BOARD OF DIRECTORS - RETAINER AGREEMENT

This agreement (" Agreement ") is made as of October 1, 2009 between China Energy Recovery, Inc., a Delaware corporation, with its principal place of business at 7F, No. 267 Qu Yang Road, Hongkou District, Shanghai 200081, China (" CER "), and Estelle Lau, with an address of Estelle Lau (" Director "), whereby Director agrees to serve as a director of CER and provide all necessary services in connection therewith, according to the following:

Subject to the approval of its stockholders, CER agrees to engage Director to serve, and Director agrees to serve, as a member of the Board of Directors of CER (the " Board of Directors ") and to provide those services required of a director pursuant to (i) CER’s Certificate of Incorporation and Bylaws, as each may be amended from time to time (the " Certificate and Bylaws "), (ii) the General Corporation Law of the State of Delaware (" DGCL "), the federal securities laws and other state and federal laws and regulations, as applicable, and (iii) as otherwise directed by the Board of Directors and shareholders of CER (collectively, the " Services ").

Director is an independent contractor and this Agreement will not create any partnership, joint venture or employer/employee relationship for purposes of employee benefits, income tax withholding, F.I.C.A. taxes or otherwise.  Except as specifically provided herein, Director shall have no right, authority or power to enter into any agreement or incur any obligation on behalf of CER or its Affiliates (as defined below) or to bind CER or its Affiliates.  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 10% 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 CER has and maintains an investment through itself or any other Affiliate.

CER will supply, at no cost to Director: periodic briefings on the business, director packages for each board and committee meeting, copies of minutes of meetings and any other materials that are required under CER’s Certificate and Bylaws or the charter of any committee of the board on which Director serves and any other materials which may be necessary for performing the Services requested under this Agreement.

Director represents and warrants that no other party has exclusive rights to his services in the specific areas described herein and that Director is in no way compromising any rights, duties or trust between any other party and Director.  Director further represents, warrants and agrees that no other agreement, written or otherwise, now exists or will be entered into that will create a conflict of interest with this Agreement or otherwise impair Director's ability to perform his obligations under this Agreement or otherwise with respect to CER.  Director further covenants and agrees that he will comply with all applicable state and federal laws and regulations, as applicable, including, but not limited to, Director's fiduciary duties to CER set forth in the DGCL and Sections 10 and 16 of the Securities and Exchange Act of 1934, as amended.

During the term of this Agreement and for a period of six months thereafter (the " Non-Competition Period "), Director shall not, without obtaining CER’s prior written consent, directly or indirectly, as an officer, director, employee, consultant, owner, shareholder, adviser, joint venturer or otherwise, participate in, assist, aid, engage in, prepare to engage in or advise in any way any business or enterprise that is in competition with the Company anywhere that the Company is conducting business during the Non-Competition Period.

On the Effective Date (as defined below) of this Agreement, Director shall receive options to purchase 60,000 shares of CER common stock, exercisable at a price per share equal to the current fair market value of CER's common stock on the grant date of the option as determined by the Board of Directors.  This option grant shall be subject to the terms of the equity incentive plan adopted by CER's Board of Directors, and made pursuant to the terms of a separate option agreement between CER and Director.  Twelve and one half percent (12.5%) of the total number of options shall vest on each quarterly anniversary of the grant date; provided, that upon the termination of Director’s service as a director of CER, all unvested options shall be terminated and be forfeited.

Retainer payments shall be made quarterly in cash in advance on the first day of each accounting quarter.  No invoices need be submitted by Director for payment of the retainer.

CER will reimburse Director for reasonable expenses approved in advance by CER's Chief Executive Officer, such approval not to be unreasonably withheld.  Invoices for approved expenses, with receipts attached, shall be submitted to and must be approved by CER’s Chief Executive Officer as to form and completeness.

CER and Director will execute an indemnification agreement substantially in the form of the agreement attached hereto as Exhibit B (the " Indemnification Agreement ").  In addition, CER will use its commercial best efforts to procure and maintain directors’ and officer’s liability insurance, provided such insurance can be obtained on reasonable terms.

The term of this Agreement shall commence on the date that Director is formally appointed to fill a vacant directorship by the existing Board of Directors (the " Effective Date ") and shall continue through the date that is the earlier to occur of: (i) a termination of this Agreement in accordance with Section VII; and (ii) the two year anniversary of the Effective Date.  Notwithstanding the foregoing sentence, this Agreement shall be automatically renewed for successive terms upon Director’s reelection as a member of CER’s Board of Directors for the period of such new term, unless the Board of Directors determines not to renew this Agreement in its sole discretion.  Any amendment to this Agreement must be approved in a meeting or by a written action of CER’s Board of Directors.  Amendments to Section IV regarding compensation hereof do not require Director’s approval or consent to be effective.

This Agreement shall automatically terminate upon the earlier to occur of (i) the death of Director, (ii) resignation or removal of the Director from, or failure to win election or reelection to, the CER Board of Directors, or (iii) upon the approval of the Board of Directors, in its sole discretion.

In the event of the termination of this Agreement, Director agrees to return any materials transferred to Director under this Agreement, except as may be necessary to fulfill any outstanding obligations hereunder.  Director agrees that CER has the right of injunctive relief to enforce this provision.

In the event of termination, Director shall be entitled to receive the number of options which have vested in Director as of the date of termination pursuant to Paragraph A of Section IV above.  The unvested options as of the date of termination shall be forfeited by Director.

Termination shall not relieve either party of its continuing obligations under this Agreement, the Indemnification Agreement or the Confidentiality Agreement (as defined below) with respect to confidentiality of proprietary information.

Director agrees to sign and abide by CER’s Director Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A (the " Confidentiality Agreement ").

Any dispute regarding this Agreement (including without limitation its validity, interpretation, performance, enforcement, termination and damages) shall be determined in accordance with the laws of the State of Delaware and the United States of America.  Any action under this paragraph shall not preclude any party hereto from seeking injunctive or other legal relief to which each party may be entitled.

This Agreement (including the Confidentiality Agreement and the Indemnification Agreement) supersedes all prior or contemporaneous written or oral understandings or agreements, and may not be added to, modified, or waived, in whole or in part, except by a writing signed by the party against whom such addition, modification or waiver is sought to be asserted.

This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns and, except as otherwise expressly provided herein, neither this Agreement, nor any of the rights, interests or obligations hereunder shall be assigned by either of the parties hereto without the prior written consent of the other party.

Any such notice shall be deemed given when received and notice given by registered mail shall be considered to have been given on the tenth (10th) day after having been sent in the manner provided for above.

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