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:
|
0X,
Xx Xxxx Xxxxxx
Xx.
000 Xx Xxxx Xxxx
Hongkou
District, Shanghai
Shanghai,
China 200081
Attention:
Wu Qinghuan
Facsimile
No.: [______________]
|
|
If
to Consultant:
|
ARC
China, Inc.
0000
Xxxxxx Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000
Attention:
Xxxx Xxxxxxx
Facsimile
No.: 000-000-0000
|
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:
By:
/s/
Qinghuan Wu
Qinghuan
Wu
Chief
Executive Officer
CONSULTANT:
ARC
China, Inc.
By:
/s/
Xxxx Xxxxxxx
Xxxx
Xxxxxxx
Chief
Executive Officer
Exhibit
A
Common
Stock Purchase Warrant
See
attached.
