Document:

CONSULTING
      AGREEMENT

    

    This
      Consulting Agreement (this "Agreement")
      is
      dated as of June 20th,
      2008,
      between China Energy Recovery, Inc., a Delaware corporation (the 
      

"Company"),
      and
      ARC China, Inc., a Delaware corporation ("Consultant").

    

    RECITALS

    

    WHEREAS,
      the
      Company desires to engage Consultant, and Consultant desires to be engaged,
      as
      an independent contractor to provide various sales, marketing and other advisory
      services for the Company pursuant to the terms and subject to the conditions
      set
      forth in this Agreement.

    

    NOW,
      THEREFORE,
      in
      consideration of the services to be performed by Consultant, and for the mutual
      covenants and promises as specified hereinafter, and for other good and valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      the
      parties agree as follows:

    

    1.    CONSULTANT'S
      DUTIES. 

     

    1.1    The
      Company engages Consultant and Consultant accepts the Company's engagement
      to
      provide sales, marketing and other advisory and consulting services to the
      Company, as such services may be assigned to Consultant by the Company’s Chief
      Executive Officer from time to time (the "Services").
      In
      assigning the Services to Consultant, the Company’s Chief Executive Officer
      shall, either orally or in writing, specify to Consultant the scope of the
      Services to be completed and the deadline for completion of the Services, if
      necessary. 

     

    1.2    Consultant
      further agrees to render the Services conscientiously and to devote Consultant's
      reasonable efforts and abilities thereto, at such time during the term hereof
      and in such reasonable manner as the Company’s Chief Executive Officer and
      Consultant shall mutually agree.

     

    2.    TERM.
      The
      term
      of this Agreement shall commence on the date hereof and continue until June
      19,
      2010 (the “Term”).
      

     

    3.    COMPENSATION;
      SECURITIES LAWS; REIMBURSEMENT OF EXPENSES. 

     

    3.1    Compensation.
      For the
      Services provided hereunder, the Company agrees to issue Consultant a warrant
      substantially in the form attached hereto as Exhibit
      A
      (the
“Warrant”)
      to
      purchase 750,000 shares of the Company’s common stock, $0.001 par value per
      share ("Common
      Stock"),
      at an
      exercise price of $2.16 per share. The Warrant shall vest and be exercisable
      in
      accordance with Section 3.2. In addition, the Company agrees to pay Consultant
      a
      cash consulting fee equal to two percent of the gross proceeds of any debt
      or
      equity financing received by the Company during the Term of this Agreement
      (a
      "Financing").

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.2    Vesting.
      Subject
      to Section 3.3, the Warrant will vest and be exercisable according to the
      following schedule:

     

    (a) Warrants
      to purchase 250,000 shares of the Company's Common Stock shall vest and be
      exercisable on the date hereof;

     

    (b) Warrants
      to purchase 5,000 shares of shares of the Company's Common Stock shall vest
      and
      be exercisable on the date of the Company’s receipt of each $1,000,000 in gross
      proceeds in each Financing during the Term of this Agreement, up to a maximum
      of
      250,000 shares of the Company's Common Stock; provided that Warrants shall
      not
      vest for increments of less than $1,000,000 in gross proceeds received by the
      Company in a Financing during the Term of this Agreement (by way of example
      only, if $12,500,000 in gross proceeds are received by the Company in a
      Financing, Warrants to purchase 60,000 shares of the Company's Common Stock
      shall vest and be exercisable in connection with such Financing); and

     

    (c) Warrants
      to purchase 250,000 shares of the Company’s Common Stock shall vest and become
      exercisable upon a transfer of the quotation of the Company's Common Stock
      from
      the OTCBB to the Nasdaq Stock Market or the American Stock Exchange.

     

    3.3    Termination.
      In the
      event this Agreement is terminated by the Company for any reason or for no
      reason, all unvested portions of the Warrant on the effective date of such
      termination shall become fully vested and immediately exercisable. In the event
      this Agreement is terminated by Consultant for any reason, all unvested portions
      of the Warrant on the effective date of such termination shall be forfeited
      by
      Consultant.

     

    3.4    Securities
      Law Restrictions.
      Consultant acknowledges and agrees that the Warrant and the shares of Common
      Stock underlying the Warrant are restricted securities under federal and state
      securities laws that will be held by Consultant for its own account and not
      on
      behalf of others. Consultant further acknowledges and agrees that the Warrant
      and the shares of Common Stock underlying the Warrant are being acquired by
      Consultant for investment purposes only and not with a view to sell such Warrant
      or shares of Common Stock. Consultant is an “accredited investor” as such term
      is defined in Rule 501 of Regulation D promulgated under the Securities Act
      of
      1933, as amended (the "Securities
      Act").
      Consultant acknowledges and agrees that it may not sell, transfer, assign or
      otherwise dispose of the Warrant or any shares of Common Stock underlying the
      Warrant except pursuant to an effective registration statement under the
      Securities Act or a valid exemption therefrom, without first delivering to
      the
      Company an opinion of counsel in form and substance reasonably acceptable to
      the
      Company that registration under the Securities Act or any applicable state
      securities laws is not required in connection with such transfer. 

     

    3.5    Legends.
      Consultant understands that the Warrant and the certificates representing the
      shares of Common Stock underlying the Warrant will bear the legends set forth
      below, as well as any other legends that the Company deems necessary or
      desirable in connection with this Agreement, the Securities Act or other rules,
      regulations or laws:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    THE
      SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
      OF
      1933, AS AMENDED (THE "ACT"),
      OR
      ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION OF THESE SECURITIES MAY BE
      EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER THE ACT OR PURSUANT TO AN
      EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, OR UPON RECEIPT OF AN OPINION
      OF COUNSEL FOR THE HOLDER SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH
      REGISTRATION IS NOT REQUIRED UNDER THE ACT, OR UPON RECEIPT OF A NO-ACTION
      LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION. 

     

    

    3.6    Withholding
      of Taxes.
      Consultant acknowledges that the Company shall not withhold, or be in any way
      responsible for, the payment of any federal, state or local income tax, wage
      taxes, FICA taxes, unemployment compensation, worker's compensation
      contributions, vacation, sick leave pay, retirement benefits, medical benefits
      or any other payments except the reimbursement for pre-approved travel expenses
      pursuant to Section 3.8. Consultant hereby indemnifies and holds harmless the
      Company and its officers, directors, employees, Affiliates (as defined below)
      and agents for the failure to withhold or otherwise be responsible for any
      such
      amounts.

     

    3.7    Adjustments.
      In the
      event of a reorganization, recapitalization, stock dividend or stock split,
      or
      combination or other change in the Common Stock of the Company, the Company
      shall, in order to prevent the dilution or enlargement of rights pursuant to
      the
      Warrant or the shares of Common Stock underlying the Warrant, make such
      adjustments in the number and type of shares of Common Stock underlying the
      Warrant as is appropriate and equitable.

     

    3.8    Reimbursement
      of Expenses. During
      the Term of this Agreement, the
      Company shall reimburse Consultant for all reasonable out-of-pocket expenses
      associated with the performance of the Services. The Company shall reimburse
      Consultant for its expenses upon completion of an expense report in accordance
      with the Company's reimbursement, reporting and documentation policies in effect
      from time to time with respect to travel, entertainment and other business
      expenses.

     

    4.    STATUS
      OF THE RELATIONSHIP. Consultant
      shall be an independent contractor and this Agreement shall not create an
      employer/employee relationship between the parties. Consultant shall have sole
      control of the manner and means of performing the Services under this Agreement
      subject to the scope of the Services and time limitations established by the
      Company. Except as specifically granted to Consultant, Consultant shall have
      no
      right, authority or power to act for or on behalf of the Company or its
      Affiliates or to bind the Company or its Affiliates. All of Consultant's
      activities will be at its own risk and liability. Consultant shall not be
      entitled to receive, and shall not receive, any benefit provided by the Company
      to its employees, including, without limitation, health insurance, dental
      insurance, benefits or paid vacation. 

     

    5.    DISCLOSURE
      OF INFORMATION. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    5.1    Consultant
      acknowledges that, in and as a result of its relationship with the Company,
      it
      has been and will be making use of, acquiring or adding to confidential
      information of a special and unique nature and value, including, without
      limitation, the Company’s and its Affiliates' trade secrets, proprietary
      information, operations, prospects, systems, programs, procedures, customers,
      know how, reports and communications (including, without limitation, technical
      information on the performance of the Company’s and its Affiliates’ business),
      as well as the information, observations and data obtained by it while providing
      the Services for the Company and its Affiliates concerning the business or
      affairs of the Company and its Affiliates (collectively, "Confidential
      Information").
      Consultant further acknowledges that any information and materials received
      by
      it relating to Consultant's engagement hereunder from third parties in
      confidence shall be deemed to be and shall be Confidential Information within
      the meaning of this Section. Consultant further acknowledges that all
      Confidential Information is the property of the Company and its Affiliates.
      

     

    5.2    As
      partial consideration for the Company's agreement to enter into this Agreement,
      Consultant covenants and agrees that it shall not, except with the prior written
      consent of the Company or as required by law, at any time during or following
      the term of this Agreement, directly or indirectly, use, divulge, reveal,
      report, publish, transfer, disclose or utilize, for any purposes whatsoever,
      any
      of the terms of this Agreement or such Confidential Information which has been
      obtained by or disclosed to it as a result of Consultant's affiliation with
      the
      Company and its Affiliates. 

     

    5.3    Notwithstanding
      the foregoing, "Confidential
      Information"
      shall
      not include any information that: (i) is or becomes generally available to
      and
      known by the public (other than as a result of an unpermitted disclosure
      directly or indirectly by Consultant or its Affiliates, advisors or
      representatives); (ii) is or becomes available to Consultant on a
      non-confidential basis from a source other than the Company or its Affiliates,
      advisors or representatives, provided that such source is not and was not bound
      by confidentiality agreement with or other obligation of secrecy to the Company
      of which Consultant has knowledge; or (iii) has already been or is hereafter
      independently acquired or developed by Consultant without violating any
      confidentiality agreement with or other obligation of secrecy to the Company.
      

     

    5.4    In
      the
      event Consultant determines that it is required by applicable law to make any
      such disclosure, Consultant shall use its commercially reasonable best efforts
      to promptly advise the Company and shall consult and cooperate to the extent
      feasible with respect to the timing, manner and contents of such disclosure.
      Consultant shall deliver to the Company at the termination of this Agreement,
      or
      at any other time the Company may reasonably request, all memoranda, notes,
      plans, records, reports, computer tapes and software and other documents and
      data (and copies thereof) relating to the Confidential Information or the
      business of the Company or its Affiliates which it may then possess or have
      under its control.

     

    5.5    For
      purposes hereof, "Affiliate"
      shall
      mean with respect to any individual, partnership, joint venture, corporation,
      limited liability company, trust, unincorporated association or other entity
      (each, a "Person"):
      (i)
      any other Person that directly or indirectly through one or more intermediaries
      controls or is controlled by or is under common control with such Person; (ii)
      any other Person owning or controlling five percent or more of the outstanding
      voting securities of or other ownership interests in such Person; (iii) any
      officer, director,

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    member
      or
      partner of such Person; (iv) if such Person is an officer, director, member
      or
      partner, any other Person for which such Person acts in any such capacity;
      or
      (v) any company in which the Company has and maintains an investment through
      itself or any other Affiliate. 

     

    6.    REGISTRATION
      RIGHTS. In
      the
      event the Company proposes to register any of its securities under the
      Securities Act by
      filing
      any form
of
      registration statement (other
      than Form S-4 or Form S-8 or
      the
      successor form of either of them)
      at any
      time after the date of this Agreement that would legally permit the inclusion
      of
      the Common Stock underlying the Warrant (“Registrable
      Securities”),
      the
      Company shall give Consultant written notice thereof as soon as practicable
      but
      in no event less than 30 days prior to the filing of such
      registration
      statement,
      and
      shall provide Consultant an opportunity to include in such registration all
      Registrable Securities requested by Consultant in writing to be included
      therein. If Consultant chooses to include in any such registration statement
      all
      or any part of the Registrable Securities, Consultant shall, within 10 days
      after the above-described notice from the Company, so
      notify
      the Company in writing. Such notice shall state the intended method of
      disposition of the Registrable Securities by Consultant.
      If
Consultant
      decides
      not to include all of its Registrable Securities in any registration statement
      thereafter filed by the Company, Consultant
      shall
      nevertheless continue to have the right to include any Registrable Securities
      in
      any subsequent registration statement or registration statements as may be
      filed
      by the Company with respect to its securities, all upon the terms and conditions
      set forth herein. Consultant
      shall
      have one piggyback registration right pursuant to this Section 6 and
      a
      registration will not count as a piggyback registration until it has become
      effective and includes 100% of the Registrable Securities requested by
Consultant
      to
      be
      included in the registration statement. 

     

    7.    MISCELLANEOUS.

     

    7.1    Entire
      Agreement. This
      Agreement constitutes the entire agreement between the parties with respect
      to
      the subject matter hereof and all prior negotiations and agreements, whether
      written or oral, are merged into this Agreement.

     

    7.2    Enforcement.
      Because
      Consultant's services are unique and because Consultant has access to
      Confidential Information, the parties hereto agree that money damages would
      be
      an inadequate remedy for any breach of Section 5 of this Agreement. In the
      event
      of a breach or threatened breach of Section 5 of this Agreement, the Company,
      its Affiliates and their respective successors or assigns may, in addition
      to
      other rights and remedies existing in their favor, apply to any court of
      competent jurisdiction for specific performance and/or injunctive or other
      relief in order to enforce, or prevent any violation of, Section 5 of this
      Agreement (without posting a bond or other security).

     

    7.3    Severability. If
      any
      provision of this Agreement shall for any reason be held to be invalid, illegal
      or unenforceable in any respect, such invalidity, illegality or unenforceability
      shall not affect any other provision or part of a provision of this Agreement,
      but this Agreement shall be reformed and construed as if such provision had
      never been contained in it, and any such provision shall be reformed so that
      it
      would be valid, legal and enforceable to the maximum extent
      permitted.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    7.4    Counterparts.
      This
      Agreement may be executed in several counterparts, each of which shall be deemed
      an original, but all of which counterparts collectively shall constitute one
      document representing the agreement among the parties.

     

    7.5    Binding
      Agreement. This
      Agreement shall be binding upon and shall inure to the benefit of the parties
      to
      this Agreement and their respective successors and assigns.

     

    7.6    Amendment.
      This
      Agreement may not be amended, discharged, terminated, modified or changed
      orally, and any such proposed amendment, discharge, termination, modification
      or
      change shall be in writing and signed by each of the parties
      hereto.

     

    7.7    Waiver
      of Breach. The
      waiver by any party of a breach of any provision of this Agreement shall not
      operate or be construed as a waiver of any subsequent breach, and no waiver
      shall be valid unless it is in writing and is signed by the party against whom
      such waiver is sought.

     

    7.8    Governing
      Law; Venue; Waiver of Jury Trial.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the State of California, without regard to the
      principles of conflicts of law thereof. Each party agrees that all legal
      proceedings concerning the interpretations, enforcement and defense of the
      transactions contemplated by this Agreement (whether brought against a party
      hereto or its respective Affiliates, directors, managers, officers,
      shareholders, members, employees or agents) shall be commenced exclusively
      in
      the state and federal courts sitting in Los Angeles County, California. Each
      party hereto hereby irrevocably submits to the exclusive jurisdiction of the
      state and federal courts sitting in Los Angeles County, California for the
      adjudication of any dispute hereunder or in connection herewith or with any
      transaction contemplated hereby or discussed herein (including with respect
      to
      the enforcement of any of this Agreement), and hereby irrevocably waives, and
      agrees not to assert in any suit, action or proceeding, any claim that it is
      not
      personally subject to the jurisdiction of any such court, that such suit, action
      or proceeding is improper. Each party hereto hereby irrevocably waives personal
      service of process and consents to process being served in any such suit, action
      or proceeding by mailing a copy thereof via registered or certified mail or
      overnight delivery (with evidence of delivery) to such party at the address
      in
      effect for notices to it under this Agreement and agrees that such service
      shall
      constitute good and sufficient service of process and notice thereof. Nothing
      contained herein shall be deemed to limit in any way any right to serve process
      in any manner permitted by law. Each party hereto hereby irrevocably waives,
      to
      the fullest extent permitted by applicable law, any and all right to trial
      by
      jury in any legal proceeding arising out of or relating to this Agreement or
      the
      transactions contemplated hereby. If any party shall commence an action or
      proceeding to enforce any provisions of this Agreement, then the prevailing
      party in such action or proceeding shall be reimbursed by the other party for
      its reasonable attorneys’ fees and other reasonable costs and expenses incurred
      with the investigation, preparation and prosecution of such action or
      proceeding.
      

     

    7.9    Survival.
      The
      provisions and restrictions contained in Sections 5, 6 and 7 shall survive
      the
      termination of this Agreement or any extensions thereof. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    7.10    Successor
      and Assigns; Transfer of Warrant.
      This
      Agreement and all rights, liabilities and obligations hereunder shall be binding
      upon and inure to the benefit of each party’s successors and permitted assigns;
      provided, however, that Consultant may not assign, transfer, or subcontract
      this
      Agreement or any of its obligations hereunder without the express, prior written
      consent of the Company, which consent may be given or withheld in the Company's
      sole discretion. In addition, Consultant may not sell, transfer, assign or
      otherwise dispose of the Warrant (or any portion thereof) until such portion
      of
      the Warrant is vested pursuant to Section 3.2.

     

    7.11    Notices.
      Any and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be in writing and shall be deemed given and effective
      on the earliest of (i) the date of transmission, if such notice or communication
      is delivered via facsimile at the facsimile number specified in this Section
      7.11 prior to 5:00 p.m. (Los Angeles, California time) on a business day, (ii)
      the business day after the date of transmission, if such notice or communication
      is delivered via facsimile at the facsimile number specified in this Agreement
      later than 5:00 p.m. (Los Angeles, California time) on any date and earlier
      than
      11:59 p.m. (Los Angeles, California time) on such date, (iii) the business
      day
      following the date of mailing, if sent by nationally recognized overnight
      courier service, or (iv) upon actual receipt by the party to whom such notice
      is
      required to be given. The address for such notices and communications shall
      be
      as follows:

     

    
      	
              If
                to the Company:

            	
              China
                Energy Recovery, Inc. 

              7F,
                De Yang Garden

              No.
                267 Qu Yang Road

              Hongkou
                District, Shanghai

              Shanghai,
                China 200081

              Attention:
                Wu Qinghuan

              Facsimile
                No.: [______________]

            
	 	 
	
              If
                to Consultant:

            	
              ARC
                China, Inc.

              9440
                Little Santa Monica Boulevard, Suite 401

              Beverly
                Hills, California 90210

              Attention:
                Adam Roseman

              Facsimile
                No.: 310-402-5932

            

    

    

     

    or
      such
      other address as may be designated in writing hereafter, in the same manner,
      by
      such party.

    

    [SIGNATURE
      PAGE FOLLOWS]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties have entered into this Agreement as of the date
      first written above.

    

    

    COMPANY:

     

    China
      Energy Recovery, Inc.

     

    By: 
      /s/
      Qinghuan Wu

    Qinghuan
      Wu

    Chief
      Executive Officer

     

     

    CONSULTANT:

     

    ARC
      China, Inc.

     

    By: 
      /s/
      Adam Roseman

    Adam
      Roseman

    Chief
      Executive Officer

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      A

    

    Common
      Stock Purchase Warrant

    

    See
      attached.Unassociated Document

    CAPITAL
      SECURITY CERTIFICATE

     

    THIS
      CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY WITHIN THE MEANING OF THE
      DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
      DEPOSITORY TRUST COMPANY ("DTC") OR A NOMINEE OF DTC. THIS CAPITAL SECURITY
      IS
      EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER
      THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
      DECLARATION, AND NO TRANSFER OF THIS CAPITAL SECURITY (OTHER THAN A TRANSFER
      OF
      THIS CAPITAL SECURITY AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE
      OF
      DTC TO DTC OR ANOTHER NOMINEE OF DTC) MAY BE REGISTERED EXCEPT IN LIMITED
      CIRCUMSTANCES.

     

    UNLESS
      THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO
      JACKSONVILLE
      BANCORP, INC. STATUTORY TRUST III
      OR ITS
      AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL
      SECURITY ISSUED IS REGISTERED AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
      OF
      DTC (AND ANY PAYMENT HEREON IS MADE TO SUCH OTHER ENTITY AS IS REQUESTED BY
      AN
      AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
      FOR
      VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
      OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

     

    THIS
      SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE
      SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
      MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
      DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
      IS
      EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
      ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
      SELL
      OR OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO THE DEBENTURE ISSUER OR THE
      TRUST, (B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO
      A
      PERSON THE HOLDER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
      AS
      DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
      OF A
      QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
      BEING
      MADE IN RELIANCE ON RULE 144A, (C) TO A "NON U.S. PERSON" IN AN "OFFSHORE
      TRANSACTION" PURSUANT TO REGULATION S UNDER THE SECURITIES ACT, (D) PURSUANT
      TO
      AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT TO AN
      "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3)
      OR
      (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR
      ITS
      OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN "ACCREDITED INVESTOR," FOR INVESTMENT
      PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
      DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER
      AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
      SUBJECT TO THE DEBENTURE ISSUER'S AND THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER,
      SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF
      AN
      OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
      EACH
      OF THEM IN ACCORDANCE WITH THE AMENDED AND RESTATED DECLARATION OF TRUST, A
      COPY
      OF WHICH MAY BE OBTAINED FROM THE DEBENTURE ISSUER OR THE TRUST. THE HOLDER
      OF
      THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE
      FOREGOING RESTRICTIONS.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    THE
      HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, REPRESENTS AND WARRANTS
      THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY UNLESS
      SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE SECURITIES ACT OR AN APPLICABLE
      EXEMPTION THEREFROM.

     

    THE
      HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND
      WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT
      OR
      OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
      SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL
      REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), (EACH A "PLAN"), OR AN ENTITY
      WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT
      IN THE ENTITY AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE
      OR
      HOLD THIS SECURITY OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER
      IS
      ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR
      PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR
      ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS
      NOT
      PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT
      TO
      SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THIS SECURITY OR ANY
      INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING
      THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING
      OF
      SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS
      APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT
      PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE
      BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT
      RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975
      OF
      THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE
      EXEMPTION.

     

    IN
      CONNECTION WITH ANY TRANSFER, THE HOLDER OF THIS CERTIFICATE WILL DELIVER TO
      THE
      REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY
      BE
      REQUIRED BY THE AMENDED AND RESTATED DECLARATION OF TRUST TO CONFIRM THAT THE
      TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

       

    

    THIS
      SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A
      LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS
      THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A LIQUIDATION
      AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT
      WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER
      OF THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT
      OF
      DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED
      TO
      HAVE NO INTEREST WHATSOEVER IN THIS SECURITY.

     

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

     

    
      	Certificate Number   [P-001]	
              Number
                of Capital Securities:
                7,550

            

    

        

    CUSIP
      No.
      469249 AA 4

     

    Certificate
      Evidencing Capital Securities

     

    of

     

    Jacksonville
      Bancorp, Inc. Statutory Trust III

     

    TP
      Securities

     

    (liquidation
      amount $1,000 per Capital Security)

     

    Jacksonville
      Bancorp, Inc. Statutory Trust III, a statutory trust created under the laws
      of
      the State of Delaware (the "Trust"), hereby certifies that Cede & Co., as
      nominee on behalf of the Depository Trust Company (the "Holder"), is the
      registered owner of 7,550 capital securities of the Trust representing undivided
      beneficial interests in the assets of the Trust, designated the TP Securities
      (liquidation amount $1,000 per Capital Security) (the "Capital Securities").
      Subject to the Declaration (as defined below), the Capital Securities are
      transferable on the books and records of the Trust, in person or by a duly
      authorized attorney, upon surrender of this Certificate duly endorsed and in
      proper form for transfer. The Capital Securities represented hereby are issued
      pursuant to, and the designation, rights, privileges, restrictions, preferences
      and other terms and provisions of the Capital Securities shall in all respects
      be subject to, the provisions of the Amended and Restated Declaration of Trust
      of the Trust, dated as of June 20, 2008, among Gilbert J. Pomar, III and Valerie
      A. Kendall, as Administrators, Wells Fargo Delaware Trust Company, as Delaware
      Trustee, Wells Fargo Bank, National Association, as Institutional Trustee,
      Jacksonville Bancorp, Inc., as Sponsor, and the holders from time to time of
      undivided beneficial interests in the assets of the Trust, including the
      designation of the terms of the Capital Securities as set forth in Annex I
      to
      the Declaration, as the same may be amended from time to time (the
      "Declaration"). Capitalized terms used herein but not defined shall have the
      meaning given them in the Declaration. The Holder is entitled to the benefits
      of
      the Guarantee to the extent provided therein. The Sponsor will provide a copy
      of
      the Declaration, the Guarantee, and the Indenture to the Holder without charge
      upon written request to the Sponsor at its principal place of
      business.

     

    By
      acceptance of this Security, the Holder is bound by the Declaration and is
      entitled to the benefits thereunder.

     

    By
      acceptance of this Security, the Holder agrees to treat, for United States
      federal income tax purposes, the Debentures as indebtedness and the Capital
      Securities as evidence of beneficial ownership in the Debentures.

     

    This
      Capital Security is governed by, and shall be construed in accordance with,
      the
      laws of the State of Delaware, without regard to principles of conflict of
      laws.

     

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the Trust has duly executed this certificate. 

     

    
      	 	Jacksonville Bancorp,
              Inc.
              Statutory Trust III
	 	 	 	 
	 	 	 	 
	 	By:	 
	 	 	Name:	 
	 	 	Title:	Administrator
	 	 	 	 
	 	 	 	 
	 	Dated:	 

    

         

     

    CERTIFICATE
      OF AUTHENTICATION

     

    This
      represents Capital Securities referred to in the within-mentioned
      Declaration.

     

    
      	
            	
              WELLS FARGO BANK, NATIONAL 

              ASSOCIATION, not in its individual capacity

              but solely as Institutional Trustee

            
	 	 	 	 
	 	 	 	 
	 	By:	 
	 	 	Authorized
              Signatory
	 	 	 	 
	 	Dated:	 

    

     

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

       

    

    REVERSE
      OF SECURITY

     

    Distributions
      payable on each Capital Security will be payable at a variable per annum rate
      of
      interest, reset quarterly, equal to LIBOR (as defined in the Declaration) plus
      3.75% (the "Coupon Rate") of the stated liquidation amount of $1,000 per Capital
      Security (provided, however, that the Coupon Rate for any Distribution Payment
      Period may not exceed the highest rate permitted by New York law, as the same
      may be modified by United States law of general applicability), such Coupon
      Rate
      being the rate of interest payable on the Debentures to be held by the
      Institutional Trustee. Distributions in arrears for more than one quarterly
      period will bear interest thereon compounded quarterly at the then applicable
      Coupon Rate for each such quarterly period (to the extent permitted by
      applicable law). The term "Distributions" as used herein includes cash
      distributions, any such compounded distributions and any Additional Interest
      payable on the Debentures unless otherwise stated. A Distribution is payable
      only to the extent that payments are made in respect of the Debentures held
      by
      the Institutional Trustee and to the extent the Institutional Trustee has funds
      legally available in the Property Account therefor. The amount of Distributions
      payable for any period shall be computed for any full quarterly Distribution
      period on the basis of a 360-day year and the actual number of days elapsed
      in
      the relevant Distribution Payment Period.

     

    Except
      as
      otherwise described below, Distributions on the Capital Securities will be
      cumulative, will accrue from the date of original issuance and will be payable
      quarterly in arrears on March 15, June 15, September 15 and December 15 of
      each
      year, commencing on September 15, 2008 (each, a "Distribution Payment Date").
      Subject to prior submission of Notice (as defined in the Indenture), and so
      long
      as no Event of Default pursuant to paragraphs (c), (e), (f) or (g) of Section
      5.01 of the Indenture has occurred and is continuing, the Debenture Issuer
      has
      the right under the Indenture to defer payments of interest on the Debentures
      by
      extending the interest distribution period for up to 20 consecutive quarterly
      periods (each, an "Extension Period") at any time and from time to time on
      the
      Debentures, subject to the conditions described below, during which Extension
      Period no interest shall be due and payable (except any Additional Interest
      that
      may be due and payable). During any Extension Period, interest will continue
      to
      accrue on the Debentures, and interest on such accrued interest (such accrued
      interest and interest thereon referred to herein as "Deferred Interest") will
      accrue at an annual rate equal to the Coupon Rate in effect for each such
      Extension Period, compounded quarterly from the date such Deferred Interest
      would have been payable were it not for the Extension Period, to the extent
      permitted by law. No Extension Period may end on a date other than a
      Distribution Payment Date. At the end of any such Extension Period, the
      Debenture Issuer shall pay all Deferred Interest then accrued and unpaid on
      the
      Debentures; provided,
      however,
      that no
      Extension Period may extend beyond the Maturity Date, Redemption Date (to the
      extent redeemed) or Special Redemption Date. Prior to the termination of any
      Extension Period, the Debenture Issuer may further extend such period;
provided,
      that
      such period together with all such previous and further consecutive extensions
      thereof shall not exceed 20 consecutive quarterly periods, or extend beyond
      the
      Maturity Date, Redemption Date (to the extent redeemed) or Special Redemption
      Date. Upon the termination of any Extension Period and upon the payment of
      all
      Deferred Interest, the Debenture Issuer may commence a new Extension Period,
      subject to the foregoing requirements. No interest or Deferred Interest (except
      any Additional Interest that may be due and payable) shall be due and payable
      during an Extension Period, except at the end thereof, but Deferred Interest
      shall accrue upon each installment of interest that would otherwise have been
      due and payable during such Extension Period until such installment is paid.
      If
      Distributions are deferred, the Distributions due shall be paid on the date
      that
      the related Extension Period terminates to Holders of the Securities as they
      appear on the books and records of the Trust on the record date immediately
      preceding such date. Distributions on the Securities must be paid on the dates
      payable (after giving effect to any Extension Period) to the extent that the
      Trust has funds legally available for the payment of such distributions in
      the
      Property Account of the Trust. The Trust's funds available for Distribution
      to
      the Holders of the Securities will be limited to payments received from the
      Debenture Issuer. The payment of Distributions out of moneys held by the Trust
      is guaranteed by the Guarantor pursuant to the Guarantee.

     

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

       

    

    The
      Capital Securities shall be redeemable as provided in the
      Declaration.

     

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

       

    

    ASSIGNMENT

     

    FOR
      VALUE
      RECEIVED, the undersigned assigns and transfers this Capital Security
      Certificate to:

     

    _______________________

     

    _______________________

     

    _______________________

     

    (Insert
      assignee's social security or tax identification number)

     

    _______________________

     

    _______________________

     

    _______________________

     

    (Insert
      address and zip code of assignee),

     

    and
      irrevocably appoints
      ______________________________________________________________________________________________

    as
      agent
      to transfer this Capital Security Certificate on the books of the Trust. The
      agent may substitute another to act for it, him or her.

     

    Date:
      ___________________________     

     

    Signature:
      _______________________    

     

    (Sign
      exactly as your name appears on the other side of this Capital Security
      Certificate)

     

    Signature
      Guarantee:1 __________________________      

     

    

    

    

      

      
        1
          Signature must be guaranteed by an "eligible guarantor institution" that
          is a
          bank, stockbroker, savings and loan association or credit union meeting
          the
          requirements of the Security registrar, which requirements include membership
          or
          participation in the Securities Transfer Agents Medallion Program ("STAMP")
          or
          such other "signature guarantee program" as may be determined by the Security
          registrar in addition to, or in substitution for, STAMP, all in accordance
          with
          the Securities Exchange Act of 1934, as amended.

         

        
          
             

          

          
            -8-

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