Document:

Exhibit
10.2

 

CONVERTIBLE PROMISSORY NOTE 

 

	Effective Date: January 31, 2019	U.S. $1,050,000.00

 

FOR VALUE RECEIVED,
China Recycling Energy Corporation, a Nevada corporation (“Borrower”),
promises to pay to Iliad Research and Trading, L.P., a Utah limited partnership,
or its successors or assigns (“Lender”), $1,050,000.00 and any interest, fees, charges, and late fees on
the date that is twenty-four (24) months after the Purchase Price Date (the “Maturity Date”) in accordance
with the terms set forth herein and to pay interest on the Outstanding Balance at the rate of eight percent (8%) per annum from
the Purchase Price Date until the same is paid in full. This Convertible Promissory Note (this “Note”) is issued
and made effective as of January 31, 2019 (the “Effective Date”). This Note is issued pursuant to that certain
Securities Purchase Agreement dated January 31, 2019, as the same may be amended from time to time, by and between Borrower and
Lender (the “Purchase Agreement”). Certain capitalized terms used herein are defined in Attachment 1
attached hereto and incorporated herein by this reference.

 

This Note carries
an OID of $50,000.00, all of which amount is included in the initial principal balance of this Note. The purchase price for this
Note shall be $1,000,000.00 (the “Purchase Price”), computed as follows: $1,050,000.00 original principal balance,
less the OID. The Purchase Price shall be payable by Lender via
wire transfer of immediately available funds.

 

Payment; Prepayment;
Maturity Date Extension.

 

1.1.
Payment. Provided there is an Outstanding Balance, on each Redemption Date (as defined below), Borrower shall pay
to Lender an amount equal to the Redemption Amount (as defined below) due on such Redemption Date in accordance with Section 8.
All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below),
as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments
shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid
interest, and thereafter, to (d) principal.

 

1.2.
Prepayment. Notwithstanding the foregoing, so long as Borrower has not received a Lender Conversion Notice (as defined
below) or a Redemption Notice (as defined below) from Lender where the applicable Conversion Shares have not yet been delivered
and so long as no Event of Default has occurred since the Effective Date (whether declared by Lender or undeclared and regardless
of whether or not cured), then Borrower shall have the right, exercisable on not less than five (5) Trading Days prior written
notice to Lender to prepay the Outstanding Balance of this Note, in full, in accordance with this Section 1.2. Any notice of prepayment
hereunder (an “Optional Prepayment Notice”) shall be delivered to Lender at its registered address and shall
state: (i) that Borrower is exercising its right to prepay this Note, and (ii) the date of prepayment, which shall be not less
than five (5) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional
Prepayment Date”), Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order
of Lender as may be specified by Lender in writing to Borrower. If Borrower exercises its right to prepay this Note, Borrower shall
make payment to Lender of an amount in cash equal to 125% (the “Prepayment Premium”) multiplied by the then
Outstanding Balance of this Note (the “Optional Prepayment Amount”). In the event Borrower delivers the Optional
Prepayment Amount to Lender prior to the Optional Prepayment Date or without delivering an Optional Prepayment Notice to Lender
as set forth herein without Lender’s prior written consent, the Optional Prepayment Amount shall not be deemed to have been
paid to Lender until the Optional Prepayment Date. Moreover, in such event the Optional Prepayment Liquidated Damages Amount will
automatically be added to the Outstanding Balance of this Note on the day Borrower delivers the Optional Prepayment Amount to Lender.
In the event Borrower delivers the Optional Prepayment Amount without an Optional Prepayment Notice, then the Optional Prepayment
Date will be deemed to be the date that is five (5) Trading Days from the date that the Optional Prepayment Amount was delivered
to Lender and Lender shall be entitled to exercise its conversion rights set forth herein during such five (5) day period.

 

     

     

    

 

1.3.
Maturity Date Extension. In the event this Note has not been repaid by the Maturity Date and provided that no Event
of Default shall have occurred hereunder at any time after the Effective Date, then the Maturity Date shall automatically be extended
for an additional year (the “Extension Period”). No interest shall accrue on this Note during the Extension
Period. Notwithstanding the foregoing, upon the occurrence of an Event of Default during the Extension Period, the Extension Period
shall immediately terminate and this Note shall immediately be due and payable in full.

 

2.
Security. This Note is not secured.

 

3.
Lender Optional Conversion.

 

3.1.
Lender Conversions. Lender has the right at any time after the Purchase Price Date until the Outstanding Balance
has been paid in full, including without limitation until any Optional Prepayment Date (even if Lender has received an Optional
Prepayment Notice) or at any time thereafter with respect to any amount that is not prepaid (each instance of conversion is referred
to herein as a “Lender Conversion”) all or any part of the Outstanding Balance into shares (“Lender
Conversion Shares”) of fully paid and non-assessable common stock, $0.001 par value per share (“Common Stock”),
of Borrower as per the following conversion formula: the number of Lender Conversion Shares equals the amount being converted (the
”Conversion Amount”) divided by the Lender Conversion Price (as defined below). Conversion notices in the form
attached hereto as Exhibit A (each, a “Lender Conversion Notice”) may be effectively delivered to Borrower
by any method of Lender’s choice (including but not limited to facsimile, email, mail, overnight courier, or personal delivery),
and all Lender Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Lender Conversion
Shares from any Lender Conversion to Lender in accordance with Section 9 below.

 

3.2.
Lender Conversion Price. Subject to adjustment as set forth in this Note, the price at which Lender has the right
to convert all or any portion of the Outstanding Balance into Common Stock is $3.00 per share of Common Stock (the “Lender
Conversion Price”). However, in the event the Market Capitalization falls below the Minimum Market Capitalization at
any time, then in such event the Lender Conversion Price for all Lender Conversions occurring after the first date of such occurrence
shall equal the lower of the Lender Conversion Price and the Market Price as of any applicable date of Conversion.

 

4.
Defaults and Remedies.

 

4.1.
Defaults. The following are events of default under this Note (each, an “Event of Default”): (a)
Borrower fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) Borrower
fails to deliver any Lender Conversion Shares in accordance with the terms hereof except such failure to deliver is due to ownership
limitation as set forth in Section 11 or otherwise legally restricted; (c) Borrower fails to deliver any Redemption Conversion
Shares (as defined below) in accordance with the terms hereof except such failure to deliver is due to ownership limitation as
set forth in Section 11 or otherwise legally restricted; (d) a receiver, trustee or other similar official shall be appointed over
Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed
or discharged within sixty (60) days; (e) Borrower fails to pay, or admits in writing its inability to pay, its debts as they become
due, subject to applicable grace periods, if any; (f) Borrower makes a general assignment for the benefit of creditors; (g) Borrower
files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); (h) an involuntary bankruptcy
proceeding is commenced or filed against Borrower; (i) Borrower defaults or otherwise fails to observe or perform any covenant,
obligation, condition or agreement of Borrower contained herein or in any other Transaction Document, other than those specifically
set forth in this Section 4.1 and Section 4 of the Purchase Agreement; (j) any representation, warranty or other statement made
or furnished by or on behalf of Borrower to Lender herein, in any Transaction Document, or otherwise in connection with the issuance
of this Note is false, incorrect, incomplete or misleading in any material respect when made or furnished; (k) the occurrence of
a Fundamental Transaction without Lender’s prior written consent; (l) Borrower fails to maintain the Share Reserve as required
under the Purchase Agreement; (m) Borrower effectuates a reverse split of its Common Stock without twenty (20) Trading Days prior
written notice to Lender; (n) any money judgment, writ or similar process is entered or filed against Borrower or any subsidiary
of Borrower or any of its property or other assets for more than $1,000,000.00, and shall remain unvacated, unbonded or unstayed
for a period of twenty (20) calendar days unless otherwise consented to by Lender; (o) Borrower fails to be DWAC Eligible; (p)
Borrower fails to observe or perform any covenant set forth in Section 4 of the Purchase Agreement; or (q) Borrower breaches any
covenant or other term or condition contained in any Other Agreements. Notwithstanding the foregoing, the occurrence of the events
described in Section 4.1(j) – (q) above shall not be considered an Event of Default if such event is cured within five (5)
Trading Days of the occurrence of such event.

 

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4.2.
Remedies. At any time and from time to time after Lender becomes aware of the occurrence of any Event of Default,
Lender may accelerate this Note by written notice to Borrower, with the Outstanding Balance becoming immediately due and payable
in cash at the Mandatory Default Amount. Notwithstanding the foregoing, at any time following the occurrence of any Event of Default,
Lender may, at its option, elect to increase the Outstanding Balance by applying the Default Effect (subject to the limitation
set forth below) via written notice to Borrower without accelerating the Outstanding Balance, in which event the Outstanding Balance
shall be increased as of the date of the occurrence of the applicable Event of Default pursuant to the Default Effect, but the
Outstanding Balance shall not be immediately due and payable unless so declared by Lender (for the avoidance of doubt, if Lender
elects to apply the Default Effect pursuant to this sentence, it shall reserve the right to declare the Outstanding Balance immediately
due and payable at any time and no such election by Lender shall be deemed to be a waiver of its right to declare the Outstanding
Balance immediately due and payable as set forth herein unless otherwise agreed to by Lender in writing). Notwithstanding the foregoing,
upon the occurrence of any Event of Default described in clauses (d), (e), (f), (g) or (h) of Section 4.1, the Outstanding Balance
as of the date of acceleration shall become immediately and automatically due and payable in cash at the Mandatory Default Amount,
without any written notice required by Lender. For the avoidance of doubt, Lender may continue making Lender Conversions and Redemption
Conversions (as defined below) at any time following an Event of Default until such time as the Outstanding Balance is paid in
full. Borrower further acknowledges and agrees that Lender may continue making Conversions following the entry of any judgment
or arbitration award in favor of Lender until such time that the entire judgment amount or arbitration award is paid in full. Borrower
agrees that any judgment or arbitration award will, by its terms, be made convertible into Common Stock. Any Conversions made following
a judgment or arbitration award shall be made pursuant to the conversion mechanics for Redemption Conversions set forth in Section
8 of this Note. In such event, Borrower and Lender agree that it is their expectation that any such judgment amount or arbitration
award that is converted will tack back to the Purchase Price Date for purposes of determining the holding period under Rule 144.
Additionally, following the occurrence of any Event of Default, Borrower may, at its option, pay any Lender Conversion in cash
instead of Lender Conversion Shares by paying to Lender on or before the applicable Delivery Date (as defined below) a cash amount
equal to the number of Lender Conversion Shares set forth in the applicable Lender Conversion Notice multiplied by the highest
intra-day trading price of the Common Stock that occurs during the period beginning on the date the applicable Event of Default
occurred and ending on the date of the applicable Lender Conversion Notice. In connection with acceleration described herein, Lender
may enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such
acceleration may be rescinded and annulled by Lender at any time prior to payment hereunder and Lender shall have all rights as
a holder of the Note until such time, if any, as Lender receives full payment pursuant to this Section 4.2. No such rescission
or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Nothing herein shall limit Lender’s
right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Note
as required pursuant to the terms hereof.

 

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4.3.
Certain Additional Rights. Notwithstanding anything to the contrary herein, in the event Borrower fails to make any
payment when due or fails to deliver any Conversion Shares as and when required under this Note, then the Lender Conversion Price
for all Lender Conversions occurring after the date of such failure to pay shall equal the lower of the Lender Conversion Price
and the Market Price as of any applicable date of Conversion. For the avoidance of doubt, Lender’s exercise of the rights
granted to it pursuant to this Section 4.3 shall not relieve Borrower of its obligation to continue paying the Redemption Amount
on all future Redemption Dates.

 

5.
Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and
enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights
of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions
called for herein in accordance with the terms of this Note.

 

6.
Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by
the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any
other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing
waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in
writing.

 

7.
Adjustment of Lender Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision
hereof, if Borrower at any time on or after the Effective Date subdivides (by any stock split, stock dividend, recapitalization
or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Lender Conversion
Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision hereof, if
Borrower at any time on or after the Effective Date combines (by combination, reverse stock split or otherwise) one or more classes
of its outstanding shares of Common Stock into a smaller number of shares, the Lender Conversion Price in effect immediately prior
to such combination will be proportionately increased. Any adjustment pursuant to this Section 7 shall become effective immediately
after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 7 occurs during
the period that a Lender Conversion Price is calculated hereunder, then the calculation of such Lender Conversion Price shall be
adjusted appropriately to reflect such event.

 

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8.
Borrower Redemptions.

 

8.1.
Redemption Conversion Price. Subject to the adjustments set forth herein, the conversion price for each Redemption
Conversion (as defined below) (the “Redemption Conversion Price”) shall be the lesser of (a) the Lender Conversion
Price, and (b) the Market Price.

 

8.2.
Redemption Conversions. Beginning on the date that is six (6) months after the Purchase Price Date, Lender shall
have the right, exercisable at any time in its sole and absolute discretion, to redeem all or any portion of the Note (such amount,
the “Redemption Amount”) by providing Borrower with a notice substantially in the form attached hereto as Exhibit
B (each, a “Redemption Notice”, and each date on which Lender delivers a Redemption Notice, a “Redemption
Date”). Notwithstanding the foregoing, during the nine-month period following the Purchase Price Date, Lender may not,
in the aggregate, redeem more than 50% of the then-current Outstanding Balance (the “Maximum Redemption Amount Cap”);
provided, however that the Maximum Redemption Amount Cap shall no longer apply after the earlier of the first occurrence
of any Event of Default hereunder and the date that is nine (9) months from the Purchase Price Date. For the avoidance of doubt,
Lender may submit to Borrower one (1) or more Redemption Notices in any given calendar month so long as the aggregate Redemption
Amounts do not exceed the Maximum Redemption Amount Cap (for so long as the Maximum Redemption Amount Cap remains in effect; thereafter,
there shall be no limit on the Redemption Amounts). Payments of each Redemption Amount may be made (a) in cash, or (b) by converting
such Redemption Amount into shares of Common Stock (”Redemption Conversion Shares”, and together with the Lender
Conversion Shares, the “Conversion Shares”) in accordance with this Section 8 (each, a “Redemption
Conversion”) per the following formula: the number of Redemption Conversion Shares equals the portion of the applicable
Redemption Amount being converted divided by the Redemption Conversion Price, or (c) by any combination of the foregoing, so long
as the cash is delivered to Lender on the third Trading Day immediately following the applicable Redemption Date and the Redemption
Conversion Shares are delivered to Lender on or before the applicable Delivery Date. Notwithstanding the foregoing, Borrower will
not be entitled to elect a Redemption Conversion with respect to any portion of any applicable Redemption Amount and shall be required
to pay the entire amount of such Redemption Amount in cash, if on the applicable Redemption Date there is an Equity Conditions
Failure, and such failure is not waived in writing by Lender. Notwithstanding that failure to repay this Note in full by the Maturity
Date is an Event of Default, the Redemption Dates shall continue after the Maturity Date pursuant to this Section 8 until
the Outstanding Balance is repaid in full.

 

8.3.
Allocation of Redemption Amounts. Following its receipt of a Redemption Notice, Borrower may either ratify Lender’s
proposed allocation in the applicable Redemption Notice or elect to change the allocation by written notice to Lender by email
or fax within twenty-four (24) hours of its receipt of such Redemption Notice, so long as the sum of the cash payments and the
amount of Redemption Conversions equal the applicable Redemption Amount. If Borrower fails to notify Lender of its election to
change the allocation prior to the deadline set forth in the previous sentence, it shall be deemed to have ratified and accepted
the allocation set forth in the applicable Redemption Notice prepared by Lender. Borrower acknowledges and agrees that the amounts
and calculations set forth thereon are subject to correction or adjustment because of error, mistake, or any adjustment resulting
from an Event of Default or other adjustment permitted under the Transaction Documents (an “Adjustment”). Furthermore,
no error or mistake in the preparation of such notices, or failure to apply any Adjustment that could have been applied prior to
the preparation of a Redemption Notice may be deemed a waiver of Lender’s right to enforce the terms of any Note, even if
such error, mistake, or failure to include an Adjustment arises from Lender’s own calculation. Borrower shall deliver the
Redemption Conversion Shares from any Redemption Conversion to Lender in accordance with Section 9 below on or before each applicable
Delivery Date. If Borrower elects to pay a Redemption Amount in cash, such payment must be delivered on the second Trading Day
immediately following the Redemption Date. If Borrowers elects to make a payment in cash and fails to make such payment by the
required due date on two (2) separate occasions, Borrower shall lose the right to make payments of Redemption Amounts in cash in
the future without Lender’s written consent.

 

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9.
Method of Conversion Share Delivery. On or before the close of business on the fifth (5th) Trading Day
following each Redemption Date or the fifth (5th) Trading Day following the date of delivery of a Lender Conversion
Notice, as applicable (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time, deliver
or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender
in the applicable Lender Conversion Notice or Redemption Notice. If Borrower is not DWAC Eligible, it shall deliver to Lender or
its broker (as designated in the Lender Conversion Notice or Redemption Notice, as applicable), via reputable overnight courier,
a certificate representing the number of shares of Common Stock equal to the number of Conversion Shares to which Lender shall
be entitled, registered in the name of Lender or its designee. For the avoidance of doubt, Borrower has not met its obligation
to deliver Conversion Shares by the Delivery Date unless Lender or its broker, as applicable, has actually received the certificate
representing the applicable Conversion Shares no later than the close of business on the relevant Delivery Date pursuant to the
terms set forth above. Moreover, and notwithstanding anything to the contrary herein or in any other Transaction Document, in the
event Borrower or its transfer agent refuses to deliver any Conversion Shares to Lender on grounds that such issuance is in violation
of Rule 144 under the Securities Act of 1933, as amended (“Rule 144”), Borrower shall deliver or cause its transfer
agent to deliver the applicable Conversion Shares to Lender with a restricted securities legend, but otherwise in accordance with
the provisions of this Section 9. In conjunction therewith, Borrower will also deliver to Lender a written opinion from its counsel
or its transfer agent’s counsel opining as to why the issuance of the applicable Conversion Shares violates Rule 144.

 

10.   
Conversion Delays. If Borrower fails to deliver Conversion Shares in accordance with the timeframes stated in Sections
9, Lender, at any time prior to selling all of those Conversion Shares may rescind in whole or in part that particular Conversion
attributable to the unsold Conversion Shares, with a corresponding increase to the Outstanding Balance (any returned amount will
tack back to the Purchase Price Date for purposes of determining the holding period under Rule 144). In addition, for each Lender
Conversion, in the event that Lender Conversion Shares are not delivered by the sixth (6th) Trading Day (inclusive of
the day of the Lender Conversion), a late fee equal to the greater of (a) $500.00 and (b) 2% of the applicable Lender Conversion
Share Value rounded to the nearest multiple of $100.00 (but in any event the cumulative amount of such late fees for each Lender
Conversion shall not exceed 100% of the applicable Lender Conversion Share Value) will be assessed for each day after the fifth
(5th) Trading Day (inclusive of the day of the Lender Conversion) until Lender Conversion Share delivery is made; and
such late fee will be added to the Outstanding Balance (such fees, the “Conversion Delay Late Fees”). For illustration
purposes only, if Lender delivers a Lender Conversion Notice to Borrower pursuant to which Borrower is required to deliver 100,000
Lender Conversion Shares to Lender and on the Delivery Date such Lender Conversion Shares have a Lender Conversion Share Value
of $20,000.00 (assuming a Closing Trade Price on the Delivery Date of $0.20 per share of Common Stock), then in such event a Conversion
Delay Late Fee in the amount of $500.00 per day (the greater of $500.00 per day and $20,000.00 multiplied by 2%, which is $400.00)
would be added to the Outstanding Balance of the Note until such Lender Conversion Shares are delivered to Lender. For purposes
of this example, if the Lender Conversion Shares are delivered to Lender twenty (20) days after the applicable Delivery Date, the
total Conversion Delay Late Fees that would be added to the Outstanding Balance would be $10,000.00 (20 days multiplied by $500.00
per day). If the Lender Conversion Shares are delivered to Lender one hundred (100) days after the applicable Delivery Date, the
total Conversion Delay Late Fees that would be added to the Outstanding Balance would be $20,000.00 (100 days multiplied by $500.00
per day, but capped at 100% of the Lender Conversion Share Value).

 

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11.
Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents,
if at any time Lender shall or would be issued shares of Common Stock under any of the Transaction Documents, but such issuance
would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares
of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the
“Maximum Percentage”), then Borrower must not issue to Lender shares of Common Stock which would exceed the
Maximum Percentage. For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d)
of the 1934 Act. The shares of Common Stock issuable to Lender that would cause the Maximum Percentage to be exceeded are referred
to herein as the “Ownership Limitation Shares”. Borrower will reserve the Ownership Limitation Shares for the
exclusive benefit of Lender. From time to time, Lender may notify Borrower in writing of the number of the Ownership Limitation
Shares that may be issued to Lender without causing Lender to exceed the Maximum Percentage. Upon receipt of such notice, Borrower
shall be unconditionally obligated to immediately issue such designated shares to Lender, with a corresponding reduction in the
number of the Ownership Limitation Shares. Notwithstanding the forgoing, the term “4.99%” above shall be replaced with
“9.99%” at such time as the Market Capitalization is less than $10,000,000.00. Notwithstanding any other provision
contained herein, if the term “4.99%” is replaced with “9.99%” pursuant to the preceding sentence, such
increase to “9.99%” shall remain at 9.99% until increased, decreased or waived by Lender as set forth below. By written
notice to Borrower, Lender may increase, decrease or waive the Maximum Percentage as to itself but any such waiver will not be
effective until the 61st day after delivery thereof. The foregoing 61-day notice requirement is enforceable, unconditional and
non-waivable and shall apply to all affiliates and assigns of Lender.

 

12.
Payment of Collection Costs. If this Note is placed in the hands of an attorney for collection or enforcement prior
to commencing arbitration or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Lender
otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note, then Borrower shall pay
the costs incurred by Lender for such collection, enforcement or action including, without limitation, attorneys’ fees and
disbursements. Borrower also agrees to pay for any costs, fees or charges of its transfer agent that are charged to Lender pursuant
to any Conversion or issuance of shares pursuant to this Note.

 

13.
Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender
has the right to have any such opinion provided by its counsel.

 

14.
Governing Law; Venue. This Note shall be construed and enforced in accordance with, and all questions concerning
the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of
Utah, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other
jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Utah. The provisions set
forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

 

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15.
Resolution of Disputes.

 

15.1.   
Arbitration of Disputes. By its acceptance of this Note, each party agrees to be bound by the Arbitration Provisions
(as defined in the Purchase Agreement) set forth as an exhibit to the Purchase Agreement.

 

15.2.   
Calculation Disputes. Notwithstanding the Arbitration Provisions, in the case of a dispute as to any Calculation
(as defined in the Purchase Agreement), such dispute will be resolved in the manner set forth in the Purchase Agreement.

 

16.
Cancellation. After repayment or conversion of the entire Outstanding Balance, this Note shall be deemed paid in
full, shall automatically be deemed canceled, and shall not be reissued.

 

17.
Amendments. The prior written consent of both parties hereto shall be required for any change or amendment to this
Note.

 

18.
Assignments. Neither party may assign this Note without the prior written consent of the other party; provided, however,
that Lender may assign this Note to any of its affiliates or any trust where John M. Fife’s descendants are beneficiaries
without Borrower’s consent. Any shares of Common Stock issued upon conversion of this Note may be offered, sold, assigned
or transferred by Lender without the consent of Borrower.

 

19.
Time is of the Essence. Time is expressly made of the essence with respect to each and every provision of this Note
and the documents and instruments entered into in connection herewith.

 

20.
Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall
be given in accordance with the subsection of the Purchase Agreement titled “Notices.”

 

21.
Liquidated Damages. Lender and Borrower agree that in the event Borrower fails to comply with any of the terms or
provisions of this Note, Lender’s damages would be uncertain and difficult (if not impossible) to accurately estimate because
of the parties’ inability to predict future interest rates, future share prices, future trading volumes and other relevant
factors. Accordingly, Lender and Borrower agree that any fees, balance adjustments, or other charges assessed under this Note are
not penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages (under Lender’s and
Borrower’s expectations that any such liquidated damages will tack back to the Purchase Price Date for purposes of determining
the holding period under Rule 144).

 

22.
Waiver of Jury Trial. EACH OF LENDER AND BORROWER IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND
THAT ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS NOTE OR THE RELATIONSHIPS OF THE PARTIES
HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE
STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING
SUCH PARTY’S RIGHT TO DEMAND TRIAL BY JURY.

 

23.
Voluntary Agreement. Borrower has carefully read this Note and has asked any questions needed for Borrower to understand
the terms, consequences and binding effect of this Note and fully understand them. Borrower has had the opportunity to seek the
advice of an attorney of Borrower’s choosing, or has waived the right to do so, and is executing this Note voluntarily and
without any duress or undue influence by Lender or anyone else.

 

24.
Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to
achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in
full force and effect.

 

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     8

     

    

 

IN WITNESS WHEREOF,
Borrower has caused this Note to be duly executed as of the Effective Date.

 

	 	BORROWER:
	 	 	 
	 	China Recycling Energy Corporation
	 	 	 
	 	By:	
	 	 	Guohua Ku,
	 	 	Chairman & Chief Executive Officer	

 

ACKNOWLEDGED, ACCEPTED AND AGREED:

 

LENDER:

 

	Iliad Research and Trading, L.P.	 
	 	 	 	 
	By:	 Iliad Management, LLC, its General Partner	 
	 	 	 	 
	 	By:  	Fife Trading, Inc., its Manager
	 	 	 	 
	 	By:		 
	 	 	John M. Fife, President	

 

    [Signature Page to Convertible Promissory Note]

     

    

 

ATTACHMENT 1

DEFINITIONS

 

For purposes
of this Note, the following terms shall have the following meanings:

 

A1.  
“Bloomberg” means Bloomberg L.P. (or if that service is not then reporting the relevant information regarding
the Common Stock, a comparable reporting service of national reputation selected by Lender and reasonably satisfactory to Borrower).

 

A2.  
“Closing Bid Price” and “Closing Trade Price” means the last closing bid price and
last closing trade price, respectively, for the Common Stock on its principal market, as reported by Bloomberg, or, if its principal
market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as
the case may be) then the last bid price or last trade price, respectively, of the Common Stock prior to 4:00:00 p.m., New
York time, as reported by Bloomberg, or, if its principal market is not the principal securities exchange or trading market for
the Common Stock, the last closing bid price or last trade price, respectively, of the Common Stock on the principal securities
exchange or trading market where the Common Stock is listed or traded as reported by Bloomberg, or if the foregoing do not apply,
the last closing bid price or last trade price, respectively, of the Common Stock in the over-the-counter market on the electronic
bulletin board for the Common Stock as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is
reported for the Common Stock by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers
for the Common Stock as reported by OTC Markets Group, Inc., and any successor thereto. If the Closing Bid Price or the Closing
Trade Price cannot be calculated for the Common Stock on a particular date on any of the foregoing bases, the Closing Bid Price
or the Closing Trade Price (as the case may be) of the Common Stock on such date shall be the fair market value as mutually determined
by Lender and Borrower. If Lender and Borrower are unable to agree upon the fair market value of the Common Stock, then such dispute
shall be resolved in accordance with the procedures in Section 15.2. All such determinations shall be appropriately adjusted
for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

A3.  
“Conversion” means a Lender Conversion under Section 3 or a Redemption Conversion under Section 8.

 

A4.  
“Conversion Factor” means 75%, subject to the following adjustments. If at any time after the Effective
Date, Borrower is not DWAC Eligible, then the then-current Conversion Factor will automatically be reduced by 5% for all future
Conversions. If at any time after the Effective Date, the Conversion Shares are not DTC Eligible, then the then-current Conversion
Factor will automatically be reduced by an additional 5% for all future Conversions. Finally, in addition to the Default Effect,
if any Major Default occurs after the Effective Date, the Conversion Factor shall automatically be reduced for all future Conversions
by an additional 5% for each of the first three (3) Major Defaults that occur after the Effective Date (for the avoidance of doubt,
each occurrence of any Major Default shall be deemed to be a separate occurrence for purposes of the foregoing reductions in Conversion
Factor, even if the same Major Default occurs three (3) separate times). For example, the first time Borrower is not DWAC Eligible,
the Conversion Factor for future Conversions thereafter will be reduced from 75% to 70% for purposes of this example. Following
such event, the first time the Conversion Shares are no longer DTC Eligible, the Conversion Factor for future Conversions thereafter
will be reduced from 70% to 65% for purposes of this example. If, thereafter, there are three (3) separate occurrences of a Major
Default pursuant to Section 4.1(c), then for purposes of this example the Conversion Factor would be reduced by 5% for the first
such occurrence, and so on for each of the second and third occurrences of such Major Default.

 

A5.  
“Default Effect” means multiplying the Outstanding Balance as of the date the applicable Event of Default
occurred by (a) 15% for each occurrence of any Major Default, or (b) 5% for each occurrence of any Minor Default, and then adding
the resulting product to the Outstanding Balance as of the date the applicable Event of Default occurred, with the sum of the foregoing
then becoming the Outstanding Balance under this Note as of the date the applicable Event of Default occurred; provided that the
Default Effect may only be applied three (3) times hereunder with respect to Major Defaults and three (3) times hereunder with
respect to Minor Defaults; and provided further that the Default Effect shall not apply to any Event of Default pursuant to Section
4.1(b) hereof. Notwithstanding the foregoing, in no event shall the Default Effect result in increases to the Outstanding Balance
exceeding, in the aggregate, 25%.

 

A6.  
“DTC” means the Depository Trust Company or any successor thereto.

 

    Attachment 1 to Convertible Promissory Note, Page 1

     

    

 

A7.  
“DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited
in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm
servicing Lender’s brokerage firm for the benefit of Lender.

 

A8.  
“DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

 

A9.  
“DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A10.
“DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant
to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has
been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an
agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; (e) Borrower has previously
delivered all Conversion Shares to Lender via DWAC; and (f) Borrower’s transfer agent does not have a policy prohibiting
or limiting delivery of the Conversion Shares via DWAC.

 

A11.
“Equity Conditions Failure” means that any of the following conditions has not been satisfied during
any applicable Equity Conditions Measuring Period (as defined below): (a) with respect to the applicable date of determination
all of the Conversion Shares would be freely tradable under Rule 144 or without the need for registration under any applicable
federal or state securities laws (in each case, disregarding any limitation on conversion of this Note); (b) on each day during
the period beginning one month prior to the applicable date of determination and ending on and including the applicable date of
determination (the “Equity Conditions Measuring Period”), the Common Stock is listed or designated for quotation
(as applicable) on any of NYSE, NASDAQ, OTCQX, or OTCQB (each, an “Eligible Market”) and shall not have been
suspended from trading on any such Eligible Market (other than suspensions of not more than two (2) Trading Days and occurring
prior to the applicable date of determination due to business announcements by Borrower); (c) on each day during the Equity
Conditions Measuring Period, Borrower shall have delivered all shares of Common Stock issuable upon conversion of this Note on
a timely basis as set forth in Section 8.1 hereof and all other shares of capital stock required to be delivered by Borrower
on a timely basis as set forth in the other Transaction Documents; (d) any shares of Common Stock to be issued in connection
with the event requiring determination may be issued in full without violating Section 11 hereof (Lender acknowledges that
Borrower shall be entitled to assume that this condition has been met for all purposes hereunder absent written notice from Lender);
(e) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without
violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation
(as applicable); (f) on each day during the Equity Conditions Measuring Period, no public announcement of a pending, proposed
or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (g) Borrower
shall have no knowledge of any fact that would reasonably be expected to cause any of the Conversion Shares to not be freely tradable
without the need for registration under any applicable state securities laws (in each case, disregarding any limitation on conversion
of this Note); (h) on each day during the Equity Conditions Measuring Period, Borrower otherwise shall have been in material
compliance with each, and shall not have breached any, term, provision, covenant, representation or warranty of any Transaction
Document; (i) without limiting clause (j) above, on each day during the Equity Conditions Measuring Period, there shall not
have occurred an Event of Default or an event that with the passage of time or giving of notice would constitute an Event of Default;
(k) on each Redemption Date, the average and median daily dollar volume of the Common Stock on its principal market for the previous
twenty (20) and two hundred (200) Trading Days shall be greater than $200,000.00; (l) the ten (10) day average VWAP of the Common
Stock is greater than $1.00, (m) the Market Capitalization shall be above the Minimum Market Capitalization; and (n) the Common
Stock shall be DWAC Eligible as of each applicable Redemption Date or other date of determination.

 

A12.
“Excluded Securities” means any shares of Common Stock, options, or convertible securities issued or
issuable in connection with any Approved Stock Plan; provided that the option term, exercise price or similar provisions
of any issuances pursuant to such Approved Stock Plan are not amended, modified or changed on or after the Purchase Price Date.

 

A13.
“Free Trading” means that (a) the shares or certificate(s) representing the applicable shares of Common
Stock have been cleared and approved for public resale by the compliance departments of Lender’s brokerage firm and the clearing
firm servicing such brokerage, and (b) such shares are held in the name of the clearing firm servicing Lender’s brokerage
firm and have been deposited into such clearing firm’s account for the benefit of Lender.

 

    Attachment 1 to Convertible Promissory Note, Page 2

     

    

 

A14.
“Fundamental Transaction” means that (a) (i) Borrower or any of its subsidiaries shall, directly
or indirectly, in one or more related transactions, consolidate or merge with or into (whether or not Borrower or any of its subsidiaries
is the surviving corporation) any other person or entity, or (ii) Borrower or any of its subsidiaries shall, directly or indirectly,
in one or more related transactions, sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially
all of its respective properties or assets to any other person or entity, or (iii) Borrower or any of its subsidiaries shall,
directly or indirectly, in one or more related transactions, allow any other person or entity to make a purchase, tender or exchange
offer that is accepted by the holders of more than 50% of the outstanding shares of voting stock of Borrower (not including any
shares of voting stock of Borrower held by the person or persons making or party to, or associated or affiliated with the persons
or entities making or party to, such purchase, tender or exchange offer), or (iv) Borrower or any of its subsidiaries shall,
directly or indirectly, in one or more related transactions, consummate a stock or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other person or
entity whereby such other person or entity acquires more than 50% of the outstanding shares of voting stock of Borrower (not including
any shares of voting stock of Borrower held by the other persons or entities making or party to, or associated or affiliated with
the other persons or entities making or party to, such stock or share purchase agreement or other business combination), or (v) Borrower
or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, reorganize, recapitalize or reclassify
the Common Stock, other than an increase in the number of authorized shares of Borrower’s Common Stock, or (b) any “person”
or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations
promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding voting stock of Borrower.

 

A15.
“Lender Conversion Share Value” means the product of the number of Lender Conversion Shares deliverable
pursuant to any Lender Conversion multiplied by the Closing Trade Price of the Common Stock on the Delivery Date for such Lender
Conversion.

 

A16.
“Major Default” means any Event of Default occurring under Sections 4.1(a), 4.1(c), 4.1(l), or 4.1(p)
of this Note.

 

A17.
“Mandatory Default Amount” means the greater of (a) the Outstanding Balance divided by the Redemption
Conversion Price on the date the Mandatory Default Amount is demanded, multiplied by the VWAP on the date the Mandatory Default
Amount is demanded, or (b) the Outstanding Balance following the application of the Default Effect.

 

A18.
“Market Capitalization” means a number equal to (a) the average VWAP of the Common Stock for the immediately
preceding fifteen (15) Trading Days, multiplied by (b) the aggregate number of outstanding shares of Common Stock as reported on
Borrower’s most recently filed Form 10-Q or Form 10-K.

 

A19.
“Market Price” means the Conversion Factor multiplied by the lowest Closing Bid Price during the twenty
(20) Trading Days immediately preceding the applicable Conversion.

 

A20.
“Minimum Market Capitalization” means $8,000,000.00.

 

A21.
“Minor Default” means any Event of Default that is not a Major Default.

 

A22.
“OID” means an original issue discount.

 

A23.
“Optional Prepayment Liquidated Damages Amount” means an amount equal to the difference between (a) the
product of (i) the number of shares of Common Stock obtained by dividing (1) the applicable Optional Prepayment Amount by (2) the
Lender Conversion Price as of the date Borrower delivered the applicable Optional Prepayment Amount to Lender, multiplied by (ii)
the Closing Trade Price of the Common Stock on the date Borrower delivered the applicable Optional Prepayment Amount to Lender,
and (b) the applicable Optional Prepayment Amount paid by Borrower to Lender. For illustration purposes only, if the applicable
Optional Prepayment Amount were $50,000.00, the Lender Conversion Price as of the date the Optional Prepayment Amount was paid
to Lender was equal to $0.75 per share of Common Stock, and the Closing Trade Price of a share of Common Stock as of such date
was equal to $1.00, then the Optional Prepayment Liquidated Damages Amount would equal $16,666.67 computed as follows: (a) $66,666.67
(calculated as (i) (1) $50,000.00 divided by (2) $0.75 multiplied by (ii) $1.00) minus (b) $50,000.00.

 

    Attachment 1 to Convertible Promissory Note, Page 3

     

    

 

A24.
“Other Agreements” means, collectively, (a) all existing and future agreements and instruments between,
among or by Borrower (or an affiliate), on the one hand, and Lender (or an affiliate), on the other hand, and (b) any financing
agreement or a material agreement that affects Borrower’s ongoing business operations.

 

A25. “Outstanding
Balance” means as of any date of determination, the Purchase Price, as reduced or increased, as the case may be, pursuant
to the terms hereof for payment, Conversion, offset, or otherwise, plus the OID, accrued but unpaid interest, collection and enforcements
costs (including attorneys’ fees) incurred by Lender, transfer, stamp, issuance and similar taxes and fees related to Conversions,
and any other fees or charges (including without limitation Conversion Delay Late Fees) incurred under this Note.

 

A26.
“Purchase Price Date” means the date the Purchase Price is delivered by Lender to Borrower.

 

A27.
“Trading Day” means any day on which the New York Stock Exchange is open for trading.

 

A28.
“VWAP” means the volume weighted average price of the Common stock on the principal market for a particular
Trading Day or set of Trading Days, as the case may be, as reported by Bloomberg.

 

    Attachment 1 to Convertible Promissory Note, Page 4

     

    

 

EXHIBIT A

 

Iliad Research and Trading, L.P.

303 East Wacker Drive, Suite 1040

Chicago, Illinois 60601

 

	China Recycling Energy Corporation	 	Date: __________________
	Attn: GuangYu Wu, CEO 	 	 
	Suite 909, Tower B 	 	 
	Chang An International Building 	 	 
	Xi An City, 710068	 	 
	China 	 	 

 

LENDER CONVERSION NOTICE

 

The above-captioned Lender hereby gives
notice to China Recycling Energy Corporation, a Nevada corporation (the “Borrower”), pursuant to that certain
Convertible Promissory Note made by Borrower in favor of Lender on January 31, 2019 (the “Note”), that Lender
elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of
Borrower as of the date of conversion specified below. Said conversion shall be based on the Lender Conversion Price set forth
below. In the event of a conflict between this Lender Conversion Notice and the Note, the Note shall govern, or, in the alternative,
at the election of Lender in its sole discretion, Lender may provide a new form of Lender Conversion Notice to conform to the Note.
Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

		A.	Date of Conversion: ____________

		B.	Lender Conversion #: ____________

		C.	Conversion Amount: ____________

		D.	Lender Conversion Price: _______________

		E.	Lender Conversion Shares: _______________ (C divided by D)

		F.	Remaining Outstanding Balance of Note: ____________*

 

* Subject to adjustments for corrections,
defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms
of which shall control in the event of any dispute between the terms of this Lender Conversion Notice and such Transaction Documents.

 

Please transfer the Lender Conversion
Shares electronically (via DWAC) to the following account:

 

	Broker:  __________________________	 	Address:	_________________
	DTC#: ___________________________	 	 	_________________
	Account #: _______________________	 	 	_________________
	Account Name: ____________________	 	 

 

To the extent the
Lender Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated
shares to Lender via reputable overnight courier after receipt of this Lender Conversion Notice (by facsimile transmission or otherwise)
to:

_____________________________________

_____________________________________

_____________________________________

 

    Exhibit A to Convertible Promissory Note, Page 1

     

    

 

Sincerely,

 

Lender:

 

	Iliad Research and Trading, L.P.	 
	 	 	 	 	 
	By:	 Iliad Management, LLC, its General Partner	 
	 	 	 	 	 
	 	By:  	Fife Trading, Inc., its Manager
	 	 	 	 	 
	 		By:		 
	 	 	 	John M. Fife, President	

 

 

    Exhibit A to Convertible Promissory Note, Page 2

     

    

 

EXHIBIT B

 

Iliad Research and Trading, L.P.

303 East Wacker Drive, Suite 1040

Chicago, Illinois 60601

 

	China Recycling Energy Corporation	Date: __________________
	Attn: Guohua Ku, Chairman & CEO	 
	4/F Block C	 
	Rong Cheng Yun Gu Building 	 
	Xi An City 710068	 
	China 	 

 

REDEMPTION NOTICE

 

The above-captioned Lender hereby gives
notice to China Recycling Energy Corporation, a Delaware corporation (the “Borrower”), pursuant to that certain
Convertible Promissory Note made by Borrower in favor of Lender on January 31, 2019 (the “Note”), that Lender
elects to redeem a portion of the Note in Redemption Conversion Shares or in cash as set forth below. In the event of a conflict
between this Redemption Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole
discretion, Lender may provide a new form of Redemption Notice to conform to the Note. Capitalized terms used in this notice without
definition shall have the meanings given to them in the Note.

 

REDEMPTION INFORMATION 

 

		A.	Redemption Date: ____________, 201_

		B.	Redemption Amount: ____________

		C.	Portion of Redemption Amount to be Paid in Cash: ____________

		D.	Portion of Redemption Amount to be Converted into Common Stock: ____________ (B minus C)

		E.	Redemption Conversion Price: _______________ (lower of (i) Lender Conversion Price in effect and
(ii) Market Price as of Redemption Date)

		F.	Redemption Conversion Shares: _______________ (D divided by E)

		G.	Remaining Outstanding Balance of Note: ____________ *

* Subject to adjustments for corrections,
defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms
of which shall control in the event of any dispute between the terms of this Redemption Notice and such Transaction Documents.

 

		2.	EQUITY CONDITIONS CERTIFICATION (Section to be completed
by Borrower)

 

		A.	Market Capitalization:________________

 

(Check One)

 

		B.	_________ Borrower herby certifies that no Equity Conditions Failure exists as of the applicable
Redemption Date.

 

    Exhibit B to Convertible Promissory Note, Page 1

     

    

 

		C.	_________ Borrower hereby gives notice that an Equity Conditions Failure has occurred and requests
a waiver from Lender with respect thereto. The Equity Conditions Failure is as follows:

 

________________________________________________________________

________________________________________________________________

________________________________________________________________

________________________________________________________________

 

 

Please transfer the Redemption Conversion
Shares, if applicable, electronically (via DWAC) to the following account:

 

	Broker:___________________________	 	Address:	__________________
	DTC#:____________________________	 	 	__________________
	Account #:________________________	 	 	__________________
	Account Name:_____________________	 	 	 

 

To the extent the
Redemption Conversion Shares are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated
shares to Lender via reputable overnight courier after receipt of this Redemption Notice (by facsimile transmission or otherwise)
to:

_____________________________________

_____________________________________

_____________________________________

 

Sincerely,

 

Lender:

 

	Iliad Research and Trading, L.P.	 
	 	 	 	 	 
	By:	 Iliad Management, LLC, its General Partner	 
	 	 	 	 	 
	 	By:  	Fife Trading, Inc., its Manager
	 	 	 	 	 
	 		By:		 
	 	 	 	John M. Fife, President	

 

 

Exhibit B to Convertible Promissory Note,
Page 2Exhibit
10.3

 

Securities
Purchase Agreement

 

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

 

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

 

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

 

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

 

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

 

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

 

1.
Purchase and Sale of Securities.

 

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

 

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

 

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

 

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

 

    1

     

    

 

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

 

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

 

    2

     

    

 

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

 

    3

     

    

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    4

     

    

 

8.
OFAC; Patriot Act.

 

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

 

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

 

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

 

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

 

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

 

    5

     

    

 

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

 

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

 

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

 

    6

     

    

 

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

 

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

 

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

 

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

 

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

 

    7

     

    

 

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

 

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

 

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

 

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

 

If
to Company:

 

China
Recycling Energy Corporation

Attn:
Guohua Ku

4/F
Block C

Rong
Cheng Yun Gu Building

Keji
3rd, Yanta District

Xi
An City 710075

China

 

If
to Investor:

 

Iliad
Research and Trading, L.P.

Attn:
John Fife

303
East Wacker Drive, Suite 1040

Chicago,
Illinois 60601

 

    8

     

    

 

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

 

Hansen
Black Anderson Ashcraft PLLC

Attn:
Jonathan Hansen

3051
West Maple Loop Drive, Suite 325

Lehi,
Utah 84043

 

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

 

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

 

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

 

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

 

    9

     

    

 

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

 

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

 

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

 

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

 

    10

     

    

 

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

 

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

 

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

 

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

 

    11

     

    

 

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

 

SUBSCRIPTION
AMOUNT:

 

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

 

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

 

    [Signature Page to Securities Purchase Agreement]

     

    

 

ATTACHED
EXHIBITS:

 

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

 

     

     

    

 

Exhibit
F

 

ARBITRATION
PROVISIONS

 

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

 

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

 

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

 

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

 

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

 

    Arbitration Provisions, Page 1

     

    

 

4.2 Selection
and Payment of Arbitrator.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    Arbitration Provisions, Page 2

     

    

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    Arbitration Provisions, Page 3

     

    

 

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

 

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

 

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

 

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

 

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

 

    Arbitration Provisions, Page 4

     

    

 

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

 

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

 

5. Arbitration
Appeal.

 

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

 

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

 

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

 

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

 

    Arbitration Provisions, Page 5

     

    

 

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

 

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

 

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

 

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

 

5.4 Timing.

 

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

 

    Arbitration Provisions, Page 6

     

    

 

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

 

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

 

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

 

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

 

6.
 Miscellaneous.

 

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

 

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

 

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

 

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

 

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

 

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Arbitration Provisions, Page 7

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