NONSTATUTORY STOCK OPTION AGREEMENT


 


NON-EMPLOYEE DIRECTOR 


 


This NONSTATUTORY STOCK
OPTION AGREEMENT (this "Agreement"), made and entered into as of the 31st day of January, 2011, by and between Mr. Chungui
Shi (the "Optionee") and China Recycling Energy Corporation, a Nevada corporation (the "Corporation"), sets
forth the terms and conditions of the stock option (the “Option”) granted by the Corporation to the Optionee as to
the number of shares of the Corporation’s Common Stock set forth below and its Board of Directors (“Board”) resolution
approving this stock option grant dated October 7, 2010 (“Grant Date”).


 


1.          Grant
of Option. Subject to the provisions of this Agreement, the Board grants to the Optionee an Option to purchase 40,000 shares of
Common Stock of the Corporation as of the Grant Date. The Option is not granted pursuant to the Corporation’s Nonstatutory
Stock Option Plan (the “Plan”), but is granted pursuant to the Board’s authority to grant such options to certain
persons, including non-employee directors of the Corporation. Notwithstanding the foregoing, all of the terms and conditions set
forth in the Plan, except those set forth in Sections 3, 4(a), 5(a), 5(b) (except for the paragraph titled “Medium and
Time of Payment” which shall be incorporated herein), 6, 7, 10, 11, and 17 of the Plan, are incorporated herein to the
extent applicable in the context of a non-Plan grant of stock options, and the Optionee hereby agrees that the Option and all rights
of the Optionee under this Agreement are subject to such terms and conditions. The Optionee agrees to be bound by the terms of
this Agreement, including all incorporated provisions. Any capitalized terms used but not defined herein shall have the meaning
prescribed in the incorporated provisions of the Plan.


 


2.          Exercise
Price. The exercise price for the granted shares of Common Stock subject to the Option shall equal the closing price per share
of the Common Stock on the Grant Date: $2.98.


 


3.          Vesting.
The Option shall vest and become exercisable on the six-month anniversary of the Grant Date. The Option may only be exercised to
the extent that the Option has become vested and exercisable. Vesting requires continued service through the vesting date as a
condition to the vesting of the Option and the rights and benefits under this Agreement. Service for only a portion of the vesting
period, even if a substantial portion, will not entitle the Optionee to any proportionate vesting or avoid or mitigate a termination
of rights and benefits upon or following a termination of service as provided in Section 4 below or under the incorporated provisions
of the Plan.


 


4.          Removal
from Service. In the event of the Optionee's resignation or removal as a director of the Corporation for any reason, any portion
of the Option that has not become vested and exercisable shall immediately be forfeited, and the Option, to the extent it has become
vested and exercisable, shall expire as set forth in Section 5 of this Agreement.


 


5.          Stock
Option Term. Unless an earlier date is provided herein, the Option shall expire on the fifth anniversary of the Grant Date.


 




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6.          Method
of Stock Option Exercise. The Option may be exercised during its term, in whole or in part, to the extent it has become vested
and exercisable pursuant to Section 3 or 4 and has not yet been forfeited or expired, by giving written notice of exercise to the
Corporation (or to such other party as the Corporation may designate from time to time) specifying the number of shares of Stock
subject to the Option to be purchased. Such notice shall be accompanied by payment in full of the purchase price by certified or
bank check or such other instrument as the Corporation may accept. Options may also be exercised by any other means permitted by
the Plan that the Compensation Committee of the Board (the “Committee”) may designate from time to time. To the extent
permitted by applicable law and to the extent permitted by the Committee, the Optionee may discharge any withholding obligation
in respect of this Agreement by directing the Corporation or an Affiliate to withhold shares of Stock to be delivered upon exercise
of the Option that have a Fair Market Value on the date of exercise equal to the Corporation's or such Affiliate’s minimum
withholding obligation.


 


7.          Transferability.
The Option shall not be transferable by the Optionee other than by will or by the laws of descent and distribution. The Option
shall be exercisable, subject to the incorporated terms of the Plan, only by the Optionee, the Optionee's estate or beneficiary,
the guardian or legal representative of the Optionee, or any person to whom such Option is transferred pursuant to this Section
7, it being understood that the term "Optionee" includes such guardian, legal representative and other permitted transferee.


 


8.          Successors,
Assigns and Transferees. Subject to the Corporation’s right to terminate the Option in accordance with the incorporated provisions
of the Plan, this Agreement shall be binding upon, and inure to the benefit of, the parties hereto and each of their respective
successors and permitted transferees (including, upon the death of the Optionee, the Optionee's estate).


 


9.          Incorporation
of Plan. The Optionee acknowledges having read and understanding this Agreement. Unless otherwise expressly provided in other sections
of this Agreement, provisions of the Plan that are incorporated herein that confer discretionary authority on the Board or the
Committee do not and shall not be deemed to create any rights in the Optionee unless such rights are expressly set forth herein
or are otherwise in the sole discretion of the Board or the Committee so conferred by appropriate action of the Board or the Committee
under the Plan after the date hereof. The Optionee may obtain a copy of the Plan from the Corporation.


 


10.       Not
an Employment Contract. Nothing contained in this Agreement or in the incorporated provisions of the Plan shall confer on the Optionee
any right with respect to continuance of service with the Corporation or an Affiliate, nor shall it interfere in any way with any
right the Corporation or an Affiliate would otherwise have to terminate or modify the terms of the Optionee's service at any time,
or affect the right of the Corporation or an Affiliate to increase or decrease the Optionee’s other compensation.


 


11.       Integration.
This Agreement and the other documents referred to herein or delivered pursuant hereto, which form a part hereof, contain the entire
understanding of the parties with respect to their subject matter. There are no restrictions, agreements, promises, representations,
warranties, covenants or undertakings with respect to the subject matter hereof other than those expressly set forth herein. This
Agreement supersedes all prior agreements and understandings between the parties with respect to its subject matter.


 




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12.         Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but which together constitute
one and the same instrument. Notwithstanding the foregoing, any duly authorized officer of the Corporation may execute this Agreement
by providing an appropriate facsimile signature, and any counterpart or amendment hereto containing such facsimile signature shall
for all purposes be deemed an original instrument duly executed by the Corporation.


 


13.         Modification;
Waiver. No provision of this Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in
writing and signed by the Optionee and by a duly authorized officer of the Corporation, and such waiver is set forth in writing
and signed by the party to be charged. No waiver by either party hereto at any time of any breach by the other party hereto of
any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.


 


14.         Bonus
Designation. The Option is designated as a bonus that is in addition to the Optionee’s regular cash compensation. By accepting
the Option, the Optionee acknowledges that this Award does not create a right or entitlement to future grants or awards.


 


15.         Data
Collection. By accepting the Option, the Optionee consents to the collection, holding, process, use, and transfer of Optionee’s
personal data across country borders that is necessary and needed to accomplish the full and complete implementation of the Option,
including the settlement of the granted shares of Stock. The Optionee can obtain a copy of the Corporation’s data processing
activities upon request by contacting the Human Resources representative.


 


IN WITNESS WHEREOF,
the Optionee has executed this Agreement on the Optionee's own behalf, thereby representing that the Optionee has carefully read
and understands this Agreement as of the day and year first written above, and the Corporation has caused this Agreement to be
executed in its name and on its behalf, all as of the date first written above.


 


	By:	 	 
	 	Chungui Shi	 
	 	Optionee	 
	 	 	 
	By:	 	 
	 	Guohua Ku	 
	 	Chairman	 
	 	China Recycling Energy Corporation	 


 




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