Unassociated Document

 

     

    THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR
THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE COMPANY, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER THE ACT OR UNLESS SOLD PURSUANT TO, AND IN ACCORDANCE WITH, RULE 144 OR
RULE 144A UNDER THE ACT OR OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904
OF REGULATION S UNDER THE ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND
REGULATIONS.

     

    CHINA
NEW ENERGY GROUP COMPANY

    


    CONVERTIBLE
NOTE DUE OCTOBER 15, 2010

    


    $___________

     

    Issue
Date: September 14, 2010

    


    FOR VALUE
RECEIVED, China New Energy Group Company, a Delaware corporation (the "Company") hereby promises to
pay in accordance with the provisions hereof to the order of ______________, a Delaware
limited liability company or its successors, assigns and legal representatives
(the "Holder"), the
aggregate principal sum of _______________ ($___________), in lawful money of
the United States of America. This Note is issued pursuant to that certain Note
Purchase Agreement by and between the Company and the Holder, and the Holder and
this Note are subject to the terms and entitled to the benefits of the Note
Purchase Agreement. The terms used in this Note that are not defined herein,
shall have the meaning as set forth in the Note Purchase Agreement.

    


    ARTICLE
I

    


    REPAYMENT

    


    Section
1.1         Principal.  The
entire principal amount of this Note shall be due on October 15, 2010 (the
“Maturity
Date”).  Promptly following the payment in full of this Note,
the Holder shall surrender this Note to the Company for
cancellation.

    


    Section
1.2         Stock Issuance.  If
this Note is repaid in full on or before the Maturity Date, then at the time of
such repayment the Company shall issue to the Holder 0.835 shares of its Series
C Convertible Preferred Stock, par value $.001 per share (“Series C Preferred Stock”),
subject to adjustments as set forth in Article IV herein.


    
      
         


      

      
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    ARTICLE
II

    


    CONVERSION

    


    Section
2.1         Conversion.  If
this Note is not repaid in full on or before the Maturity Date, the principal
amount of this Note shall be automatically converted into 1.875 shares of Series
C Preferred Stock, subject to adjustments as set forth in Article IV
herein.

     

    Section
2.2         Effect of
Conversion.   Upon conversion of this Note into shares of
Series C Preferred Stock, the rights of the Holder of this Note shall cease, and
the Holder shall be deemed to have become the holder of record of Series C
Preferred Stock.

     

    ARTICLE
III

    


    EVENTS
OF DEFAULT

    


    Section
3.1        Event of
Default.  "Event of Default", wherever
used herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental
body):

    


    (a)         the
entry of a decree or order by a court having jurisdiction in the premises
adjudging the Company a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under Federal bankruptcy law or any other applicable
Federal or state law, or appointing a receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any substantial part
of the property of the Company, or ordering the winding up or liquidation of the
affairs of the Company; or

    


    (c)         the
institution by the Company of proceedings to be adjudicated a bankrupt or
insolvent, or the consent by the Company to the institution of bankruptcy or
insolvency proceedings against it, or the filing by the Company of a petition or
answer or consent seeking reorganization or relief under Federal bankruptcy law
or any other applicable Federal or state law, or the consent by the Company to
the filing of such petition or to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Company or of any
substantial part of the property of the Company, or the making by the Company of
an assignment for the benefit of creditors, or the admission by the Company in
writing of its inability to pay its debts generally as they become due, or the
taking of corporate action by the Company in furtherance of any such
action.

    


    Section
3.2         Acceleration of
Note.  If an Event of Default occurs and is continuing, then
and in every such case the Holder may declare the outstanding principal amount
of this Note to be due and payable immediately, by a notice in writing to the
Company, and upon any such declaration such principal shall become immediately
due and payable.  At any time after the outstanding principal amount
of this Note shall become immediately due and payable and before a judgment or
decree for payment of the money due has been obtained, the Holder, by written
notice to the Company, may rescind and annul any acceleration and its
consequences.


    
      
         


      

      
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    ARTICLE
IV

    


    ADJUSTMENTS

    


    Section
4.1         Adjustment of
Conversion Shares. If the
Company, at any time while this Note is outstanding, shall (a) subdivide
outstanding shares of Series C Preferred Stock into a larger number of shares,
or (b) combine (including by way of reverse stock split) outstanding shares of
Series C Preferred Stock into a smaller number of shares, then the number of
shares of Series C Preferred Stock issuable to the Holder pursuant to Article I
or Article II of this Note shall be multiplied by a fraction of which the
numerator shall be the number of shares of Series C Preferred Stock outstanding
before such event and of which the denominator shall be the number of shares of
Series C Preferred Stock outstanding after such event. Any adjustment made
pursuant to this Section 4.1 shall become effective immediately after the
effective date of a subdivision or combination.

    


    Section
4.2         Notice of Adjustment. The
Company shall send to the Holder a notice of adjustment within ten (10) days
after the effectiveness of a corporate event that gave rise to such adjustment
stating the nature of the corporate event and the number of shares of Series C
Preferred Stock issuable under this Note on as adjusted basis.

    


    ARTICLE
V

    


    MISCELLANEOUS

    


    Section
5.1         Governing Law;
Jurisdiction.  This Note shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to the
conflicts of laws provisions thereof.  The Company hereby irrevocably
and unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Courts of the State of New York in any action or proceeding
arising out of or relating to this Note, or for recognition or enforcement of
any judgment, and hereby irrevocably and unconditionally agrees that all claims
in respect of any such action or proceeding may be heard and determined in the
State of New York.  The Company hereby agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law.  The Company hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection which it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Note in any court referred to
above, and hereby irrevocably waives, to the fullest extent permitted by law,
the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.  The Company irrevocably consents to
service of process in the manner provided for notices below.  Nothing
in this Agreement will affect the right of the Holder to serve process in any
other manner permitted by law.


    
      
         


      

      
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    Section
5.2         Successors.  All
agreements of the Company in this Note shall bind its successors and permitted
assigns.  This Note shall inure to the benefit of the Holder and its
permitted successors and assigns.  The Company shall not delegate any
of its obligations hereunder without the prior written consent of
Holder.

    


    Section
5.3         Amendment, Modification or
Waiver.  No provision of this Note may be amended, modified or
waived except by an instrument in writing signed by the Company and the
Holder.

    


    Section
5.4         Legend.  This Note,
and any note issued in exchange or substitution for this Note, shall bear the
legend appearing on the first page hereof.

    


    Section
5.5         Notices.  All
notices and other communications in respect of this Note (including, without
limitation, any modifications of, or requests, waivers or consents under, this
Note) shall be given or made in writing (including, without limitation, by
telecopy) at the addresses specified in the Note Purchase
Agreement.  Except as otherwise provided in this Note, all such
communications shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.

    


    Section
5.6         Delay or Omission Not
Waiver.  No failure or delay on the part of the Holder 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 right, power or
privilege.  All rights and remedies existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise
available.

    


    [Remainder
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    IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed by an
authorized officer thereof as of the date and year first above
written.

     

    Date:
September 14, 2010.

    


    
      
        
          	
                  CHINA
      NEW ENERGY GROUP COMPANY

                
	 
      
	
                  By:
      

                	
                   

                
	
                  Name:
      Yang Kan Chong

                
	
                  Title:
      Chief Executive Officer

                


        

      

    

     

    
      
         


      

      
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