations of the Company enforceable in accordance with their
terms.

     

    4.    Representations, Warranties
and Covenants of the Subscriber.  The undersigned hereby
represents and warrants to, and agrees with, the Company as follows, in each
case as of the date hereof and in all material respects as of the date of any
acceptance of this subscription by the Company:

     

    (a)           The
undersigned is (i) an “Accredited Investor” as that term is defined in Rule
501(a) of Regulation D promulgated under the Securities Act, and as specifically
indicated in Exhibit
A to this Agreement, and/or (ii) not a “U.S. Person” as that term is
defined in Rule 902(k) of Regulation S promulgated under the Securities Act, and
as specifically indicated in Exhibit B to this
Agreement.

     

    (b)           If
a natural person, the undersigned is (i) a bona fide resident of the state or
non-United States jurisdiction contained in the address set forth on the
signature page of this Agreement as the undersigned’s home address, (ii) at
least 21 years of age and (iii) legally competent to execute this Agreement, and
this Agreement has been duly executed and delivered by the undersigned and
constitutes the legal, valid and binding obligation of the undersigned
enforceable against the undersigned in accordance with its terms.

     

    (c)           If
an entity, the undersigned has its principal offices or principal place of
business in the state or non-United States jurisdiction contained in the address
set forth on the signature page of this Agreement, the individual signing on
behalf of the undersigned is duly authorized to execute this Agreement and this
Agreement has been duly executed and delivered by the undersigned and
constitutes the legal, valid and binding obligation of the undersigned
enforceable against the undersigned in accordance with its terms.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    (d)           The
undersigned has received, read carefully and is familiar with this Agreement,
the Memorandum and any attachments thereto.  The undersigned
understands and acknowledges that the information included in such documents is
not complete and, among other things, does not include certain information that
would be required in offering documents with respect to an offering of
securities registered under the United States securities laws or in disclosure
documents filed by public companies which are subject to the periodic reporting
requirements of the United States securities.

     

    (e)           The
undersigned, together with the undersigned’s professional advisor, is familiar
with the Company’s business, plans and financial condition, the terms of the
Offering and any other matters relating to the Offering; the undersigned has
received all materials which have been requested by the undersigned; the
undersigned has had a reasonable opportunity to ask questions of the Company and
its representatives; and the Company has answered to the satisfaction of the
undersigned all inquiries that the undersigned or the undersigned’s
representatives have put to it.  The undersigned has had access to all
additional information that the undersigned has deemed necessary to verify the
accuracy of the information set forth in this Agreement and the Memorandum and
any other materials furnished herewith or therewith, and has taken all the steps
necessary to evaluate the merits and risks of an investment as proposed under
this Agreement and the Memorandum.

     

    (f)           The
undersigned acknowledges that this subscription is and shall be, subject to the
other terms and conditions hereof, irrevocable and this subscription and the
agreements contained herein shall survive the insolvency, death or disability of
the undersigned (as applicable), except that the undersigned shall have no
obligation hereunder in the event that its subscription is for any reason
rejected or the Offering is cancelled or terminated by the Company, which the
Company reserves the right to do in its sole and absolute discretion and for any
reason.

     

    (g)           The
undersigned or the undersigned’s purchaser representative has such knowledge and
experience in finance, securities, taxation, investments and other business
matters so as to be able to protect the interests of the undersigned in
connection with this transaction.

     

    (h)           The
undersigned understands the various risks of an investment in the Company as
proposed herein and can afford to bear such risks, including, without
limitation, the risks of losing the entire investment.

     

    (i)           The
undersigned has been advised by the Company and understands that none of the
Shares being offered have been registered under the Securities Act, that the
Shares are being offered and issued on the basis of the statutory exemption
provided by Section 4(2) of the Securities Act, Regulation D and Regulation S
promulgated thereunder, or both, relating to transactions by an issuer not
involving any public offering and under similar exemptions under certain state
securities laws; that this transaction has not been reviewed by, passed on or
submitted to any United States Federal or state agency or self-regulatory
organization where an exemption is being relied upon; and that the Company’s
reliance thereon is based in part upon the representations made by the
undersigned in this Agreement.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    (j)           The
undersigned acknowledges that the undersigned has been informed by the Company
of, or is otherwise familiar with, the nature of the limitations imposed by the
Securities Act and the rules and regulations thereunder on the transfer of the
Shares acquired hereunder.  In particular, the undersigned agrees that
no sale, assignment or transfer of any of the Shares acquired by the undersigned
shall be valid or effective, and the Company shall not be required to give any
effect to such a sale, assignment or transfer, unless the sale, assignment or
transfer is (i) registered under the Securities Act, it being understood that
the Shares are not currently registered for sale and that the Company has no
obligation or intention to so register the Shares; (ii) in accordance with all
the requirements and limitations of Rule 144 under the Securities Act, or (iii)
otherwise exempt from registration under the Securities Act, including
Regulation S promulgated thereunder.  The undersigned further
understands that an opinion of counsel and other documents may be required to
transfer the Shares.

     

    (k)           The
undersigned acknowledges that the Shares to be acquired will be subject to a
stop transfer order, and any certificate or certificates evidencing the Shares
shall bear the following or a substantially similar legend and such other
legends as may be required by state blue sky laws:

     

    “THE
SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF EXCEPT (I) OUTSIDE OF THE UNITED STATES IN ACCORDANCE WITH THE
PROVISIONS OF REGULATION S (RULE 901 THROUGH 905, AND PRELIMINARY NOTES)
PROMULGATED UNDER THE SECURITIES ACT, (II) WITHIN THE UNITED STATES PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND IN COMPLIANCE
WITH ALL APPLICABLE STATE AND OTHER SECURITIES LAWS, OR (III) WITHIN THE UNITED
STATES PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND
IN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES LAWS.  HEDGING
TRANSACTIONS INVOLVING THE SHARES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH
THE SECURITIES ACT.”

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    (l)       
     The undersigned will acquire the Shares for the
undersigned’s own account (or, if such individual is married, for the joint
account of the undersigned and the undersigned’s spouse either in joint tenancy,
tenancy by the entirety or tenancy in common) for investment and not with a view
to the sale or distribution thereof or the granting of any participation therein
in violation of the securities laws, and has no present intention of
distributing or selling to others any of such interest or granting any
participation therein in violation of the securities laws.

     

    (m)           No
representation, guarantee or warranty has been made to the undersigned by any
broker, the Company, any of the officers, directors, stockholders, partners,
employees or agents of any of them, or any other persons, whether expressly or
by implication, that:

     

    
      	
               
      

            	
              (i)

            	
              the
      Company or the undersigned will realize any amount or type of
      consideration, profit or loss as a result of the Company’s activities or
      the undersigned’s investment in the Company;
or

            

    

     

    
      	
               
      

            	
              (ii)

            	
              the
      past performance or experience of the management of the Company, or of any
      other person, will in any way indicate the future results of an investment
      in the Company or of the Company’s
activities.

            

    

     

    (n)           No
oral or written representations have been made other than as stated in this
Agreement, and to the extent that certain information, which is not necessarily
complete, is included in the Memorandum and any attachments thereto, and no oral
or written information furnished to the undersigned or the undersigned’s
advisor(s) in connection with the Offering were in any way inconsistent with the
information stated in the Memorandum and any such attachments.

     

    (q)           The
undersigned is not subscribing for the Shares as a result of or subsequent to
any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
presented at any seminar or meeting, or any solicitation of a subscription by a
person other than a representative of the Company with which the undersigned had
a pre-existing relationship in connection with investments in securities
generally.

     

    (r)           The
undersigned is not relying on the Company with respect to the tax and other
economic considerations of an investment.

     

    (s)           The
undersigned understands that the net proceeds from all subscriptions paid and
accepted pursuant to the Offering (after deduction for commissions, discounts
and expenses of the Offering) will be used in all material respects for the
purposes set forth in the Memorandum.

     

    (t)           Without
limiting any of the undersigned’s other representations and warranties
hereunder, the undersigned acknowledges that the undersigned has reviewed and is
aware of the risks described in the Memorandum.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    (u)           The
undersigned acknowledges that the representations, warranties and agreements
made by the undersigned herein shall survive the execution and delivery of this
Agreement and the purchase of the Shares.

     

    (v)           The
undersigned has consulted the undersigned’s own financial, legal and tax
advisors with respect to the economic, legal and tax consequences of an
investment in the Shares and has not relied on the Memorandum or the Company,
its officers, directors or professional advisors for advice as to such
consequences.

     

    (w)           Except
as set forth on the signature page hereto, the undersigned has not engaged any
broker or other person or entity that is entitled to a commission, fee or other
remuneration as a result of the execution, delivery or performance of this
Agreement.

     

    5.    Indemnification.  Each
party to this Agreement understands the meaning and legal consequences of the
representations and warranties contained in Sections 3 and 4 hereof, and agrees
to indemnify and hold harmless the other party and each officer, director,
partner, employee, agent and controlling person of each of them, past, present
or future, from and against any and all loss, damage or liability due to or
arising out of a breach of any such representation or warranty contained
herein.

     

    6.    Transferability.  Neither
this Agreement, nor any interest of the undersigned herein, shall be assignable
or transferable by the undersigned in whole or in part except by operation of
law.  Any attempt to assign or transfer this Agreement or any interest
therein other than by operation of law shall be void.

     

    7.    Confidentiality.  The
undersigned acknowledges and agrees that all information, written and oral,
concerning the Company furnished from time to time to the undersigned,
including, without limitation, the Memorandum has been and is provided to the
undersigned on a confidential basis.  The undersigned further
acknowledges and agrees that the undersigned may not disclose such information,
other than to the extent that (a) the information becomes publicly available
other than as a result of disclosure in violation of the provisions of this
Agreement or of the Memorandum or (b) such disclosure is required by law, to
anyone other than (i) the undersigned’s officers, directors, employees, legal
counsel, accountants or authorized agents or advisors who have a need to know
such information in connection with evaluating whether the undersigned should
enter into this Agreement and acquire the Shares, each of whom have agreed to
the provisions of this Section 7, and (ii) other stockholders of  the
Company and their representatives who have similarly agreed to the provisions of
this Section 7.  The provisions of this Section 7 shall survive the
purchase of the Shares and/or the termination of this Agreement.

     

    8.    Miscellaneous.

     

    (a)           This
Agreement, including the exhibits hereto, together with any other agreement or
other document required by the Company in connection with herewith and fully
executed and delivered by the Company, sets forth the entire understanding of
the parties with respect to the subject matter hereof, supersedes all existing
agreements among them concerning such subject matter, and may be modified only
by a written instrument duly executed by the party to be charged.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    (b)           Except
as otherwise specifically provided herein, any notice or other communication
required or permitted to be given hereunder shall be in writing and shall be
mailed by certified mail, return receipt requested, or by Federal Express,
Express Mail or similar overnight delivery or courier service or delivered (in
person or by telecopy, telex or similar telecommunications equipment) against
receipt to the party to whom it is to be given,

     

    
      	
               
      

            	
              (i)

            	
              if
      to the Company, to:

            

    

     

    Zhaoheng
Hydropower Company

    F/19,
Unit A, JingFengCheng Building

    5015
Shennan Road

    Shenzhen
PRC 518025

    Attention:  Alan
Peng

    Confirm:
011-86-755-82070966

     

    
      	
               
      

            	
              (ii)

            	
              if
      to the undersigned, at the address set forth on the signature page
      hereof,

            

    

     

    or in any
case, to such other address as the party shall have furnished to the other party
in writing in accordance with the provisions of this Section
8(b).  Any notice given by means permitted by this Section 8(b) shall
be deemed given at the time of receipt thereof at the address specified in this
Section 8(b).

     

    (c)           This
Agreement shall be binding upon and inure to the benefit of the parties hereto,
the successors and assigns of the Company, and the permitted successors,
assigns, heirs and personal representatives of the undersigned, not including,
however, any transferees of the Shares.

     

    (d)           The
headings in this Agreement are solely for convenience of reference and shall be
given no effect in the construction or interpretation of this
Agreement.

     

    (e)           This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

     

    (f)           This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, without giving effect to principles governing conflicts of
law that would defer to the substantive law of another
jurisdiction.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    (g)           This
Agreement does not create, and shall not be construed as creating, any rights
enforceable by any person not a party to this Agreement (except as specifically
provided in this Agreement).

     

    (h)           EACH PARTY HERETO WAIVES TRIAL BY
JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR ANY
BREACH OR ALLEGED BREACH HEREOF.

     

    [Signature
pages follow]

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    SIGNATURE
PAGE

     

    IN WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the date this subscription has
been accepted by the Company as set forth below.

     

    
      
        
          
            	
                    
                      Number
      of Shares Subscribed For:

                      _______________

                    

                  	
                    
                      By:           ____________________

                    

                  
	 
      	 
      
	
                    
                      ___________________________

                    

                  	
                    Name: Guosheng
      Xu

                  
	
                    
                      Subscriber

                    

                  	 
      
	 
      	 
      
	
                    
                      __________________________

                    

                  	
                    Title:  
      Chairman and CEO

                  
	
                    
                      Identification
      Number

                    

                  	 
      
	 
      	 
      
	
                    
                      Address:

                    

                  	 
      
	 
      	 
      
	
                    Telephone:

                    
                      Fax:

                    

                  	 
      

          

        

      

    

     

    If the
Shares will be held as joint tenants, tenants in common, or community property,
please complete the following:

     

    
      
        
          
            
              
                	 
      	 
      	 
      
	 
      	 
      	
                        Print
      name of spouse or other co-subscriber

                      
	 	 	 
	 
      	 
      	 
      
	 
      	 
      	
                        Signature
      of spouse or other co-subscriber

                      
	 	 	 
	 
      	 
      	 
      
	 
      	 
      	
                        Print
      manner in which Shares will be
held

                      

              

            

          

        

      

    

    

    Social
Security Number or other Taxpayer Identification
Number:_____________________

     

    If the
Shares have been purchased through a broker or other intermediary, please
identify such entity:

     

    Please
complete Exhibit A and/or Exhibit B for each subscriber, as
applicable.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ACCEPTANCE
OF SUBSCRIPTION

    
      
        
          	 
      	 
      
	 
      	 
      
	 
      	
                  Name
      of Subscriber

                
	 
      	 
      
	 
      	 
      
	 
      	 
      
	
                  ACCEPTED
      BY:

                	 
      
	 
      	 
      
	
                  ZHAOHENG
      HYDROPOWER

                  COMPANY

                	 
      
	 
      	 
      
	
                  By:

                	 
      	 
      
	
                  Name:

                	
                  Guosheng
      Xu

                	 
      
	
                  Title:

                	
                  Chairman
      and CEO

                	 
      
	
                  Date:

                	 
      	 
      

        

      

    

    

    Accepted
for __________________ Number of Shares

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    EXHIBIT
A

    ACCREDITED
INVESTOR STATUS

     

    The
subscriber represents that such subscriber is an Accredited Investor on the
basis that such subscriber is (check one):

     

    _____(i)  A
bank as defined in Section 3(a)(2) of the Securities Act, or a savings and loan
association or other institution as defined in Section 3(a)(5)(A) of the
Securities Act, whether acting in its individual or fiduciary capacity; a broker
dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934;
an insurance company as defined in Section 2(13) of the Securities Act; an
investment company registered under the Investment Company Act of 1940 (the
“Investment Company Act”) or a business development company as defined in
Section 2(a)(48) of the Investment Company Act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958; a plan established and
maintained by a state, its political subdivisions or any agency or
instrumentality of a state or its political subdivisions for the benefit of its
employees, if such plan has total assets in excess of $5,000,000; an employee
benefit plan within the meaning of the Employee Retirement Income Security Act
of 1974 (“ERISA”), if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of ERISA, which is either a bank, savings and loan
association, insurance company, or registered investment advisor, or if the
employee benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that are
accredited investors.

     

    _____(ii)  A
private business development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940.

     

    _____(iii)  An
organization described in Section 501(c)(3) of the Internal Revenue Code,
corporation, Massachusetts or similar business trust, or partnership, not formed
for the specific purpose of acquiring the securities offered, with total assets
in excess of $5,000,000.

     

    _____(iv)  A
director or executive officer of the Company.

     

    _____(v)  A
natural person whose individual net worth, or joint net worth with that person’s
spouse, at the time of his or her purchase exceeds $1,000,000.

     

    _____(vi)  A
natural person who had an individual income in excess of $200,000 in each of the
two most recent years or joint income with that person’s spouse in excess of
$300,000 in each of those years and has a reasonable expectation of reaching the
same income level in the current year.

     

    _____(vii)  A
trust, with total assets in excess of $5,000,000, not formed for the specific
purpose of acquiring the securities offered, whose purchase is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) (i.e., a person who has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the prospective
investment).

     

    _____(viii)  An
entity in which all of the equity owners are accredited
investors.  (If this alternative is checked, the undersigned must
identify each equity owner and provide statements signed by each demonstrating
how each is qualified as an accredited investor.  Further, the
undersigned represents that it has made such investigation as is reasonably
necessary in order to verify the accuracy of this alternative.)

     

    
      
        
          
            
              
                
                  
                    	 
      	
                            Confirmed:

                          	 
	 
      	 
      	 
	 
      	 
      	 
	 
      	
                            Subscriber

                          	 
	
                            By:

                          	 
      	 
	
                            Name:

                          	
                            Guosheng
      Xu

                          	 
	
                            Title:

                          	
                            Chairman
      and CEO

                          	 

                  

                

              

            

          

        

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    EXHIBIT
B

    NON-U.S.
PERSON STATUS

     

    The
subscriber represents that such subscriber is not a “U.S. Person” on the basis
that such subscriber is (check all that apply):

     

    _____(i)  Not
a “U.S. Person” as defined in Rule 902 of Regulation S (“Regulation S”) under
the Securities Act.

     

    _____(ii)  A
broker/dealer, investment advisor or other person that has discretionary
authority to engage in securities transactions for others in the ordinary course
of business and hereby certifies that: (a) all purchases of securities will
be for the benefit or account of another individual or entity (the “Purchaser”)
as to which such subscriber has authority to make, and does make, the statements
contained herein, and not for such subscriber’s own account, and (b) the
Purchaser is not a U.S. person, as
defined in Rule 902 of Regulation S under the Securities Act, and is not an
estate or trust.

     

    _____(iii)  Aware
that the sale of Shares is being made wholly or partially in reliance on
Regulation S under the Securities Act and certifies that (1) the undersigned is
not an “affiliate” of the Company (as that term is defined in Rule 144 under the
Securities Act), (2) the offer of such securities was not made to a person in
the United States and at the time the subscription was originated, the
undersigned was outside the United States, and no transaction has been
prearranged with a buyer in the United States, (3) neither the Company nor any
affiliate nor any person acting on any of their behalf has engaged in any
“directed selling efforts” in the United States in connection with such offer
and sale of such securities, (4) such transaction is bona fide and not for the
purpose of avoiding the restrictions under the Securities Act, (5) it is not
intended that such securities will be replaced with fungible unrestricted
securities, and (6) such transaction is not a transaction, or part of a series
of transactions which, although in technical compliance with Regulation S, is
part of a plan or scheme to evade the registration provisions of the
Act.  Terms used herein and not defined have the meanings given to
them by Regulation S.

     

    
      
        
          
            
              
                
                  	 
      	
                          Confirmed:

                        	 
	 
      	 
      	 
	 
      	 
      	 
	 
      	
                          Subscriber

                        	 
	
                          By:

                        	 
      	 
	
                          Name:

                        	
                          Guosheng
      Xu

                        	 
	
                          Title:

                        	
                          Chairman
      and CEO

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