Unassociated Document


    Exhibit
10.3

    


    THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED IN THE (A) ABSENCE OF (I) A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER THE SECURITIES ACT OR (II) AN OPINION OF COUNSEL
TO THE HOLDER THAT SUCH REGISTRATION IS NOT REQUIRED OR (B) UNLESS SOLD PURSUANT
TO RULE 144 OR RULE 144A OF THE SECURITIES ACT.  THIS SECURITY AND THE
SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.

    


    AMENDED AND
RESTATED

    5% SECURED CONVERTIBLE
PROMISSORY NOTE

    


    


    
      	
              US$5,000,000

            	
              April
      29, 2009

            


    

    


    


    FOR VALUE
RECEIVED,  CHINA RECYCLING ENERGY CORPORATION, a Nevada corporation
(hereinafter called “Borrower”), hereby promises to
pay to CARLYLE ASIA GROWTH PARTNERS III, L.P., a limited partnership organized
under the Laws of the Cayman Islands (“CAGP”), and CAGP III
CO-INVESTMENT, L.P., a limited partnership organized under the Laws of the
Cayman Islands (together with CAGP, each, a “Holder”) or its registered
assigns or successors in interest or order, without demand, the sum of Five
Million U.S. Dollars (US$5,000,000) (“Principal Amount”), plus
accrued interest thereon, on April 29, 2011 (the “Maturity Date”). The
percentage ownership interest of each Holder in this Amended and Restated 5%
Secured Convertible Promissory Note (“Note”) is set forth in Schedule A attached
hereto.

    


    This Note
has been entered into pursuant to, and is subject to, a Stock and Notes Purchase
Agreement dated as of November 16, 2007, as amended April 29, 2008 and April 29,
2009, by and among Borrower and the Holder, among others (as it may be amended,
restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”), and
shall be governed by the terms of such Purchase Agreement. Unless otherwise
separately defined herein, all capitalized terms used in this Note shall have
the same meaning as is set forth in the Purchase Agreement.

    


    This Note
shall constitute an amendment and restatement of the original Note executed and
delivered as of April 29, 2008 and not an extinguishment, discharge,
satisfaction or novation of any indebtedness, liabilities and/or obligations
evidenced by the original Note.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    This
securities represented by this Note is also subject to a (i) Registration Rights
Agreement, and a (ii) Shareholders Agreement.  This Note is secured by
a security interest granted to the Holder pursuant to a Share Pledge
Agreement.

    


    The
following terms shall apply to this Note:

    


    ARTICLE
I

    


    INTEREST

    


    1.1  Interest
Rate.  Interest on the outstanding Principal Amount shall
accrue from April 29, 2008 and shall be payable:

    


    (a)  annually,
in arrears on the 29th day of
April, provided that the Holder has delivered written notice to the Borrower not
less than thirty (30) days prior to such anniversary date stating that Holder
requires the annual payment of such interest (for the avoidance of doubt,
payment of interest under this clause (a) shall include all previously accrued
and unpaid interest on this Note, regardless of whether the Holder has made a
written request with respect to such amounts in the applicable written notice);
or

    


    (b)  to
the extent interest is not payable pursuant to clause (a) above, in arrears
together with, at the same time and in the same manner as payment of Principal
Amount and on the Maturity Date, whether by acceleration or
otherwise.

    


    Interest
on the outstanding principal balance of this Note shall accrue at 5.0% per annum
(the “Interest
Rate”).  Interest on the outstanding principal balance of the
Note shall be computed on the basis of the actual number of days elapsed and a
year of three hundred and sixty (360) days. The Holder and the Borrower
acknowledge that the Holder shall be deemed to have timely made written notice
to Borrower pursuant Section 1.1(a) with respect to the payment on April 29,
2009 of interest accrued on this Note.

    


    ARTICLE
II

    


    CONVERSION
RIGHTS

    


    2.1  Conversion Right and
Conversion Price.

    


    (a)  The
Holder shall have the right, but not the obligation, to convert all or any part
of the aggregate outstanding Principal Amount of this Note, together with
interest, if any, into shares of Common Stock, at any time on or after March 30,
2010 (or such earlier date if the audited consolidated financial statements of
the Borrower for the fiscal year ending December 31, 2009 are available on a
date prior to March 30, 2010) and prior to the Maturity Date (or such later date
on which this Note is paid in full), subject to the terms and conditions set
forth in this Article II, at a conversion price per share of Common Stock
calculated as follows: (a) an amount equal to (i) the Actual Borrower Net
Profit, multiplied by (ii) 5.5, and less (iii) the Principal Amount of this
Note, together with accrued interest, divided by (b) the
then total shares of Common Stock outstanding on a fully-diluted basis (for the
avoidance of doubt, including securities which may be exercised, converted or
exchanged for Common Stock issued under the Management Incentive Plan, but
excluding the shares of the Common Stock to be issued upon conversion of this
Note (such result, the “Conversion Price”, as the same
may be adjusted from time to time in accordance with this Note).  For
purposes of this Note, “Actual
Borrower Net Profit” shall mean an amount equal to the consolidated
after-tax net profit of the Borrower and its Subsidiaries for the fiscal year
ending December 31, 2009 (in U.S. Dollars) after paying all relevant taxes and
after eliminating all offsetting debits and credits between the Borrower and its
Subsidiaries and all other items required to be eliminated in the course of the
preparation of consolidated financial statements of the Borrower and its
Subsidiaries in accordance with U.S. GAAP, calculated in accordance with U.S.
GAAP, but excluding for purposes of this calculation any non-cash redemption
amortization charges in respect of this Note and any gains or losses arising
from (a) the write-back of provisions and other non-recurring non-cash
adjustments, and (b) any events or transactions which possess a significant
degree of abnormality, are of a type not expected to recur in successive
accounting periods or are unrelated or only incidentally related to the ordinary
and typical activities of the Company Group, as shall be determined based on the
audited consolidated financial statements of the Borrower for the fiscal year
ending December 31, 2009, which shall be prepared by any of
PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young, or KPMG
(each, a “Qualified Accounting
Firm”) no later than three months following the end of December 31,
2009.  Such Actual Borrower Net Profit shall be calculated using the
foreign exchange rate in effect as of April 29, 2008. Notwithstanding anything
herein to the contrary, if the Actual Borrower Net Profit as finally determined
is less than US$0.01, then for the purposes of this Section 2.1(a), the Actual
Borrower Net Profit shall be deemed to be US$0.01

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b)  The
number of shares of Common Stock to be issued upon each conversion of this Note
pursuant to this Article II shall be determined by dividing the then applicable
Conversion Price by the Principal Amount and accrued interest to be
converted.

    


    (c)  The
Holder may exercise such right by delivery to the Borrower of a written Notice
of Conversion pursuant to Section 2.2.

    


    (d)  Upon
any conversion of this Note, the number of shares of Common Stock allocable
among each Holder shall be in accordance with their percentage interest set
forth in Schedule
A attached to this Note.  As between the Holders, any partial
interest in one whole share of Common Stock held by the Holders should be
allocated to the Holder with the greater partial interest such that only one
Holder will be entitled to receive such whole share of Common
Stock.  After giving effect to the foregoing, in lieu of the Borrower
issuing any fractional shares to the Holders upon conversion of this Note, the
Borrower shall make an adjustment and payment in cash to the
Holders.

    


    2.2  Mechanics of Holder’s
Conversion.

    


    (a)  In
the event that the Holder elects to convert this Note into Common Stock, the
Holder shall give notice of such election by delivering an executed and
completed notice of conversion (a “Notice of Conversion”) to the
Borrower, which Notice of Conversion shall provide a breakdown in reasonable
detail of the Principal Amount, accrued interest and amounts being
converted.  The date specified in the Notice of Conversion, or if no
date is specified, then the date of the delivery of the Notice of Conversion,
shall be referred to as the “Conversion Date.”  A
form of Notice of Conversion to be employed by the Holder is annexed hereto as
Exhibit
A.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b)  Pursuant
to the terms of the Notice of Conversion, the Borrower shall deliver, or cause
to be delivered, such number of Conversion Shares as determined pursuant to this
Note via, at the Holder’s election, (i) physical certificates, or (ii)
electronically through the Depository Trust Borrower or other established
clearing corporation performing similar functions. In the case of the exercise
of the conversion rights set forth herein, the conversion privilege shall be
deemed to have been exercised and the Conversion Shares issuable upon such
conversion shall be deemed to have been issued upon the Conversion
Date.  The Holder shall be treated for all purposes as the beneficial
holder of such shares of Common Stock, unless the Holder provides the Borrower
written instructions to the contrary.

    


    2.3  Adjustment
Events.

    


    (a)  The
Conversion Price and number and kind of shares or other securities to be issued
upon conversion shall be subject to adjustment from time to time upon the
happening of certain events while this conversion right remains outstanding, as
follows:

    


    (i)  Merger, Sale of Assets,
etc.  If (A) the Borrower effects any merger or consolidation
of the Borrower with or into another entity, (B) the Borrower effects any sale
of all or substantially all of its assets in one or a series of related
transactions, (C) any tender offer or exchange offer (whether by the Borrower or
another entity) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash or
property, (D) the Borrower consummates a stock purchase agreement or other
business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with one or more persons or
entities whereby such other persons or entities acquire more than the 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by such other persons or entities making or party to, or associated or
affiliated with the other persons or entities making or party to, such stock
purchase agreement or other business combination), or (E) any “person” or
“group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the
1934 Act) is or shall become the "beneficial owner" (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, of 50% of the aggregate Common
Stock of the Borrower (in any such case, a “Fundamental Transaction”),
this Note, as to the Principal Amount hereof and accrued interest hereon, shall
thereafter be deemed to evidence the right to convert into such number and kind
of shares or other securities and property as would have been issuable or
distributable on account of such Fundamental Transaction, upon or with respect
to the securities subject to the conversion right immediately prior to such
Fundamental Transaction.  The foregoing provision shall similarly
apply to successive Fundamental Transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of the foregoing, the
anti-dilution provisions of this Section shall apply to such securities of such
successor or purchaser after any such Fundamental Transaction.

    


    (ii)  Reclassification,
etc.  If the Borrower at any time shall, by reclassification or
otherwise, change the Common Stock into the same or a different number of
securities of any class or classes, this Note, as to the Principal Amount hereof
and accrued interest hereon, shall thereafter be deemed to evidence the right to
convert into an adjusted number of such securities and kind of securities as
would have been issuable as the result of such change with respect to the Common
Stock immediately prior to such reclassification or other change.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (iii)  Stock Splits, Combinations
and Dividends.  If the shares of Common Stock are subdivided or
combined into a greater or smaller number of shares of Common Stock, or if a
dividend is paid on the Common Stock in shares of Common Stock, the Conversion
Price shall be proportionately reduced in case of subdivision of shares or stock
dividend or proportionately increased in the case of combination of shares, in
each such case by the ratio which the total number of shares of Common Stock
outstanding immediately after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event.

    


    (iv)  Share
Issuance.  So long as this Note is outstanding, if the Borrower
shall issue any Common Stock except for shares of Common Stock issued pursuant
to its Management Incentive Plan, prior to the conversion or payment of this
Note, for a consideration less than the Conversion Price that would be in effect
at the time of such issue, then, and thereafter successively upon each such
issuance, the Conversion Price shall be reduced to such other lower issue
price.  For purposes of this adjustment, the issuance of any security
or debt instrument of the Borrower carrying the right to convert such security
or debt instrument into Common Stock or of any warrant, right or option to
purchase Common Stock shall result in an adjustment to the Conversion Price upon
the issuance of the above-described security, debt instrument, warrant, right,
or option and again upon the issuance of shares of Common Stock upon exercise of
such conversion or purchase rights if such issuance is at a price lower than the
then applicable Conversion Price.

    


    (b)  If
the Borrower at any time or from time to time, prior to the full conversion of
this Note, shall take any action affecting its Common Stock or share capital
similar to or having an effect similar to any of the actions described in Section 2.3(a), then,
and in each such case, the Conversion Price shall be adjusted in such manner as
would be equitable under such circumstances.

    


    (c)  Whenever
the Conversion Price is adjusted pursuant to this Article II, the
Borrower shall promptly mail to the Holder a notice setting forth the Conversion
Price after such adjustment and setting forth a statement of the facts requiring
such adjustment.

    


    2.4  Reservation.  Borrower
covenants that it will at all times reserve and keep available out of its
authorized and unissued shares of Common Stock for the sole purpose of issuance
upon conversion of this Note, free from all Liens, preemptive rights or any
other actual contingent purchase rights of Persons other than the Holder, not
less than one hundred and seventy-five percent (175%) of the aggregate number of
shares of the Common Stock as shall be issuable (taking into account the
adjustments and restrictions of this Article II) upon the
conversion of this Note.  The Borrower covenants that all shares of
Common Stock that shall be so issuable shall, upon issue, be duly authorized,
validly issued, fully paid and nonassessable and, pursuant to the Registration
Rights Agreement, shall be registered for public sale in accordance
therewith.  The Borrower agrees that its issuance of this Note shall
constitute full authority to its officers, agents, and transfer agents who are
charged with the duty of executing and issuing stock certificates to execute and
issue the necessary certificates for shares of Common Stock upon the conversion
of this Note.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    ARTICLE
III

    


    EVENTS
OF DEFAULT

    


    The
occurrence of any of the following constitutes an event of default under this
Note (“Event of
Default”):

    


    3.1  Failure to Pay Principal or
Interest.  The Borrower fails to pay the Principal Amount,
interest or other sum due under this Note or any Transaction Document when due
and such failure continues for a period of five (5) business days after the due
date.

    


    3.2  Breach of
Covenant.  The Borrower breaches any covenant or other term or
condition of the this Note or any other Transaction Document in any material
respect and such breach, if subject to cure, continues for a period of five (5)
business days after written notice to the Borrower from the Holder.

    


    3.3  Breach of Representations
and Warranties.  Any representation or warranty of the Borrower
made herein or in any other Transaction Document shall be false or misleading in
any material respect as of the date made and the Closing Date.

    


    3.4  Failure to Prepare Audited
Financial Statements.  Failure of the Borrower to deliver
audited consolidated financial statements of the Borrower for the fiscal years
ending December 31, 2009, prepared by a Qualified Accounting Firm, no later than
April 15, 2010 (which statements shall be deemed to be delivered upon filing
with the SEC).

    


    3.5  Receiver or
Trustee.  The Borrower or any Subsidiary of Borrower shall make
an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for them or for a substantial part of their
property or business; or such a receiver or trustee shall otherwise be
appointed.

    


    3.6  Judgments.  Any
money judgment, writ or similar final process shall be entered or filed against
Borrower or any Subsidiary of Borrower or any of their property or other assets
for more than $100,000, and shall remain unvacated, unbonded, unappealed,
unsatisfied, or unstayed for a period of forty-five (45) days.

    


    3.7  Non-Payment.  A
default by the Borrower or any Subsidiary under any one or more obligations in
an aggregate monetary amount in excess of $100,000 for more than thirty (30)
days after the due date, unless the Borrower or such Subsidiary is contesting
the validity of such obligation in good faith and has segregated cash funds
equal to the contested amount.

    


    3.8  Bankruptcy.  Bankruptcy,
insolvency, reorganization, or liquidation proceedings or other proceedings or
relief under any bankruptcy law or any law, or the issuance of any notice in
relation to such event, shall be instituted by or against the Borrower or any
Subsidiary of Borrower.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    3.9  Delisting.  Delisting
of the Common Stock from the OTC Bulletin Board or such other principal exchange
on which the Common Stock is listed for trading; failure to comply with the
requirements for continued listing on the OTC Bulletin Board or applicable
exchange; or notification from OTC Bulletin Board or applicable exchange that
the Borrower is not in compliance with the conditions for such continued
listing.

    


    3.10  Stop
Trade.  An SEC or judicial stop trade order or OTC Bulletin
Board or other exchange trading suspension with respect to Borrower’s Common
Stock.

    


    3.11  Failure to Deliver Common
Stock.  Borrower’s failure to timely deliver shares of Common
Stock to the Holder pursuant to and in the form required by this
Note.

    


    3.12  Non-Registration.  The
failure to timely register this Note and the Conversion Shares in accordance
with the Registration Rights Agreement.

    


    3.13  Cross
Default.  A default by the Borrower of a material term,
covenant, warranty or undertaking of any Transaction Document or other agreement
to which the Borrower is a party, or the occurrence of a material event of
default under any such other agreement which is not cured after any required
notice and/or cure period.

    


    3.14  Moratorium and
Nationalization.  (a) the confiscation, expropriation or
nationalization by any Governmental Authority of any property or assets of the
Borrower or any of its Subsidiaries; or (b) if such revocation or repudiation
could reasonably be expected to have a Material Adverse Effect, the revocation
or repudiation by any Governmental Authority of any previously granted
governmental permits or licenses to the Borrower or its Subsidiaries or that
affect the operations of their business; or (c) the imposition or introduction
of material and discriminatory taxes, tariffs, royalties, customs or excise
duties imposed on Borrower or its Subsidiaries, or the material and
discriminatory withdrawal or suspension of material privileges or specifically
granted material rights of a fiscal nature.

    


    3.15  Security
Interest.  The Share Pledge Agreement or any of the security
provided for therein shall, at any time, cease to be in full force and effect
for any reason other than the satisfaction in full of all obligations under the
Note and discharge of the Note or any security interest created thereunder shall
be declared invalid or unenforceable or the Borrower or any of the Persons
granting security under the Share Pledge Agreement shall assert, in any pleading
in any court of competent jurisdiction, that any such security interest is
invalid or unenforceable.

    


    3.16  Reservation
Default.  Failure by the Borrower to have reserved for issuance
upon conversion of the Note the amount of Common Stock as set forth in this Note
and the Transaction Documents.

    


    3.17  Material Adverse
Effect.  The occurrence of a Material Adverse Effect in respect
of the Borrower or any of its Subsidiaries.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Upon the
occurrence and during the continuance of an Event of Default, the Holders may by
written notice to the Borrower, declare the Principal Amount together with all
accrued and unpaid interest and all other amounts payable hereunder to be
immediately due and payable, and the Principal Amount together with all accrued
and unpaid interest and all other amounts payable hereunder shall thereupon
immediately become due and payable, without presentment, further notice,
protest, grace period or other requirements of any kind, all of which hereby are
expressly waived by the Borrower.  Following the occurrence and during
the continuance of an Event of Default, which, if susceptible to cure is not
cured within the cure periods (if any) set forth in this Article III, otherwise,
then from the first date of such occurrence, the interest rate on this Note
shall be the Interest Rate set forth in Section 1.1, plus an additional five
percent (5%), and be due on demand.  Upon the occurrence and during
the continuance of an Event of Default, the Holders may exercise all rights and
remedies under the Note and any other Transaction Documents.

    


    ARTICLE
IV

    


    SENIOR
STATUS OF NOTE

    


    4.1  Senior Status of
Note.  The obligations of the Borrower under this Note shall
rank senior to all other Indebtedness of the Borrower, whether now or
hereinafter existing (except it shall rank pari passu with all other
Notes. Upon any Liquidation Event, the Holder will be entitled to receive,
before any distribution or payment is made upon, or set apart with respect to,
any other Indebtedness of the Borrower or any class of capital stock or the
Borrower, an amount equal to the Principal Amount plus all accrued interest
thereon.  For purposes of this Note, “Liquidation Event” means a
liquidation pursuant to a filing of a petition for bankruptcy under applicable
law or any other insolvency or debtor’s relief, an assignment for the benefit of
creditors, or a voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Borrower.

    


    ARTICLE
V

    


    MISCELLANEOUS

    


    5.1  Failure or Indulgence Not
Waiver.  No failure or delay on the part of Holder hereof in
the exercise of any power, right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege. All rights and remedies existing hereunder are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.

    


    5.2  Notices.  Any
notice required or permitted pursuant to this Note shall be given in writing and
shall be given either personally or by sending it by next-day or second-day
courier service, fax, electronic mail or similar means to the address as shown
below (or at such other address as such party may designate by fifteen (15)
days’ advance written notice to the other parties to this Note given in
accordance with this section):

    


    If to the
Borrower, to:

    


    


    If to the
Holders, to:

    


     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Where a
notice is sent by next-day or second-day courier service, service of the notice
shall be deemed to be effected by properly addressing, pre-paying and sending by
next-day or second-day service through an internationally-recognized courier a
letter containing the notice, with a confirmation of delivery, and to have been
effected at the expiration of two (2) days after the letter containing the same
is sent as aforesaid. Where a notice is sent by fax or electronic mail, service
of the notice shall be deemed to be effected by properly addressing, and sending
such notice through a transmitting organization, with a written confirmation of
delivery, and to have been effected on the day the same is sent as
aforesaid.

    


    5.3  Amendment
Provision.  The term “Note” and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or supplemented. Any
provision of this Note may be amended, supplemented or waived, if such
amendment, supplement or waiver is in writing and signed by the Borrower and the
Holders.

    


    5.4  Assignability.  This
Note shall be binding upon the Borrower and its successors and assigns, and
shall inure to the benefit of the Holder and its successors and
assigns.  Subject to applicable laws and regulations, this Note and
all rights hereunder may be transferred or assigned in whole or in part by the
Holder, and the Borrower shall assist the Holder in consummating any such
transfer or assigned. Borrower may not assign this Note without the consent of
all Holders.  A transfer of this Note may be effected only by a
surrender hereof to the Borrower and the issuance by the Borrower of a new note
or notes in replacement thereof, which shall be registered by the Borrower in
accordance with Section 5.5 hereof
once an executed copy of the replacement note has been executed by the
transferee.

    


    5.5  Transfer Register. In
the event of a transfer, the Borrower shall maintain a register (the “Register”) for the
registration or transfer of the Note, and shall enter the names and addresses of
the registered holders of the Note, the transfers of the Note and the names and
addresses of the transferees of the Note. The Holder and each assignee shall be
provided reasonable opportunities to inspect the Register from time to
time.  The Borrower shall treat any registered holder as the absolute
owner of the Note held by such holder, as indicated in the Register, for the
purpose of receiving payment of all amounts payable with respect to such Note
and for all other purposes.  The Note is registered obligations and
the right, title, and interest of any Person in and to such Note shall be
transferable only upon notation of such transfer in the
Register.  Solely for purposes of this Section 5.5 and for
tax purposes only, the keeper of the Register, if it is not the Borrower, shall
be the Borrowers' agent for purposes of maintaining the
Register.  This Section 5.5 shall be
construed so that the Note is at all times maintained in “registered form”
within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and
any related regulations (and any other relevant or successor provisions of the
Code or such regulations).

    


    5.6  Cost of
Collection.  If default is made in the payment of this Note,
Borrower shall pay the Holder hereof reasonable costs of collection, including
attorneys’ fees.

    


    5.7  Removal of
Legend.  The Borrower agrees to reissue the Note and the
Conversion Shares issuable upon conversion or exercise of the Note, without the
legend set forth above, at such time as (a) the holder thereof is permitted to
dispose of such Notes or the Conversion Shares pursuant to Rule 144 under the
Securities Act without restriction, or (b) such securities are sold to a
purchaser or purchasers who are able to dispose of such shares publicly without
registration under the Securities Act, or (iii) such securities have been
registered under the Securities Act.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    5.8  Transfer
Taxes.  The issuance of certificates for shares of the Common
Stock on conversion of this Note shall be made without charge to the Holder
hereof for any documentary, stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificates.

    


    5.9  Governing Law; Rules of
Construction.  THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE
BORROWER HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING, WITHOUT
LIMITATION, SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

    


    5.10  Consent to Jurisdiction and
Service of Process.  ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST
BORROWER ARISING OUT OF OR RELATING TO THIS NOTE, OR ANY OBLIGATIONS HEREUNDER,
MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE, COUNTY AND CITY OF NEW YORK.

    


    5.11  Waiver of Jury
Trial.  BORROWER HEREBY AGREES TO WAIVE ITS RIGHT TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
NOTE.  THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF
ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE
SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS.

    


    5.12  Maximum
Payments.  Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.

    


    5.13  Construction.  Each
party acknowledges that its legal counsel participated in the preparation of
this Note and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Note to favor any party against the
other.

    


    5.14  No
Redemption.  Except as provided in Section 2.4 hereof,
this Note may not be redeemed or called by the Borrower or any other Person
(other than the Holder) without the consent of the Holder.

    


    5.15  United States
Dollars.  All references to “$” or dollars in this Note shall
refer to the currency of the United States.

     

    5.16  Non-Business
Days.  Whenever any payment or any action to be made shall be
due on a Saturday, Sunday or a public holiday under the laws of the State of New
York, such payment may be due or action shall be required on the next succeeding
business day and, for such payment, such next succeeding day shall be included
in the calculation of the amount of accrued interest payable on such
date.

    


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    IN WITNESS WHEREOF, Borrower
has caused this Note to be signed in its name by an authorized officer as of the
date first set forth above.

    


    


    
      	 
      	CHINA
      RECYCLING ENERGY CORPORATION	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
              By:

            	
                 
      

            	 
      
	 
      	 
      	
              Name:

            	
              :

            
	 
      	 
      	
              Title

            	 
      


    

    


    


    


    ACCEPTED
AND AGREED:

    


    
      	
              HOLDER:

            	
              For
      and on behalf of:

            	 
      
	 
      	 
      	 
      	 
      
	 
      	
              CARLYLE
      ASIA GROWTH PARTNERS III, L.P.

            	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
              By:

            	   
      	 
      
	 
      	 
      	
              Name:

            	 
      
	 
      	 
      	
              Title:

            	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
              For
      and on behalf of:

            	 
      
	 
      	 
      	 
      	 
      
	 
      	
              CAGP
      III CO-INVESTMENT, L.P.

            	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
              By:

            	    
      	 
      
	 
      	 
      	
              Name:

            	 
      
	 
      	 
      	
               Title:

            	 
      


    

    


    
      
         

      

      
        S-11