Execution Copy

    


    NEITHER THESE SECURITIES NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES
ACT”) AND APPLICABLE STATE
SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.  THESE SECURITIES
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

     

    WARRANT
AGREEMENT

     

    Warrant
Agreement (the “Warrant”), dated as of May 21, 2009, between China Energy
Recovery, Inc., a Delaware company (the “Company”), and Hold And Opt Investments
Limited, a Bahamas company (the “Holder”).

     

    WITNESSETH:

     

    WHEREAS,
the Company has entered into a loan (“Loan”) with the Holder, and the Loan
provides for the issuance of this Warrant for the purchase of shares of common
stock of the Company, $.001 par value (“Common Stock”), as provided herein and
subject hereto; and

     

    WHEREAS,
the Holder is taking this Warrant in reliance on the representations of the
Company, set forth in the Loan agreement;

     

    WHEREAS,
this Warrant is being issued on a private placement basis, on the terms provided
herein, in conjunction with the Loan, and the Company is relying on the
representations of the Holder in the Loan agreement, and the Holder understands
the limitations and responsibilities of acquiring the restricted securities
comprising the Warrant and the underlying shares of Common Stock (“Warrant
Shares”) and the registration rights provided in a separate Registration Rights
Agreement (“Registration Rights Agreement”) between the Company and the Holder
of even date herewith.

     

    NOW,
THEREFORE, in consideration of the premises contained herein, including the Loan
by the Holder to the Company, the agreements set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

     

    1.            Grant and
Period.

     

    1.1         Grant.  The
Holder is hereby granted the right to purchase from the Company, at any time
during the exercise period, up to an aggregate of 1,388,889 Warrant Shares of
the Company at an initial exercise price (subject to adjustment as provided in
Section 5 hereof) of $1.80 per Warrant Share (the “Exercise Price”), such
exercise to be subject to the terms and conditions of this Warrant.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.2         Period.  The
Warrant will be exercisable commencing on May 21, 2009, and expire at 5:00 PM on
May 21, 2014 (“Expiration Time”).  If the Expiration Time is not a
business day in the City of Shanghai, then the expiration date will be extended
to 5:00 PM on the next business day in the City of Shanghai.  Days on
which banks are generally closed for business and financial transactions in the
City of Shanghai, Saturdays and Sundays will be considered a non-business
day.

     

    2.           Exercise of
Warrant.

     

    2.1         Full
Exercise.  Except as provided in Section 2.3 below, the
Holder shall effect an exercise of the Warrant by surrendering to the Company
this Warrant, together with a Subscription in the form of Exhibit A attached
thereto, duly executed by such Holder, at any time prior to the Expiration Time,
at the Company’s principal office, accompanied by payment in cash or by
certified or official bank check payable to the order of the Company in the
amount of the aggregate purchase price (the “Aggregate Price”), subject to any
adjustments provided for in the Warrant. The Aggregate Price shall be the amount
that is the result of the Exercise Price multiplied by the number of Warrant
Shares that are the subject of the Warrant (as adjusted as hereinafter provided)
being purchased by the Holder.

     

    2.2         Partial
Exercise.  The Warrant may also be exercised from time to time
in part by surrendering the Warrant in the manner specified in Sections 2.1 or
2.3 hereof, except that the Purchase Price payable shall be the amount that is
the result of the number of Warrant Shares being purchased hereunder multiplied
by the Exercise Price, subject to any adjustments provided for in the Warrant.
Upon any such partial exercise, the Company, at its expense, will forthwith
issue to the Holder a new Warrant of like tenor for the aggregate number of
securities (as constituted as of the date hereof) for which the Warrant shall
not have been exercised, issued in the name of the Holder or as the Holder (upon
payment by such Holder of any applicable transfer taxes) may
direct.

     

    2.3         Conversion
Right.  The Holder may effect an exercise of the Warrants and
pay the Exercise Price through a conversion of the Warrant (“Conversion Right”);
provided, that
such conversion right shall exist only at such time that the Company has the
obligation to provide a resale registration statement for the underlying
securities of the Warrant, whether pursuant to the exercise of a demand right or
an exercised piggyback right, and the Company does not have a registration
statement effective and currently the available for the resale by the Holder of
the underlying securities of the Warrant as provided in the Registration Rights
Agreement. Subject to the foregoing limitation, the Holder may effect a
Conversion Right of the Warrant by surrendering to the Company this Warrant,
together with a Subscription in the form of Exhibit B attached hereto, duly
executed by such Holder, prior to the Expiration Time, at the Company’s
principal office, upon which the Company shall issue to the Holder the number of
Warrant Shares determined as follows:

     

    
      
        
          	 
      	
                  X

                	
                  =

                	
                  Y x
      (A-B)/A

                
	 
      	 
      	 
      	 
      
	
                  where

                	
                  X

                	
                  =

                	
                  the
      number of Warrant Shares to be issued to the Holder;

                
	 
      	 
      	 
      	 
      
	 
      	
                  Y

                	
                  =

                	
                  the
      number of Warrant Shares with respect to which this Warrant is being
      exercised;

                
	 
      	 
      	 
      	 
      
	 
      	
                  A

                	
                  =

                	
                  the
      Market Price of a share of Common Stock as of the Date of Exercise;
      and

                
	 
      	 
      	 
      	 
      
	 
      	
                  B

                	
                  =

                	
                  the
      Exercise Price.

                


        

      

    

    


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    2.4         Certain Defined
Terms.  “Market Price” of a share of Common Stock on any date
shall mean, (i) if the shares of Common Stock are traded on the NASDAQ Global
Market, NASDAQ Global Select Market or the NASDAQ Capital Market, the last bid
price reported on that date; (ii) if the shares of Common Stock are not quoted
on a NASDAQ market and are listed on any other national securities exchange, the
last sale price of the Common Stock reported by such exchange on that date;
(iii) if the shares of Common Stock are not quoted on any such market or listed
on any such exchange and the shares of Common Stock are traded in the
over-the-counter market, the last price reported on such day by the OTC Bulletin
Board; (iv) if the shares of Common Stock are not quoted on a any such market,
listed on any such exchange or quoted on the OTC Bulletin Board, then the last
price quoted on such day in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); or (v) if none of clauses
(i)-(iv) are applicable, then as determined, in good faith, by the Board of
Directors of the Company and the Holders. “Date of Exercise” means the date on
which the Holder shall have delivered to the Company (i) the Warrant, (ii) the
applicable Subscription form attached thereto, appropriately completed and duly
signed, and (iii) if applicable, payment of the Exercise Price.

     

    3.            Issuance of
Certificates.  Upon the exercise of the Warrant, the issuance
of certificates for Warrant Shares shall be made promptly (and, in any event
within five business days thereafter) without charge to the Holder thereof
including, without limitation, any tax which may be payable in respect of the
issuance thereof, and such certificates shall (subject to the provisions of
Section 4 and Section 5 hereof) be issued in the name of, or in such names as
may be directed by, the Holder thereof; provided, however, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.

     

    4.           Restriction on
Transfer.  The Warrant and the Warrant Shares may be
transferred only pursuant to a registration statement filed under the Securities
Act of 1933, as amended (the “Securities Act”) and the applicable state
securities laws or an exemption from such registrations.  Subject to
such restrictions, the Company shall transfer the Warrant and the Warrant
Shares, from time to time, upon the books to be maintained by the Company for
that purpose, upon surrender thereof, for transfer properly endorsed or
accompanied by appropriate instructions for transfer and such other documents as
may be reasonably required by the Company, including, if required by the
Company, an opinion of its counsel to the effect that such transfer is exempt
from the registration requirements of the Securities Act, and to establish that
such transfer is being made in accordance with the terms hereof.  Upon
such surrender to the Company of this Warrant for its transfer, the Company
shall execute and deliver a new Warrant, representing the new Warrant or
Warrants in the name of the transferee or transferees and in the denomination or
denominations specified in such instructions, and shall issue to the transferor
a new Warrant evidencing the portion of the Warrant not so transferred, and this
Warrant shall promptly be cancelled.  A Warrant, if properly
transferred, may be exercised by a new holder without having a new Warrant
issued.

     

    5.           Adjustments to Exercise
Price and Number of Securities.

     

    5.1         Stock Dividends and
Splits.  If the Company, at any time while this Warrant is
outstanding: (i) pays a stock dividend or otherwise makes a distribution or
distributions to all its stockholders equally which are payable in shares of
Common Stock on shares of Common Stock or any Common Stock equivalents, (ii)
subdivides outstanding shares of Common Stock into a larger number of shares,
(iii) combines (including by way of a reverse stock split) outstanding shares of
Common Stock into a smaller number of shares or (iv) issues, in the event of a
reclassification of shares of the Common Stock, any shares of capital stock of
the Company, then the Exercise Rate shall be multiplied by a fraction of which
the numerator shall be the number of shares of Common Stock (excluding any
treasury shares of the Company) outstanding immediately before such event and of
which the denominator shall be the number of shares of Common Stock outstanding
immediately after such event.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    5.2         Extraordinary
Transactions.  If, (i) the Company effects any merger or
consolidation of the Company with or into another Person and the Company is not
the surviving entity, or (ii) the Company effects any reclassification of the
Common Stock or any compulsory share exchange pursuant to which the Common Stock
is effectively converted into or exchanged for other securities, (in either such
case, an “Extraordinary Transaction”), then the Warrant will become the right
thereafter to receive, upon exercise, the same amount and kind of securities as
the Holder would have been entitled to receive upon the occurrence of such
Extraordinary Transaction if it had been, immediately prior to such
Extraordinary Transaction, the holder of the number of Warrant Shares then
issuable upon exercise in full of the Warrant (the “Alternate Consideration”) in
lieu of the Warrant Shares. The aggregate Exercise Price for each Warrant will
not be affected by any such Extraordinary Transaction, but the Company shall
apportion such aggregate Exercise Price to the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, to be received in an Extraordinary Transaction, then each
Holder, to the extent practicable, shall be given the same choice as to the
Alternate Consideration it receives upon any exercise of the Warrant following
such Extraordinary Transaction. In addition, at the request of the Holder, upon
surrender of the Warrant, any successor to the Company or surviving entity in
such Extraordinary Transaction shall issue to the Holder a new Warrant
consistent with the foregoing provisions and evidencing the Holder’s right to
purchase the Alternate Consideration for the aggregate Exercise Price upon
exercise thereof. Each Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Extraordinary
Transaction.

     

    5.3         Adjustment in Number of
Securities.  Upon each adjustment of the Exercise Price
pursuant to the provisions of Sections 5.1 and 5.2, the number of securities
issuable upon the exercise of the Warrant shall be adjusted to the nearest full
amount by multiplying a number equal to the Exercise Price in effect immediately
prior to such adjustment by the number of securities issuable upon exercise of
the Warrant immediately prior to such adjustment and dividing the product so
obtained by the adjusted Exercise Price.

     

    5.4         No Adjustment of Exercise
Price in Certain Cases.  No adjustment of the Exercise Price
shall be made if the amount of said adjustment shall be less than $.01 per
Warrant Share; provided, however, that in such case any adjustment that would
otherwise be required then to be made shall be carried forward and shall be made
at the time of and together with the next subsequent adjustment which, together
with any adjustment so carried forward, shall amount to at least $.01 per
Warrant Share.

     

    5.5         Notice of
Adjustment.  In each case of an adjustment or readjustment of
the Exercise Price or the number and kind of any securities issuable upon
exercise of the Warrant, the Company at its expense will promptly calculate such
adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment, including a statement of the adjusted
Exercise Price and adjusted number of shares of Common Stock or type of
Alternate Consideration issuable upon exercise of the Warrant (as applicable),
describing the transactions giving rise to such adjustments and showing in
detail the facts upon which such adjustment is based. The Company will promptly
deliver to each Holder who makes a request in writing, a copy of each such
certificate.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    6.           Registration
Rights.  The shares of Common Stock issuable upon exercise of
this Warrant, whether by cash or conversion, are entitled to the registration
rights set forth in that separate Registration Rights Agreement.

     

    7.           Elimination of Fractional
Interest.  The Company shall not be required to issue
certificates representing fractions of securities upon the exercise of the
Warrant, nor shall it be required to issue script or pay cash in lieu of
fractional interests, it being the intent of the parties that all fractional
interests may be eliminated, at the Company’s option, by rounding any fraction
up to the nearest whole number of shares of Common Stock or other securities,
properties or rights issuable on exercise, or in lieu thereof paying cash equal
to such fractional interest.

     

    8.           Reservation, Validity and
Listing.  The Company covenants and agrees that during the
exercise period, the Company shall at all times reserve and keep available out
of its authorized shares of Common Stock, solely for the purpose of issuance
upon the exercise of the Warrant, such number of shares of Common Stock or other
securities, properties or rights as shall be issuable upon the exercise under
this Warrant. The Company covenants and agrees that, upon exercise of the
Warrant, and payment of the Exercise Price therefore, all shares of Common Stock
and other securities issuable upon such exercise shall be duly authorized,
validly issued, fully paid, non-assessable and not subject to the preemptive
rights of any shareholder. As long as the Warrant is outstanding, the Company
shall use its reasonable commercial efforts to cause all shares of Common Stock
issuable upon the exercise of the Warrant to be listed and quoted (subject to
official notice of issuance) on all securities exchanges and systems on which
the other outstanding shares of Common Stock are then listed and/or quoted,
including NASDAQ and the American Stock Exchange.

     

    9.           Notices to Warrant
Holder.  Nothing contained in this Warrant shall be construed
as conferring upon the Holder of the Warrant the right to vote or to consent or
to receive notice as a shareholder in respect of any meetings of shareholders
for the election of directors or any other matter, or as having any rights
whatsoever as a shareholder of the Company. If, however, at any time prior to
the Expiration Time of the Warrant and its exercise in full, any of the
following events shall occur:

     

    (a)           the
Company shall take a record of the holders of its shares of Common Stock for the
purpose of entitling them to receive a dividend or distribution payable
otherwise than in cash, or a cash dividend or distribution payable otherwise
than out of current or retained earnings, as indicated by the accounting
treatment of such dividend or distribution on the books of the Company;
or

     

    (b)           the
Company shall offer to all the holders of its Common Stock any additional shares
of capital stock of the Company or securities convertible into or exchangeable
for shares of capital stock of the Company, or any option, right or warrant to
subscribe therefore; or

     

    (c)           a
dissolution, liquidation or winding up of the Company (other than in connection
with a consolidation or merger) or a sale of all or substantially all of its
property, assets and business as an entirety shall be proposed;

     

    then, in
any one or more of said events, the Company to the extent practicable shall give
written notice of such event at least 15 days prior to the date fixed as a
record date of the date of closing the transfer books for the determination of
the shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notices shall
specify such record date or the date of closing the transfer books, as the case
may be.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    10.           Notices.  All
notices, requests, consents and other communications hereunder shall be in
writing and shall be deemed to have been duly given when sent by (i) facsimile;
or (ii) delivered personally or by overnight courier or mailed by registered or
certified mail, return receipt requested:

     

    (a)           If
to the Company, to the address of below or as such may be changed from time to
time.

     

    
      	
              China
      Energy Recovery, Inc.

            
	
              7F,
      No. 267 Quyang Road

            
	
              Hongkou
      District

            
	
              Shanghai,
      China 200081

            
	
              Fax

            
	
              Tel:
      86-021-5556-0020

            
	 
      
	
              With
      a copy to:

            
	 
      
	
              Golenbock
      Eiseman Assor Bell & Peskoe LLP

            
	
              437
      Madison Avenue

            
	
              New
      York, NY  10022

            
	
              Attn:
      Andrew D. Hudders, Esq.

            
	
              Fax:
      (212) 754-0330

            
	
              Tel:
      (212) 907-7300

            


    

     

    
      	
               
      

            	
              (b)

            	
              If
      to the Holder, to the address set forth below or as shown on the books of
      the Company as such may be changed from time to
  time.

            


    

     

    
      	
              Hold
      And Opt Investments Limited

            
	
              Deltec
      House, Lyford Cay

            
	
              P.O.
      Box N-3229

            
	
              Nassau,
      Bahamas

            
	
              Fax:
      1242-362-4623

            
	
              Tel:
      1242-302-4100

            
	
              Email:
      tis@deltecbank.com

            


    

    


    
      
        
          	
                  With
      a copy to: Jean Chalopin

                
	
                  Beijing
      Media Plus

                
	
                  11F,
      Tower A, Building No. 1 GT International Center

                
	
                  Jia
      3 Yongandongli, Jianguomenwai Avenue

                
	
                  Chaoyang
      District, Beijing 100022 China

                
	 
      
	
                  Email:  jc@movieplus.com.cn

                


        

      

    

     

    11.           Entire Agreement:
Modification.  This Warrant contains the entire understanding
between the parties hereto with respect to the subject matter hereof, and the
terms and provisions of this Warrant may only be modified, waived or amended in
writing. Any modification, waiver or amendment executed by the Company and the
Holder (or the Holders holding a majority of the Warrant Shares or the other
securities, property or rights issuable upon exercise of the Warrants, as the
case may be) shall be binding on the Holder (or all Holders, as the case may
be). Notice of any modification, waiver or amendment shall be promptly provided
to any Holder not consenting to such modification, waiver or
amendment.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    12.           Assignment.  The
Holder may assign to one or more assignees (each an “Assignee”) all, or any
part, of the Warrant, provide, the Company may continue to deal solely and
directly with the Holder in connection with the interest assigned to the
Assignee until (i) written notice of such assignment, has been given to the
Company by the Holder and the Assignee, and (ii) the Holder and its Assignee
have delivered to the Company a document reflecting the assignment and
acceptance, as reasonably acceptable to the Company.

     

    13.           Successors.  All
the covenants and provisions of the Warrant shall be binding upon and inure to
the benefit of the Company, the Holders and their respective permitted
successors and assigns hereunder.

     

    14.           Governing Law;
Submission to
Jurisdiction.  This Warrant shall be governed by and construed
in accordance with the internal laws of the State of Delaware without regard to
the conflicts of laws principles thereof. The parties hereto hereby irrevocably
agree that any suit or proceeding arising directly and/or indirectly pursuant to
or under this Warrant, shall be brought solely in a federal or state court
located in the State of Delaware. By its execution hereof, the parties hereby
covenant and irrevocably submit to the in personam jurisdiction of
the federal and state courts located in the City of Wilmington, State of
Delaware and agree that any process in any such action may be served upon any of
them personally, or by certified mail or registered mail upon them or their
agent, return receipt requested, with the same full force and effect as if
personally served upon them in the State of Delaware. The parties hereto waive
any claim that any such jurisdiction is not a convenient forum for any such suit
or proceeding and any defense or lack of in personam jurisdiction with
respect thereto. In the event of any such action or proceeding, the party
prevailing therein shall be entitled to payment from the other party hereto of
its reasonable counsel fees and disbursements in an amount judicially
determined.

     

    15.           Severability.  If
any provision of the Warrant shall be held to be invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provision of the
Warrant.

     

    16.           Captions.  The
caption headings of the sections of the Warrant are for convenience of reference
only and are not intended, nor should they be construed as, a part of the
Warrant and shall be given no substantive effect.

     

    17.           Benefits of This
Warrant.  Nothing in the Warrant shall be construed to give to
any person or corporation other than the Company and any registered Holder(s) of
the Warrant(s) any legal or equitable right, remedy or claim under the Warrant;
and the Warrant shall be for the sole and exclusive benefit of the Company and
any Holder(s) of the Warrant.

     

    18.           Counterparts.  The
Warrant may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original, and such
counterparts shall together constitute but one and the same
instrument.

     

    IN
WITNESS HEREOF, the parties hereto have caused this Warrant to be duly executed,
as of the day and year first above written.

     

    
      
        
          
            
              
                
                  	 
      	
                          China
      Energy Recovery, Inc.

                        
	 
      	 
      
	 
      	 
      
	 
      	
                          By:

                        	 
      
	 
      	
                                      Name:
      Qinghuan Wu

                        
	 
      	
                                      Title:
      Chief Executive
Officer

                        


                

              

            

          

        

      

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      
        
          
            	
                  	
                    Holder:
      Hold And Opt Investments Limited

                  
	 	 	 
	 
      	
                    By:

                  	 
      
	 
      	
                    Name:

                  	
                    Timothy
      Fraser-Smith

                  
	 
      	
                    Title:

                  	
                    Authorized
      Signatory

                  


          

        

      

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
A

     

    FORM
OF SUBSCRIPTION (CASH EXERCISE)

     

    (To be
signed only upon exercise of Warrant)

    


    
      	
              TO:

            	
              China
      Energy Recovery, Inc.

            
	 
      	
              7F.
      No. 267 Qu Yang Road

            
	 
      	
              Hongkou
      District

            
	 
      	
              Shanghai,
      China 200081

            


    

     

    The
undersigned holder of Warrant dated ________________ (the “Warrant”), of China
Energy Recovery, Inc. (the “Company”), which is being delivered herewith, hereby
irrevocably elects to purchase ______________ Warrant Shares (as defined in the
Warrant), and herewith makes payment of $ _________________ therefore, all
in accordance with the Warrant. Certificates for the Warrant Shares shall be
issued in the name of ________________ and delivered to the following
address:

     

    
      
        	
              	
                 
      

              
	 
      	 
      
	 
      	 
      


      

    

    


    
      
        
          
            
              
                	
                        By:

                      	 
      
	

                        Name:

                      	
                         

                      	 
      
	

                        Social
      Security Number or Tax Identification Number:

                      	 
      
	
                        Date:

                      	 
      
	 
      	 
      


              

            

          

        

      

    

    (Signature
must conform in all respects to name of Holder as specified in the
Warrant)

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
B

     

    FORM
OF SUBSCRIPTION (CASHLESS EXERCISE)

     

    
      	
              TO:

            	
              China
      Energy Recovery, Inc.

            	 
      
	 
      	
              7F.
      No. 267 Qu Yang Road

            	 
      
	 
      	
              Hongkou
      District

            	 
      
	 
      	
              Shanghai,
      China 200081

            	 
      


    

    


     

    The
undersigned holder of Warrant dated _________________ (the “Warrant”), of China
Energy Recovery, Inc. (the “Company”), which Warrant is being delivered
herewith, hereby irrevocably elects to exercise (on a conversion right basis, in
accordance with the formula set forth in Section 2.3 of the Warrant with respect
to __________________ Warrant Shares (as defined in the Warrant), all in
accordance with the Warrant. Certificates for the Warrant Shares shall be issued
in the name of _____________________ and delivered to the following
address:

     

    
      
        	
              	
                 
      

              
	 
      	 
      
	 
      	 
      


      

    

     

    
      
        
          
            	
                    By:

                  	 
      
	

                    Name:

                  	
                     

                  	 
      
	
                    Social
      Security Number or Tax Identification Number:

                  	 
      
	
                    Date:

                  	 
      
	 
      	 
      


          

        

      

    

    (Signature
must conform in all respects to name of Holder as specified on the face of the
Warrant)

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    FORM OF
ASSIGNMENT

     

    (To be
used by the registered holder if such Holder desires to transfer the
Warrant)

     

    FOR VALUE
RECEIVED ______________________________________________ hereby sells, assigns
and transfers unto:

     

    Print
Name of Transferee:
____________________________________________________


     

    Address:
__________________________________________________________________


     

    City
State Zip
Code:__________________________________________________________

     

    Social
Security or Federal Tax ID Number:
________________________________________

     

    this
Warrant, originally dated __________ 2009, and issued by China Energy Recovery,
Inc. (“Company”), together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint ___________________________ as its
Attorney in Fact, to transfer the Warrant on the books of the Company, with full
power of substitution.

     

    
      
        
          	
                  Dated:                                                      

                	
                  Signature:

                
	 
      	 
      
	 	 
	 
      	
                  (Signature
      must conform in all respects to name of Holder as specified on the face of
      the Warrant)