Exhibit
10.3


 


Securities
Purchase Agreement


 


This
Securities Purchase Agreement (this “Agreement”),
dated as of February 27, 2019, is entered into by and between China Recycling Energy Corporation,
a Nevada corporation (“Company”), and Iliad Research and Trading, L.P.,
a Utah limited partnership, its successors and/or assigns (“Investor”) (Company and Investor, each as “Party”
and collectively as “Parties”).


 


A. Company
and Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded
by the Securities Act of 1933, as amended (the “1933 Act”), and the rules and regulations promulgated thereunder
by the United States Securities and Exchange Commission (the “SEC”).


 


B. Investor
desires to purchase and Company desires to issue and sell, upon the terms and conditions set forth in this Agreement, a Convertible
Promissory Note, in the form attached hereto as Exhibit A, in the original principal amount of $1,050,000.00 (the “Note”),
convertible into shares of common stock, $0.001 par value per share, of Company (the “Common Stock”), upon
the terms and subject to the limitations and conditions set forth in such Note.


 


C. This
Agreement, the Note, and all other certificates, documents, agreements, resolutions and instruments delivered to any party under
or in connection with this Agreement, as the same may be amended from time to time, are collectively referred to herein as the
“Transaction Documents”.


 


D. For
purposes of this Agreement: “Conversion Shares” means all shares of Common Stock issuable upon conversion of
all or any portion of the Note; and “Securities” means the Note and the Conversion Shares.


 


NOW,
THEREFORE, in consideration of the above recitals and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Company and Investor hereby agree as follows:


 


1.
Purchase and Sale of Securities.


 


1.1.
Purchase of Securities. Company shall issue and sell to Investor and Investor shall purchase from Company the Note. In
consideration thereof, Investor shall pay the Purchase Price (as defined below) to Company.


 


1.2.
Form of Payment. On the Closing Date (as defined below), Investor shall pay the Purchase Price to Company via wire transfer
of immediately available funds against delivery of the Note.


 


1.3.
Closing Date. Subject to the satisfaction (or written waiver) of the conditions set forth in Section 5 and Section 6 below,
the date of the issuance and sale of the Securities pursuant to this Agreement (the “Closing Date”) shall be
February 27, 2019, or such other mutually agreed upon date. The closing of the transactions contemplated by this Agreement (the
“Closing”) shall occur on the Closing Date by means of the exchange by email of signed .pdf documents, but
shall be deemed for all purposes to have occurred at the offices of Hansen Black Anderson Ashcraft PLLC.


 


1.4.
Original Issue Discount. The Note carries an original issue discount of $50,000.00 (the “OID”), all
of which amount is included in the initial principal balance of the Note. The Purchase Price, therefore, shall be $1,000,000.00,
computed as follows: $1,050,000.00 initial principal balance, less the OID.


 






    1


     


    

 


2.
Investor’s Representations and Warranties. Investor represents and warrants to Company that as of the Closing Date:
(i) this Agreement has been duly and validly authorized; (ii) this Agreement constitutes the valid and binding obligations of
Investor enforceable in accordance with its terms; (iii) Investor is an “accredited investor” as that term is defined
in Rule 501(a) of Regulation D of the 1933 Act; and (iv) this Agreement has been duly executed and delivered on behalf of Investor.


 


3.
Company’s Representations and Warranties. Company represents and warrants to Investor that as of the Closing Date:
(i) Company is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation
and has the requisite corporate power to own its properties and to carry on its business as now being conducted; (ii) Company
is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the
business conducted or property owned by it makes such qualification necessary; (iii) Company has registered its Common Stock under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and is obligated to
file reports pursuant to Section 13 or Section 15(d) of the 1934 Act; (iv) each of the Transaction Documents and the
transactions contemplated hereby and thereby, have been duly and validly authorized by Company and all necessary actions have
been taken; (v) this Agreement, the Note, and the other Transaction Documents have been duly executed and delivered by Company
and constitute the valid and binding obligations of Company enforceable in accordance with their terms; (vi) the execution and
delivery of the Transaction Documents by Company, the issuance of Securities in accordance with the terms hereof, and the consummation
by Company of the other transactions contemplated by the Transaction Documents do not and will not conflict with or result in
a breach by Company of any of the terms or provisions of, or constitute a default under (a) Company’s formation documents
or bylaws, each as currently in effect, (b) any indenture, mortgage, deed of trust, or other material agreement or instrument
to which Company is a party or by which it or any of its properties or assets are bound, including, without limitation, any listing
agreement for the Common Stock, or (c) any existing applicable law, rule, or regulation or any applicable decree, judgment, or
order of any court, United States federal, state or foreign regulatory body, administrative agency, or other governmental body
having jurisdiction over Company or any of Company’s properties or assets; (vii) no further authorization, approval or consent
of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders
or any lender of Company is required to be obtained by Company for the issuance of the Securities to Investor or the entering
into of the Transaction Documents; (viii) none of Company’s filings with the SEC contained, at the time they were filed,
any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which they were made, not misleading; (ix) Company has filed
all reports, schedules, forms, statements and other documents required to be filed by Company with the SEC under the 1934 Act
on a timely basis or has received a valid extension of such time of filing and has filed any such report, schedule, form, statement
or other document prior to the expiration of any such extension; (x) there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body pending or, to the knowledge of Company, threatened against or affecting Company
before or by any governmental authority or non-governmental department, commission, board, bureau, agency or instrumentality or
any other person, wherein an unfavorable decision, ruling or finding would have a material adverse effect on Company or which
would adversely affect the validity or enforceability of, or the authority or ability of Company to perform its obligations under,
any of the Transaction Documents; (xi) Company has not consummated any financing transaction that has not been disclosed in a
periodic filing or current report with the SEC under the 1934 Act; (xii) Company is not, nor has it been at any time in the previous
twelve (12) months, a “Shell Company,” as such type of “issuer” is described in Rule 144(i)(1) under the
1933 Act; (xiii) with respect to any commissions, placement agent or finder’s fees or similar payments that will or would
become due and owing by Company to any person or entity as a result of this Agreement or the transactions contemplated hereby
(“Broker Fees”), any such Broker Fees will be made in full compliance with all applicable laws and regulations
and only to a person or entity that is a registered investment adviser or registered broker-dealer; (xiv) Investor shall have
no obligation with respect to any Broker Fees or with respect to any claims made by or on behalf of other persons for fees of
a type contemplated in this subsection that may be due in connection with the transactions contemplated hereby and Company shall
indemnify and hold harmless each of Investor, Investor’s employees, officers, directors, stockholders, members, managers,
agents, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs
of preparation and attorneys’ fees) and expenses suffered in respect of any such claimed Broker Fees; (xv) when issued,
the Conversion Shares will be duly authorized, validly issued, fully paid for and non-assessable, free and clear of all liens,
claims, charges and encumbrances; (xvi) neither Investor nor any of its officers, directors, stockholders, members, managers,
employees, agents or representatives has made any representations or warranties to Company or any of its officers, directors,
employees, agents or representatives except as expressly set forth in the Transaction Documents and, in making its decision to
enter into the transactions contemplated by the Transaction Documents, Company is not relying on any representation, warranty,
covenant or promise of Investor or its officers, directors, members, managers, employees, agents or representatives other than
as set forth in the Transaction Documents; (xvii) Company acknowledges that the State of Utah has a reasonable relationship and
sufficient contacts to the transactions contemplated by the Transaction Documents and any dispute that may arise related thereto
such that the laws and venue of the State of Utah, as set forth more specifically in Section 9.3 below, shall be applicable to
the Transaction Documents and the transactions contemplated therein; and (xviii) Company will not use its own lack of due diligence
with respect to the background and history of John M. Fife or Investor as a defense to or justification of its failure to perform
any of its obligations under the Transaction Documents or in any attempt to avoid, modify or reduce such obligations.


 






    2


     


    

 


4.
Company Covenants. Until all of Company’s obligations under all of the Transaction Documents are paid and performed
in full, or within the timeframes otherwise specifically set forth below, Company will at all times comply with the following
covenants: (i) so long as Investor beneficially owns any of the Securities and for at least twenty (20) Trading Days (as defined
in the Note) thereafter, Company will timely file on the applicable deadline all reports required to be filed with the SEC pursuant
to Sections 13 or 15(d) of the 1934 Act, and will take all reasonable action under its control to ensure that adequate current
public information with respect to Company, as required in accordance with Rule 144 of the 1933 Act, is publicly available, and
will not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would permit such termination; (ii) the Common Stock shall be listed or quoted for trading on any of (a) NYSE, (b)
NASDAQ, (c) OTCQX, or (d) OTCQB; (iii) when issued, the Conversion Shares will be duly authorized, validly issued, fully paid
for and non-assessable, free and clear of all liens, claims, charges and encumbrances; (iv) trading in Company’s Common
Stock will not be suspended, halted, chilled, frozen, reach zero bid or otherwise cease on Company’s principal trading market;
(v) Company will not make any Variable Security Issuance (as defined below) where Company receives net proceeds of less than $1,000,000.00
from such Variable Security Issuance, without Investor’s prior written consent, which consent may be granted or withheld
in Investor’s sole and absolute discretion; and (vi) at Closing and on the first day of each calendar quarter for so long
as the Note remains outstanding or on any other date during which the Note is outstanding, as may be requested by Investor, Company
shall cause its Chief Executive Officer to provide to Investor a certificate in substantially the form attached hereto as Exhibit
B (the “Officer’s Certificate”) certifying in his personal capacity and in his capacity as Chief
Executive Officer of Company that Company has not made any Variable Security Issuances where Company received less than $1,000,000.00
in net proceeds subsequent to the Closing Date. For purposes hereof, the term “Variable Security Issuance”
means any issuance of any Company securities that (A) have or may have conversion rights of any kind, contingent, conditional
or otherwise, in which the number of shares that may be issued pursuant to such conversion right varies with the market price
of the Common Stock, or (B) are or may become convertible into Common Stock (including without limitation convertible debt, warrants
or convertible preferred stock), with a conversion price that varies with the market price of the Common Stock, even if such security
only becomes convertible following an event of default, the passage of time, or another trigger event or condition. For avoidance
of doubt, the issuance of shares of Common Stock under, pursuant to, in exchange for or in connection with any contract or instrument,
whether convertible or not, is deemed a Variable Security Issuance for purposes hereof if the number of shares of Common Stock
to be issued is based upon or related in any way to the market price of the Common Stock, including, but not limited to, Common
Stock issued in connection with a Section 3(a)(9) exchange, a Section 3(a)(10) settlement, or any other similar settlement or
exchange.


 






    3


     


    

 


5.
Conditions Precedent to Company’s Obligation to Sell. The obligation of Company hereunder to issue and sell the Securities
to Investor at the Closing is subject to the satisfaction, on or before the Closing Date, of each of the following conditions:


 


5.1.
Investor shall have executed this Agreement and delivered the same to Company.


 


5.2.
Investor shall have delivered the Purchase Price to Company in accordance with Section 1.2 above.


 


6.
Conditions Precedent to Investor’s Obligation to Purchase. The obligation of Investor hereunder to purchase the Securities
at the Closing is subject to the satisfaction, on or before the Closing Date, of each of the following conditions, provided that
these conditions are for Investor’s sole benefit and may be waived by Investor at any time in its sole discretion:


 


6.1.
Company shall have executed this Agreement and the Note and delivered the same to Investor.


 


6.2.
Company’s Chief Executive Officer shall have executed the Officer’s Certificate and delivered the same to Investor.


 


6.3.
Company shall have delivered to Investor a fully executed Irrevocable Letter of Instructions to Transfer Agent (the “TA
Letter”) substantially in the form attached hereto as Exhibit C acknowledged and agreed to in writing by Company’s
transfer agent (the “Transfer Agent”).


 


6.4.
Company shall have delivered to Investor a fully executed Secretary’s Certificate substantially in the form attached hereto
as Exhibit D evidencing Company’s approval of the Transaction Documents.


 


6.5.
Company shall have delivered to Investor a fully executed Share Issuance Resolution substantially in the form attached hereto
as Exhibit E to be delivered to the Transfer Agent.


 


6.6.
Company shall have delivered to Investor fully executed copies of all other Transaction Documents required to be executed by Company
herein or therein.


 


7.
Reservation of Shares. On the date hereof, Company will reserve 6,000,000 shares of Common Stock from its authorized and
unissued Common Stock to provide for all issuances of Common Stock under the Note (the “Share Reserve”). Company
further agrees to add additional shares of Common Stock to the Share Reserve in increments of 500,000 shares as and when requested
by Investor if as of the date of any such request the number of shares being held in the Share Reserve is less than three (3)
times the number of shares of Common Stock obtained by dividing the Outstanding Balance (as defined in the Note) as of the date
of the request by the Redemption Conversion Price (as defined in the Note). Company shall further require the Transfer Agent to
hold the shares of Common Stock reserved pursuant to the Share Reserve exclusively for the benefit of Investor and to issue such
shares to Investor promptly upon Investor’s delivery of a conversion notice under the Note. Finally, Company shall require
the Transfer Agent to issue shares of Common Stock pursuant to the Note to Investor out of its authorized and unissued shares,
and not the Share Reserve, to the extent shares of Common Stock have been authorized, but not issued, and are not included in
the Share Reserve. The Transfer Agent shall only issue shares out of the Share Reserve to the extent there are no other authorized
shares available for issuance and then only with Investor’s written consent.


 






    4


     


    

 


8.
OFAC; Patriot Act.


 


8.1.
OFAC Certification. Company certifies that (i) it is not acting on behalf of any person, group, entity, or nation named
by any Executive Order or the United States Treasury Department, through its Office of Foreign Assets Control (“OFAC”)
or otherwise, as a terrorist, “Specially Designated Nation”, “Blocked Person”, or other banned or blocked
person, entity, nation, or transaction pursuant to any law, order, rule or regulation that is enforced or administered by OFAC
or another department of the United States government, and (ii) Company is not engaged in this transaction on behalf of, or instigating
or facilitating this transaction on behalf of, any such person, group, entity or nation.


 


8.2.
Foreign Corrupt Practices. Neither Company, nor any of its subsidiaries, nor any director, officer, agent, employee or
other person acting on behalf of Company or any subsidiary has, in the course of his actions for, or on behalf of, Company, used
any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity;
made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.


 


8.3.
Patriot Act. Company shall not (i) be or become subject at any time to any law, regulation, or list of any government agency
(including, without limitation, the OFAC) that prohibits or limits Investor from making any advance or extension of credit to
Company or from otherwise conducting business with Company, or (ii) fail to provide documentary and other evidence of Company’s
identity as may be requested by Investor at any time to enable Investor to verify Company’s identity or to comply with any
applicable law or regulation, including, without limitation, Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.
Company shall comply with all requirements of law relating to money laundering, anti-terrorism, trade embargos and economic sanctions,
now or hereafter in effect. Upon Investor’s request from time to time, Company shall certify in writing to Investor that
Company’s representations, warranties and obligations under this Section 8.3 remain true and correct and have not been breached.
Company shall immediately notify Investor in writing if any of such representations, warranties or covenants are no longer true
or have been breached or if Company has a reasonable basis to believe that they may no longer be true or have been breached. In
connection with such an event, Company shall comply with all requirements of law and directives of governmental authorities and,
at Investor’s request, provide to Investor copies of all notices, reports and other communications exchanged with, or received
from, governmental authorities relating to such an event. Company shall also reimburse Investor any expense incurred by Investor
in obtaining any necessary license from governmental authorities as may be necessary for Investor to enforce its rights under
the Transaction Documents, and in complying with all requirements of law applicable to Investor as the result of the existence
of such an event and for any penalties or fines imposed upon Investor as a result thereof.


 


9.
Miscellaneous. The provisions set forth in this Section 9 shall apply to this Agreement, as well as all other Transaction
Documents as if these terms were fully set forth therein; provided, however, that in the event there is a conflict between any
provision set forth in this Section 9 and any provision in any other Transaction Document, the provision in such other Transaction
Document shall govern.


 


9.1.
Certain Capitalized Terms. To the extent any capitalized term used in any Transaction Document is defined in any other
Transaction Document (as noted therein), such capitalized term shall remain applicable in the Transaction Document in which it
is so used even if the other Transaction Document (wherein such term is defined) has been released, satisfied, or is otherwise
cancelled or terminated.


 






    5


     


    

 


9.2.
Arbitration of Claims. The parties shall submit all Claims (as defined in Exhibit F) arising under this Agreement
or any other Transaction Document or any other agreement between the parties and their affiliates or any Claim relating to the
relationship of the parties to binding arbitration pursuant to the arbitration provisions set forth in Exhibit F attached
hereto (the “Arbitration Provisions”). The parties hereby acknowledge and agree that the Arbitration Provisions
are unconditionally binding on the parties hereto and are severable from all other provisions of this Agreement. By executing
this Agreement, Each of Company and Investor represents, warrants and covenants to each other that each of them has reviewed the
Arbitration Provisions carefully, consulted with legal counsel about such provisions (or waived its right to do so), understands
that the Arbitration Provisions are intended to allow for the expeditious and efficient resolution of any dispute hereunder, agrees
to the terms and limitations set forth in the Arbitration Provisions, and that Company will not take a position contrary to the
foregoing representations. Company acknowledges and agrees that Investor may rely upon the foregoing representations and covenants
of Company regarding the Arbitration Provisions.


 


9.3.
Governing Law; Venue. This Agreement shall be construed and enforced in accordance with, and all questions concerning the
construction, validity, interpretation and performance of this Agreement shall be governed by, the laws of the State of Utah,
without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the State of Utah. Each party consents to and expressly
agrees that the exclusive venue for arbitration of any dispute arising out of or relating to any Transaction Document or the relationship
of the parties or their affiliates shall be in Salt Lake County, Utah. Without modifying the parties’ obligations to resolve
disputes hereunder pursuant to the Arbitration Provisions, for any litigation arising in connection with any of the Transaction
Documents (and notwithstanding the terms (specifically including any governing law and venue terms) of any transfer agent services
agreement or other agreement between the Transfer Agent and Company, such litigation specifically includes, without limitation
any action between or involving Company and the Transfer Agent under the TA Letter or otherwise related to Investor in any way
(specifically including, without limitation, any action where Company seeks to obtain an injunction, temporary restraining order,
or otherwise prohibit the Transfer Agent from issuing shares of Common Stock to Investor for any reason)), each party hereto hereby
(i) consents to and expressly submits to the exclusive personal jurisdiction of any state or federal court sitting in Salt Lake
County, Utah, (ii) expressly submits to the exclusive venue of any such court for the purposes hereof, (iii) agrees to not bring
any such action (specifically including, without limitation, any action where Company seeks to obtain an injunction, temporary
restraining order, or otherwise prohibit the Transfer Agent from issuing shares of Common Stock to Investor for any reason) outside
of any state or federal court sitting in Salt Lake County, Utah, and (iv) waives any claim of improper venue and any claim or
objection that such courts are an inconvenient forum or any other claim, defense or objection to the bringing of any such proceeding
in such jurisdiction or to any claim that such venue of the suit, action or proceeding is improper. Finally, Company covenants
and agrees to name Investor as a party in interest in, and provide written notice to Investor in accordance with Section 9.13
below prior to bringing or filing, any action (including without limitation any filing or action against any person or entity
that is not a party to this Agreement, including without limitation the Transfer Agent) that is related in any way to the Transaction
Documents or any transaction contemplated herein or therein, including without limitation any action brought by Company to enjoin
or prevent the issuance of any shares of Common Stock to Investor by the Transfer Agent, and further agrees to timely name Investor
as a party to any such action. Company acknowledges that the governing law and venue provisions set forth in this Section 9.3
are material terms to induce Investor to enter into the Transaction Documents and that but for Company’s agreements set
forth in this Section 9.3 Investor would not have entered into the Transaction Documents.


 


9.4.
Specific Performance. Each Party acknowledges and agrees that irreparable damage may occur to the other Party (the “Non-defaulting
Party”) in the event that either Party (“Defaulting Party”) fails to perform any material provision
of this Agreement or any of the other Transaction Documents in accordance with its specific terms. It is accordingly agreed that
the Non-defaulting Party shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement or such other Transaction Document and to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which the Non-defaulting Party may be entitled under the Transaction Documents, at law or in
equity. For the avoidance of doubt, in the event the Non-defaulting Party seeks to obtain an injunction against Company or specific
performance of any provision of any Transaction Document, such action shall not be a waiver of any right of Non-defaulting Party
under any Transaction Document, at law, or in equity, including without limitation its rights to arbitrate any Claim pursuant
to the terms of the Transaction Documents.


 






    6


     


    

 


9.5.
Calculation Disputes. Notwithstanding the Arbitration Provisions, in the case of a dispute as to any determination or arithmetic
calculation under the Transaction Documents, including without limitation, calculating the Outstanding Balance, Lender Conversion
Price (as defined in the Note), Lender Conversion Shares (as defined in the Note), Redemption Conversion Price, Redemption Conversion
Shares (as defined in the Note), Conversion Factor (as defined in the Note), Market Price (as defined in the Note), or VWAP (as
defined in the Note) (each, a “Calculation”), Company or Investor (as the case may be) shall submit any disputed
Calculation via email or facsimile with confirmation of receipt (i) within two (2) Trading Days after receipt of the applicable
notice giving rise to such dispute to Company or Investor (as the case may be) or (ii) if no notice gave rise to such dispute,
at any time after Investor learned of the circumstances giving rise to such dispute. If Investor and Company are unable to agree
upon such Calculation within two (2) Trading Days of such disputed Calculation being submitted to Company or Investor (as the
case may be), then Investor will promptly submit via email or facsimile the disputed Calculation to Unkar Systems Inc. (“Unkar
Systems”). Investor shall cause Unkar Systems to perform the Calculation and notify Company and Investor of the results
no later than ten (10) Trading Days from the time it receives such disputed Calculation. Unkar Systems’ determination of
the disputed Calculation shall be binding upon all parties absent demonstrable error. Unkar Systems’ fee for performing
such Calculation shall be paid by the incorrect party, or if both parties are incorrect, by the party whose Calculation is furthest
from the correct Calculation as determined by Unkar Systems. In the event Company is the losing party, no extension of the Delivery
Date (as defined in the Note) shall be granted and Company shall incur all effects for failing to deliver the applicable shares
in a timely manner as set forth in the Transaction Documents.


 


9.6.
Counterparts. Each Transaction Document may be executed in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one instrument. The parties hereto confirm that any electronic copy of another
party’s executed counterpart of a Transaction Document (or such party’s signature page thereof) will be deemed to
be an executed original thereof.


 


9.7.
Document Imaging. Either Party shall be entitled, in its sole discretion, to image or make copies of all or any selection
of the agreements, instruments, documents, and items and records governing, arising from or relating to any of Company’s
loans, including, without limitation, this Agreement and the other Transaction Documents, or either Party may destroy or archive
the paper originals. The Parties (i) waive any right to insist or require that the other Party produce paper originals, (ii)
agree that such images shall be accorded the same force and effect as the paper originals, (iii) agree that both Parties are entitled
to use such images in lieu of destroyed or archived originals for any purpose, including as admissible evidence in any demand,
presentment or other proceedings, and (iv) further agree that any executed facsimile (faxed), scanned, emailed, or other imaged
copy of this Agreement or any other Transaction Document shall be deemed to be of the same force and effect as the original manually
executed document.


 


9.8.
Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the
interpretation of, this Agreement.


 


9.9.
Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute
or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform to such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.


 






    7


     


    

 


9.10. Entire Agreement. This Agreement, together with the other Transaction Documents, contains the entire understanding of the
parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither
Company nor Investor makes any representation, warranty, covenant or undertaking with respect to such matters. For the avoidance
of doubt, all prior term sheets or other documents between Company and Investor, or any affiliate thereof, related to the transactions
contemplated by the Transaction Documents (collectively, “Prior Agreements”), that may have been entered into
between Company and Investor, or any affiliate thereof, are hereby null and void and deemed to be replaced in their entirety by
the Transaction Documents. To the extent there is a conflict between any term set forth in any Prior Agreement and the term(s)
of the Transaction Documents, the Transaction Documents shall govern.


 


9.11. No Reliance. Company acknowledges and agrees that neither Investor nor any of its officers, directors, members, managers,
representatives or agents has made any representations or warranties to Company or any of its officers, directors, representatives,
agents or employees except as expressly set forth in the Transaction Documents and, in making its decision to enter into the transactions
contemplated by the Transaction Documents, Company is not relying on any representation, warranty, covenant or promise of Investor
or its officers, directors, members, managers, agents or representatives other than as set forth in the Transaction Documents.


 


9.12. Amendments.
No provision of this Agreement may be waived or amended other than by an instrument in writing signed by both parties
hereto.


 


9.13. Notices.
Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed
effectively given on the earliest of: (i) the date delivered, if delivered by personal delivery as against written
receipt therefor or by email to an executive officer, or by facsimile (with successful transmission confirmation), (ii) the
earlier of the date delivered or the third Trading Day after deposit, postage prepaid, in the United States Postal Service by
certified mail, or (iii) the earlier of the date delivered or the third Trading Day after mailing by express courier, with
delivery costs and fees prepaid, in each case, addressed to each of the other parties thereunto entitled at the following
addresses (or at such other addresses as such party may designate by five (5) calendar days’ advance written notice
similarly given to each of the other parties hereto):


 


If
to Company:


 


China
Recycling Energy Corporation


Attn:
Guohua Ku


4/F
Block C


Rong
Cheng Yun Gu Building


Keji
3rd, Yanta District


Xi
An City 710075


China


 


If
to Investor:


 


Iliad
Research and Trading, L.P.


Attn:
John Fife


303
East Wacker Drive, Suite 1040


Chicago,
Illinois 60601


 






    8


     


    

 


With
a copy to (which copy shall not constitute notice):


 


Hansen
Black Anderson Ashcraft PLLC


Attn:
Jonathan Hansen


3051
West Maple Loop Drive, Suite 325


Lehi,
Utah 84043


 


9.14. Successors
and Assigns. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed
by either party hereunder may not be assigned to a third party, including its affiliates, in whole or in part, without prior
written consent of the other party. Neither party may assign its rights or obligations under this Agreement or delegate its
duties hereunder without the prior written consent of the other party.


 


9.15. Survival.
The representations and warranties of Company and the agreements and covenants set forth in this Agreement shall survive the
Closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of Investor. Company agrees to
indemnify and hold harmless Investor and all its officers, directors, employees, attorneys, and agents for loss or damage
arising as a result of or related to any breach or alleged breach by Company of any of its representations, warranties and
covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of
expenses as they are incurred.


 


9.16. Further
Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and
shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.


 


9.17. Rights
and Remedies Cumulative; Liquidated Damages. All rights, remedies, and powers conferred in this Agreement and
the Transaction Documents are cumulative and not exclusive of any other rights or remedies, and shall be in addition to every
other right, power, and remedy that a Party may have, whether specifically granted in this Agreement or any other Transaction
Document, or existing at law, in equity, or by statute, and any and all such rights and remedies may be exercised from time
to time and as often and in such order as the Party may deem expedient. The parties acknowledge and agree that upon
Defaulting Party’s failure to comply with the provisions of the Transaction Documents, the Non-defaulting Party’s
damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability
to predict future interest rates and future share prices, the Non-defaulting Party’s increased risk, and the
uncertainty of the availability of a suitable substitute investment opportunity for the Non-defaulting Party, among other
reasons. Accordingly, any fees, charges, and default interest due under the Note and the other Transaction Documents are
intended by the parties to be, and shall be deemed, liquidated damages (under Company’s and Investor’s
expectations that any such liquidated damages will tack back to the Closing Date for purposes of determining the holding
period under Rule 144 under the 1933 Act). The parties agree that such liquidated damages are a reasonable estimate of the
Non-defaulting Party’s actual damages and not a penalty, and shall not be deemed in any way to limit any other right or
remedy the Non-defaulting Party may have hereunder, at law or in equity. The parties acknowledge and agree that under the
circumstances existing at the time this Agreement is entered into, such liquidated damages are fair and reasonable and are
not penalties. All fees, charges, and default interest provided for in the Transaction Documents are agreed to by the parties
to be based upon the obligations and the risks assumed by the parties as of the Closing Date and are consistent with
investments of this type. The liquidated damages provisions of the Transaction Documents shall not limit or preclude a
party from pursuing any other remedy available at law or in equity; provided, however, that the liquidated damages
provided for in the Transaction Documents are intended to be in lieu of actual damages.


 






    9


     


    

 


9.18. Ownership
Limitation. Notwithstanding anything to the contrary contained in this Agreement or the other Transaction Documents, if
at any time Investor would be issued shares of Common Stock under any of the Transaction Documents, but such issuance
would cause Investor (together with its affiliates) to beneficially own a number of shares exceeding the Maximum Percentage
(as defined in the Note), then Company must not issue to Investor the shares that would cause Investor to exceed the Maximum
Percentage. The shares of Common Stock issuable to Investor that would cause the Maximum Percentage to be exceeded are
referred to herein as the “Ownership Limitation Shares”. Company shall reserve the Ownership Limitation
Shares for the exclusive benefit of Investor. From time to time, Investor may notify Company in writing of the number of the
Ownership Limitation Shares that may be issued to Investor without causing Investor to exceed the Maximum Percentage. Upon
receipt of such notice, Company shall be unconditionally obligated to immediately issue such designated shares to Investor,
with a corresponding reduction in the number of the Ownership Limitation Shares. For purposes of this Section, beneficial
ownership of Common Stock will be determined under Section 13(d) of the 1934 Act.


 


9.19. Attorneys’
Fees and Cost of Collection. In the event of any arbitration or action at law or in equity to enforce or interpret the
terms of this Agreement or any of the other Transaction Documents, the parties agree that the party who is awarded the most
money (which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties, fees, or
other charges awarded to any party) shall be deemed the prevailing party for all purposes and shall therefore be entitled
to an additional award of the full amount of the reasonable attorneys’ fees, deposition costs, and expenses paid by
such prevailing party in connection with arbitration or litigation without reduction or apportionment based upon the
individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair an
arbitrator’s or a court’s power to award fees and expenses for frivolous or bad faith pleading. If (i) the
Note is placed in the hands of an attorney for collection or enforcement prior to commencing arbitration or legal
proceedings, or is collected or enforced through any arbitration or legal proceeding, or Investor otherwise takes action to
collect amounts due under the Note or to enforce the provisions of the Note, or (ii) there occurs any bankruptcy,
reorganization, receivership of Company or other proceedings affecting Company’s creditors’ rights and involving
a claim under the Note; then Company shall pay the direct costs incurred by Investor for such collection, enforcement or
action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without
limitation, reasonable attorneys’ fees, expenses, deposition costs, and disbursements.


 


9.20. Waiver.
No waiver of any provision of this Agreement shall be effective unless it is in the form of a writing signed by the party
granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other
provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a
continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically
set forth in writing.


 


9.21. Waiver
of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR
THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY
JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES
THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.


 






    10


     


    

 


9.22. Time
is of the Essence. Time is expressly made of the essence with respect to each and every provision of this Agreement and
the other Transaction Documents.


 


9.23. No
Changes; Signature Pages. Each Party, as well as the person signing each Transaction Document on behalf of such
Party, represents and warrants to the other Party that it has not made any changes to this Agreement or any other Transaction
Document except those that have been conspicuously disclosed to the other Party in a “redline” or similar draft
of the applicable Transaction Document, which clearly marks all changes such Party has made to the applicable Transaction
Document. Moreover, the versions of the Transaction Documents signed by each Party are the same versions the other Party
delivered to it as being the “final” versions of the Transaction Documents and both Investor and Company
represent and warrant that they have not made any changes to such “final” versions of the Transaction Documents
and that the versions such Party signed are the same versions the other Party delivered to it. In the event one Party has
made any changes to any Transaction Document that are not conspicuously disclosed to the other Party in a
“redline” or similar draft of the applicable Transaction Document and that have not been explicitly accepted and
agreed upon by the other Party, such Party making the changes acknowledges and agrees that any such changes shall not be
considered part of the final document set. Finally, and in furtherance of the foregoing, Company agrees and authorizes
Investor to compile the “final” versions of the Transaction Documents, which shall consist of Company’s
executed signature pages for all Transaction Documents being applied to the last set of the Transaction Documents that
Investor delivered to Company. Investor represents and warrants that it has not made any changes to the last version of
Transaction Documents agreed and sent to Investor by the Company when compiling the documents. Company agrees that such
versions of the Transaction Documents that have been collated by Investor shall be deemed to be the final versions of the
Transaction Documents for all purposes, provided that the representations and warranties of the Investors in the preceding
sentence is true.


 


9.24. Voluntary
Agreement. Each Party has carefully read this Agreement and each of the other Transaction Documents and has asked any
questions needed for it to understand the terms, consequences and binding effect of this Agreement and each of the other
Transaction Documents and fully understand them. Each Party has had the opportunity to seek the advice of an attorney of its
choosing, or has waived the right to do so, and is executing this Agreement and each of the other Transaction Documents
voluntarily and without any duress or undue influence by the other Party or anyone else.


 


[Remainder
of page intentionally left blank; signature page follows]


 






    11


     


    

 


IN
WITNESS WHEREOF, the undersigned Investor and Company have caused this Agreement to be duly executed as of the date first above
written.


 


SUBSCRIPTION
AMOUNT:


 


	Principal Amount of Note:	$	   1,050,000.00	 
	 	 	 	 
	Purchase Price:	$	1,000,000.00	 





 





	 	INVESTOR:
	 	 	 	 	 
	 	Iliad
Research and Trading, L.P.
	 	 	 	 	 
	 	By:	Iliad
    Management, LLC, its General Partner
	 	 	 	 	 
	 	 	By:	Fife Trading, Inc., its Manager
	 	 	 	 	 
	 	 		By:	 
	 	 	 	 	John
    M. Fife, President
	 	 	 	 	 
	 	COMPANY:
	 	 	 	 	 
	 	China
Recycling Energy Corporation
	 	 	 	 	 
	 	By:	 
	 	 	Guohua
    Ku, Chairman & Chief Executive Officer


 



    [Signature Page to Securities Purchase Agreement]


     


    

 


ATTACHED
EXHIBITS:


 


	Exhibit A	
    Note
	Exhibit
    B	
    Officer’s Certificate
	Exhibit C	
    Irrevocable Transfer Agent Instructions
	Exhibit D	
    Secretary’s Certificate
	Exhibit E	
    Share Issuance Resolution
	Exhibit F	Arbitration
Provisions


 






     


     


    

 


Exhibit
F


 


ARBITRATION
PROVISIONS


 


1. Dispute
Resolution. For purposes of this Exhibit F, the term “Claims” means any disputes, claims, demands,
causes of action, requests for injunctive relief, requests for specific performance, liabilities, damages, losses, or controversies
whatsoever arising from, related to, or connected with the transactions contemplated in the Transaction Documents and any communications
between the parties related thereto, including without limitation any claims of mutual mistake, mistake, fraud, misrepresentation,
failure of formation, failure of consideration, promissory estoppel, unconscionability, failure of condition precedent, rescission,
and any statutory claims, tort claims, contract claims, or claims to void, invalidate or terminate the Agreement (or these Arbitration
Provisions (defined below)) or any of the other Transaction Documents. The term “Claims” specifically excludes a dispute
over Calculations. The parties to the Agreement (the “parties”) hereby agree that the arbitration provisions
set forth in this Exhibit F (“Arbitration Provisions”) are binding on each of them. As a result, any
attempt to rescind the Agreement (or these Arbitration Provisions) or declare the Agreement (or these Arbitration Provisions)
or any other Transaction Document invalid or unenforceable for any reason is subject to these Arbitration Provisions. These Arbitration
Provisions shall also survive any termination or expiration of the Agreement. Any capitalized term not defined in these Arbitration
Provisions shall have the meaning set forth in the Agreement.


 


2. Arbitration.
Except as otherwise provided herein, all Claims must be submitted to arbitration (“Arbitration”) to be conducted
exclusively in Salt Lake County, Utah and pursuant to the terms set forth in these Arbitration Provisions. Subject to the arbitration
appeal right provided for in Paragraph 5 below (the “Appeal Right”), the parties agree that the award of the
arbitrator rendered pursuant to Paragraph 4 below (the “Arbitration Award”) shall be (a) final and binding
upon the parties, (b) the sole and exclusive remedy between them regarding any Claims, counterclaims, issues, or accountings presented
or pleaded to the arbitrator, and (c) promptly payable in United States dollars free of any tax, deduction or offset (with respect
to monetary awards). Subject to the Appeal Right, any costs or fees, including without limitation attorneys’ fees, incurred
in connection with or incident to enforcing the Arbitration Award shall, to the maximum extent permitted by law, be charged against
the party resisting such enforcement. The Arbitration Award shall include default interest (as defined or otherwise provided for
in the Note, “Default Interest”) (with respect to monetary awards) at the rate specified in the Note for Default
Interest both before and after the Arbitration Award. Judgment upon the Arbitration Award will be entered and enforced by any
state or federal court sitting in Salt Lake County, Utah.


 


3. The
Arbitration Act. The parties hereby incorporate herein the provisions and procedures set forth in the Utah Uniform Arbitration
Act, U.C.A. § 78B-11-101 et seq. (as amended or superseded from time to time, the “Arbitration Act”);
provided, however, to the extent any provisions or procedures regarding the Arbitration are not adequately described in
these Arbitration Provisions or the Arbitration Act then the rules of the American Arbitration Association shall apply with respect
to such provisions or procedures. Notwithstanding the foregoing, pursuant to, and to the maximum extent permitted by, Section
105 of the Arbitration Act, in the event of conflict or variation between the terms of these Arbitration Provisions and the provisions
of the Arbitration Act, the terms of these Arbitration Provisions shall control and the parties hereby waive or otherwise agree
to vary the effect of all requirements of the Arbitration Act that may conflict with or vary from these Arbitration Provisions.


 


4. Arbitration
Proceedings. Arbitration between the parties will be subject to the following:


 


4.1 Initiation
of Arbitration. Pursuant to Section 110 of the Arbitration Act, the parties agree that a party may initiate Arbitration by
giving written notice to the other party (“Arbitration Notice”) in the same manner that notice is permitted
under Section 9.13 of the Agreement; provided, however, that the Arbitration Notice may not be given by email or fax. Arbitration
will be deemed initiated as of the date that the Arbitration Notice is deemed delivered to such other party under Section 9.13
of the Agreement (the “Service Date”). After the Service Date, information may be delivered, and notices may
be given, by email or fax pursuant to Section 9.13 of the Agreement or any other method permitted thereunder. The Arbitration
Notice must describe the nature of the controversy, the remedies sought, and the election to commence Arbitration proceedings.
All Claims in the Arbitration Notice must be pleaded consistent with the Utah Rules of Civil Procedure.


 






    Arbitration Provisions, Page 1


     


    

 


4.2 Selection
and Payment of Arbitrator.


 


(a)
Within ten (10) calendar days after the Service Date, Investor shall select and submit to Company the names of three (3) arbitrators
that are designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com)
(such three (3) designated persons hereunder are referred to herein as the “Proposed Arbitrators”). For the
avoidance of doubt, each Proposed Arbitrator must be qualified as a “neutral” with Utah ADR Services. Within five
(5) calendar days after Investor has submitted to Company the names of the Proposed Arbitrators, Company must select, by written
notice to Investor, one (1) of the Proposed Arbitrators to act as the arbitrator for the parties under these Arbitration Provisions.
If Company fails to select one of the Proposed Arbitrators in writing within such 5-day period, then Investor may select the arbitrator
from the Proposed Arbitrators by providing written notice of such selection to Company.


 


(b)
If Investor fails to submit to Company the Proposed Arbitrators within ten (10) calendar days after the Service Date pursuant
to subparagraph (a) above, then Company may at any time prior to Investor so designating the Proposed Arbitrators, identify the
names of three (3) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Service by written
notice to Investor. Investor may then, within five (5) calendar days after Company has submitted notice of its Proposed Arbitrators
to Investor, select, by written notice to Company, one (1) of the Proposed Arbitrators to act as the arbitrator for the parties
under these Arbitration Provisions. If Investor fails to select in writing and within such 5-day period one (1) of the three (3)
Proposed Arbitrators selected by Company, then Company may select the arbitrator from its three (3) previously selected Proposed
Arbitrators by providing written notice of such selection to Investor.


 


(c)
If a Proposed Arbitrator chosen to serve as arbitrator declines or is otherwise unable to serve as arbitrator, then the party
that selected such Proposed Arbitrator may select one (1) of the other three (3) Proposed Arbitrators within three (3) calendar
days of the date the chosen Proposed Arbitrator declines or notifies the parties he or she is unable to serve as arbitrator. If
all three (3) Proposed Arbitrators decline or are otherwise unable to serve as arbitrator, then the arbitrator selection process
shall begin again in accordance with this Paragraph 4.2.


 


(d)
The date that the Proposed Arbitrator selected pursuant to this Paragraph 4.2 agrees in writing (including via email) delivered
to both parties to serve as the arbitrator hereunder is referred to herein as the “Arbitration Commencement Date”.
If an arbitrator resigns or is unable to act during the Arbitration, a replacement arbitrator shall be chosen in accordance with
this Paragraph 4.2 to continue the Arbitration. If Utah ADR Services ceases to exist or to provide a list of neutrals and there
is no successor thereto, then the arbitrator shall be selected under the then prevailing rules of the American Arbitration Association.


 


(e)
Subject to Paragraph 4.10 below, the cost of the arbitrator must be paid equally by both parties. Subject to Paragraph 4.10 below,
if one party refuses or fails to pay its portion of the arbitrator fee, then the other party can advance such unpaid amount (subject
to the accrual of Default Interest thereupon), with such amount being added to or subtracted from, as applicable, the Arbitration
Award.


 


4.3 Applicability
of Certain Utah Rules. The parties agree that the Arbitration shall be conducted generally in accordance with the Utah Rules
of Civil Procedure and the Utah Rules of Evidence. More specifically, the Utah Rules of Civil Procedure shall apply, without limitation,
to the filing of any pleadings, motions or memoranda, the conducting of discovery, and the taking of any depositions. The Utah
Rules of Evidence shall apply to any hearings, whether telephonic or in person, held by the arbitrator. Notwithstanding the foregoing,
it is the parties’ intent that the incorporation of such rules will in no event supersede these Arbitration Provisions.
In the event of any conflict between the Utah Rules of Civil Procedure or the Utah Rules of Evidence and these Arbitration Provisions,
these Arbitration Provisions shall control.


 


4.4 Answer
and Default. An answer and any counterclaims to the Arbitration Notice shall be required to be delivered to the party initiating
the Arbitration within twenty (20) calendar days after the Arbitration Commencement Date. If an answer is not delivered by the
required deadline, the arbitrator must provide written notice to the defaulting party stating that the arbitrator will enter a
default award against such party if such party does not file an answer within five (5) calendar days of receipt of such notice.
If an answer is not filed within the five (5) day extension period, the arbitrator must render a default award, consistent with
the relief requested in the Arbitration Notice, against a party that fails to submit an answer within such time period.


 






    Arbitration Provisions, Page 2


     


    

 


4.5 Related
Litigation. The party that delivers the Arbitration Notice to the other party shall have the option to also commence concurrent
legal proceedings with any state or federal court sitting in Salt Lake County, Utah (“Litigation Proceedings”),
subject to the following: (a) the complaint in the Litigation Proceedings is to be substantially similar to the claims set forth
in the Arbitration Notice, provided that an additional cause of action to compel arbitration will also be included therein, (b)
so long as the other party files an answer to the complaint in the Litigation Proceedings and an answer to the Arbitration Notice,
the Litigation Proceedings will be stayed pending an Arbitration Award (or Appeal Panel Award (defined below), as applicable)
hereunder, (c) if the other party fails to file an answer in the Litigation Proceedings or an answer in the Arbitration proceedings,
then the party initiating Arbitration shall be entitled to a default judgment consistent with the relief requested, to be entered
in the Litigation Proceedings, and (d) any legal or procedural issue arising under the Arbitration Act that requires a decision
of a court of competent jurisdiction may be determined in the Litigation Proceedings. Any award of the arbitrator (or of the Appeal
Panel (defined below)) may be entered in such Litigation Proceedings pursuant to the Arbitration Act.


 


4.6 Discovery.
Pursuant to Section 118(8) of the Arbitration Act, the parties agree that discovery shall be conducted as follows:


 


(a)
Written discovery will only be allowed if the likely benefits of the proposed written discovery outweigh the burden or expense
thereof, and the written discovery sought is likely to reveal information that will satisfy a specific element of a claim or defense
already pleaded in the Arbitration. The party seeking written discovery shall always have the burden of showing that all of the
standards and limitations set forth in these Arbitration Provisions are satisfied. The scope of discovery in the Arbitration proceedings
shall also be limited as follows:


 


(i) To
facts directly connected with the transactions contemplated by the Agreement.


 


(ii) To
facts and information that cannot be obtained from another source or in another manner that is more convenient, less burdensome
or less expensive than in the manner requested.


 


(b)
No party shall be allowed (i) more than fifteen (15) interrogatories (including discrete subparts), (ii) more than fifteen (15)
requests for admission (including discrete subparts), (iii) more than ten (10) document requests (including discrete subparts),
or (iv) more than three (3) depositions (excluding expert depositions) for a maximum of seven (7) hours per deposition. The costs
associated with depositions will be borne by the party taking the deposition. The party defending the deposition will submit a
notice to the party taking the deposition of the estimated attorneys’ fees that such party expects to incur in connection
with defending the deposition. If the party defending the deposition fails to submit an estimate of attorneys’ fees within
five (5) calendar days of its receipt of a deposition notice, then such party shall be deemed to have waived its right to the
estimated attorneys’ fees. The party taking the deposition must pay the party defending the deposition the estimated attorneys’
fees prior to taking the deposition, unless such obligation is deemed to be waived as set forth in the immediately preceding sentence.
If the party taking the deposition believes that the estimated attorneys’ fees are unreasonable, such party may submit the
issue to the arbitrator for a decision. All depositions will be taken in Utah.


 


(c)
All discovery requests (including document production requests included in deposition notices) must be submitted in writing to
the arbitrator and the other party. The party submitting the written discovery requests must include with such discovery requests
a detailed explanation of how the proposed discovery requests satisfy the requirements of these Arbitration Provisions and the
Utah Rules of Civil Procedure. The receiving party will then be allowed, within five (5) calendar days of receiving the proposed
discovery requests, to submit to the arbitrator an estimate of the attorneys’ fees and costs associated with responding
to such written discovery requests and a written challenge to each applicable discovery request. After receipt of an estimate
of attorneys’ fees and costs and/or challenge(s) to one or more discovery requests, consistent with subparagraph (c) above,
the arbitrator will within three (3) calendar days make a finding as to the likely attorneys’ fees and costs associated
with responding to the discovery requests and issue an order that (i) requires the requesting party to prepay the attorneys’
fees and costs associated with responding to the discovery requests, and (ii) requires the responding party to respond to the
discovery requests as limited by the arbitrator within twenty-five (25) calendar days of the arbitrator’s finding with respect
to such discovery requests. If a party entitled to submit an estimate of attorneys’ fees and costs and/or a challenge to
discovery requests fails to do so within such 5-day period, the arbitrator will make a finding that (A) there are no attorneys’
fees or costs associated with responding to such discovery requests, and (B) the responding party must respond to such discovery
requests (as may be limited by the arbitrator) within twenty-five (25) calendar days of the arbitrator’s finding with respect
to such discovery requests. Any party submitting any written discovery requests, including without limitation interrogatories,
requests for production subpoenas to a party or a third party, or requests for admissions, must prepay the estimated attorneys’
fees and costs, before the responding party has any obligation to produce or respond to the same, unless such obligation is deemed
waived as set forth above.


 






    Arbitration Provisions, Page 3


     


    

 


(d)
In order to allow a written discovery request, the arbitrator must find that the discovery request satisfies the standards set
forth in these Arbitration Provisions and the Utah Rules of Civil Procedure. The arbitrator must strictly enforce these standards.
If a discovery request does not satisfy any of the standards set forth in these Arbitration Provisions or the Utah Rules of Civil
Procedure, the arbitrator may modify such discovery request to satisfy the applicable standards, or strike such discovery request
in whole or in part.


 


(e)
Each party may submit expert reports (and rebuttals thereto), provided that such reports must be submitted within sixty (60) days
of the Arbitration Commencement Date. Each party will be allowed a maximum of two (2) experts. Expert reports must contain the
following: (i) a complete statement of all opinions the expert will offer at trial and the basis and reasons for them; (ii) the
expert’s name and qualifications, including a list of all the expert’s publications within the preceding ten (10)
years, and a list of any other cases in which the expert has testified at trial or in a deposition or prepared a report within
the preceding ten (10) years; and (iii) the compensation to be paid for the expert’s report and testimony. The parties are
entitled to depose any other party’s expert witness one (1) time for no more than four (4) hours. An expert may not testify
in a party’s case-in-chief concerning any matter not fairly disclosed in the expert report.


 


4.6 Dispositive
Motions. Each party shall have the right to submit dispositive motions pursuant Rule 12 or Rule 56 of the Utah Rules of Civil
Procedure (a “Dispositive Motion”). The party submitting the Dispositive Motion may, but is not required to,
deliver to the arbitrator and to the other party a memorandum in support (the “Memorandum in Support”) of the
Dispositive Motion. Within seven (7) calendar days of delivery of the Memorandum in Support, the other party shall deliver to
the arbitrator and to the other party a memorandum in opposition to the Memorandum in Support (the “Memorandum in Opposition”).
Within seven (7) calendar days of delivery of the Memorandum in Opposition, as applicable, the party that submitted the Memorandum
in Support shall deliver to the arbitrator and to the other party a reply memorandum to the Memorandum in Opposition (“Reply
Memorandum”). If the applicable party shall fail to deliver the Memorandum in Opposition as required above, or if the
other party fails to deliver the Reply Memorandum as required above, then the applicable party shall lose its right to so deliver
the same, and the Dispositive Motion shall proceed regardless.


 


4.7 Confidentiality.
All information disclosed by either party (or such party’s agents) during the Arbitration process (including without limitation
information disclosed during the discovery process or any Appeal (defined below)) shall be considered confidential in nature.
Each party agrees not to disclose any confidential information received from the other party (or its agents) during the Arbitration
process (including without limitation during the discovery process or any Appeal) unless (a) prior to or after the time of disclosure
such information becomes public knowledge or part of the public domain, not as a result of any inaction or action of the receiving
party or its agents, (b) such information is required by a court order, subpoena or similar legal duress to be disclosed if such
receiving party has notified the other party thereof in writing and given it a reasonable opportunity to obtain a protective order
from a court of competent jurisdiction prior to disclosure, or (c) such information is disclosed to the receiving party’s
agents, representatives and legal counsel on a need to know basis who each agree in writing not to disclose such information to
any third party. Pursuant to Section 118(5) of the Arbitration Act, the arbitrator is hereby authorized and directed to issue
a protective order to prevent the disclosure of privileged information and confidential information upon the written request of
either party.


 


4.8 Authorization;
Timing; Scheduling Order. Subject to all other portions of these Arbitration Provisions, the parties hereby authorize and
direct the arbitrator to take such actions and make such rulings as may be necessary to carry out the parties’ intent for
the Arbitration proceedings to be efficient and expeditious. Pursuant to Section 120 of the Arbitration Act, the parties hereby
agree that an Arbitration Award must be made within one hundred twenty (120) calendar days after the Arbitration Commencement
Date. The arbitrator is hereby authorized and directed to hold a scheduling conference within ten (10) calendar days after the
Arbitration Commencement Date in order to establish a scheduling order with various binding deadlines for discovery, expert testimony,
and the submission of documents by the parties to enable the arbitrator to render a decision prior to the end of such 120-day
period.


 






    Arbitration Provisions, Page 4


     


    

 


4.9 Relief.
The arbitrator shall have the right to award or include in the Arbitration Award (or in a preliminary ruling) any relief which
the arbitrator deems proper under the circumstances, including, without limitation, specific performance and injunctive relief,
provided that the arbitrator may not award exemplary or punitive damages.


 


4.10 Fees
and Costs. As part of the Arbitration Award, the arbitrator is hereby directed to require the losing party (the party being
awarded the least amount of money by the arbitrator, which, for the avoidance of doubt, shall be determined without regard to
any statutory fines, penalties, fees, or other charges awarded to any party) to (a) pay the full amount of any unpaid costs and
fees of the Arbitration, and (b) reimburse the prevailing party for all reasonable attorneys’ fees, arbitrator costs and
fees, deposition costs, other discovery costs, and other expenses, costs or fees paid or otherwise incurred by the prevailing
party in connection with the Arbitration.


 


5. Arbitration
Appeal.


 


5.1 Initiation
of Appeal. Following the entry of the Arbitration Award, either party (the “Appellant”) shall have a period
of thirty (30) calendar days in which to notify the other party (the “Appellee”), in writing, that the Appellant
elects to appeal (the “Appeal”) the Arbitration Award (such notice, an “Appeal Notice”)
to a panel of arbitrators as provided in Paragraph 5.2 below. The date the Appellant delivers an Appeal Notice to the Appellee
is referred to herein as the “Appeal Date”. The Appeal Notice must be delivered to the Appellee in accordance
with the provisions of Paragraph 4.1 above with respect to delivery of an Arbitration Notice. In addition, together with delivery
of the Appeal Notice to the Appellee, the Appellant must also pay for (and provide proof of such payment to the Appellee together
with delivery of the Appeal Notice) a bond in the amount of 110% of the sum the Appellant owes to the Appellee as a result of
the Arbitration Award the Appellant is appealing. In the event an Appellant delivers an Appeal Notice to the Appellee (together
with proof of payment of the applicable bond) in compliance with the provisions of this Paragraph 5.1, the Appeal will occur as
a matter of right and, except as specifically set forth herein, will not be further conditioned. In the event a party does not
deliver an Appeal Notice (along with proof of payment of the applicable bond) to the other party within the deadline prescribed
in this Paragraph 5.1, such party shall lose its right to appeal the Arbitration Award. If no party delivers an Appeal Notice
(along with proof of payment of the applicable bond) to the other party within the deadline described in this Paragraph 5.1, the
Arbitration Award shall be final. The parties acknowledge and agree that any Appeal shall be deemed part of the parties’
agreement to arbitrate for purposes of these Arbitration Provisions and the Arbitration Act.


 


5.2 Selection
and Payment of Appeal Panel. In the event an Appellant delivers an Appeal Notice to the Appellee (together with proof of payment
of the applicable bond) in compliance with the provisions of Paragraph 5.1 above, the Appeal will be heard by a three (3) person
arbitration panel (the “Appeal Panel”).


 


(a)
Within ten (10) calendar days after the Appeal Date, the Appellee shall select and submit to the Appellant the names of five
(5) arbitrators that are designated as “neutrals” or qualified arbitrators by Utah ADR Services (http://www.utahadrservices.com)
(such five (5) designated persons hereunder are referred to herein as the “Proposed Appeal Arbitrators”). For
the avoidance of doubt, each Proposed Appeal Arbitrator must be qualified as a “neutral” with Utah ADR Services, and
shall not be the arbitrator who rendered the Arbitration Award being appealed (the “Original Arbitrator”).
Within five (5) calendar days after the Appellee has submitted to the Appellant the names of the Proposed Appeal Arbitrators,
the Appellant must select, by written notice to the Appellee, three (3) of the Proposed Appeal Arbitrators to act as the members
of the Appeal Panel. If the Appellant fails to select three (3) of the Proposed Appeal Arbitrators in writing within such 5-day
period, then the Appellee may select such three (3) arbitrators from the Proposed Appeal Arbitrators by providing written notice
of such selection to the Appellant.


 


(b)
If the Appellee fails to submit to the Appellant the names of the Proposed Appeal Arbitrators within ten (10) calendar days
after the Appeal Date pursuant to subparagraph (a) above, then the Appellant may at any time prior to the Appellee so designating
the Proposed Appeal Arbitrators, identify the names of five (5) arbitrators that are designated as “neutrals” or qualified
arbitrators by Utah ADR Service (none of whom may be the Original Arbitrator) by written notice to the Appellee. The Appellee
may then, within five (5) calendar days after the Appellant has submitted notice of its selected arbitrators to the Appellee,
select, by written notice to the Appellant, three (3) of such selected arbitrators to serve on the Appeal Panel. If the Appellee
fails to select in writing within such 5-day period three (3) of the arbitrators selected by the Appellant to serve as the members
of the Appeal Panel, then the Appellant may select the three (3) members of the Appeal Panel from the Appellant’s list of
five (5) arbitrators by providing written notice of such selection to the Appellee.


 






    Arbitration Provisions, Page 5


     


    

 


(c)
If a selected Proposed Appeal Arbitrator declines or is otherwise unable to serve, then the party that selected such Proposed
Appeal Arbitrator may select one (1) of the other five (5) designated Proposed Appeal Arbitrators within three (3) calendar days
of the date a chosen Proposed Appeal Arbitrator declines or notifies the parties he or she is unable to serve as an arbitrator.
If at least three (3) of the five (5) designated Proposed Appeal Arbitrators decline or are otherwise unable to serve, then the
Proposed Appeal Arbitrator selection process shall begin again in accordance with this Paragraph 5.2; provided, however,
that any Proposed Appeal Arbitrators who have already agreed to serve shall remain on the Appeal Panel.


 


(d)The
date that all three (3) Proposed Appeal Arbitrators selected pursuant to this Paragraph 5.2 agree in writing (including via email)
delivered to both the Appellant and the Appellee to serve as members of the Appeal Panel hereunder is referred to herein as the
“Appeal Commencement Date”. No later than five (5) calendar days after the Appeal Commencement Date, the Appellee
shall designate in writing (including via email) to the Appellant and the Appeal Panel the name of one (1) of the three (3) members
of the Appeal Panel to serve as the lead arbitrator in the Appeal proceedings. Each member of the Appeal Panel shall be deemed
an arbitrator for purposes of these Arbitration Provisions and the Arbitration Act, provided that, in conducting the Appeal, the
Appeal Panel may only act or make determinations upon the approval or vote of no less than the majority vote of its members, as
announced or communicated by the lead arbitrator on the Appeal Panel. If an arbitrator on
the Appeal Panel ceases or is unable to act during the Appeal proceedings, a replacement arbitrator shall be chosen in accordance
with Paragraph 5.2 above to continue the Appeal as a member of the Appeal Panel. If Utah ADR Services ceases to exist or
to provide a list of neutrals, then the arbitrators for the Appeal Panel shall be selected under the then prevailing rules of
the American Arbitration Association.


 


(d)
Subject to Paragraph 5.7 below, the cost of the Appeal Panel must be paid entirely by the Appellant.


 


5.3 Appeal
Procedure. The Appeal will be deemed an appeal of the entire Arbitration Award. In conducting the Appeal, the Appeal Panel
shall conduct a de novo review of all Claims described or otherwise set forth in the Arbitration Notice. Subject to the foregoing
and all other provisions of this Paragraph 5, the Appeal Panel shall conduct the Appeal in a manner the Appeal Panel considers
appropriate for a fair and expeditious disposition of the Appeal, may hold one or more hearings and permit oral argument, and
may review all previous evidence and discovery, together with all briefs, pleadings and other documents filed with the Original
Arbitrator (as well as any documents filed with the Appeal Panel pursuant to Paragraph 5.4(a) below). Notwithstanding the foregoing,
in connection with the Appeal, the Appeal Panel shall not permit the parties to conduct any additional discovery or raise any
new Claims to be arbitrated, shall not permit new witnesses or affidavits, and shall not base any of its findings or determinations
on the Original Arbitrator’s findings or the Arbitration Award.


 


5.4 Timing.



 


(a) Within
seven (7) calendar days of the Appeal Commencement Date, the Appellant (i) shall deliver or cause to be delivered to the Appeal
Panel copies of the Appeal Notice, all discovery conducted in connection with the Arbitration, and all briefs, pleadings and other
documents filed with the Original Arbitrator (which material Appellee shall have the right to review and supplement if necessary),
and (ii) may, but is not required to, deliver to the Appeal Panel and to the Appellee a Memorandum in Support of the Appellant’s
arguments concerning or position with respect to all Claims, counterclaims, issues, or accountings presented or pleaded in the
Arbitration. Within seven (7) calendar days of the Appellant’s delivery of the Memorandum in Support, as applicable, the
Appellee shall deliver to the Appeal Panel and to the Appellant a Memorandum in Opposition to the Memorandum in Support. Within
seven (7) calendar days of the Appellee’s delivery of the Memorandum in Opposition, as applicable, the Appellant shall deliver
to the Appeal Panel and to the Appellee a Reply Memorandum to the Memorandum in Opposition. If the Appellant shall fail to substantially
comply with the requirements of clause (i) of this subparagraph (a), the Appellant shall lose its right to appeal the Arbitration
Award, and the Arbitration Award shall be final. If the Appellee shall fail to deliver the Memorandum in Opposition as required
above, or if the Appellant shall fail to deliver the Reply Memorandum as required above, then the Appellee or the Appellant, as
the case may be, shall lose its right to so deliver the same, and the Appeal shall proceed regardless.


 






    Arbitration Provisions, Page 6


     


    

 


(b)
 Subject to subparagraph (a) above, the parties hereby agree that the Appeal must be
heard by the Appeal Panel within thirty (30) calendar days of the Appeal Commencement Date, and that the Appeal Panel must render
its decision within thirty (30) calendar days after the Appeal is heard (and in no event later than sixty (60) calendar days after
the Appeal Commencement Date).


 


5.5 Appeal
Panel Award. The Appeal Panel shall issue its decision (the “Appeal Panel Award”) through the lead arbitrator
on the Appeal Panel. Notwithstanding any other provision contained herein, the Appeal Panel Award shall (a) supersede in its entirety
and make of no further force or effect the Arbitration Award (provided that any protective orders issued by the Original Arbitrator
shall remain in full force and effect), (b) be final and binding upon the parties, with no further rights of appeal, (c) be the
sole and exclusive remedy between the parties regarding any Claims, counterclaims, issues, or accountings presented or pleaded
in the Arbitration, and (d) be promptly payable in United States dollars free of any tax, deduction or offset (with respect to
monetary awards). Any costs or fees, including without limitation attorneys’ fees, incurred in connection with or incident
to enforcing the Appeal Panel Award shall, to the maximum extent permitted by law, be charged against the party resisting such
enforcement. The Appeal Panel Award shall include Default Interest (with respect to monetary awards) at the rate specified in
the Note for Default Interest both before and after the Arbitration Award. Judgment upon the Appeal Panel Award will be entered
and enforced by a state or federal court sitting in Salt Lake County, Utah.


 


5.6 Relief.
The Appeal Panel shall have the right to award or include in the Appeal Panel Award any relief which the Appeal Panel deems
proper under the circumstances, including, without limitation, specific performance and injunctive relief, provided that the Appeal
Panel may not award exemplary or punitive damages.


 


5.7 Fees
and Costs. As part of the Appeal Panel Award, the Appeal Panel is hereby directed to require the losing party (the party being
awarded the least amount of money by the arbitrator, which, for the avoidance of doubt, shall be determined without regard to
any statutory fines, penalties, fees, or other charges awarded to any party) to (a) pay the full amount of any unpaid costs and
fees of the Arbitration and the Appeal Panel, and (b) reimburse the prevailing party (the party being awarded the most amount
of money by the Appeal Panel, which, for the avoidance of doubt, shall be determined without regard to any statutory fines, penalties,
fees, or other charges awarded to any part) the reasonable attorneys’ fees, arbitrator and Appeal Panel costs and fees,
deposition costs, other discovery costs, and other expenses, costs or fees paid or otherwise incurred by the prevailing party
in connection with the Arbitration (including without limitation in connection with the Appeal).


 


6.
 Miscellaneous.


 


6.1 Severability.
If any part of these Arbitration Provisions is found to violate or be illegal under applicable law, then such provision shall
be modified to the minimum extent necessary to make such provision enforceable under applicable law, and the remainder of the
Arbitration Provisions shall remain unaffected and in full force and effect.


 


6.2 Governing
Law. These Arbitration Provisions shall be governed by the laws of the State of Utah without regard to the conflict of laws
principles therein.


 


6.3 Interpretation.
The headings of these Arbitration Provisions are for convenience of reference only and shall not form part of, or affect the interpretation
of, these Arbitration Provisions.


 


6.4 Waiver.
No waiver of any provision of these Arbitration Provisions shall be effective unless it is in the form of a writing signed by
the party granting the waiver.


 


6.5 Time
is of the Essence. Time is expressly made of the essence with respect to each and every provision of these Arbitration Provisions.


 


[Remainder
of page intentionally left blank]


 


 


Arbitration Provisions, Page 7