Document:

REGISTRATION
      RIGHTS AGREEMENT

     

    This
      Registration Rights Agreement (this "Agreement")
      is made
      and entered into as of August 20, 2008, by and among China New Energy Group
      Company, a Delaware corporation (the "Company"),
      and
      China Hand Fund I, LLC, a Delaware limited liability company (“Purchaser”).

     

    This
      Agreement is made in connection with the Series A Convertible Preferred Stock
      Securities Purchase Agreement, dated as of the date hereof by and between the
      Company and Purchaser (the "Purchase
      Agreement").
      

     

    The
      Company and Purchaser hereby agree as follows: 

     

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

     

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

     

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

     

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

     

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

     

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

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

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

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

    "Shares"
      means
      (i) the shares of Common Stock issuable upon conversion of the Series A
      Preferred Stock and shares of Common Stock issuable upon exercise of the
      Warrants issued to Purchaser pursuant to the Purchase Agreement.

     

    2. Registration.

     

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

    
      
        
        

      

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

     

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

    
      
        
        

      

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

     

    (e) Failure
      to File Registration Statement and Other Events.
      The
      Company and Purchaser agree that the Holders will suffer damages if a
      Registration Statement is not filed on or prior to the applicable Filing Date,
      or not declared effective by the Commission on or prior to the applicable
      Effectiveness Date and maintained in the manner contemplated herein during
      the
      applicable Effectiveness Period or if certain other events occur. The Company
      and the Holders further agree that it would not be feasible to ascertain the
      extent of such damages with precision. Accordingly, if: (i) a Registration
      Statement is not filed on or prior to its Filing Date covering the Registrable
      Securities required under this Agreement to
      be
      included therein (if the Company files a Registration Statement without
      affording the Holders the opportunity to review and comment on the same as
      required by Section 3(a) hereof, the Company shall not be deemed to have
      satisfied this clause (i)), or (ii) a Registration Statement is not declared
      effective by the Commission on or prior to its required Effectiveness Date
      or if
      by the Business Day immediately following the Effective Date, the Company shall
      not have filed a “final” prospectus for the Registration Statement with the
      Commission under Rule 424(b) in accordance with the terms hereof (whether or
      not
      such a prospectus is technically required by such Rule), (iii) after its
      Effective Date, without regard for the reason thereunder or efforts therefor,
      such Registration Statement ceases for any reason to be effective and available
      to the Holders as to all Registrable Securities to which it is required to
      cover
      at any time prior to the expiration of its Effectiveness Period for more than
      an
      aggregate of 30 Trading Days (which need not be consecutive), or (iv) trading
      in
      the Common Stock shall be suspended or if the Common Stock is no longer quoted
      on or is delisted from the OTC Bulletin Board (or other principal exchange
      on
      which the Common Stock is listed or traded) for any reason for more than three
      (3) Business Days in the aggregate (any
      such
      failure or breach being referred to as an "Event,"
      and for
      purposes of clauses (i) or (ii) the date on which such Event occurs, or for
      purposes of clause (iii) and (iv) the date which such specified period is
      exceeded, being referred to as "Event
      Date"),
      then
      in addition to any other rights the Holders may have hereunder or under
      applicable law, on each such Event Date and on each monthly anniversary of
      each
      such Event Date (if the applicable Event shall not have been cured by such
      date)
      until the applicable Event is cured, the Company shall pay to each Holder an
      amount in cash, as partial liquidated damages and not as a penalty, equal to
      1.0% of the aggregate Investment Amount paid by such Holder for Shares pursuant
      to the Purchase Agreement. The
      parties agree that in no event will the Company be liable for liquidated damages
      under this Agreement in excess of 1.0% of the aggregate Purchase Price in any
      30-day period and the maximum aggregate liquidated damages payable to a Holder
      under this Agreement (which maximum amount payable shall only be relevant to
      amounts paid pursuant to this Section 2(e) and shall expressly not apply to
      any
      amounts payable under any other section of this or any other Transaction
      Document) shall be fifteen percent (15%) of the aggregate Purchase Price paid
      by
      Purchaser pursuant to the Purchase Agreement.
      The
      partial liquidated damages pursuant to the terms hereof shall apply on a daily
      pro-rata basis for any portion of a month prior to the cure of an Event (except
      in the case of the first Event Date), and shall cease to accrue (unless earlier
      cured) upon the expiration of the Effectiveness Period. The Company will not
      be
      liable for liquidated damages under this Agreement with respect to any
      securities issued to a placement agent as compensation or partial
      compensation.

    
      
        
        

      

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

     

    3. Registration
      Procedures.

     

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

     

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

    
      
        
        

      

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

     

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

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

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

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    5. Indemnification.

     

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

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

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

     

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

     

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

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

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

     

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

     

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

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    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) No
      Piggyback on Registrations.
      Neither
      the Company nor any of its security holders (other than the Holders in such
      capacity pursuant hereto) may include securities of the Company in a
      Registration Statement other than the Registrable Securities without the consent
      of the remaining Holders of a majority of the then outstanding Registrable
      Securities, and the Company shall not during the Effectiveness Period enter
      into
      any agreement providing any such right to any of its security
      holders.

     

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

     

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

     

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

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

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

     

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

    
      

      
        	 	
                If
                  to the Company:

              	
                China
                  New Energy Group CompanyFloor 17, Hongji Building,

                Jing
                  Wei Road

              
	 	 	
                Hebei
                  District, Tianjin

              
	 	 	
                People’s
                  Republic of China 300010

              

      

      

      
        	 	
                With
                  a copy to:

              	
                Thelen
                  Reid Brown Raysman & Steiner LLP

              
	 	 	
                701
                  Eighth Street, NW

              
	 	 	
                Washington,
                  DC 20001

              
	 	 	
                Facsimile:
                  (202) 654-1804

              
	 	 	
                Attn.:
                  Louis A. Bevilacqua, Esq.

              

      

      

      
        	 	
                If
                  to a Purchaser:

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

              

      

      

      
        	 	
                With
                  a copy to:

              	
                Guzov
                  Ofsink, LLC

              
	 	 	
                600
                  Madison Ave., 14th Floor

              
	 	 	
                New
                  York, New York 10022

              
	 	 	
                Facsimile:
                  (212)688-7273

              
	 	 	
                Attn.:
                  Darren L. Ofsink, Esq.

              
	 	 	 

      

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      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

              

      

       

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

    

     

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

     

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

     

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

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

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    SIGNATURE
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        16

        
          

        

      

      
        
        

      

    

    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/
                Shang Jiaji

            
	 	
              Name:

            	
              Shang
                Jiaji

            
	 	
              Title:

            	
              Chairman
                of the Board,

            
	 	 	
              Chief
                Executive Officer

            

    

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGES OF PURCHASER TO FOLLOW]

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

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

    

    
      	
              NAME OF INVESTING ENTITY

            
	 
	
              CHINA HAND FUND I, LLC

            
	 	 
	
              By:

            	
              /s/
                John D. Kuhns

            
	 	
              Name:
                

            	
              John
                D. Kuhns

            
	 	
              Title:
                

            	
              Member-Manager

            
	 	 	 
	
              ADDRESS FOR NOTICE

            
	 	 	 
	
              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

            

    

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    Annex A

     

    Plan of
      Distribution

     

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

     

    
      	
              ·

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

            

    

     

    
      	
              ·

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

            

    

     

    
      	
              ·

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

            

    

     

    
      	
              ·

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

            

    

     

    
      	
              ·

            	
              privately
                negotiated transactions;

            

    

     

    
      	
              ·

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

            

    

     

    
      	
              ·

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

            

    

     

    
      	
              ·

            	
              a
                combination of any such methods of sale;
                and

            

    

     

    
      	
              ·

            	
              any
                other method permitted pursuant to applicable
                law.

            

    

     

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

     

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

     

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

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

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

     

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

     

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

     

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

     

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

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    Annex
      B

     

    CHINA
      NEW ENERGY GROUP COMPANY

     

    Selling
      Securityholder Notice and Questionnaire

     

    The
      undersigned beneficial owner of common stock (the “Common
      Stock”)
      of
      China New Energy Group Company, a Delaware corporation (the “Company”),
      understands that the Company has filed or intends to file with the Securities
      and Exchange Commission (the “Commission”)
      a
      Registration Statement for the registration and resale of the Registrable
      Securities, in accordance with the terms of the Registration Rights Agreement,
      dated as of August 20, 2008 (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:

              	  

      

    

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    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 o
No  o

     

    
      	 	
              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
o  
No
o

     

    
      	 	
              (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
o  
No
o

     

    
      	 	
              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:

            

    

     

    
      	 

	 

	 

    

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    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:

            	 

    

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    

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

    

    Laura
      H. Luo, Esq.,

    Guzov
      Ofsink, LLC

    600
      Madison Avenue, 14th
      Floor

    New
      York, NY 10022

    Fax:
      (212) 688-7273

    
      
        
        

      

      
        24SECURITIES
      ESCROW AGREEMENT

     

    THIS
      SECURITIES ESCROW AGREEMENT (the “Agreement”),
      dated
      as of August 20, 2008, is entered into by and among China New Energy Group
      Company, a Delaware corporation (the “Company”),
      China
      Hand Fund I, LLC, a Delaware limited liability company, for itself and as
      representative (the “Purchaser
      Representative”)
      of any
      additional investors which may become parties to this Agreement (together with
      their respective successors and assigns, each, a “Purchaser”
and
      collectively, the “Purchasers”),
      and
      Escrow, LLC, with an address at 360 Main Street, P.O. Box 391, Washington,
      Virginia 22747 (the “Escrow
      Agent”).
      Capitalized terms used, but not defined herein shall have the meanings set
      forth
      in the Purchase Agreement (as defined below).

     

    WITNESSETH:

     

    WHEREAS,
      the Purchaser Representative will be purchasing on the date hereof (the
“First
      Closing Date”)
      from
      the Company, shares of the Company’s Series A Convertible Preferred Stock, par
      value $0.001 per share (the “Series
      A Preferred”),
      convertible into shares of the Company’s common stock, par value $0.001 per
      share (the “Common
      Stock”),
      and
      certain common stock purchase warrants (the “Warrants”)
      pursuant to a Series A Convertible Preferred Stock Purchase Agreement dated
      as
      of the First Closing Date by and among the Company and the Purchaser
      Representative (the “Purchase
      Agreement”),
      and
      it is contemplated that each of the Purchase Agreement and this Agreement may
      hereafter be amended to provide for the purchase of additional shares of Series
      A Preferred and Warrants (collectively, the “Securities”)
      by
      additional Purchasers at one or more additional closings after the First Closing
      Date (each, a “Subsequent
      Closing”
and
      collectively, the “Subsequent
      Closings”)
      and
      the deposit of additional shares of Series A Preferred in escrow by the Company
      and the additional Purchasers;

     

    WHEREAS,
      as an inducement to the Purchaser Representative to enter into the Purchase
      Agreement, and for additional Purchasers to purchase Securities at one or more
      Subsequent Closings, the Company has agreed (i) immediately prior to the First
      Closing Date and the date of each Subsequent Closing to issue and deposit the
      number of shares of Series A Preferred Stock equal to 30% of the number of
      shares of Series A Preferred Stock issued under the Purchase Agreement and
      in
      each Subsequent Closing to be held by the Escrow Agent for the benefit of the
      Purchasers in the event the Company fails to achieve any of the following
      financial performance thresholds for the 12-month periods ending December 31,
      2008 (“2008”)
      and
      December 31, 2009 (“2009”),
      and
      (ii) upon distribution to Purchasers of any Make Good Escrow Shares for
2008,
      if any,
      the Company shall replenish the Make Good Escrow Shares by issuing and
      delivering the number of shares of Series A Preferred Stock equal to the number
      of Series A Preferred Stock so distributed to be held in escrow for 2009
      distributions:

     

    (a) In
      2008,
      (i) audited and consolidated After-Tax Net Income of at least $4.3
      million1,
      or (ii)
      Earnings Per Share on a Fully-Diluted Basis of at least $[$0.0261] (each of
      the
      performance thresholds set forth in (i) and (ii) above shall be individually
      referred to herein as a “2008
      Target Number”
and
      they are collectively referred to herein as the “2008
      Performance Threshold”);

     

    
      
        

      

       

      1
        Drafting
        Note:
        Company
        to confirm ATNI and EPS numbers and all other financial metrics throughout
        agreement.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) In
      2009,
      (i) After-Tax Net Income of at least (w) $6.0 million, if the Company receives
      at least $5.4 million in additional gross proceeds from the sale of Securities
      at Subsequent Closings held not later than 30 days after the filing of the
      Company’s Annual Report on Form 10-K for the fiscal year ending December 31,
      2008 (the “10-K
      Filing Date”)
      or (x)
      $4.5 million, if the Company does not receive at least $5.4 million in
      additional gross proceeds from the sale of Securities at Subsequent Closings
      held on or prior to the 10-K Filing Date or (ii) Earnings Per Share on a
      Fully-Diluted Basis of at least (y) $[0.0294], if the Company receives at least
      $5.4 million in additional gross proceeds from the sale of Securities at
      Subsequent Closings held on or prior to the 10-K Filing Date or (z) $[0.0273],
      if the Company does not receive at least $5.4 million in additional gross
      proceeds from the sale of Securities at Subsequent Closings held on or prior
      to
      the 10-K Filing Date (the performance thresholds set forth in (i) and (ii)
      above
      shall be individually referred to herein as a “2009
      Target Number”
and
      they are collectively referred to herein as the “2009
      Performance Threshold”
and
      together with the 2008 Performance Threshold, the “Performance
      Thresholds”
and
      each of the 2008 Target Number and 2009 Target Number is individually referred
      to herein as a “Target
      Number”
and
      collectively referred to herein as the “Target
      Numbers”);
      

     

    WHEREAS,
      as a further inducement to the Purchaser Representative to enter into the
      Purchase Agreement, and for additional Purchasers to purchase Securities at
      one
      or more Subsequent Closings, the Company has agreed immediately prior to the
      First Closing Date and the date of each Subsequent Closing to place the Listing
      Escrow Shares (as hereinafter defined) into escrow for the benefit of the
      Purchasers in the event that shares of Common Stock are not listed and trading
      on a National Stock Exchange by January 31, 2010;

     

    WHEREAS,
      as an incentive to the members of management of the Company set forth on Exhibit
      A attached hereto (“Management”)
      to
      cause the Company to meets its financial projections, the Purchaser
      Representative has agreed to place Purchaser Deposited Escrow Shares (as
      hereinafter defined) into escrow for the benefit of the Purchasers and each
      additional Purchaser which becomes a party to this Agreement will deposit
      additional Purchaser Deposited Escrow Shares into escrow to transfer to
      Management in the event the Company achieves all of the 2008 Performance
      Threshold and the 2009 Performance Threshold; and 

     

    WHEREAS,
      the Company and the Purchaser Representative have requested, and the Additional
      Purchasers, by becoming parties to this Agreement will request, that the Escrow
      Agent hold the Company Deposited Escrow Shares (as herein after defined) and
      the
      Purchaser Deposited Escrow Shares (as hereinafter defined) on the terms and
      conditions set forth in this Agreement and the Escrow Agent has agreed to act
      as
      escrow agent pursuant to the terms and conditions of this
      Agreement.

     

    NOW,
      THEREFORE, in consideration of the covenants and mutual promises contained
      herein and other good and valuable consideration, the receipt and legal
      sufficiency of which are hereby acknowledged and intending to be legally bound
      hereby, the parties agree as follows:

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      I

     

    TERMS
      OF
      THE ESCROW

     

    1.1. The
      parties hereby agree to establish an escrow account with the Escrow Agent
      whereby the Escrow Agent shall hold the Company Deposited Escrow Shares and
      the
      Purchaser Deposited Escrow Shares as contemplated by this
      Agreement.

     

    1.2. Upon
      the
      execution of this Agreement, the Company shall issue and deliver to the Escrow
      Agent a stock certificate or stock certificates evidencing an aggregate of
      557,212 shares of Series A Preferred (which number of shares of Series A
      Preferred is equivalent to 30% of the number of shares of Series A Preferred
      to
      be issued and sold to the Purchaser Representative on the First Closing Date
      and
      which shares of Series A Preferred may be converted into 19,502,412 shares
      of
      Common Stock). Immediately prior to each Subsequent Closing, the Company shall
      issue and deliver to the Escrow Agent a stock certificate or stock certificates
      evidencing an aggregate number of shares of Series A Preferred equal to 30%
      of
      the number of shares of Series A Preferred to be issued and sold to the
      Additional Purchasers on the closing date of the Subsequent Closing). In
      addition, the Company will issue a stock certificate or stock certificates
      evidencing such additional number of shares of Series A Preferred or Common
      Stock as may be required to be deposited pursuant to Section 1.3(iv) hereof.
      All
      of the shares of Series A Preferred described in this Section 1.2 shall be
      collectively referred to in this Agreement as the “Company
      Deposited Escrow Shares”).
      All
      Company Deposited Escrow Shares shall be accompanied by stock powers executed
      in
      blank with signature medallion guaranteed.

     

    1.3. The
      parties hereby agree that the Company Deposited Escrow Shares shall be delivered
      based on the achievement of the Performance Thresholds as set forth
      below:

    

    (i) If
      either
      or both of the After-Tax Net Income or Earnings Per Share on a Fully-Diluted
      Basis for 2008 or 2009 is less than the applicable Target Number for such year,
      then if the Percentage Shortfall (as hereinafter defined) for such year, is
      less
      than
      fifty percent (50%), but equal or greater than fifteen percent (15%), then
      an
      Adjustment Percentage for such year shall be determined. For purposes of this
      Section, the “Percentage
      Shortfall”
shall
      mean the greater of (A) the percentage obtained by dividing
      (w) the
      amount of the shortfall of the After-Tax Net Income from the applicable Target
      Number by
      (x) the
      applicable Target Number for such year or (B) the percentage obtained by
dividing
      (y) the
      amount of the shortfall of the Earnings
      Per Share on a Fully-Diluted Basis for such year from
      the
      applicable Target Number for such year by
      (z) the
      applicable Target Number for such year. For purposes of this Section, the
“Adjustment
      Percentage”
for
      2008 or 2009 shall mean the percentage that the Percentage Shortfall for such
      year bears to fifty percent (50%). Within five days after the determination
      of
      the Percentage Shortfall for 2008 and/or 2009 the Purchaser Representative
      and
      the Company shall give joint written instructions to the Escrow Agent to, and
      upon receipt of such written instructions, the Escrow Agent shall, within five
      days after receipt of such instructions deliver to the Purchasers on a pro
      rata
      basis such number of shares of Series A Preferred as is determined by
      multiplying the Adjustment Percentage for such year by the total number of
      Company Deposited Escrow Shares then required to be in escrow. In the case
      of a
      delivery of less than all of the shares of the Company Deposited Escrow Shares
      in respect of the computation of the Adjustment Percentage for 2008, the Escrow
      Agent shall retain in escrow the balance of the Company Deposited Escrow Shares
      which are not required to be delivered to the Purchasers. For example, if the
      Percentage Shortfall for 2008 is 20%, the Adjustment Percentage would be 40%,
      and 40% of the total number of Company Deposited Escrow Shares then required
      to
      be in escrow would be delivered to the Purchasers on a pro rata basis, with
      the
      balance being retained by the Escrow Agent pursuant to this
      Agreement. 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (ii) If
      the
      Percentage Shortfall for 2008 or 2009, as applicable, is equal to or greater
      than fifty percent (50%), then within five days after the determination of
      the
      Percentage Shortfall for 2008 and/or 2009 the Purchaser Representative and
      the
      Company shall give joint written instructions to the Escrow Agent, and upon
      receipt of such written instructions, the Escrow Agent shall within five days
      after receipt of such instructions, deliver all of the remaining Company
      Deposited Escrow Shares then held by the Escrow Agent to Purchasers on a pro
      rata basis. 

     

    (iii) If
      the
      Percentage Shortfall for 2008 is less than fifteen percent (15%), then all
      of
      the Company Deposited Escrow Shares shall remain in escrow for 2009 to be
      distributed in accordance with paragraphs (i) and (ii) of this Section 1.3.
      If
      the Percentage Shortfall for 2009 is less than fifteen percent (15%), then
      the
      Purchaser Representative and the Company shall give joint written instructions
      to the Escrow Agent to, and upon receipt of such written instructions, the
      Escrow Agent shall within five days after receipt of such instructions, return
      to the Company for cancellation all of the Company Deposited Escrow Shares
      which
      remain in escrow. 

     

    (iv) Upon
      distribution to the Purchasers of Company Deposited Escrow Shares for 2008
      pursuant to Section 1.3(i) or 1.3(ii), the Company shall within 10 days
      replenish the Company Deposited Escrow Shares by issuing and delivering the
      number of shares of Series A Preferred equal to the number of shares of Series
      A
      Preferred so distributed for 2008. 

     

    (v) The
      determination regarding the number and the distribution, if any, of Company
      Deposited Escrow Shares to be distributed to the Purchasers pursuant to this
      Section 1.3 shall be made within five (5) Trading Days after the date the
      Company is required to file its Annual Report on Form 10-K for the applicable
      fiscal year with the Commission (after giving effect to any extension pursuant
      to Rule 12b-25 of the Exchange Act). In the event that the Company does not
      file
      its Annual Report on Form 10-K for the year ended December 31, 2008 or 2009,
      as
      applicable, with the Commission within thirty (30) days after the date such
      filing was required, after giving effect to any extension pursuant to Rule
      12b-25 of the Exchange Act, all of the Company Deposited Escrow Shares shall
      be
      delivered to the Purchasers on a pro rata basis within five (5) Trading Days
      following the expiration of such thirty (30) day period. 

     

    (vi) Notwithstanding
      anything to the contrary set forth herein, only those Purchasers who own shares
      of Series A Preferred issued under the Purchase Agreement and remain
      shareholders of the Company at the time that any Company Deposited Escrow Shares
      become deliverable hereunder shall be entitled to their pro rata portion of
      such
      Company Deposited Escrow Shares calculated based on their ownership interest
      at
      the time when the Company Deposited Escrow Shares become deliverable hereunder.
      Any Company Deposited Escrow Shares not delivered to Purchasers because the
      Purchasers no longer hold shares of Series A Preferred acquired under the
      Purchase Agreement shall remain in escrow with the Escrow Agent until
      transferred either to the Purchasers or returned to the Company pursuant to
      Section 1.3(ii) or 1.3(iii), as applicable.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (vii) Notwithstanding
      anything to the contrary contained in this Section 1.3 or in the Purchase
      Agreement, the Parties agree that for purposes of determining whether or not
      the
      Target Numbers have been achieved, 

     

    (A) the
      release of any or all of the Company Deposited Escrow Shares shall not be
      counted as an expense, charge, or other deduction from revenues in calculating
      net income even though GAAP may require contrary treatment,

     

    (B) any
      registration delay payments arising under the Registration Rights Agreement
      that
      are accrued or paid by the Company to any Series A Purchaser will be excluded
      from the calculation of net income, and 

     

    (C) any
      increase in taxes payable by the Company or any Subsidiary as a result of
      recently adopted PRC tax laws or any related implementing regulations
      promulgated for the purpose of making more equal the tax treatment of foreign
      invested entities and domestic entities shall not be included as an expense
      in
      calculating net income.

     

    (viii) So
      long
      as the Company Deposited Escrow Shares remain in escrow, such shares shall
      not
      be counted in calculating a quorum for stockholder voting purposes nor shall
      such shares be voted at any meeting of stockholders or included in a written
      consent.

     

    1.4. (i)
      Upon
      the execution of this Agreement, the Purchaser Representative shall deliver
      to
      the Escrow Agent a stock certificate or stock certificates evidencing an
      aggregate of 37,148 shares of Series A Preferred (which number of shares of
      Series A Preferred is equivalent to 2.0% of the number of shares of Series
      A
      Preferred issued and sold to the Purchaser Representative on the First Closing
      Date and which shares of Series A Preferred may be converted into 1,300,161
      shares of Common Stock). At each Subsequent Closing, each additional Purchaser
      shall deliver to the Escrow Agent a stock certificate or stock certificates
      evidencing a number of shares of Series A Preferred equivalent to 2.0% of the
      number of shares of Series A Preferred issued and sold to such additional
      Purchaser on the closing date of the Subsequent Closing. Such shares shall
      be
      collectively referred to in this Agreement as the “Purchaser
      Deposited Escrow Shares”).
      All
      Purchaser Deposited Escrow Shares shall be accompanied by stock powers executed
      in blank with signature medallion guaranteed.

     

    (ii)
      If
      the Company achieves both the 2008 Performance Threshold and the 2009
      Performance Threshold, then within five Trading Days after the filing of the
      Company’s Annual Report on Form 10-K for the fiscal year ending December 31,
      2009 the Company and the Purchaser Representative shall give joint written
      instructions to the Escrow Agent to, and upon receipt of such instructions,
      the
      Escrow Agent shall within five days after receipt of such instructions, transfer
      all of the Purchaser Deposited Escrow Shares to Management, pro rata in
      accordance with the percentages set forth in Exhibit A. In such instance, the
      Purchaser Deposited Escrow Shares shall be converted to common stock in
      accordance with their terms prior to distribution to
      Management.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (iii)
      If
      the Company fails to achieve the 2008 Performance Threshold, then within five
      Trading Days after the filing of the Company’s Annual Report on Form 10-K for
      the fiscal year ending December 31, 2008 the Company and the Purchaser
      Representative shall give joint written instructions to the Escrow Agent to,
      and
      upon receipt of such instructions, the Escrow Agent shall within five days
      after
      receipt of such instructions, transfer all of the Purchaser Deposited Escrow
      Shares to the Purchasers who deposited such shares. 

     

    (iv)
      If
      the Company achieves the 2008 Performance Threshold, but fails to achieve the
      2009 Performance Threshold, then within five Trading Days after the filing
      of
      the Company’s Annual Report on Form 10-K for the fiscal year ending December 31,
      2009 the Company and the Purchaser Representative shall give joint written
      instructions to the Escrow Agent to, and upon receipt of such instructions,
      the
      Escrow Agent shall within five days after receipt of such instructions, transfer
      all of the Purchaser Deposited Escrow Shares to the Purchasers who deposited
      such shares. 

     

    1.5. The
      Company will provide the Purchaser Representative with (i) the Company’s audited
      financial statements for 2008 and 2009, prepared in accordance with US GAAP,
      on
      or before March 31, 2009 (or such later date on which the Company has filed
      its
      annual report on Form 10-K for 2008 fiscal year) and March 31, 2010 (or such
      later date on which the Company has filed its annual report on Form 10-K for
      2009 fiscal year), respectively, so as to allow the Purchaser Representative
      the
      opportunity to evaluate whether the 2008 Performance Threshold and the 2009
      Performance Threshold were attained.

     

    1.6. The
      parties hereby agree that the Listing Escrow Shares (as hereinafter defined)
      shall be deposited in escrow and as set forth below:

     

    (a) Upon
      the
      execution of this Agreement, the Company shall issue and deliver to the Escrow
      Agent a stock certificate or stock certificates evidencing an aggregate of
      __________ shares of Series A Preferred (which number of shares of Series A
      Preferred is equivalent to 2.5% of the number of shares of Series A Preferred
      to
      be issued and sold to the Purchaser Representative on the First Closing Date
      and
      which shares of Series A Preferred may be converted into __________ shares
      of
      Common Stock). Immediately prior to each Subsequent Closing, the Company shall
      issue and deliver to the Escrow Agent a stock certificate or stock certificates
      evidencing an aggregate of shares of Series A Preferred equivalent to 2.5%
      of
      the number of shares of Series A Preferred to be issued and sold to the
      additional Purchasers on the closing date of the Subsequent Closing). All of
      the
      shares of Series A Preferred described in this Section 1.6 shall be collectively
      referred to in this Agreement as the “Listing
      Escrow Shares”).
      

     

    (b) In
      the
      event shares of Common Stock are not listed and trading on a National Stock
      Exchange by January 31, 2010, the
      Purchaser Representative and the Company shall within five days thereafter
      give
      joint written instructions to the Escrow Agent to, and upon receipt of such
      written instructions, the Escrow Agent shall, within five days after receipt
      of
      such instructions deliver to the Purchasers on a pro rata basis all of the
      Listing Escrow Shares. In
      the
      event shares of Common Stock are listed and trading on a National Stock Exchange
      by January 31, 2010, the
      Company and Purchaser Representative shall within five days after such listing
      give joint written instructions to the Escrow Agent to, and upon receipt of
      such
      written instructions, the Escrow Agent shall, within five days after receipt
      of
      such instructions deliver to the Company all of the Listing Escrow Shares and
      the Company shall cancel all of such Listing Escrow Shares.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      II

    REPRESENTATIONS
      OF THE COMPANY

     

    2.1. The
      Company hereby represents and warrants to the Purchasers and the Purchaser
      Representative as follows:

     

    (i) The
      Company Deposited Escrow Shares and the Listing Escrow Shares being placed
      into
      escrow immediately prior to the First Closing Date and to be placed into escrow
      prior to the closing date of each Subsequent Closing are or will be upon release
      from escrow in accordance with this Agreement validly issued, fully paid and
      nonassessable shares of the Company, free and clear of all pledges, liens,
      claims and encumbrances, except encumbrances created by this Agreement. There
      are no restrictions on the ability of the Company to issue and deposit in escrow
      the Company Deposited Escrow Shares or Listing Escrow Shares or to enter into
      this Agreement other than transfer restrictions under applicable federal and
      state securities laws. Upon any delivery to the Purchasers of Company Deposited
      Escrow Shares or Listing Escrow Shares placed into escrow pursuant to this
      Agreement, the Purchasers will acquire good and valid title to such Company
      Deposited Escrow Shares or Listing Escrow Shares, free and clear of any pledges,
      liens, claims and encumbrances.

     

    (ii) The
      performance of this Agreement and compliance with the provisions hereof will
      not
      violate any provision of any law applicable to the Company and will not conflict
      with or result in any breach of any of the terms, conditions or provisions
      of,
      or constitute a default under, or result in the creation or imposition of any
      lien, charge or encumbrance upon, any of the properties or assets of the Company
      pursuant to the terms of the certificate of incorporation or by-laws of the
      Company or any indenture, mortgage, deed of trust or other agreement or
      instrument binding upon the Company or affecting the Company Deposited Escrow
      Shares or Listing Escrow Shares. No notice to, filing with, or authorization,
      registration, consent or approval of any governmental authority or other person
      is necessary for the execution, delivery or performance of this Agreement or
      the
      consummation of the transactions contemplated hereby by the
      Company.

     

    ARTICLE
      III

    REPRESENTATIONS
      OF THE PURCHASERS

     

    3.1. Each
      Purchaser hereby severally represents and warrants to the Company and the
      Purchaser Representative as follows:

     

    (i) The
      Purchaser Deposited Escrow Shares being placed into escrow at the First Closing
      Date and to be placed into escrow prior to the closing date of each Subsequent
      Closing are or will be owned by the Purchaser free and clear of all pledges,
      liens, claims and encumbrances, except encumbrances created by this Agreement.
      There are no restrictions on the ability of the Purchaser to deposit in escrow
      the Purchaser Deposited Escrow Shares or to enter into this Agreement other
      than
      transfer restrictions under applicable federal and state securities laws. Upon
      any delivery to Management of Purchaser Deposited Escrow Shares placed into
      escrow pursuant to this Agreement, Management will acquire good and valid title
      to such Purchaser Deposited Escrow Shares, free and clear of any pledges, liens,
      claims and encumbrances.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (ii) The
      performance of this Agreement and compliance with the provisions hereof will
      not
      violate any provision of any law applicable to the Purchaser and will not
      conflict with or result in any breach of any of the terms, conditions or
      provisions of, or constitute a default under, or result in the creation or
      imposition of any lien, charge or encumbrance upon, any of the properties or
      assets of the Purchaser pursuant to the terms of any indenture, mortgage, deed
      of trust or other agreement or instrument binding upon the Purchaser or
      affecting the Purchaser Deposited Escrow Shares. No notice to, filing with,
      or
      authorization, registration, consent or approval of any governmental authority
      or other person is necessary for the execution, delivery or performance of
      this
      Agreement or the consummation of the transactions contemplated hereby by the
      Purchaser.

    

    ARTICLE
      IV

    ESCROW
      AGENT

    

    4.1
      Interpleader.
      In the
      event this Agreement, the Company Deposited Escrow Shares, the Purchaser
      Deposited Escrow Shares or the Escrow Agent becomes the subject of litigation,
      or if the Escrow Agent shall desire to do so for any other reason, the Company
      authorizes the Escrow Agent, at its option, to deposit the Company Deposited
      Escrow Shares, the Listing Escrow Shares and/or the Purchaser Deposited Escrow
      Shares with the clerk of the court in which the litigation is pending, or a
      court of competent jurisdiction if no litigation is pending, and thereupon
      the
      Escrow Agent shall be fully relieved and discharged of any further
      responsibility with regard thereto. The Company also authorizes the Escrow
      Agent, if it receives conflicting claims to the Company Deposited Escrow Shares,
      and/or the Purchaser Deposited Escrow Shares, is threatened with litigation
      or
      if the Escrow Agent shall desire to do so for any other reason, to interplead
      all interested parties in any court of competent jurisdiction and to deposit
      the
      Company Deposited Escrow Shares, the Listing Escrow Shares and/or the Purchaser
      Deposited Escrow Shares with the clerk of that court and thereupon the Escrow
      Agent shall be fully relieved and discharged of any further responsibility
      hereunder to the parties from which they were received.

    

    4.2
       Exculpation
      and Indemnification of Escrow Agent

    

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

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

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

    

    (c)
      The
      Escrow Agent shall not be responsible for the sufficiency or accuracy of the
      form, or of the execution, validity, value or genuineness of, any document
      or
      property received, held or delivered to it hereunder, or of any signature or
      endorsement thereon, or for any lack of endorsement thereon, or for any
      description therein; nor shall the Escrow Agent be responsible or liable to
      the
      Company, the Purchaser Representative, any Purchaser or to anyone else in any
      respect on account of the identity, authority or rights, of the person executing
      or delivering or purporting to execute or deliver any document or property
      or
      this Escrow Agreement. 

    

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

    

    (e)
      The
      Escrow Agent shall be indemnified and held harmless against any liability for
      taxes and for any penalties in respect of taxes, on any investment income or
      payments with respect to the Company Deposited Escrow Shares and the Purchaser
      Deposited Escrow Shares in the manner provided in Section 4.2 (f).

    

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

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

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

     

    ARTICLE
      V

     

    TERMINATION
      OF AGREEMENT

    

    5.1 This
      Escrow Agreement shall terminate upon delivery by the Escrow Agent in accordance
      with this Agreement of all of the Company Deposited Escrow Shares, the Listing
      Escrow Shares and Purchaser Deposited Escrow Shares, provided that the rights
      of
      the Escrow Agent and the obligations of the Company under Article IV shall
      survive the termination hereof.

    

    5.2 The
      Escrow Agent may resign at any time and be discharged from its duties as Escrow
      Agent hereunder by giving the Company and the Purchaser Representative at least
      five days written notice thereof (the “Notice
      Period”).
      As
      soon as practicable after its resignation, the Escrow Agent shall, if it
      receives notice from the Company within the Notice Period, turn over to a
      successor escrow agent appointed by the Company all of the Company Deposited
      Escrow Shares, the Listing Escrow Shares and Purchaser Deposited Escrow Shares
      then held by the Escrow Agent upon presentation of the document appointing
      the
      new escrow agent and its acceptance thereof. If no new agent is so appointed
      within the Notice Period, the Escrow Agent may deposit the Company Deposited
      Escrow Shares and Purchaser Deposited Escrow Shares with the clerk of a court
      of
      competent jurisdiction in accordance with Section 4.1 of this Agreement.

    

    ARTICLE
      VI

    COMPENSATION
      OF ESCROW AGENT

    

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

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

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

    

    6.2 Delivery
      Fee.
      The
      Company shall pay a fee of $_______ to the Escrow Agent each time during the
      term of the Agreement in which the Escrow Agent delivers any of Company
      Deposited Escrow Shares, the Listing Escrow Shares and Purchaser Deposited
      Escrow Shares.

     

    ARTICLE
      VII

    MISCELLANEOUS

     

    7.1 No
      waiver
      or any breach of any covenant or provision herein contained shall be deemed
      a
      waiver of any preceding or succeeding breach thereof, or of any other covenant
      or provision herein contained. No extension of time for performance of any
      obligation or act shall be deemed an extension of the time for performance
      of
      any other obligation or act.

     

    7.2 All
      notices, communications and instructions required or desired to be given under
      this Agreement must be in writing and shall be deemed to be duly given if sent
      by registered or certified mail, return receipt requested, or overnight courier
      to the following addresses:

     

    If
      to
      Escrow Agent:

    

    Escrow,
      LLC

    360
      Main
      Street

    P.O.
      Box
      391

    Washington,
      Virginia 22747

    Attt:
      Jonnie Zarecor

    Tel
      No.:
      800-984-2155 or 540-675-2155

    Fax
      No.:
      540-675-3155

    Email:
      

    

    If
      to the
      Company:

    China
      New
      Energy Group Company

    c/o
      Tianjin Sing Ocean Public Utility Development Co., Ltd.

    17th
      Floor, HongJi Building, JinWei Road

    HeBei
      District, Tianjin, China

    People’s
      Republic of China

    Attention:
      Jia Ji Shang

    Tel: 
       (86 22) 2804 8651

    Fax:
       (86 22) 2804 8657

    Email: jameswang@etlg.net

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    With
      a
      copy to:

    Thelen
      Reid Brown Raysman & Steiner LLP

    701
      8th
      Street NW

    Washington,
      D.C. 20001

    Attn.:
      Louis A. Bevilacqua, Esq.

    Tel.
      No.:
      (202) 508-4281

    Facsimile:
      (202) 508-4321

    Email:
      lbevilacqua@thelen.com 

     

    If
      to the
      Purchaser  

    Representative:
       

    

    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

     

    or
      to
      such other address and to the attention of such other person as any of the
      above
      may have furnished to the other parties in writing and delivered in accordance
      with the provisions set forth above.

     

    7.3 This
      Escrow Agreement shall be binding upon and shall inure to the benefit of the
      permitted successors and permitted assigns of the parties hereto.

    

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

    

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

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    7.6 The
      parties hereto expressly agree that this Escrow Agreement shall be governed
      by,
      interpreted under and construed and enforced in accordance with the laws of
      the
      State of New York, without regard to conflicts of law principles that would
      result in the application of the substantive laws of another jurisdiction.
      Each
      of the parties hereby irrevocably consents to the jurisdiction of the courts
      of
      the State of New York and of any Federal court located in such state in
      connection with any action, suit or proceedings arising out of or relating
      to
      this Escrow Agreement or any action taken or omitted hereunder, and waives
      personal service of any summons, complaint or other process and agrees that
      the
      service thereof may be made by certified or registered mail directed to it
      at
      the address for notices set forth in Section 7.2.

     

    7.7 The
      Escrow Agent’s duties hereunder may be altered, amended, modified or revoked
      only by a writing signed by the Company, the Purchaser Representative and the
      Escrow Agent.

    

    7.8 The
      representations and warranties contained in this Escrow Agreement shall survive
      the execution and delivery hereof and any investigations made by any party.
      The
      headings in this Escrow Agreement are for purposes of reference only and shall
      not limit or otherwise affect any of the terms thereof. 

    

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

     

    7.10 If
      the
      Escrow Agent reasonably requires other or further instruments in connection
      with
      this Escrow Agreement or obligations in respect hereto, the necessary parties
      hereto shall join in furnishing such instruments.

     

    [Signature
      Page Follows]

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    [SIGNATURE
      PAGE TO SECURITIES ESCROW AGREEMENT]

     

    IN
      WITNESS WHEREOF, the parties hereto have executed this Agreement as of this
      20th
      day of
      August, 2008.

     

    CHINA
      NEW ENERGY GROUP COMPANY

    
      	 	 
	
              By:

            	
              /s/
                Jiaji Shang

            
	 	
              Name:
                Jiaji Shang

            
	 	
              Title:
                Chairman & CEO

            
	 	 
	
              PURCHASER
                REPRESENTATIVE:

            
	 
	
              CHINA
                HAND FUND I, LLC

            
	 	 
	
              By:

            	
              /s/
                John D. Kuhns

            
	 	
              Name:
                John D. Kuhns

            
	 	
              Title:
                Member-Manager

            
	 	 
	
              ESCROW
                AGENT:

            
	 
	
              ESCROW,
                LLC

            
	 	 
	
              By:

            	 
	 	
              Name:
                

            
	 	
              Title:
                

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

    

    MANAGEMENT

    

      
        	
                Name

              	 	
                Percentage
                  of Purchaser Deposited Escrow 

                Shares
                  to Which Entitled if Performance 

                Thresholds
                  are Attained

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