exv10w20









Exhibit 10.20




THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES
LAWS. THEY 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.




SECURED CONVERTIBLE PROMISSORY NOTE




			
	 	 	 
	US$5,000,000
	 	August 13, 2008






     FOR VALUE RECEIVED, Eastern Well Holdings Limited  a company organized and existing under
the laws of Hong Kong Special Administrative Region (“Borrower”), hereby promises to pay to Carlyle
Asia Growth Partners IV, L.P., a company organized and existing under the laws of the Cayman
Islands (“Holder”) or its registered assigns or successors in interest or order, the sum of Five
Million U.S. Dollars (US$5,000,000) plus any interest that has been compounded thereon pursuant to
Section 2.1 (“Principal Amount”), plus accrued interest (“Entire Outstanding Amount”), on the
Maturity Date (as defined below) in accordance with Section 3.1, unless this Note is earlier offset
pursuant to Section 4.1.



     This Note is issued in connection with that certain Letter of Intent for Investment and
Cooperation  dated July 28, 2008 by and among the Borrower and the Holder (the “Letter of
Intent”), which Letter of Intent contemplates a proposed issuance by the Borrower of certain
convertible notes (“Convertible Notes”) to the Holder, subject to the terms and conditions set
forth therein (the “Contemplated Transaction”).



     This Note is secured by a security interest granted to the Holder pursuant to a Share Mortgage
(the “Share Mortgage”) dated August 13, 2008 between the Holder and Mr. Sun Kwok Ping  (the
“Founder”), and guaranteed by the Founder pursuant to a Guarantee (the “Guarantee”) dated August
13, 2008 between the Holder and the Founder.



     The following terms shall apply to this Note:



ARTICLE I



CERTAIN DEFINITIONS



     1.1 As used in this Note, the following terms, unless the context otherwise requires, have
the following meanings:



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          (a) “Affiliate” means, in respect of any person, any other person which controls, is
controlled by, or is under common control with, such person. For the purposes of this definition,
“control,” when used with respect to any person, means the power to direct the management and
policies of such person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms “controls” or “controlled” have meanings
correlative to the foregoing.


          (b) “Borrower Party” means any of the Borrower, the Founder and all other entities (i) that
are directly or indirectly controlled by the Borrower or the Founder or (ii) whose results of
operations and financial conditions would be consolidated with those of the Borrower for financial
reporting purposes in accordance with PRC GAAP, including without limitation, Shanghai Nuobo
Trading Co., Ltd.  and Jiangxi Nobao Electro Co.,
Ltd. , each of which a company organized and
existing under the laws of the People’s Republic of China. The Borrower Parties as of the date
hereof are set forth on Schedule 1 hereto.


          (c) “Business Day” means a weekday that the banks in the Hong Kong Special Administrative
Region and the People’s Republic of China are generally open for business.


          (d) “Indebtedness” means, with respect to any person or entity, whether recourse is to all or
a portion of the assets of such person or entity, and whether or not contingent, (i) any obligation
of such person or entity for money borrowed, (ii) any obligation of such person or entity evidenced
by bonds, debentures, notes, guarantees or other similar instruments, including, without
limitation, any such obligations incurred in connection with the acquisition of properties or
businesses, excluding trade accounts payable made in the ordinary course of business, (iii) any
reimbursement obligation of such person or entity with respect to letters of credit, bankers’
acceptances or similar facilities issued for the account of such person or entity, (iv) any
obligation of such person or entity issued or assumed as the deferred purchase price of properties
or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary
course of business), (v) any obligations of such person or entity under or in respect of
capitalized lease, (vi) the principal amount of any interest hedging obligations or exchange rate
swap obligations of such person or entity at the time of determination, (vii) any attributable
indebtedness with respect to any sale and leaseback transaction to which such person or entity is a
party and (viii) any obligation of the type referred to in clauses (i) through (vii) of this
definition of another person or entity and all dividends and distributions of another person or
entity the payment of which, in either case, such person or entity has guaranteed or is responsible
or liable, directly or indirectly, as obligor, guarantor or otherwise.


          (e) “Lien”  means any mortgage, deed of trust, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other) or preference, priority, right or other security interest or
preferential arrangement of any kind or nature whatsoever.


          (f) “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.



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          (g) “Material Adverse Effect” means any change, event or circumstance that is or would have a
material adverse effect on (i) the business, properties or condition (financial or otherwise),
results of operations or prospects of any Borrower Party individually or taken as a whole, (ii)
the validity or enforceability of this Note and any agreement contemplated by the Note Documents
against any party thereto other than the Holder, (iii) the ability of any Borrower Party to
perform its obligations under the Note Documents or in connection with the transactions
contemplated under the Note Documents, and (iv) the decision by a reasonable investor whether to
consummate the Contemplated Transaction.


          (h) “Note Documents” means this Note, the Share Mortgage and the Guarantee.


          (i) “PRC GAAP” means generally accepted accounting principles in the People’s Republic of
China.


          (j) “Restricted Payment” means any dividend or other distribution (whether in cash, securities
or other property) with respect to any capital stock or other equity interest of  any Borrower
Party, or any payment (whether in cash, securities or other property), including any sinking fund
or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation
or termination of any such capital stock or other equity interest or of any option, warrant or
other right to acquire any such capital stock or other equity interest.


          (k) “Solvent” means, with respect to any person, that as of the date of determination both
(i) (a) the then fair saleable value of the property of such person is (x) greater than the total
amount of liabilities (including contingent liabilities) of such person and (y) not less than the
amount that will be required to pay the probable liabilities on such person’s then existing debts
as they become absolute and matured considering all financing alternatives and potential asset
sales reasonably available to such person; (b) such person’s capital is not unreasonably small in
relation to its business or any contemplated or undertaken transaction; and (c) such person does
not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (ii) such person is “solvent” within
the meaning given that term and similar terms under applicable laws relating to fraudulent
transfers and conveyances. For purposes of this definition, the amount of any contingent liability
at any time shall be computed as the amount that, in light of all of the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to become an actual
or matured liability.



ARTICLE II




INTEREST



     2.1 Interest Rate. Unless this Note is offset in accordance with Section 4.1,
interest on the outstanding Principal Amount of this Note shall accrue from the date of this Note
and shall be payable in arrears together with, at the same time and in the same manner as payment
of, the Principal Amount (whether on Maturity Date or earlier by acceleration), until the date on
which this Note is repaid in full. Subject to Section 5.2, interest on the outstanding Principal
Amount of this Note shall accrue at an annual rate equal to eight percent (8%) on the outstanding



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Principal Amount from the date hereof to the date that is ninety (90) days after the Notice Date
(as defined below) and thereafter at an annual rate equal to ten percent (10%) on the outstanding
Principal Amount (the “Interest Rate”). Interest on the outstanding Principal Amount 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.




ARTICLE III




PAYMENTS



     3.1 Payment on Demand. Subject to Section 4.1, the Entire Outstanding Amount shall be
immediately 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, on the date
that is one-hundred-eighty (180) days after the date of a written notice (the “Notice Date”) given
by the Holder to the Borrower requesting payment of the Entire Outstanding Amount, which notice may
be given at any time if the Holder decides, in its sole discretion, not to consummate the
Contemplated Transaction (the “Maturity Date”). On the Maturity Date, the Borrower shall pay the
Entire Outstanding Amount to the Holder in U.S. Dollars, by wire transfer of immediately available
funds to an account designated in writing by the Holder.



     3.2 No Set-off or Prepayment. Subject to Section 4.1, all payments of the Entire
Outstanding Amount shall be made to the Holder without set-off or counterclaim and free and clear
of and without deduction of any kind. Subject to Section 4.1, this Note may not be prepaid without
the prior written consent of the Holder.



ARTICLE IV




OFFSET; CONTEMPLATED TRANSACTION



     4.1 Note Offset. In the event of and conditioned upon the closing of the sale and
purchase of the Convertible Notes in the Contemplated Transaction, the Borrower shall offset the
purchase price of the Convertible Notes in the Contemplated Transaction by the Principal Amount
then outstanding and this Note and all obligations hereunder shall thereafter be deemed satisfied
and paid (it being understood that no interest shall be deemed to have accrued on this Note if this
Note is offset in the foregoing manner).



     4.2 Taxes. The Borrower will pay any and all original issuance, transfer, stamp and
other similar taxes that may be payable in respect of the issue or delivery of the
Convertible Notes pursuant to the offset of this Note under Section 4.1.



     4.3 Contemplated Transaction. Notwithstanding anything to the contrary contained in
the Letter of Intent, for so long as this Note remains outstanding or until the Notice Date, the
Holder shall be entitled (but not obligated) to invest in the Borrower by consummating the
Contemplated Transaction substantially as described in the Letter of Intent, and the exclusivity
provision set forth in the Letter of Intent under the paragraph with the heading  shall continue
to be effective and binding on the Borrower (except that the expiration of the exclusivity as
provided in the Letter of Intent shall not apply).



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ARTICLE V




EVENTS OF DEFAULT



     5.1 Events of Default. The occurrence of any of the following constitutes an event of
default under this Note if such event is not remedied (provided that such event is capable of being
remedied) within five (5) days of its occurrence (“Event of Default”):


          (a) Failure to Pay Principal or Interest. The Borrower fails to pay the Principal
Amount, interest or other sum due under this Note when due.


          (b) Breach of Covenant. The Borrower breaches any covenant or other term or condition
under the Note Documents.


          (c) Breach of Representations and Warranties. Any representation or
warranty made by any Borrower Party in the Note Documents shall be false or misleading.


          (d) Receiver or Trustee. Any Borrower Party 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.


          (e) Judgments. Any money judgment, writ or similar final process shall be entered or
filed against any Borrower Party or any of its property or other assets, and shall remain
unvacated, unbonded, unappealed, unsatisfied, or unstayed for a period of thirty (30) days.


          (f) 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 any Borrower Party.


          (g) Cross Default. A default by any Borrower Party of any term, covenant,
representation, warranty or undertaking of any agreement to which such Borrower Party is a party or
by which any of such Borrower Party’s assets are bound, or the occurrence of any event or condition
under any Indebtedness of any Borrower Party that results in the acceleration of the maturity of or
default under such Indebtedness, where such acceleration or default, if capable of remedy, is not
cured within the applicable notice or cure period.


          (h) Moratorium and Nationalization. (a) The confiscation, expropriation or
nationalization by any governmental authority of any property or assets of any Borrower Party; or
(b) the revocation or repudiation by any governmental authority of any previously granted
governmental permits or licenses to any Borrower Party or that affect the operations of its
business; or (c) the imposition or introduction of discriminatory taxes, tariffs, royalties,
customs or excise duties imposed on any Borrower Party, or the discriminatory withdrawal or
suspension of material privileges or specifically granted material rights of a fiscal nature.


          (i) Security Interest. The Share Mortgage, the Guarantee or any of the
security provided for therein shall, at any time, cease to be in full force and effect for any
reason



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other than the satisfaction in full of all obligations under this Note and discharge of this Note
or any security interest created thereunder shall be declared invalid or unenforceable or any
Borrower Party under the Share Mortgage or the Guarantee shall assert, in any pleading in any court
of competent jurisdiction, that any such security interest is invalid or unenforceable.


          (j) Material Adverse Effect. The occurrence of a Material Adverse Effect.



     5.2 Acceleration. Upon the occurrence and during the continuance of an Event of
Default, unless waived by the Holder in writing, the Entire Outstanding Amount shall be immediately
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, the interest rate on this Note shall be thirteen
percent (13%) on the outstanding Principal Amount, compounded annually. Upon the occurrence and
during the continuance of an Event of Default, the Holder may exercise all rights and remedies
under this Note, the Share Mortgage, the Guarantee or applicable law.



ARTICLE VI




SENIOR STATUS OF NOTE



     6.1 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. 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, the Entire Outstanding Amount.



ARTICLE VII




REPRESENTATIONS AND WARRANTIES



     As a material inducement to the Holder to purchase this Note, the Borrower hereby represents,
warrants and covenants to the Holder, on behalf of itself and the other Borrower Parties, that:



     7.1 Organization, Good Standing and Qualification. Each Borrower Party is duly
organized, validly existing and in good standing under the laws of its place of organization, has
all requisite corporate power and authority to carry on its business and is duly qualified to
transact business and is in good standing in each jurisdiction in which such qualification is
required by applicable law.



     7.2 Authorization. Each party to any Note Document (other than the Holder) has duly
executed and delivered such Note Document. All corporate action on the part of each party to any
Note Document (other than the Holder), its officers, directors and shareholders necessary for the
authorization, execution and delivery of such Note Document, the performance of all obligations of
each party (other than the Holder) under such Note Document and the authorization, issuance and
delivery of the Note, has been taken, and the Note Documents, when executed and delivered by the
respective parties thereto (other than the Holder), shall constitute valid and legally binding
obligations of such respective parties, enforceable against such



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respective parties in accordance with their terms except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general
application affecting enforcement of creditors’ rights generally, and as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies.




     7.3 No Violation. Neither the execution and delivery of the Note Documents by the
parties thereto (other than the Holder) nor the performance by such parties of their obligations
under the Note Documents will: (i) violate any provisions of the memorandum of association,
articles of association, business license or any other constitutional documents of any such party;
(ii) with or without the giving of notice or the passage of time, or both, violate, or be in
conflict with, or constitute a default under, or cause or permit the termination or the
acceleration of the maturity of, any Indebtedness of any such party; (iii) require notice to or the
consent of any third party to any agreement or commitment to which such party is a party, or by
which it or its properties is bound or subject; (iv) result in the creation or imposition of any
Lien upon any property or assets of any such party under any agreement or commitment to which it is
a party, or by which it or the properties thereof are bound or subject; or (v) violate any
applicable law.



     7.4 Governmental Consents. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any federal, state or local
governmental authority on the part of any of the parties to the Note Documents (other than the
Holder) is required in connection with the offer, sale or issuance of the Note or the
consummation of any other transactions contemplated by the Note Documents.


     7.5  Capitalization; Subsidiaries.




          (a) Schedule 1 to this Note lists each Borrower Party, and correctly sets forth the
capitalization of such Borrower Party, the nature of legal entity which the Borrower Party
constitutes, the jurisdiction in which the Borrower Party was organized, a list of all outstanding
securities of the Borrower Party and the holders thereof and a brief summary of the Borrower
Party’s principal business.


          (b) There are no outstanding options, warrants, rights (including conversion or preemptive
rights and rights of first refusal or similar rights) or agreements, orally or in writing, for the
purchase or acquisition from any Borrower Party of any of its securities or any other agreements to
participate in the profits of any Borrower Party. There are no outstanding rights or obligations of
any Borrower Party to repurchase or redeem any of its securities. No Borrower Party is a party or
subject to any contract that affects or relates to the voting or giving of written consents with
respect to, or the right to cause the registration of, any share or other security of any Borrower
Party.


          (c) In respect of each Borrower Party that is organized and existing under the laws of the
People’s Republic of China, except as disclosed in Schedule 1 hereto, the full amount of
the registered capital of such Borrower Party has been contributed, such contribution has been duly
verified by a certified accountant registered in the People’s Republic of China and the accounting
firm employing such accountant, and the report of the certified accountant evidencing such
verification has been registered with the relevant governmental authority.



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          (d) Except as disclosed in Schedule 1 hereto, none of the Borrower Parties has any
subsidiary, or is a participant in any joint venture, partnership or other similar arrangement, or
otherwise owns (directly or indirectly) any share or interest in any other entity.


          (e) No debt or equity securities of any Borrower Party is subject to any Lien (other than
pursuant to the Note Documents).



     7.6 Valid Issuance of Securities. This Note has been duly and validly issued, fully-paid and nonassessable. The offer, issue and sale of this Note is exempt from the registration
and prospectus delivery requirements of the U.S. Securities Act of 1933, as amended and have been
registered or qualified (or are exempt from registration and qualification) under the registration,
permit or qualification requirements of all applicable state securities laws within the time
periods required by such laws. Neither the Borrower nor any authorized agent acting on its behalf
will take any action hereafter that would cause the loss of such exemptions.



     7.7 Financial Statements.


          (a) The Borrower has furnished to the Holder the unaudited consolidated balance sheets of the
Borrower as of the end of each monthly period from January 1, 2008 to July 31, 2008, the related
unaudited consolidated statements of operations, shareholders’ equity and cash flows for each
monthly period from January 1, 2008 to July 31, 2008 (“Financial Statements”).


          (b) The Financial Statements were prepared in accordance with PRC GAAP, are true, correct and
complete in all respects, and fairly and accurately present the financial position of the Borrower
on the dates of such statements and the results of the operations of the Borrower for the periods
covered thereby. The Financial Statements show all indebtedness, obligations and other
liabilities, direct or contingent, of the Borrower as of the respective date thereof, including
liabilities for any taxes, commitments and indebtedness.


          (c) All of the accounts receivable owing to any Borrower Party, including without limitation
all accounts receivable set forth on the Financial Statements, constitute valid and enforceable
claims, and are good and collectible in the ordinary course of business, and, net of any reserves
shown on the Financial Statements (which reserves are adequate and were calculated on a basis
consistent with PRC GAAP), no further goods or services are required to be provided in order to
complete the sales and to entitle any Borrower Party to collect in full. There are no material
contingent or asserted claims, refusals to pay, or other rights of set-off with respect to any
Borrower Party to the knowledge of any of the Borrower Parties after due inquiry.



     7.8 Absence of Undisclosed Liabilities. None of the Borrower Parties has, except as
and to the extent reflected or reserved against in the Financial Statements, had any material
accrued or contingent liability or liabilities or obligations (contractual or otherwise) arising
out of any transaction or state of facts existing prior to or on the date hereof or arising other
than in the ordinary course of business since July 31, 2008 (whether such liability is accrued, to
become due, contingent or otherwise) in excess of RMB1,000,000 in the aggregate.



     7.9 Use of Proceeds. The Borrower will apply the Principal Amount to acquire assets,
expand its business and use as working capital. No part of Principal Amount will be used,



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directly or indirectly, for the purpose of repaying any Indebtedness of any Borrower Party or for
the purpose of acquiring or investing in any securities of any entity other than the Borrower
Parties.




     7.10 Litigation. There is no action, suit, proceeding or investigation pending or,
to each of the Borrower Parties’ knowledge, currently threatened against any Borrower Party, nor is
any Borrower Party aware that there is any basis for the foregoing. None of the Borrower Parties is
a party to or subject to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality specifically applicable to it. There is no action,
suit, proceeding or investigation by any of the Borrower Parties currently pending or which any of
the Borrower Parties intends to initiate.



     7.11 Compliance with Law; Permits.


          (a) Each Borrower Party is, and at all times has been, in compliance with any and all law
applicable to it or to the conduct or operation of its business or the ownership or use of any of
its properties and assets (including intellectual and intangible property).


          (b) None of the Borrower Parties is in violation of its business license, or any provision of
its memorandum of association, articles of association, or equivalent constitutional documents as
in effect.


          (c) None of the Borrower Parties is in violation of, or default under any material provision
of any instrument, mortgage, deed of trust, loan, contract, commitment, judgment, decree, order or
obligation to which it is a party or by which it or any of its properties are bound.



     7.12 Solvency. Each Borrower Party is Solvent, and after giving effect to the Note and
obligations being incurred in connection herewith and with other Note Documents, will be Solvent.



     7.13 No Cross-Default Provisions. None of the Borrower Parties is a party to any
agreement relating to Indebtedness which contains a cross-default provision, such that a default
under one agreement would result in a default under another agreement.



     7.14 Taxes. Each of the Borrower Parties has filed or caused to be filed all tax returns that
are required by any government authority to be filed by it, and has paid or caused to be paid all
Taxes shown to be due and payable on such returns or on any assessments received by it, including
payroll taxes, except to the extent subject to a contest maintained in good faith by appropriate
proceedings and with respect to which the applicable Borrower Party has set on its books adequate
reserves with respect thereto.



ARTICLE VIII




COVENANTS



     8.1 Negative Covenants. So long as this Note remains outstanding, without the prior
written consent of the Holder, the Borrower shall not, and shall cause each other Borrower Party



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not to, effect any of the following transactions (other than pursuant to or as contemplated by the
Note Documents):



          (a) Create, incur, assume or suffer to exist any Lien upon any of its properties, revenues or
incomes, whether now owned or hereafter acquired.


          (b) Create, incur, assume or suffer to exist any Indebtedness or prepay, forgive or discharge
in whole or in part any outstanding Indebtedness.


          (c) Guarantee, directly or indirectly, any Indebtedness of any person or entity.


          (d) Convey, sell, lease, assign, transfer or otherwise dispose of any of its material
properties, whether now on or hereafter acquired.


          (e) Enter into with any person or entity any agreement which prohibits or limits the ability
of any Borrower Party to create, incur, assume or suffer to exist any Lien upon any of its
properties, revenues or income, whether now owned or hereafter acquired.


          (f) Merge, dissolve, liquidate, consolidate with or into another entity, or dispose of
(whether in one transaction or in a series of transactions) all or substantially all of its
properties (whether now owned or hereafter acquired) to or in favor of any person or entity.


          (g) Declare or make, directly or indirectly, any Restricted Payment, or incur any obligation
(contingent or otherwise) to do so.


          (h) Engage in any line of business different from design, manufacture, installation,
management and sale of ground source heat pump systems.


          (i) Enter into any transaction of any kind with any shareholders, officers, directors or
affiliates of any Borrower Party or members of their immediate families, whether or not in the
ordinary course of business, other than on fair and reasonable terms as favorable to the respective
Borrower Party as would be obtainable by such Borrower Party in a comparable arm’s length
transaction with a person or entity other than any shareholders, officers, directors or affiliates
of any Borrower Party or members of their immediate families.


          (j) Issue, sell, create or authorize any shares of any class or series of its securities, or
issue, grant or create any warrants, subscriptions, options, convertible securities, or other
commitments to issue shares or other securities that are potentially exchangeable or exercisable
for, or convertible into, shares of its capital stock.


          (k) Initiate any litigation, action, suit, proceeding, claim or arbitration (other than for
the routine collection of accounts receivable) or settle or agree to settle any litigation, action,
suit, proceeding, claim or arbitration.



     8.2 Taxes. Any and all payments by the Borrower Parties hereunder that are made to or
for the benefit of the Holder shall be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings and penalties,
interests and all other liabilities with respect thereto (collectively, “Taxes”), excluding taxes



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imposed on the Holder’s net income or capital and franchise taxes imposed on the Holder by the
jurisdiction under the laws of which the Holder is organized or any political subdivision thereof
(all such nonexcluded Taxes being hereinafter referred to as “Covered Taxes”). If any of the
Borrower Parties shall be required by law to deduct any Covered Taxes from or in respect of any sum
payable hereunder to the Holder, the sum payable shall be increased as may be necessary so that
after making all required deductions of Covered Taxes (including deductions of Covered Taxes
applicable to additional sums payable under this paragraph), the Holder receives an amount equal to
the sum it would have received had no such deductions been made. The Borrower Parties shall make
such deductions and the Borrower Parties shall pay the full amount so deducted to the relevant
taxation authority or other authority in accordance with applicable law. In addition, the Borrower
Parties agree to pay any present or future stamp, documentary, excise, privilege, intangible or
similar levies that arise at any time or from time to time from any payment made under the Note or
from the execution or delivery by the Borrower Parties or from the filing or recording or
maintenance of, or otherwise with respect to the exercise by the Holder of its rights under the
Note (collectively, “Other Taxes”). The Borrower Parties will indemnify the Holder for the full
amount of Covered Taxes imposed on or with respect to amounts payable hereunder and Other Taxes,
and any liability (including penalties, interest and expenses) arising therefrom or with respect
thereto. Payment of this indemnification shall be made within thirty (30) days from the date the
Holder provides the Borrower with a certificate certifying and setting forth in reasonable detail
the calculation thereof as to the amount and type of such Taxes. Any such certificates submitted by
the Holder in good faith to the Borrower shall, absent manifest error, be final, conclusive and
binding on all parties. The obligation of the Borrower Parties under this Section 8.2 shall survive
the payment and termination of this Note. Within thirty (30) days after the Borrower Parties having
received a receipt for payment of Covered Taxes and/or Other Taxes, the Borrower Parties shall
furnish to the Holder, the original or certified copy of a receipt evidencing payment thereof.




ARTICLE IX




MISCELLANEOUS



     9.1 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.



     9.2 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 on the signature page hereto (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). 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



11









 







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.



     9.3 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
Holder.



     9.4 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 to any of its Affiliates prior to the occurrence of any
Event of Default, and upon the occurrence and during the continuance of any Event of Default, to
any person. The Borrower shall assist the Holder in consummating any such transfer or assigned.
The Borrower may not assign this Note without the consent of the Holder. 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.



     9.5 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.



     9.6 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 HONG KONG SPECIAL ADMINISTRATIVE REGION, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.



     9.7 Dispute Resolution.


          (a) Any dispute, controversy or claim arising out of, in connection with or relating to this
Note (or the interpretation, breach, termination or validity thereof), shall be first resolved
through consultation between the parties. Such consultation shall begin immediately after one
party hereto has delivered to the other party hereto a written request for such consultation (the
“Request for Consultation”). If within thirty (30) days following the date on which the Request for
Consultation is delivered the dispute cannot be resolved, the dispute shall be submitted to
arbitration upon the request of either party with written notice to the other (the “Arbitration
Notice”).


          (b) The arbitration shall be conducted in Hong Kong under the UNCITRAL Arbitration Rules in
force at the time of the initiation of the arbitration. The arbitration shall be administered by
the Hong Kong International Arbitration Centre (the “HKIAC”) in accordance with the HKIAC
Procedures for the Administration of International Arbitration in force at the time of the
initiation of the arbitration. There shall be a single arbitrator. If the parties do not agree on
the nomination of an arbitrator within thirty (30) days after the delivery of the


12









 







Arbitration Notice to the other party, the appointment shall be made by the Secretary General of
the HKIAC. The arbitration shall be conducted in the English language.



          (c) The arbitrator shall decide any dispute submitted by the parties strictly in accordance
with the substantive law of Hong Kong and shall not apply any other substantive law.


          (d) Each party shall cooperate with the other in making full disclosure of and providing
complete access to all information and documents requested by the other in connection with such
arbitration proceedings, subject only to any doctrine of legal privilege or any confidentiality
obligations binding on such party.


          (e) The costs of arbitration shall be borne by the losing party, unless otherwise determined
by the arbitration tribunal.


          (f) When any dispute occurs and when any dispute is under arbitration, except for the matters
in dispute, the parties shall continue to fulfill their respective obligations and shall be
entitled to exercise their rights under this Note.


          (g) The award of the arbitration tribunal shall be final and binding upon the parties, and the
prevailing party may apply to a court of competent jurisdiction for enforcement of such award.


          (h) Either party shall be entitled to seek preliminary injunctive relief from any court
of competent jurisdiction pending the constitution of the arbitration tribunal.



     9.8 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.



     9.9 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.



     9.10 No Redemption. 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.



     9.11 Non-Business Days. Whenever any payment or any action to be made shall be due
on a date other than a Business Day, such payment may be due or action shall be required on the
next succeeding Business Day and, for such payment, such next succeeding Business Day shall be
included in the calculation of the amount of accrued interest payable on such date.



[Remainder of page intentionally left blank.]



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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.




	 	 	 	 	 
	 	EASTERN WELL HOLDINGS LIMITED

 	 
	 	By:  	/s/ Sun Kwok Ping
 	 
	 	 	Name:  	Sun Kwok Ping 	 
	 	 	Title:  	Director 	 
	 



Address:




Room 3, 21/F, Fast East Consortium Building

121 Des Voeux Road Central

Hong Kong

Attention: Sun Kwok Ping 

Fax: 00852-21849811




 









 





ACCEPTED AND AGREED:




HOLDER:




	 	 	 	 	 
	 	CARLYLE ASIA GROWTH PARTNERS IV, L.P.

 	 
	 	By:  	/s/ Daniel A. Daniello
 	 
	 	 	Name:  	Daniel A. Daniello 	 
	 	 	Title:  	Director 	 
	 



Address:




c/o Carlyle Asia Investment Advisors Limited



Attention: Nicholas Shao

Fax: 86-21-6103-3220









 









 











SCHEDULE 1




BORROWER PARTIES



	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Shareholders and	 	 
	Borrower Party	 	Capitalization	 	Nature	 	Jurisdiction	 	Shareholding	 	Business
	Borrower

	 	HK$10,000 divided
into 10,000
ordinary shares of
HK$1.00 each
	 	Limited liability

company
	 	Hong Kong
	 	Founder: 90%

 Mr. Zhao Genglong: 10%
	 	Holding company
	 
	 	 	 	 	 	 	 	 	 	 
	Founder

	 	N/A
	 	N/A
	 	N/A
	 	N/A
	 	N/A
	 
	 	 	 	 	 	 	 	 	 	 
	Shanghai Nuobo
Trading Co., Ltd.


	 	RMB10,000,000 (paid
up in full)
	 	Limited liability

company
	 	PRC
	 	Borrower: 100%
	 	Wholesale and
commission agency
of heating, air
conditioning and
energy saving
equipment and
accessories; import
and export of such
equipment and
accessories; and
provision of
relevant technical
services
	 
	 	 	 	 	 	 	 	 	 	 
	Jiangxi Nobao
Electro Co., Ltd.


	 	US$13,000,000 (of

which US$540,000

was paid up)
	 	Limited liability

company
	 	PRC
	 	Borrower: 100%
	 	Manufacture,

processing,

assembly,






 









 






	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Shareholders and	 	 
	Borrower Party	 	Capitalization	 	Nature	 	Jurisdiction	 	Shareholding	 	Business
	

	 	 	 	 	 	 	 	 	 	research and
development of Nobo
branded electrical
appliance and
parts; agency of
relevant electric
appliance; import
and export; and
distribution of
imported heat pumps