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      REGISTRATION
        RIGHTS AGREEMENT

      

      This
        Registration Rights Agreement (the "Agreement")
        is
        made as of the date set forth below between China Energy Recovery, Inc.,
        a
        Delaware corporation (the "Company"),
        and
        the purchasers of its Series A Preferred Stock (as defined below) pursuant
        to a
        Securities Purchase Agreement dated as of the date hereof (each an "Investor"
        and,
        collectively, the "Investors").
        Capitalized terms used and not defined herein shall have the respective meanings
        ascribed to them in the Securities Purchase Agreement. 

      

      RECITALS

      

      WHEREAS,
        the Company has sold up to 8,339,902 shares (the "Preferred
        Shares")
        of
        Series A Convertible Preferred Stock of the Company, par value $0.001 per
        share
        (the "Series
        A Preferred Stock"),
        convertible into shares ("Shares")
        of the
        Company's common stock, par value $0.001 per share (the "Common
        Stock"),
        and
        warrants (the "Warrants")
        to
        purchase up to 4,169,951 Shares at an exercise price of $1.29 per share (the
        "Warrant
        Shares,"
        and
        together with the Shares, the "Securities")
        to
        certain investors in a private placement (the "Offering");
        and

      

      WHEREAS,
        the execution and delivery of this Agreement by the Company is a condition
        to
        the completion of the Offering. 

      

      NOW,
        THEREFORE, the parties hereto agree as follows: 

      

      1. Registration
        Procedures and Expenses.
        The
        Company shall: 

       

      (a) subject
        to receipt of necessary information from the Investors, use its commercially
        reasonable efforts to cause a Registration Statement on Form S-3, or on such
        other form as is available to the Company (the "Initial
        Registration Statement"),
        to be
        filed with the Securities and Exchange Commission ("SEC"),
        within 30 calendar days following the Closing Date (the "Required
        Filing Date"),
        to
        enable the resale of the Securities by the Investors from time to time.
        Notwithstanding the registration obligations set forth in the first sentence
        of
        this Section
        1(a),
        in the
        event the SEC informs the Company that all of the Securities cannot, as a
        result
        of the application of Rule 415, be registered for resale as a secondary offering
        on a single registration statement, the Company agrees to promptly (i) inform
        each of the holders thereof, (ii) use its best efforts to file amendments
        to the
        Initial Registration Statement as required by the SEC or (iii) withdraw the
        Initial Registration Statement and file a new registration statement (a
        "New
        Registration Statement,"
        and
        together with the Initial Registration Statement, the "Registration
        Statement"),
        in
        either case covering the maximum number of Securities permitted to be registered
        by the SEC on Form S-3 or such other form available to register for resale
        the
        Securities as a secondary offering, with the number of shares included on
        such
        amendment or the New Registration Statement cut back proportionally for each
        Investor; provided, however, that prior to filing such amendment or New
        Registration Statement, the Company shall be obligated to use its best efforts
        to advocate with the SEC for the registration of all of the Securities in
        accordance with SEC policies. In the event the Company amends the Initial
        Registration Statement or files a New Registration Statement, as the case
        may
        be, under clauses (ii) or (iii) above, the Company will use its commercially
        reasonable efforts to file with the SEC, as promptly as allowed by the SEC,
        one
        or more registration statements on Form S-3 or such other form available
        to
        register for resale those Securities that were not registered for resale
        on the
        Initial Registration Statement, as amended, or the New Registration Statement;
        

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (b) subject
        to receipt of necessary information from the Investors, use its commercially
        reasonable efforts to cause the Registration Statement to become effective
        no
        later than the date that is 90 calendar days after the Closing Date, (or,
        in the
        event of a "full review" of the Registration Statement by the SEC, 150 calendar
        days after the Closing Date) (the "Required
        Effective Date").
        If
        the Registration Statement (i) has not been filed by the Required Filing
        Date or
        (ii) has not been declared effective by the SEC on or before the Required
        Effective Date, the Company shall, on the Business Day immediately following
        the
        Required Filing Date or the Required Effective Date, as the case may be,
        and
        each 30th day thereafter, make a payment to the Investor as partial compensation
        for such delay (the "Late
        Registration Payments")
        equal
        to 1% of the purchase price paid for the Preferred Shares purchased by the
        Investor and not previously sold by the Investor until the Registration
        Statement is filed or declared effective by the SEC, as the case may be;
        provided, however, that in no event shall the payments made pursuant to this
        Subsection
        (b)
        if any,
        exceed in the aggregate 10% of such purchase price. Late Registration Payments
        will be prorated on a daily basis during each 30 day period and will be paid
        to
        the Investor by wire transfer or check within five Business Days after the
        earlier of (i) the end of each 30 day period following the Required Effective
        Date or (ii) the effective date of the Registration Statement;

       

      (c) subject
        to a Suspension (as defined in Section
        2(c))
        being
        in effect, use its commercially reasonable efforts to prepare and file with
        the
        SEC such amendments and supplements to the Registration Statement and the
        related prospectus (the "Prospectus")
        as may
        be necessary to keep the Registration Statement current and effective for
        a
        period ending on the earlier of (i) the second anniversary of the Closing
        Date,
        (ii) the date on which the Investor may sell Securities pursuant to Rule
        144
        under the Securities Act or any successor rule ("Rule
        144")
        or
        (iii) such time as all Securities purchased by such Investor in this Offering
        have been sold (A) pursuant to a registration statement, (B) to or through
        a
        broker, dealer or underwriter in a public distribution or a public securities
        transaction or (C) in a transaction exempt from the registration and prospectus
        delivery requirements of the Securities Act under Section 4(1) thereof so
        that
        all transfer restrictions and restrictive legends with respect thereto, if
        any,
        are removed upon the consummation of such sale, and to notify each Investor
        promptly upon the Registration Statement and each post-effective amendment
        thereto, being declared effective by the SEC; 

       

      (d) furnish
        to the Investor such number of copies of the Registration Statement and the
        Prospectus (including supplemental prospectuses) (collectively, the
        "Prospectuses")
        as the
        Investor may reasonably request, in order to facilitate the public sale or
        other
        disposition of all or any of the Securities by the Investor; 

       

      (e) file
        documents required of the Company for customary blue sky clearance in states
        specified in writing by the Investor; provided, however, that the Company
        shall
        not be required to qualify to do business or consent to service of process
        in
        any jurisdiction in which it is not now so qualified or has not so
        consented;

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (f) bear
        all
        expenses (other than underwriting discounts and commissions, if any) in
        connection with the procedures in paragraph (a) through (e) of this Section
        1
        and the
        registration of the Securities pursuant to the Registration Statement;

       

      (g) advise
        the Investors, promptly after it shall receive notice or obtain knowledge
        of the
        issuance of any stop order by the SEC delaying or suspending the effectiveness
        of the Registration Statement or of the initiation of any proceeding for
        that
        purpose; and it will promptly use its commercially reasonable efforts to
        prevent
        the issuance of any stop order or to obtain its withdrawal at the earliest
        possible moment if such stop order should be issued; and 

       

      (h) with
        a
        view to making available to the Investor the benefits of Rule 144 and any
        other
        rule or regulation of the SEC that may at any time permit the Investor to
        sell
        Securities to the public without registration, the Company covenants and
        agrees
        to use its commercially reasonable efforts to: (i) make and keep public
        information available, as those terms are understood and defined in Rule
        144,
        until the earlier of (A) such date as all of the Investor's Securities may
        be
        resold pursuant to Rule 144 or any other rule of similar effect or (B) such
        date
        as all of the Investor's Securities shall have been resold; (ii) file with
        the
        SEC in a timely manner all reports and other documents required of the Company
        under the Securities Act and under the Securities Exchange Act of 1934, as
        amended (the "Exchange
        Act");
        and
        (iii) furnish to the Investor upon request, as long as the Investor owns
        any
        Securities, (A) a written statement by the Company that it has complied with
        the
        reporting requirements of the Securities Act and the Exchange Act, (B) a
        copy of
        the Company's most recent Annual Report on Form 10-K or Quarterly Report
        on Form
        10-Q, and (C) such other information as may be reasonably requested in order
        to
        avail the Investor of any rule or regulation of the SEC that permits the
        selling
        of any such Securities without registration. 

       

      It
        shall
        be a condition precedent to the obligations of the Company to take any action
        pursuant to this Section
        1
        that the
        Investor shall furnish to the Company such information regarding itself,
        the
        Securities to be sold by the Investor, and the intended method of disposition
        of
        such securities as shall be required to effect the registration of the
        Securities. 

      

      The
        Company understands that the Investor disclaims being an underwriter, but
        acknowledges that a determination by the SEC that the Investor is deemed
        an
        underwriter shall not relieve the Company of any obligations it has hereunder.
        

      

      2. Transfer
        of Shares After Registration; Suspension.
        

       

      (a) The
        Investor agrees that it will not effect any disposition of the Securities
        or its
        right to purchase the Securities that would constitute a sale within the
        meaning
        of the Securities Act other than transactions exempt from the registration
        requirements of the Securities Act, as contemplated in the Registration
        Statement and as described below, and that it will promptly notify the Company
        of any material changes in the information set forth in the Registration
        Statement regarding the Investor or its plan of distribution. 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (b) Except
        in
        the event that Subsection
        (c)
        below
        applies, the Company shall: (i) if deemed necessary by the Company, prepare
        and
        file from time to time with the SEC a post-effective amendment to the
        Registration Statement or a supplement to the related Prospectus or a supplement
        or amendment to any document incorporated therein by reference or file any
        other
        required document so that such Registration Statement will not contain an
        untrue
        statement of a material fact or omit to state a material fact required to
        be
        stated therein or necessary to make the statements therein not misleading,
        and
        so that, as thereafter delivered to purchasers of the Securities being sold
        thereunder, such Prospectus will not contain an untrue statement of a material
        fact or omit to state a material fact required to be stated therein or necessary
        to make the statements therein, in light of the circumstances under which
        they
        were made, not misleading; (ii) provide the Investor copies of any documents
        filed pursuant to Section
        2(b)(i);
        and
        (iii) upon request, inform each Investor who so requests that the Company
        has
        complied with its obligations in Section
        2(b)(i)
        (or
        that, if the Company has filed a post-effective amendment to the Registration
        Statement which has not yet been declared effective, the Company will notify
        the
        Investor to that effect, will use its commercially reasonable efforts to
        secure
        the effectiveness of such post-effective amendment as promptly as possible
        and
        will promptly notify the Investor pursuant to Section
        2(b)(i)
        hereof
        when the amendment has become effective). 

       

      (c) Subject
        to Subsection
        (d)
        below,
        in the event: (i) of any request by the SEC or any other federal or state
        governmental authority during the period of effectiveness of the Registration
        Statement for amendments or supplements to the Registration Statement or
        related
        Prospectus or for additional information; (ii) of the issuance by the SEC
        or any
        other federal or state governmental authority of any stop order suspending
        the
        effectiveness of the Registration Statement or the initiation of any proceedings
        for that purpose; (iii) of the receipt by the Company of any notification
        with
        respect to the suspension of the qualification or exemption from qualification
        of any of the Securities for sale in any jurisdiction or the initiation of
        any
        proceeding for such purpose; or (iv) of any event or circumstance which
        necessitates the making of any changes in the Registration Statement or
        Prospectus, or any document incorporated or deemed to be incorporated therein
        by
        reference, so that, in the case of the Registration Statement, it will not
        contain any untrue statement of a material fact or omit to state a material
        fact
        required to be stated therein or necessary to make the statements therein
        not
        misleading, and that in the case of the Prospectus, it will not contain any
        untrue statement of a material fact or omit to state a material fact required
        to
        be stated therein or necessary to make the statements therein, in the light
        of
        the circumstances under which they were made, not misleading; then the Company
        shall promptly deliver a certificate in writing to the Investor (the
        "Suspension
        Notice")
        to the
        effect of the foregoing and, upon receipt of such Suspension Notice, the
        Investor will refrain from selling any Securities pursuant to the Registration
        Statement (a "Suspension")
        until
        the Investors are advised in writing by the Company that the current Prospectus
        may be used, and has received copies of any additional or supplemental filings
        that are incorporated or deemed incorporated by reference in any such
        Prospectus. In the event of any Suspension, the Company will use its
        commercially reasonable efforts to cause the use of the Prospectus so suspended
        to be resumed as soon as reasonably practicable after delivery of a Suspension
        Notice to the Investors. In addition to and without limiting any other remedies
        (including, without limitation, at law or at equity) available to the Investor,
        the Investor shall be entitled to specific performance in the event that
        the
        Company fails to comply with the provisions of this Section
        2(c).
        The
        Investor covenants that from the date hereof it will maintain in confidence
        the
        receipt and content of any Suspension Notice provided in accordance with
        this
Section
        2(c)
        in
        accordance with and subject to Section
        4.6
        of
Annex
        I
        to the
        Securities Purchase Agreement. 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (d) Notwithstanding
        the foregoing paragraphs of this Section
        2,
        the
        Company shall use its commercially reasonable efforts to ensure that (i)
        a
        Suspension shall not exceed 60 days individually and (ii) no more than two
        Suspensions shall occur during any 12-month period (each Suspension that
        satisfies the foregoing criteria being referred to herein as a "Qualifying
        Suspension").

       

      (e) If
        a
        Suspension is not then in effect, the Investor may sell Securities under
        the
        Registration Statement, provided that it complies with any applicable prospectus
        delivery requirements. Upon receipt of a request therefor, the Company will
        provide an adequate number of current Prospectuses to the Investor and to
        any
        other parties requiring such Prospectuses. 

       

      (f) In
        the
        event of a sale of Securities by the Investor, unless such requirement is
        waived
        by the Company in writing, the Investor must also deliver to the Company's
        transfer agent, with a copy to the Company, a Certificate of Subsequent Sale
        substantially in the form attached hereto as Exhibit
        A,
        so that
        the Securities may be properly transferred. 

       

      (g) The
        Company agrees that it shall, immediately prior to the Registration Statement
        being declared effective, deliver to its transfer agent an opinion letter
        of
        counsel, opining that at any time the Registration Statement is effective,
        the
        transfer agent shall issue, in connection with the sale of the Securities,
        certificates representing such Securities without restrictive legend, provided
        the Securities are to be sold pursuant to the Prospectus contained in the
        Registration Statement and the transfer agent receives a Certificate of
        Subsequent Sale in the form attached hereto as Exhibit
        A.
        Upon
        receipt of such opinion, the Company shall cause the transfer agent to confirm,
        for the benefit of the Investor, that no further opinion of counsel is required
        at the time of transfer in order to issue such Securities without restrictive
        legend. 

       

      The
        Company shall cause its transfer agent to issue a certificate without any
        restrictive legend to a purchaser of any Securities from the Investor, if
        (a)
        the sale of such Securities is registered under the Registration Statement
        (including registration pursuant to Rule 415 under the Securities Act) and
        the
        Investor has delivered a Certificate of Subsequent Sale to the Transfer Agent;
        (b) the holder has provided the Company with an opinion of counsel, in form,
        substance and scope customary for opinions of counsel in comparable
        transactions, to the effect that a public sale or transfer of such Securities
        may be made without registration under the Securities Act; or (c) such
        Securities are sold in compliance with Rule 144 under the Securities Act.
        

      

      3. Indemnification.
        For the
        purpose of this Section
        3:
        

       

      (a) the
        term
        "Selling
        Stockholder"
        shall
        mean the Investor and each person, if any, who controls the Investor within
        the
        meaning of Section 15 of the Securities Act or Section 20 of the Exchange
        Act;

       

      (b) the
        term
        "Registration
        Statement"
        shall
        include any final Prospectus, exhibit, supplement or amendment included in
        or
        relating to, and any document incorporated by reference in, the Registration
        Statement (or deemed to be a part thereof) referred to in Section
        1;
        and

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (c) the
        term
        "untrue
        statement"
        shall
        mean any untrue statement or alleged untrue statement, or any omission or
        alleged omission to state in the Registration Statement a material fact required
        to be stated therein or necessary to make the statements therein, not
        misleading. 

       

      (d)         
        (i) The
        Company agrees to indemnify and hold harmless each Selling Stockholder from
        and
        against any losses, claims, damages or liabilities to which such Selling
        Stockholder may become subject (under the Securities Act or otherwise) insofar
        as such losses, claims, damages or liabilities (or actions or proceedings
        in
        respect thereof) arise out of, or are based upon (i) any untrue statement
        of a
        material fact contained in the Registration Statement, (ii) any inaccuracy
        in
        the representations and warranties of the Company contained in the Agreement
        or
        the failure of the Company to perform its obligations hereunder or (iii)
        any
        failure by the Company to fulfill any undertaking included in the Registration
        Statement, and the Company will reimburse such Selling Stockholder for any
        reasonable legal expense or other actual accountable out of pocket expenses
        reasonably incurred in investigating, defending or preparing to defend any
        such
        action, proceeding or claim; provided, however, that the Company shall not
        be
        liable in any such case to the extent that such loss, claim, damage or liability
        arises out of, or is based upon, an untrue statement made in such Registration
        Statement in reliance upon and in conformity with written information furnished
        to the Company by or on behalf of such Selling Stockholder specifically for
        use
        in preparation of the Registration Statement, or any inaccuracy in
        representations made by such Selling Stockholder in the Investor Questionnaire
        or the failure of such Selling Stockholder to comply with its covenants and
        agreements contained in Section
        4
        of
Annex
        I
        to the
        Securities Purchase Agreement or Section
        2
        hereof
        or any statement or omission in any Prospectus that is corrected in any
        subsequent Prospectus that was delivered to the Selling Stockholder prior
        to the
        pertinent sale or sales by the Selling Stockholder. 

       

      (ii)
        The
        Investor agrees to indemnify and hold harmless the Company (and each person,
        if
        any, who controls the Company within the meaning of Section 15 of the Securities
        Act, each officer of the Company who signs the Registration Statement and
        each
        director of the Company) from and against any losses, claims, damages or
        liabilities to which the Company (or any such officer, director or controlling
        person) may become subject (under the Securities Act or otherwise), insofar
        as
        such losses, claims, damages or liabilities (or actions or proceedings in
        respect thereof) arise out of, or are based upon, (i) any failure to comply
        with
        the covenants and agreements contained in Section
        4
        of
Annex
        I
        to the
        Securities Purchase Agreement or Section
        2
        hereof,
        or (ii) any untrue statement of a material fact contained in the Registration
        Statement if, and only if, such untrue statement was made in reliance upon
        and
        in conformity with written information furnished by or on behalf of the Investor
        specifically for use in preparation of the Registration Statement, and the
        Investor will reimburse the Company (or such officer, director or controlling
        person), as the case may be, for any reasonable legal expense or other actual
        accountable out-of-pocket expenses reasonably incurred in investigating,
        defending or preparing to defend any such action, proceeding or claim. The
        obligation to indemnify shall be limited to the net amount of the proceeds
        received by the Investor from the sale of the Securities pursuant to the
        Registration Statement. 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (iii) Promptly
        after receipt by any indemnified person of a notice of a claim or the beginning
        of any action in respect of which indemnity is to be sought against an
        indemnifying person pursuant to this Section
        3,
        such
        indemnified person shall notify the indemnifying person in writing of such
        claim
        or of the commencement of such action, but the omission to so notify the
        indemnifying party will not relieve it from any liability which it may have
        to
        any indemnified party under this Section
        3
        (except
        to the extent that such omission materially and adversely affects the
        indemnifying party's ability to defend such action) or from any liability
        otherwise than under this Section
        3.
        Subject
        to the provisions hereinafter stated, in case any such action shall be brought
        against an indemnified person, the indemnifying person shall be entitled
        to
        participate therein, and, to the extent that it shall elect by written notice
        delivered to the indemnified party promptly after receiving the aforesaid
        notice
        from such indemnified party, shall be entitled to assume the defense thereof,
        with counsel reasonably satisfactory to such indemnified person. After notice
        from the indemnifying person to such indemnified person of its election to
        assume the defense thereof (unless it has failed to assume the defense thereof
        and appoint counsel reasonably satisfactory to the indemnified party), such
        indemnifying person shall not be liable to such indemnified person for any
        legal
        expenses subsequently incurred by such indemnified person in connection with
        the
        defense thereof; provided, however, that if there exists or shall exist a
        conflict of interest that would make it inappropriate, in the reasonable
        opinion
        of counsel to the indemnified person, for the same counsel to represent both
        the
        indemnified person and such indemnifying person or any affiliate or associate
        thereof, the indemnified person shall be entitled to retain its own counsel
        at
        the expense of such indemnifying person; provided, however, that no indemnifying
        person shall be responsible for the fees and expenses of more than one separate
        counsel (together with appropriate local counsel) for all indemnified parties.
        In no event shall any indemnifying person be liable in respect of any amounts
        paid in settlement of any action unless the indemnifying person shall have
        approved the terms of such settlement; provided that such consent shall not
        be
        unreasonably withheld. No indemnifying person shall, without the prior written
        consent of the indemnified person, effect any settlement of any pending or
        threatened proceeding in respect of which any indemnified person is or could
        reasonably have been a party and indemnification could have been sought
        hereunder by such indemnified person, unless such settlement includes an
        unconditional release of such indemnified person from all liability on claims
        that are the subject matter of such proceeding. 

       

      (iv) If
        the
        indemnification provided for in this Section
        3
        is
        unavailable to or insufficient to hold harmless an indemnified party under
        Subsections
        3(d)(i)
        or
3(d)(ii)
        above in
        respect of any losses, claims, damages or liabilities (or actions or proceedings
        in respect thereof) referred to therein, then each indemnifying party shall
        contribute to the amount paid or payable by such indemnified party as a result
        of such losses, claims, damages or liabilities (or actions in respect thereof)
        in such proportion as is appropriate to reflect the relative fault of the
        Company on the one hand and the Investor on the other in connection with
        the
        statements or omissions or other matters which resulted in such losses, claims,
        damages or liabilities (or actions in respect thereof), as well as any other
        relevant equitable considerations. The relative fault shall be determined
        by
        reference to, among other things, in the case of an untrue statement, whether
        the untrue statement relates to information supplied by the Company on the
        one
        hand or the Investor on the other and the parties' relative intent, knowledge,
        access to information and opportunity to correct or prevent such untrue
        statement. The Company and the Investor agree that it would not be just and
        equitable if contribution pursuant to this Section
        3(d)
        were
        determined by pro rata allocation (even if the Investors were treated as
        one
        entity for such purpose) or by any other method of allocation which does
        not
        take into account the equitable considerations referred to above in this
        Section
        3(d).
        The
        amount paid or payable by an indemnified party as a result of the losses,
        claims, damages or liabilities (or actions in respect thereof) referred to
        above
        in this Section
        3(d)
        shall be
        deemed to include any legal or other expenses reasonably incurred by such
        indemnified party in connection with investigating or defending any such
        action
        or claim. Notwithstanding the provisions of this Section
        3(d),
        the
        Investor shall not be required to contribute any amount in excess of the
        amount
        by which the gross amount received by the Investor from the sale of the
        Securities to which such loss relates exceeds the amount of any damages which
        the Investor has otherwise been required to pay by reason of such untrue
        statement. No person guilty of fraudulent misrepresentation (within the meaning
        of Section 11(f) of the Securities Act) shall be entitled to contribution
        from
        any person who was not guilty of such fraudulent misrepresentation. The
        Investors' obligations in this subsection to contribute are several in
        proportion to their sales of Securities to which such loss relates and not
        joint. 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      The
        parties to this Agreement hereby acknowledge that they are sophisticated
        business persons who were represented by counsel during the negotiations
        regarding the provisions hereof including, without limitation, the provisions
        of
        this Section
        3,
        and are
        fully informed regarding said provisions. They further acknowledge that the
        provisions of this Section 3 fairly allocate the risks in light of the ability
        of the parties to investigate the Company and its business in order to assure
        that adequate disclosure is made in the Registration Statement as required
        by
        the Securities Act and the Exchange Act. 

      

      4. Termination
        of Conditions and Obligations.
        The
        conditions precedent imposed by Section
        4
        of
Annex
        I
        to the
        Securities Purchase Agreement or this Agreement upon the transferability
        of the
        Securities shall cease and terminate as to any particular number of the
        Securities when such Securities shall have been effectively registered under
        the
        Securities Act and sold or otherwise disposed of in accordance with the intended
        method of disposition set forth in the Registration Statement covering such
        Securities or at such time as an opinion of counsel satisfactory to the Company
        shall have been rendered to the effect that such conditions are not necessary
        in
        order to comply with the Securities Act. 

       

      5. Information
        Available.
        So long
        as the Registration Statement is effective covering the resale of Securities
        owned by the Investor, the Company will furnish (or, to the extent such
        information is available electronically through the Company's filings with
        the
        SEC, the Company will make available) to the Investor: 

       

      (a) as
        soon
        as practicable after it is available, one copy of (i) its most recent Annual
        Report to Stockholders (which Annual Report shall contain financial statements
        audited in accordance with generally accepted accounting principles by an
        independent registered public accounting firm, and (ii) if not included in
        substance in the Annual Report to Stockholders, its most recent Annual Report
        on
        Form 10-K (the foregoing, in each case, excluding exhibits); 

       

      (b) upon
        the
        reasonable request of the Investor, all exhibits excluded by the parenthetical
        to Subsection
        (a)(ii)
        of this
Section
        5
        as filed
        with the SEC and all other information that is made available to shareholders;
        and 

       

      (c) upon
        the
        reasonable request of the Investor, an adequate number of copies of the
        Prospectuses to supply to any other party requiring such Prospectuses; and
        the
        Company, upon the reasonable request of the Investor, will meet with the
        Investor or a representative thereof at the Company's headquarters during
        the
        Company's normal business hours to discuss all information relevant for
        disclosure in the Registration Statement covering the Securities and will
        otherwise reasonably cooperate with the Investor conducting an investigation
        for
        the purpose of reducing or eliminating the Investor's exposure to liability
        under the Securities Act, including the reasonable production of information
        at
        the Company's headquarters; provided, that the Company shall not be required
        to
        disclose any confidential information to or meet at its headquarters with
        the
        Investor until and unless the Investor shall have entered into a confidentiality
        agreement, in form and substance reasonably satisfactory to the Company,
        with
        the Company with respect thereto. 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      6. Limits
        on Additional Issuances.
        Except
        for the issuance of stock options, restricted stock and stock appreciation
        rights under the Company's long term incentive plans, the issuance of Common
        Stock purchase warrants, or the issuance of Common Stock upon the conversion
        of
        preferred stock or upon exercise of outstanding options, warrants and other
        equity-based rights and the offering contemplated hereby, the Company will
        not,
        for a period of six months following the Closing Date, offer for sale or
        sell
        any securities unless, in the opinion of the Company's counsel, such offer
        or
        sale does not jeopardize the availability of exemptions from the registration
        and qualification requirements under applicable securities laws with respect
        to
        the Offering. The foregoing shall not apply to securities issued in connection
        with any acquisition, including by way of merger, or purchase of stock or
        all or
        substantially all of the assets of any third party. Except for the issuance
        of
        stock options, restricted stock and stock appreciation rights under the
        Company's long term incentive plans, the issuance of Common Stock purchase
        warrants, or the issuance of Common Stock upon the conversion of preferred
        stock
        or upon exercise of outstanding options, warrants and other equity-based
        rights
        and the offering contemplated hereby, the Company has not engaged in any
        such
        offering during the six-month period prior to the date of this Agreement.
        The
        foregoing provisions shall not prevent the Company from filing a "shelf"
        registration statement pursuant to Rule 415 under the Securities Act, but
        the
        foregoing provisions shall apply to any sale of securities thereunder.

       

      7. Notices.
        All
        notices, requests, consents and other communications hereunder shall be in
        writing, shall be delivered (A) if within the United States, by first-class
        registered or certified airmail, or nationally recognized overnight express
        courier, postage prepaid, or by facsimile, or (B) if from outside the United
        States, by International Federal Express (or comparable service) or facsimile,
        and shall be deemed given (i) if delivered by first-class registered or
        certified mail domestic, upon the Business Day received, (ii) if delivered
        by
        nationally recognized overnight carrier, one Business Day after timely delivery
        to such carrier, (iii) if delivered by International Federal Express (or
        comparable service), two Business Days after timely delivery to such carrier,
        (iv) if delivered by facsimile, upon electric confirmation of receipt and
        shall
        be addressed as follows, or to such other address or addresses as may have
        been
        furnished in writing by a party to another party pursuant to this paragraph:
        

       

      if
        to the
        Company, to: 

      

      China
        Energy Recovery, Inc. 

      9440
        Little Santa Monica Boulevard, Suite 401 

      Beverly
        Hills, California 90210 

      Attention:
        Michael Kurdziel

      Facsimile:
        (310) 402-5937 

      

      with
        a
        copy to: 

      

      Brownstein
        Hyatt Farber Schreck, LLP

      410
        Seventeenth Street, Suite 2200

      Denver,
        Colorado 80202 

      Attention:
        Adam J. Agron

      

      if
        to the
        Investor, at its address on the signature page hereto. 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      8. Amendments;
        Waiver.
        This
        Agreement may not be modified or amended except pursuant to an instrument
        in
        writing signed by the Company and the Investor. Any waiver of a provision
        of
        this Agreement must be in writing and executed by the party against whom
        enforcement of such waiver is sought. 

       

      9. Headings.
        The
        headings of the various sections of this Agreement have been inserted for
        convenience of reference only and shall not be deemed to be part of this
        Agreement. 

       

      10. Entire
        Agreement; Severability.
        This
        Agreement sets forth the entire agreement and understanding of the parties
        relating to the subject matter hereof and supersedes all prior and
        contemporaneous agreements, negotiations and understandings between the parties,
        both oral and written relating to the subject matter hereof. If any provision
        contained in this Agreement is determined to be invalid, illegal or
        unenforceable in any respect, the validity, legality and enforceability of
        the
        remaining provisions contained herein shall not in any way be affected or
        impaired thereby. 

       

      11. Governing
        Law.
        This
        Agreement shall be governed by, and construed in accordance with, the internal
        laws of the State of Delaware, without giving effect to the principles of
        conflicts of law. 

       

      12. Counterparts.
        This
        Agreement may be executed in two or more counterparts, each of which shall
        constitute an original, but all of which, when taken together, shall constitute
        but one instrument, and shall become effective when one or more counterparts
        have been signed by each party hereto and delivered to the other parties.
        

       

      [Remainder
        of This Page Intentionally Left Blank; Signature Page to
        Follow]

       

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Please
        confirm that the foregoing correctly sets forth the agreement between us
        by
        signing in the space provided below for that purpose. 

       

      

      Dated
        as
        of: ______________, 2008 

       

      
        	 	  

	 	[Investor
                Name]
	 	 
	 	 	 
	 	By:	    
                
	 	Name:	    
	 	Title:	    
	 	 	 
	 	Address:
	 	 	 
	 	   

	 	   

	 	   

      

      
 

      AGREED
        AND ACCEPTED: 

      

      CHINA
        ENERGY RECOVERY, INC. 

      

      

      By:
        ________________________________

      Name: Michael
        Kurdziel

      Title: Chief
        Executive Officer

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      EXHIBIT
        A

      

      CHINA
        ENERGY RECOVERY, INC.

      CERTIFICATE
        OF SUBSEQUENT SALE

      

      Corporate
        Stock Transfer, Inc.

      3200
        Cherry Creek South Drive, Suite 430

      Denver,
        Colorado 80209

      Attention:
        Carylyn Bell

      

      
        	 	
                RE:

              	
                Sale
                  of Shares of Common Stock of China Energy Recovery, Inc. (the
                  "Company")
                  pursuant to the Company's Prospectus dated _______________, 2008
                  (the
                  "Prospectus").

              

      

      

      

      Dear
        Sir/Madam: 

      

      The
        undersigned hereby certifies, in connection with the sale of shares of Common
        Stock of the Company included in the table of Selling Stockholders in the
        Prospectus, that the undersigned has sold the Shares pursuant to the Prospectus
        and in a manner described under the caption "Plan
        of Distribution"
        in the
        Prospectus and that such sale complies with all applicable securities laws,
        including, without limitation, the Prospectus delivery requirements of the
        Securities Act of 1933, as amended. 

      

       

      
        	 Selling
                Stockholder (the beneficial owner):	 
                

      

       

      
        
          	 Record
                  Holder (e.g., if held in name of nominee):	 
                  

        

      

           

      
        
          
            	 Restricted
                    Stock Certificate No.(s):	 
                    

          

        

               

      

      
        
          
            
              	 Number
                      of Shares Sold:	 
                      

            
  

        

      

      
        
          
            
              	 Date
                      of Sale:	 
                      

            

          

           

           

        

      

      In
        the
        event that you receive a stock certificate(s) representing more shares of
        Common
        Stock than have been sold by the undersigned, then you should return to the
        undersigned a newly issued certificate for such excess shares in the name
        of the
        Record Holder and BEARING A RESTRICTIVE LEGEND. Further, you should place
        a stop
        transfer on your records with regard to such certificate. 

       

      
        
          	Dated:_____________
                  	Very truly yours, 
	 	
                	 
	 	By:	    
                  
	 	Name:	   
                  
	 	Title:SECURITIES
      PURCHASE AGREEMENT

    

     

    China
      Energy Recovery, Inc. 

    9440
      Little Santa Monica Boulevard, Suite 401 

    Beverly
      Hills, California 90210 

     

    The
      undersigned (the "Investor")
      hereby
      confirms its agreement with you as follows: 

     

    1. This
      Securities Purchase Agreement is made as of the date set forth below between
      China Energy Recovery, Inc., a Delaware corporation (the "Company"),
      and
      the Investor. 

     

    2. The
      Company has authorized the sale and issuance of up to 8,339,902 Units
      ("Units"),
      with
      each Unit comprised of (i) one share (a "Share")
      of the
      Company's Series A Convertible Preferred Stock, par value $0.001 per share
      (the
      "Series
      A Preferred Stock"),
      and
      (ii) one warrant (a "Warrant")
      to
      purchase one-half of one share (a "Warrant
      Share")
      of the
      Company's Common Stock, par value $0.001 per share (the "Common
      Stock"),
      at an
      exercise price of $1.29, to certain investors in a private placement (the
      "Offering").
      

     

    3. The
      Company and the Investor agree that the Investor will purchase from the Company
      and the Company will issue and sell to the Investor ___________ Units at a
      purchase price of $1.08 per Unit, representing ____ Shares and Warrants to
      purchase _____ shares of Common Stock for an aggregate purchase price of
      $____________________ (the "Purchase
      Price"),
      subject to the Terms and Conditions for Purchase of Units attached hereto as
      Annex
      I
      and
      incorporated herein by reference as if fully set forth herein. Unless otherwise
      requested by the Investor in Exhibit
      A,
      certificates representing the Shares purchased by the Investor and Warrants
      will
      be registered in the Investor's name and address as set forth below. The Company
      and the Investor agree to enter into a registration rights agreement (the
      "Registration
      Rights Agreement")
      in the
      form of Exhibit
      B
      concurrently with the execution of this Securities Purchase Agreement.

     

    4. The
      Investor represents that, except as set forth below, (a) it has had no position,
      office or other material relationship within the past three years with the
      Company or its affiliates, (b) neither it, nor any group of which it is a member
      or to which it is related, beneficially owns (including the right to acquire
      or
      vote) any securities of the Company, and (c) neither it, nor any affiliate
      of
      the Investor, has any direct or indirect affiliation or association with any
      Finance and Regulatory Authority, Inc. ("FINRA")
      member. Exceptions: 

     

    (If
      no
      exceptions, write "none." If left blank, response will be deemed to be "none.")
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Please
      confirm that the foregoing correctly sets forth the agreement between us by
      signing in the space provided below for that purpose. 

     

    
      	 	 	 	
              Dated
                as of: _________________, 2008 

            
	 	 	 	 
	 	 	 	 
	 	 	 	
              
[Investor
              Name] 
	 	 	 	 
	
            	 	 	By:
	
            	 	 	
              
                

              

              Name: 

              
                

              

              Title: 

              
                

              

                

            
	 	 	 	 
	 	 	 	Address:
	 	 	 	
              

              

              

            
	 	 	 	 

    

     

    AGREED
      AND ACCEPTED: 

     

    CHINA
      ENERGY RECOVERY, INC.

    

     

    By:

    
      

    

    Name: Michael
      Kurdziel

    Title: Chief
      Executive Officer

    

    [SECURITIES
      PURCHASE AGREEMENT SIGNATURE PAGE]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Annex
      I

     

    Terms
      and Conditions for Purchase of Units

     

    1. Agreement
      to Sell and Purchase the Units; Subscription Date. 

     

    1.1 Purchase
      and Sale. At
      the
      Closing (as defined in Section
      2),
      the
      Company will sell to the Investor, and the Investor will purchase from the
      Company, upon the terms and subject to the conditions set forth herein, and
      at
      the Purchase Price, the number of Shares and Warrants described in Paragraph
      3
      of the
      Securities Purchase Agreement attached hereto (collectively with this
Annex
      I
      and the
      other exhibits attached hereto, this "Agreement").
      

     

    1.2 Other
      Investors.
      As part
      of the Offering, the Company proposes to enter into Securities Purchase
      Agreements in the same form as this Agreement with certain other investors
      (the
      "Other
      Investors"),
      and
      the Company expects to complete sales of Units to them. The Investor and the
      Other Investors are sometimes collectively referred to herein as the
      "Investors,"
      and
      this Agreement, the Registration Rights Agreement and the Securities Purchase
      Agreements executed by the Other Investors are sometimes collectively referred
      to herein as the "Agreements".
      The
      Company may accept executed Agreements from Investors for the purchase of Shares
      and Warrants commencing upon the date on which the Company provides the
      Investors with the proposed purchase price per Share and concluding upon the
      date (the "Subscription
      Date")
      on
      which the Company decides that it will no longer accept Agreements for the
      purchase of Units in the Offering, but in no event shall the Subscription Date
      be later than [February ___, 2008]. Each Investor must execute and deliver
      a
      Securities Purchase Agreement and a Registration Rights Agreement (in the form
      attached as Exhibit
      B
      hereto),
      and must complete a Stock Certificate Questionnaire (in the form attached as
      Exhibit
      A
      hereto)
      and an Investor Questionnaire (in the form attached as Exhibit
      C
      hereto)
      in order to purchase Shares and Warrants in the Offering. 

     

    2. Delivery
      of the Units at Closing.
      The
      completion of the purchase and sale of the Shares and Warrants (the
      "Closing")
      shall
      occur on a date specified by the Company (the "Closing
      Date"),
      which
      date shall not be later than [February ___, 2008] (the "Outside
      Date"),
      and
      of which the Investors will be notified in advance by the Company. At the
      Closing, the Company shall deliver to the Investor one or more stock
      certificates representing the number of Shares set forth in Paragraph
      3
      of the
      Securities Purchase Agreement, each such certificate to be registered in the
      name of the Investor or, if so indicated on the Stock Certificate Questionnaire
      attached hereto as Exhibit
      A,
      in the
      name of a nominee designated by the Investor, along with a Warrant registered
      in
      the same name. In exchange for the delivery of the stock certificates
      representing such Shares and the Warrant, the Investor shall deliver the
      Purchase Price to the Company by wire transfer of immediately available funds
      pursuant to the Company's written instructions. 

     

    The
      Company's obligation to issue and sell the Shares and Warrants to the Investor
      shall be subject to the following conditions, any one or more of which may
      be
      waived by the Company: (a) prior receipt by the Company of a copy of this
      Agreement executed by the Investor; (b) completion of purchases and sales of
      Shares and Warrants under the Agreements with the Other Investors for an
      aggregate purchase price of not less than $8,500,000; (c) the accuracy of the
      representations and warranties made by the Investor in this Agreement and the
      fulfillment of the obligations of the Investor to be fulfilled by it under
      this
      Agreement on or prior to the Closing; and (d) the absence of any order, writ,
      injunction, judgment or decree that questions the validity of the Agreements
      or
      the right of the Company or the Investor to enter into such Agreements or to
      consummate the transactions contemplated hereby and thereby. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      Investor's obligation to purchase the Shares and Warrants shall be subject
      to
      the following conditions, any one or more of which may be waived by the
      Investor: (a) the completion of purchases and sales under the Agreements with
      the Other Investors for an aggregate purchase price of not less than $8,500,000;
      (b) the accuracy of the representations and warranties made by the Company
      in
      this Agreement on the date hereof and, if different, on the Closing Date; (c)
      the execution and delivery by the Company of the Registration Rights Agreement,
      (d) the fulfillment of the obligations of the Company to be fulfilled by it
      under this Agreement on or prior to the Closing; and (e) the absence of any
      order, writ, injunction, judgment or decree that questions the validity of
      the
      Agreements or the right of the Company or the Investor to enter into such
      Agreements or to consummate the transactions contemplated hereby and thereby.
      

     

    In
      the
      event that the Closing does not occur on or before the Outside Date as a result
      of the Company's failure to satisfy any of the conditions set forth above (and
      such condition has not been waived by the Investor), the Company shall return
      any and all funds paid hereunder to the Investor no later than one Business
      Day
      following the Outside Date and the Investors shall have no further obligations
      hereunder. For purposes of this Agreement, "Business
      Day"
      shall
      mean any day other than a Saturday, Sunday or other day on which the New York
      Stock Exchange or commercial banks located in New York, New York are permitted
      or required by law to close. 

     

    3. Representations,
      Warranties and Covenants of the Company.
      Except
      as otherwise described in the Company's Annual Report on Form 10-KSB for the
      year ended December 31, 2006 filed on April 2, 2007 (and any amendments thereto
      filed at least two Business Days prior to the date hereof), the Company's
      Quarterly Reports on Form 10-QSB filed on May 18, 2007, August 14, 2007 and
      November 19, 2007 for the quarterly periods ended March 31, 2007, June 30,
      2007
      and September 30, 2007, respectively, or any of the Company's Current Reports
      on
      Form 8-K filed since December 31, 2006 and at least two Business Days prior
      to
      the date hereof (collectively, the "SEC
      Reports"),
      the
      Company hereby represents and warrants to, and covenants with, the Investor
      as
      of the date hereof and the Closing Date, as follows: 

     

    3.1 Organization.
      The
      Company is duly incorporated and validly existing in good standing under the
      laws of the State of Delaware. The Company has full power and authority to
      own,
      operate and occupy its properties and to conduct its business as presently
      conducted and is registered or qualified to do business and in good standing
      in
      each jurisdiction in which it owns or leases property or transacts business
      and
      where the failure to be so qualified would have a material adverse effect upon
      the Company and its subsidiaries as a whole or the business, financial
      condition, properties, operations or assets of the Company and its subsidiaries
      as a whole or the Company's ability to perform its obligations under the
      Agreements in all material respects ("Material
      Adverse Effect"),
      and
      no proceeding has been instituted in any such jurisdiction revoking, limiting
      or
      curtailing, or seeking to revoke, limit or curtail, such power and authority
      or
      qualification. The Company has no "subsidiaries" (as defined in Rule 405 under
      the Securities Act of 1933, as amended (the "Securities
      Act")),
      other than as set forth in its most recent Form 10-KSB. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.2 Due
      Authorization.
      The
      Company has all requisite power and authority to execute, deliver and perform
      its obligations under the Agreements. The execution and delivery of the
      Agreements, and the consummation by the Company of the transactions contemplated
      hereby, have been duly authorized by all necessary corporate action and no
      further action on the part of the Company or its Board of Directors or
      stockholders is required. The Agreements have been validly executed and
      delivered by the Company and constitute legal, valid and binding agreements
      of
      the Company enforceable against the Company in accordance with their terms,
      except to the extent (i) rights to indemnity and contribution may be limited
      by
      state or federal securities laws or the public policy underlying such laws,
      (ii)
      such enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium or similar laws affecting creditors' and contracting
      parties' rights generally and (iii) such enforceability may be subject to
      general principles of equity (regardless of whether such enforceability is
      considered in a proceeding in equity or at law). 

     

    3.3 Non-Contravention.
      The
      execution and delivery of the Agreements, the issuance and sale of the Shares
      and Warrants to be sold by the Company under the Agreements, the fulfillment
      of
      the terms of the Agreements and the consummation of the transactions
      contemplated thereby, including the issuance of the Warrant Shares in accordance
      with the terms of the Warrants, will not (A) result in a conflict with or
      constitute a violation of, or default (with the passage of time or otherwise)
      under, (i) any bond, debenture, note or other evidence of indebtedness, or
      any
      material lease, contract, indenture, mortgage, deed of trust, loan agreement,
      joint venture or other agreement or instrument to which the Company or any
      subsidiary (each, a "Subsidiary"
      and
      collectively, the "Subsidiaries")
      is a
      party or by which the Company or the Subsidiaries or their respective properties
      are bound, (ii) the Certificate of Incorporation, Bylaws, or other
      organizational documents of the Company, as amended, or (iii) any law,
      administrative regulation, ordinance or order of any court or governmental
      agency, arbitration panel or authority binding upon the Company or any
      Subsidiary or their respective properties, which conflict, violation or default,
      individually or in the aggregate, is reasonably likely to have a Material
      Adverse Effect, or (B) result in the creation or imposition of any lien,
      encumbrance, claim, security interest or restriction whatsoever upon any of
      the
      material properties or assets of the Company or the Subsidiaries or an
      acceleration of indebtedness pursuant to any obligation, agreement or condition
      contained in any material bond, debenture, note or any other evidence of
      indebtedness or any material indenture, mortgage, deed of trust or any other
      agreement or instrument to which the Company or any Subsidiary is a party or
      by
      which it is bound or to which any of the property or assets of the Company
      is
      subject. No consent, approval, authorization or other order of, or registration,
      qualification or filing with, any regulatory body, administrative agency, or
      other governmental body is required for the execution and delivery of the
      Agreements by the Company and the valid issuance or sale of the Shares by the
      Company pursuant to the Agreements, other than such as have been made or
      obtained, and except for any filings required to be made under federal or state
      securities laws. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.4 Capitalization.
      The
      authorized capital stock of the Company as of February 5, 2008 consists of
      (i)
      100,000,000 shares of Common Stock, of which 9,451,889 shares are outstanding,
      (ii) 50,000,000 shares of Preferred Stock (10,000,000 of which have been
      designated as Series A Preferred Stock), of which zero shares are outstanding,
      and (iii) warrants to purchase 4,169,951 shares of Common Stock that are issued
      and outstanding. The Shares, Warrants and Warrant Shares to be sold pursuant
      to
      the Agreements have been duly authorized, and when issued and paid for in
      accordance with the terms of the Agreements and the Warrants, will be duly
      and
      validly issued, fully paid and nonassessable, subject to no lien, claim or
      encumbrance (except for any such lien, claim or encumbrance created, directly
      or
      indirectly, by the Investor). The outstanding shares of capital stock of the
      Company have been duly and validly issued and are fully paid and nonassessable,
      have been issued in compliance with the registration requirements of federal
      and
      state securities laws, and were not issued in violation of any preemptive rights
      or similar rights to subscribe for or purchase securities. The Company owns
      all
      of the outstanding capital stock of each Subsidiary, free and clear of all
      liens, claims and encumbrances. Other than as set forth above and the Company's
      obligation to issue 41,514,179 shares of Common Stock pursuant to a Share
      Exchange Agreement dated as of January 29, 2008 between the Company and Poise
      Profit International, Ltd. (the “Share
      Exchange Agreement”),
      there
      are no outstanding rights (including, without limitation, preemptive rights),
      warrants or options to acquire, or instruments convertible into or exchangeable
      for, any unissued shares of capital stock or other equity interest in the
      Company or any Subsidiary, or any contract, commitment, agreement, understanding
      or arrangement of any kind to which the Company or any Subsidiary is a party
      and
      providing for the issuance or sale of any capital stock of the Company or of
      any
      Subsidiary, any such convertible or exchangeable securities or any such rights,
      warrants or options. Without limiting the foregoing, no preemptive right,
      co-sale right, registration right, right of first refusal or other similar
      right
      exists with respect to the issuance and sale of the Shares, except as provided
      in the Agreements. There are no shareholders agreements, voting agreements
      or
      other similar agreements with respect to the Common Stock to which the Company
      is a party. 

     

    3.5 Legal
      Proceedings.
      There
      is no material legal or governmental proceeding pending, or to the knowledge
      of
      the Company, threatened, to which the Company or any Subsidiary is a party
      or of
      which the business or property of the Company or any Subsidiary is subject
      that
      is required to be disclosed and that is not so disclosed in the SEC Reports.
      Neither the Company nor any Subsidiary is subject to any injunction, judgment,
      decree or order of any court, regulatory body, administrative agency or other
      government body. 

     

    3.6 No
      Violations.
      Neither
      the Company nor any Subsidiary is in violation of its Certificate of
      Incorporation, Bylaws or other organizational documents, as amended, or in
      violation of any law, administrative regulation, ordinance or order of any
      court
      or governmental agency, arbitration panel or authority applicable to the
      Company, which violation, individually or in the aggregate, is reasonably likely
      to have a Material Adverse Effect, and neither the Company nor any Subsidiary
      is
      in default (and there exists no condition which, with the passage of time or
      otherwise, would constitute a default) in the performance of any bond,
      debenture, note or any other evidence of indebtedness or any indenture,
      mortgage, deed of trust or any other material agreement or instrument to which
      the Company or any Subsidiary is a party or by which the Company or such
      Subsidiary or their respective properties are bound, which default is reasonably
      likely to have a Material Adverse Effect. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.7 Governmental
      Permits, Etc.
      Each of
      the Company and the Subsidiaries has all necessary franchises, licenses,
      certificates and other authorizations from any foreign, federal, state or local
      government or governmental agency, department or body that are currently
      necessary for the operation of the business of the Company and the Subsidiaries
      as currently conducted, except where the failure to currently possess such
      franchises, licenses, certificates and other authorizations is not reasonably
      likely to have a Material Adverse Effect. 

     

    3.8 Intellectual
      Property.
      

     

    (a) Except
      for matters which are not reasonably likely to have a Material Adverse Effect,
      each of the Company and the Subsidiaries has ownership of, or a license or
      other
      legal right to use, all patents, copyrights, trade secrets, trademarks, customer
      lists, designs, manufacturing or other processes, computer software, systems,
      data compilation, research results or other proprietary rights used in the
      business of the Company (collectively, "Intellectual
      Property").
      

     

    (b) Except
      for matters which are not reasonably likely to have a Material Adverse Effect,
      all material licenses or other material agreements under which (i) the Company
      or any Subsidiary employs rights in Intellectual Property, or (ii) the Company
      or any Subsidiary has granted rights to others in Intellectual Property owned
      or
      licensed by the Company or any Subsidiary are in full force and effect, and
      there is no default by the Company with respect thereto. 

     

    (c) The
      Company believes that it has taken all steps reasonably required in accordance
      with sound business practice and business judgment to establish and preserve
      the
      ownership of all material Intellectual Property owned by the Company or any
      Subsidiary. 

     

    (d) Except
      for matters which are not reasonably likely to have a Material Adverse Effect,
      to the knowledge of the Company, (i) the present business, activities and
      products of the Company or any Subsidiary do not infringe any intellectual
      property of any other person; (ii) neither the Company nor any Subsidiary is
      making unauthorized use of any confidential information or trade secrets of
      any
      person; and (iii) the activities of any of the employees of the Company or
      any
      Subsidiary, acting on behalf of the Company or such Subsidiary, do not violate
      any agreements or arrangements related to confidential information or trade
      secrets of third parties. 

     

    (e) No
      proceedings are pending, or to the knowledge of the Company, threatened, which
      challenge the rights of the Company or any Subsidiary to the use of Intellectual
      Property, except for matters which are not reasonably likely to have a Material
      Adverse Effect. 

     

    3.9 Financial
      Statements.
      The
      financial statements of the Company and the related notes contained in the
      SEC
      Reports present fairly and accurately in all material respects the financial
      position of the Company as of the dates therein indicated, and the results
      of
      its operations, cash flows and the changes in shareholders' equity for the
      periods therein specified, subject, in the case of unaudited financial
      statements for interim periods, to normal year-end audit adjustments. Such
      financial statements (including the related notes) have been prepared in
      accordance with generally accepted accounting principles applied on a consistent
      basis at the times and throughout the periods therein specified, except that
      unaudited financial statements may not contain all footnotes required by
      generally accepted accounting principles. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.10 No
      Material Adverse Change.
      Except
      as disclosed in the SEC Reports or in any press releases issued by the Company
      at least two Business Days prior to the date of this Agreement, since September
      30, 2007, there has not been (i) an event, circumstance or change that has
      had
      or is reasonably likely to have a Material Adverse Effect, (ii) any obligation
      incurred by the Company or any Subsidiary, direct or contingent, that is
      material to the Company, (iii) any dividend or distribution of any kind
      declared, paid or made on the capital stock of the Company, or (iv) any loss
      or
      damage (whether or not insured) to the physical property of the Company or
      any
      Subsidiary which has had a Material Adverse Effect. 

     

    3.11 Reporting
      Status.
      The
      Company has timely made all filings required under the Exchange Act during
      the
      12 months preceding the date of this Agreement, and all of those documents
      complied in all material respects with the SEC's requirements as of their
      respective filing dates, and the information contained therein as of the
      respective dates thereof did not contain an untrue statement of a material
      fact
      or omit to state a material fact required to be stated therein or necessary
      to
      make the statements therein in light of the circumstances under which they
      were
      made not misleading. 

     

    3.12 No
      Manipulation.
      The
      Company has not taken and will not take any action designed to or that might
      reasonably be expected to cause or result in an unlawful manipulation of the
      price of the Common Stock to facilitate the sale or resale of the Shares.

     

    3.13 Accountants.
      Lawrence Scharfman & Co., CPA P.C., who expressed their opinion with respect
      to the consolidated financial statements in the Company's Annual Report on
      Form
      10-KSB for the year ended December 31, 2006, have advised the Company that
      they
      are, and to the knowledge of the Company they are, independent accountants
      as
      required by the Securities Act and the rules and regulations promulgated
      thereunder. 

     

    3.14 Contracts.
      Except
      for matters which are not reasonably likely to have a Material Adverse Effect
      and those contracts that are substantially or fully performed or expired by
      their terms, the contracts listed as exhibits to or described in the SEC Reports
      that are material to the Company and all amendments thereto, are in full force
      and effect on the date hereof, and neither the Company nor, to the Company's
      knowledge, any other party to such contracts is in breach of or default under
      any of such contracts, except for any breach that is not reasonably likely
      to
      have a Material Adverse Effect. 

     

    3.15 Taxes.
      Except
      for matters which are not reasonably likely to have a Material Adverse Effect,
      each of the Company and the Subsidiaries has filed all necessary federal, state
      and foreign income and franchise tax returns and has paid or accrued all taxes
      shown as due thereon, and the Company has no knowledge of a tax deficiency
      which
      has been asserted or threatened against the Company or any Subsidiary.

     

    3.16 Transfer
      Taxes.
      On the
      Closing Date, all stock transfer or other taxes (other than income taxes) which
      are required to be paid in connection with the sale and transfer of the Shares
      hereunder will be, or will have been, fully paid or provided for by the Company
      and the Company will have complied with all laws imposing such taxes.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.17 Investment
      Company.
      The
      Company is not an "investment company" or an "affiliated person" of, or
      "promoter" or "principal underwriter" for an investment company, within the
      meaning of the Investment Company Act of 1940, as amended, and will not be
      deemed an "investment company" as a result of the transactions contemplated
      by
      this Agreement. 

     

    3.18 Offering
      Prohibitions.
      Neither
      the Company nor any person acting on its behalf or at its direction has in
      the
      past or will in the future take any action to sell, offer for sale or solicit
      offers to buy any securities of the Company which would bring the offer or
      sale
      of the Shares or Warrants as contemplated by this Agreement within the
      provisions of Section 5 of the Securities Act.

     

    3.19 Related
      Party Transactions.
      Except
      as described in the SEC Reports and the Registration Rights Agreement between
      the Company and certain of its investors dated January __, 2008, to the
      knowledge of the Company, no transaction has occurred between or among the
      Company or any of its affiliates, officers or directors or any affiliate or
      affiliates of any such officer or director that with the passage of time will
      be
      required to be disclosed pursuant to Section 13, 14 or 15(d) of the Exchange
      Act. 

     

    3.20 Books
      and Records.
      The
      books, records and accounts of the Company accurately and fairly reflect, in
      reasonable detail, the transactions in, and dispositions of, the assets of,
      and
      the operations of, the Company. The Company maintains a system of internal
      accounting controls sufficient to provide reasonable assurances that (i)
      transactions are executed in accordance with management's general or specific
      authorizations, (ii) transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles and to maintain asset accountability, (iii) access to
      assets is permitted only in accordance with management's general or specific
      authorization and (iv) the recorded accountability for assets is compared with
      the existing assets at reasonable intervals and appropriate action is taken
      with
      respect to any differences. 

     

    4. Representations,
      Warranties and Covenants of the Investor.
      

     

    4.1 Investor
      Knowledge and Status.
      The
      Investor represents and warrants to, and covenants with, the Company that:
      (i)
      the Investor is an "accredited investor" as defined in Regulation D under the
      Securities Act, is knowledgeable, sophisticated and experienced in making,
      and
      is qualified to make decisions with respect to, investments in securities
      presenting an investment decision similar to that involved in the purchase
      of
      the Shares and Warrants, and has requested, received, reviewed and considered
      all information it deemed relevant in making an informed decision to purchase
      the Shares and Warrants; (ii) the Investor understands that the Shares and
      Warrants are each "restricted securities" and have not been registered under
      the
      Securities Act and is acquiring the number of Shares and Warrants set forth
      in
Paragraph
      3
      of the
      Securities Purchase Agreement in the ordinary course of its business and for
      its
      own account for investment only, has no present intention of distributing any
      of
      such Shares or Warrants and has no arrangement or understanding with any other
      persons regarding the distribution of such Shares or Warrants (this
      representation and warranty not limiting the Investor's right to sell Shares
      and
      Warrant Shares pursuant to a registration statement (“Registration
      Statement”)
      filed
      under the Registration Rights Agreement or otherwise, or other than with respect
      to any claim arising out of a breach of this representation and warranty, the
      Investor's right to indemnification under Section
      5
      of the
      Registration Rights Agreement); (iii) the Investor will not, directly or
      indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
      any offers to buy, purchase or otherwise acquire or take a pledge of) any of
      the
      Shares or Warrants except in compliance with the Securities Act, applicable
      state securities laws and the respective rules and regulations promulgated
      thereunder; (iv) the Investor has answered all questions in Paragraph
      4
      of the
      Securities Purchase Agreement and the Investor Questionnaire attached hereto
      as
Exhibit
      C
      for use
      in preparation of the Registration Statement and for determining the
      availability of state "Blue Sky" exemptions and the answers thereto are true
      and
      correct as of the date hereof and will be true and correct as of the Closing
      Date; (v) the Investor will notify the Company promptly of any change in any
      of
      such information until such time as the Investor has sold all of its Shares
      or
      until the Company is no longer required to keep the Registration Statement
      effective; and (vi) the Investor has, in connection with its decision to
      purchase the number of Shares and Warrants set forth in Paragraph
      3
      of the
      Securities Purchase Agreement, relied upon the representations and warranties
      of
      the Company contained herein and the information contained in the SEC Reports.
      The Investor understands that the issuance of the Shares and Warrants to the
      Investor has not been registered under the Securities Act, or registered or
      qualified under any state securities law, in reliance on specific exemptions
      therefrom, which exemptions may depend upon, among other things, the
      representations made by the Investor in this Agreement. No person is authorized
      by the Company to provide any representation that is inconsistent with or in
      addition to those contained herein or in the SEC Reports, and the Investor
      acknowledges that it has not received or relied on any such representations.
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4.2 Transfer
      of Shares.
      The
      Investor agrees that it will not make any sale, transfer or other disposition
      of
      the Shares, the Warrants or the Warrant Shares (a "Disposition")
      other
      than Dispositions that are made pursuant to the Registration Statement in
      compliance with any applicable prospectus delivery requirements or that are
      exempt from registration under the Securities Act. 

     

    4.3 Power
      and Authority.
      The
      Investor represents and warrants to the Company that (i) the Investor has full
      right, power, authority and capacity to enter into this Agreement and to
      consummate the transactions contemplated hereby and has taken all necessary
      action to authorize the execution, delivery and performance of this Agreement,
      and (ii) this Agreement constitutes a valid and binding obligation of the
      Investor enforceable against the Investor in accordance with its terms, except
      to the extent (i) rights to indemnity and contribution may be limited by state
      or federal securities laws or the public policy underlying such laws, (ii)
      such
      enforceability may be limited by applicable bankruptcy, insolvency,
      reorganization, moratorium or similar laws affecting creditors' and contracting
      parties' rights generally and (iii) such enforceability may be subject to
      general principles of equity (regardless of whether such enforceability is
      considered in a proceeding in equity or at law). 

     

    4.4 Short
      Position.
      From
      the earlier of (i) 30 days prior to the date hereof and (ii) the date the
      Investor learned of the Offering, neither the Investor nor any affiliate has
      directly or indirectly established or agreed to establish any hedge, "put
      equivalent position" (as defined in Rule 16a-1 under the Exchange Act) or other
      position in the Common Stock that is outstanding on the Closing Date and that
      is
      designed to or could reasonably be expected to lead to or result in a
      Disposition by the Investor or any other person or entity. For purposes hereof,
      a "hedge or other position" includes, without limitation, effecting any short
      sale or having in effect any short position (whether or not such sale or
      position is against the box and regardless of when such position was entered
      into) or any purchase, sale or grant of any right (including, without
      limitation, any put or call option) with respect to the Common Stock or with
      respect to any security (other than a broad-based market basket or index) that
      includes, relates to or derives any significant part of its value from the
      Common Stock. Each Investor acknowledges that this representation is made for
      the benefit of the Company and the other Investors, any of which may assert
      claims arising out of the breach of this Section
      4.4.
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4.5 No
      Investment, Tax or Legal Advice.
      The
      Investor understands that nothing in the SEC Reports, this Agreement, or any
      other materials presented to the Investor in connection with the purchase and
      sale of the Shares or Warrants constitutes legal, tax or investment advice.
      The
      Investor has consulted such legal, tax and investment advisors as it, in its
      sole discretion, has deemed necessary or appropriate in connection with its
      purchase of Shares and Warrants. 

     

    4.6 Confidential
      Information.
      The
      Investor covenants that from the date hereof it will maintain in confidence
      all
      material non-public information regarding the Company received by the Investor
      from the Company, including the receipt and content of any Suspension Notice
      (as
      defined in the Registration Rights Agreement) until such information (a) becomes
      generally publicly available other than through a violation of this provision
      by
      the Investor or its agents or (b) is required to be disclosed in legal
      proceedings (such as by deposition, interrogatory, request for documents,
      subpoena, civil investigation demand, filing with any governmental authority
      or
      similar process); provided, however, that before making any disclosure in
      reliance on this Section
      4.6,
      the
      Investor will give the Company at least 15 days prior written notice (or such
      shorter period as required by law) specifying the circumstances giving rise
      thereto and will furnish only that portion of the non-public information which
      is legally required and will exercise its commercially reasonable efforts to
      ensure that confidential treatment will be accorded any non-public information
      so furnished. The Investor will not trade, or provide material non-public
      information about the Company to any other party who may or does trade, the
      Company’s securities when the Investor is in possession of material non-public
      information about the Company.

     

    4.7 Additional
      Acknowledgement.
      The
      Investor acknowledges that it has independently evaluated the merits of the
      transactions contemplated by this Agreement, that it has independently
      determined to enter into the transactions contemplated hereby, that it is not
      relying on any advice from or evaluation by any Other Investor, that it is
      relying solely upon the representations and warranties of the Company set forth
      in this Agreement in making its investment decision, and that it is not acting
      in concert with any Other Investor in making its purchase of the Shares and
      Warrants hereunder. The Investor acknowledges that the Investors have not taken
      any actions that would deem the Investors to be members of a "group" for
      purposes of Section 13(d) of the Exchange Act. 

     

    5. Transfer
      Restrictions; Legends.
      Certificates evidencing the Shares, the Warrants and the Warrant Shares shall
      each bear any legend as required by the "blue sky" laws of any state and a
      restrictive legend in substantially the following form, until such time as
      they
      are not required: 

     

    [NEITHER
      THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
      HAVE BEEN REGISTERED] [THESE
      SECURITIES HAVE NOT BEEN REGISTERED]
      UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE
      STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
      TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
      STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR (B) 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 OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
      REASONABLY SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT OR (II) UNLESS
      SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
      SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
      OTHER
      LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      Company acknowledges and agrees that an Investor may from time to time pledge,
      and/or grant a security interest in, some or all of the legended Shares in
      connection with applicable securities laws, pursuant to a bona fide margin
      agreement in compliance with a bona fide margin loan. Such a pledge would not
      be
      subject to approval or consent of the Company and no legal opinion of legal
      counsel to the pledgee, secured party or pledgor shall be required in connection
      with the pledge, but such legal opinion shall be required in connection with
      a
      subsequent transfer or foreclosure following default by the Investor transferee
      of the pledge. No notice shall be required of such pledge, but the Investor's
      transferee shall promptly notify the Company of any such subsequent transfer
      or
      foreclosure. Each Investor acknowledges that the Company shall not be
      responsible for any pledges relating to, or the grant of any security interest
      in, any of the Shares or for any agreement, understanding or arrangement between
      any Investor and its pledgee or secured party. At the appropriate Investor's
      expense, the Company will execute and deliver such reasonable documentation
      as a
      pledgee or secured party of Shares may reasonably request in connection with
      a
      pledge or transfer of the Shares, including the preparation and filing of any
      required prospectus supplement under Rule 424(b)(3) of the Securities Act or
      other applicable provision of the Securities Act to appropriately amend the
      list
      of selling stockholders thereunder. 

     

    6. Survival
      of Representations, Warranties and Agreements.
      Notwithstanding any investigation made by any party to this Agreement, all
      covenants, agreements, representations and warranties made by the Company and
      the Investor herein shall survive the execution of this Agreement for a period
      of one year, and a party's reliance on such representations and warranties
      shall
      not be affected by any investigation made by such party or any information
      developed thereby. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    7. Registration
      of Shares of Common Stock; Clawback; Public Statements.
      

     

    7.1 In
      connection with the purchase and sale of the Shares by the Investors
      contemplated hereby, the Company has entered into a Registration Rights
      Agreement with each Investor providing for the filing by the Company of a
      Registration Statement on Form S-3 (or, if the Company is ineligible to use
      From
      S-3, another appropriate form) to enable the resale of shares of Common Stock
      upon conversion of the Shares by the Investors from time to time.

     

    7.2 At
      the
      closing of the Share Exchange Agreement, 3,558,358 shares of the Company’s
      Common Stock (the “Escrow
      Shares”)
      will
      be placed into an escrow account. In the event HAIE High-Tech Engineering (Hong
      Kong) Co., Ltd. (“HAIE”)
      generates (i) gross revenue for the 12-month period ended December 31, 2008
      of
      at least 150 million China Yuan Renminbi (“RMB”)
      and
      (ii) a gross margin for the 12-month period ended December 31, 2008 of at least
      30 million RMB (collectively, the “HAIE
      Target”),
      in
      each case as determined in accordance with Generally Accepted Accounting
      Principles and certified by the Company’s independent auditor registered with
      the Public Company Accounting Oversight Board in the United States in its report
      on the 2008 audited financial statements of the Company (the “Auditor’s
      Report”),
      the
      Escrow Shares will be released to the selling shareholders in the Share Exchange
      Agreement in the amounts proportionate to the number of shares set out opposite
      each selling shareholder’s name in Schedule
      I
      to the
      Share Exchange Agreement within ten business days following the Company’s
      receipt of the Auditor’s Report. In the event the HAIE Target is not achieved,
      the Escrow Shares will be released to the Investors in the Offering pro rata
      based upon their investment amounts in the Offering. 

     

    7.3 The
      Company agrees to disclose on a Current Report on Form 8-K the closing of the
      Offering and the material terms thereof, including pricing, within four Business
      Days after the Closing. The Company will not issue any public statement, press
      release or any other public disclosure listing the Investor as one of the
      purchasers of the Shares without the Investor's prior written consent, except
      as
      may be required by applicable law or rules of any exchange on which the
      Company's securities are listed.

     

    8. Notices.
      All
      notices, requests, consents and other communications hereunder shall be in
      writing, shall be delivered (A) if within the United States, by first-class
      registered or certified airmail, or nationally recognized overnight express
      courier, postage prepaid, or by facsimile, or (B) if from outside the United
      States, by International Federal Express (or comparable service) or facsimile,
      and shall be deemed given (i) if delivered by first-class registered or
      certified mail domestic, upon the Business Day received, (ii) if delivered
      by
      nationally recognized overnight carrier, one Business Day after timely delivery
      to such carrier, (iii) if delivered by International Federal Express (or
      comparable service), two Business Days after timely delivery to such carrier,
      (iv) if delivered by facsimile, upon electric confirmation of receipt and shall
      be addressed as follows, or to such other address or addresses as may have
      been
      furnished in writing by a party to another party pursuant to this paragraph:
      

     

    
      	(a) if
              to the Company, to:	
              China
                Energy Recovery, Inc. 

              9440
                Little Santa Monica Boulevard, Suite 401 

              Beverly
                Hills, California 90210 

              Attention:
                Michael Kurdziel

              Facsimile:
                (310) 402-5937 

            
	 	 
	with a copy to: 	
              Brownstein
                Hyatt Farber Schreck, LLP

              410
                Seventeenth Street, Suite 2200

              Denver,
                Colorado 80202 

              Attention:
                Adam J. Agron

              Facsimile:
                (303) 223-1111 

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) if
      to the
      Investor, at its address on the signature page to the Securities Purchase
      Agreement. 

    

    9. Amendments;
      Waiver.
      This
      Agreement may not be modified or amended except pursuant to an instrument in
      writing signed by the Company and the Investor. Any waiver of a provision of
      this Agreement must be in writing and executed by the party against whom
      enforcement of such waiver is sought.

     

    10. Headings.
      The
      headings of the various sections of this Agreement have been inserted for
      convenience of reference only and shall not be deemed to be part of this
      Agreement. 

     

    11. Entire
      Agreement; Severability.
      This
      Agreement sets forth the entire agreement and understanding of the parties
      relating to the subject matter hereof and supersedes all prior and
      contemporaneous agreements, negotiations and understandings between the parties,
      both oral and written relating to the subject matter hereof. If any provision
      contained in this Agreement is determined to be invalid, illegal or
      unenforceable in any respect, the validity, legality and enforceability of
      the
      remaining provisions contained herein shall not in any way be affected or
      impaired thereby.

     

    12. Governing
      Law.
      This
      Agreement shall be governed by, and construed in accordance with, the internal
      laws of the State of Delaware, without giving effect to the principles of
      conflicts of law.

     

    13. Counterparts.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      constitute an original, but all of which, when taken together, shall constitute
      but one instrument, and shall become effective when one or more counterparts
      have been signed by each party hereto and delivered to the other
      parties.

     

    [Remainder
      of This Page Intentionally Left Blank]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

    

    CHINA
      ENERGY RECOVERY, INC.

    STOCK
      CERTIFICATE QUESTIONNAIRE

    

    Pursuant
      to Section
      4
      of the
      Agreement, please provide us with the following information: 

     

    
      	1.	The
              exact name in which your Shares and Warrants are to be registered (this
              is
              the name that will appear on your stock certificate(s) and Warrants).
              You
              may use a nominee name if appropriate: 	 	 

	 	 	 	 
	2.	If
              a
              nominee name is listed in response to Item 1 above, the relationship
              between the Investor and such nominee: 	 	  
	 	 	 	 
	3.	The
              mailing address of the registered holder listed in response to Item
              1
              above: 	 	  
	 	 	 	 
	4.	The
              Social Security Number or Tax Identification Number of the registered
              holder listed in the response to Item 1 above: 	 	 
              

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      B

    

    CHINA
      ENERGY RECOVERY, INC.

    FORM
      OF REGISTRATION RIGHTS AGREEMENT

    

    Attached
      hereto.

    
      [See
        Exhibit 4.4 to this Current Report on Form 8-K]

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      C

    

    CHINA
      ENERGY RECOVERY, INC.

    INVESTOR
      QUESTIONNAIRE

    (All
      information will be treated confidentially)

    

    To: China
      Energy Recovery, Inc. 

     

    The
      undersigned hereby acknowledges the following: 

     

    This
      Investor Questionnaire ("Questionnaire")
      must
      be completed by each potential investor in connection with the offer and sale
      of
      the shares of the Series A Convertible Preferred Stock, par value $0.001 per
      share (the "Shares"),
      and
warrants
      to purchase shares of the Company's Common Stock, par value $0.001 per share
      ("Warrants"),
      of
      China Energy Recovery, Inc. (the "Company").
      The
      Shares are being offered and sold by the Company without registration under
      the
      Securities Act of 1933, as amended (the "Securities
      Act"),
      and
      the securities laws of certain states, in reliance on the exemptions contained
      in Section 4 of the Securities Act and on Regulation D promulgated thereunder
      and in reliance on similar exemptions under applicable state laws. The Company
      must determine that a potential investor meets certain suitability requirements
      before offering or selling Shares and Warrants to such investor. The purpose
      of
      this Questionnaire is to assure the Company that each investor will meet the
      applicable suitability requirements. The information supplied by the undersigned
      will be used in determining whether the undersigned meets such criteria, and
      reliance upon the private offering exemption from registration is based in
      part
      on the information herein supplied.

     

    This
      Questionnaire does not constitute an offer to sell or a solicitation of an
      offer
      to buy any security. The undersigned's answers will be kept strictly
      confidential. However, by signing this Questionnaire the undersigned will be
      authorizing the Company to provide a completed copy of this Questionnaire to
      such parties as the Company deems appropriate in order to ensure that the offer
      and sale of the Shares and Warrants will not result in a violation of the
      Securities Act or the securities laws of any state and that the undersigned
      otherwise satisfies the suitability standards applicable to purchasers of the
      Shares. All potential investors must answer all applicable questions and
      complete, date and sign this Questionnaire. The undersigned shall print or
      type
      its responses and attach additional sheets of paper if necessary to complete
      its
      answers to any item.

     

    A. Background
      Information

     

    
      	Name:	_____________________________________________________________________ 
	 	 
	Business Address:	_____________________________________________________________________ 
	 	
              (Number
                and Street); (City) (State); (Zip
                Code)

            
	Telephone Number: 	(_____)  
              ______________________________________________________________ 
	 	 
	Residence Address:	_____________________________________________________________________ 
	 	_____________________________________________________________________ 
	 	
              (Number
                and Street); (City) (State); (Zip
                Code)

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	Telephone Number: 	(_____)  
              _______________________________________________________

    

     

    
      	Age: _________________	Citizenship: ___________________	Where registered to vote:
              ______________________

    

     

    
      If
        a
        corporation, partnership, limited liability company, trust or other entity:
        

    

    
      	 	 
	Type of entity:	_____________________________________________________________________ 

    

     

    
      	State of
              formation:_____________________________	Date of
              formation::_____________________________

    

     

    Social
      Security or Taxpayer Identification No.
      __________________________________

     

    Send
      all
      correspondence to (check one): ____________Residence Address ____________
      Business Address

     

    B. Status
      as Accredited Investor

     

    The
      undersigned is an "accredited investor" as such term is defined in Regulation
      D
      under the Securities Act, because at the time of the sale of the Shares the
      undersigned falls within one or more of the following categories (Please initial
      one or more, as applicable): 

     

    _____
      (1)
      a bank as defined in Section 3(a)(2) of the Securities Act, or a savings and
      loan association or other institution as defined in Section 3(a)(5)(A) of the
      Securities Act whether acting in its individual or fiduciary capacity; a broker
      or dealer registered pursuant to Section 15 of the Securities Exchange Act
      of
      1934; an insurance company as defined in Section 2(13) of the Securities Act;
      an
      investment company registered under the Investment Company Act of 1940 or a
      business development company as defined in Section 2(a)(48) of that act; a
      Small
      Business Investment Company licensed by the U.S. Small Business Administration
      under Section 301(c) or (d) of the Small Business Investment Act of 1958; a
      plan
      established and maintained by a state, its political subdivisions, or any agency
      or instrumentality of a state or its political subdivisions for the benefit
      of
      its employees, if such plan has total assets in excess of $5,000,000; an
      employee benefit plan within the meaning of the Employee Retirement Income
      Security Act of 1974 if the investment decision is made by a plan fiduciary,
      as
      defined in Section 3(21) of such act, which is either a bank, savings and loan
      association, insurance company, or registered investment adviser, or if the
      employee benefit plan has total assets in excess of $5,000,000 or, if a
      self-directed plan, with the investment decisions made solely by persons that
      are accredited investors;1 

     

    _____
      (2)
      a private business development company as defined in Section 202(a)(22) of
      the
      Investment Advisers Act of 1940; 

     

    
      
        
1
        As used
        in this Questionnaire, the term "net worth" means the excess of total assets
        over total liabilities. In computing net worth for the purpose of subsection
        (4), the principal residence of the investor must be valued at cost, including
        cost of improvements, or at recently appraised value by a professional
        appraiser. In determining income, the investor should add to the investor's
        adjusted gross income any amounts attributable to tax exempt income received,
        losses claimed as a limited partner in any limited partnership, deductions
        claimed for depreciation, contributions to an IRA or KEOGH retirement plan,
        alimony payments, and any amount by which income from long-term capital gains
        has been reduced in arriving at adjusted gross income.

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    _____
      (3)
      an organization described in Section 501(c)(3) of the Internal Revenue Code
      of
      1986, as amended, as a corporation, Massachusetts or similar business trust,
      or
      partnership, not formed for the specific purpose of acquiring the Shares
      offered, with total assets in excess of $5,000,000; 

     

    _____
      (4)
      a natural person whose individual net worth, or joint net worth with that
      person's spouse, at the time of such person's purchase of the Shares exceeds
      $1,000,000; 

     

    _____
      (5)
      a natural person who had an individual income in excess of $200,000 in each
      of
      the two most recent years or joint income with that person's spouse in excess
      of
      $300,000 in each of those years and has a reasonable expectation of reaching
      the
      same income level in the current year; 

     

    _____
      (6)
      a trust, with total assets in excess of $5,000,000, not formed for the specific
      purpose of acquiring the Shares offered, whose purchase is directed by a
      sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D; and
      

     

    _____
      (7)
      an entity in which all of the equity owners are accredited investors (as defined
      above). 

     

    C. Representations

     

    The
      undersigned hereby represents and warrants to the Company as follows:

     

    1. Any
      purchase of the Shares and Warrants would be solely for the account of the
      undersigned and not for the account of any other person or with a view to any
      resale, fractionalization, division, or distribution thereof.

     

    2. The
      information contained herein is complete and accurate and may be relied upon
      by
      the Company, and the undersigned will notify the Company immediately of any
      material change in any of such information occurring prior to the closing,
      if
      any, with respect to the purchase of Shares by the undersigned or any
      co-purchaser.

     

    3. There
      are
      no suits, pending litigation, or claims against the undersigned that could
      materially affect the net worth of the undersigned as reported in this
      Questionnaire.

     

    4. The
      undersigned acknowledges that there may occasionally be times when the Company,
      based on the advice of its counsel, determines that it must suspend the use
      of
      the Prospectus forming a part of the Registration Statement (as such terms
      are
      defined in the Securities Purchase Agreement to which this Questionnaire is
      attached) until such time as an amendment to the Registration Statement has
      been
      filed by the Company and declared effective by the Securities and Exchange
      Commission or until the Company has amended or supplemented such Prospectus.
      The
      undersigned is aware that, in such event, the Shares will not be subject to
      ready liquidation, and that any Shares purchased by the undersigned would have
      to be held during such suspension. The overall commitment of the undersigned
      to
      investments which are not readily marketable is not excessive in view of the
      undersigned's net worth and financial circumstances, and any purchase of the
      Shares will not cause such commitment to become excessive. The undersigned
      is
      able to bear the economic risk of an investment in the Shares.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    5. The
      undersigned has carefully considered the potential risks relating to the Company
      and a purchase of the Shares and Warrants and fully understands that the Shares
      and Warrants are speculative investments which involve a high degree of risk
      of
      loss of the undersigned's entire investment. Among others, the undersigned
      has
      carefully considered each of the risks described in the Company's Annual Report
      on Form 10-KSB for the year ended December 31, 2006.

     

    6. The
      following is a list of all states and other jurisdictions in which blue sky
      or
      similar clearance will be required in connection with the undersigned's purchase
      of the Shares and Warrants: 

    ________________________________________

    ________________________________________

    ________________________________________

    

    The
      undersigned agrees to notify the Company in writing of any additional states
      or
      other jurisdictions in which blue sky or similar clearance will be required
      in
      connection with the undersigned's purchase of the Shares.

     

    IN
      WITNESS WHEREOF, the undersigned has executed this Questionnaire this _____
      day
      of _____________, 2008, and declares under oath that it is truthful and correct.
      

     

    
      	 	 	 	
              Investor
                Name:
                

              
                

              

            
	
            	 	 	
              By:

              
                

              

              Name:

              
                

              

              
                Title: 

                
                  

                

                (required
                  for any purchaser that is a 

                corporation,
partnership,
trust
                  or 

                other
                  entity)

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