NONQUALIFIED STOCK OPTION AGREEMENT

CHINA CLEAN ENERGY INC.
2011 LONG-TERM INCENTIVE PLAN
 
1.           Grant of Option.  Pursuant to the China Clean Energy Inc. 2011
Long-Term Incentive Plan (the “Plan”) for Employees, Contractors, and Outside
Directors of China Clean Energy Inc., a Delaware corporation (the “Company”),
the Company grants to

_________________________
(the “Participant”),

an option to purchase shares of Common Stock of the Company as follows:

On the date hereof, the Company grants to the Participant an option (the
“Option” or “Stock Option”) to purchase ___________________ (__________) full
shares (the “Optioned Shares”) of Common Stock at an Option Price equal to
$________ per share.  The “Date of Grant” of this Stock Option is
_________________, 20__.

The “Option Period” shall commence on the Date of Grant and shall expire on the
date immediately preceding the tenth (10th) anniversary of the Date of Grant,
unless terminated earlier in accordance with Section 4 below.  The Stock Option
is a Nonqualified Stock Option.  This Stock Option is intended to comply with
the provisions governing nonqualified stock options under the final Treasury
Regulations issued on April 17, 2007, in order to exempt this Stock Option from
application of Section 409A of the Code.

2.           Subject to Plan.  The Stock Option and its exercise are subject to
the terms and conditions of the Plan, and the terms of the Plan shall control to
the extent not otherwise inconsistent with the provisions of this
Agreement.  The capitalized terms used herein that are defined in the Plan shall
have the same meanings assigned to them in the Plan.  The Stock Option is
subject to any rules promulgated pursuant to the Plan by the Board or the
Committee and communicated to the Participant in writing. In addition, if the
Plan previously has not been approved by the Company’s stockholders, the Stock
Option is granted subject to such stockholder approval.

3.           Vesting; Time of Exercise.   Except as specifically provided in
this Agreement and subject to certain restrictions and conditions set forth in
the Plan, the Optioned Shares shall be vested and the Stock Option shall be
exercisable as follows:

a.           _______________________ of the total Optioned Shares shall vest and
that portion of the Stock Option shall be exercisable on the Date of Grant.

b.           _______________________ of the total Optioned Shares shall vest and
that portion of the Stock Option shall become exercisable on __________________,
provided the Participant is employed by (or, if the Participant is a Contractor
or an Outside Director, is providing services to) the Company or a Subsidiary on
that date.

c.           _______________________ of the total Optioned Shares shall vest and
that portion of the Stock Option shall become exercisable on __________________,
provided the Participant is employed by (or, if the Participant is a Contractor
or an Outside Director, is providing services to) the Company or a Subsidiary on
that date.
 
 
 

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d.           _______________________ of the total Optioned Shares shall vest and
that portion of the Stock Option shall become exercisable on __________________,
provided the Participant is employed by (or, if the Participant is a Contractor
or an Outside Director, is providing services to) the Company or a Subsidiary on
that date.

[In the event that a Change in Control occurs, then immediately prior to the
effective date of such Change in Control, the total Optioned Shares not
previously vested shall thereupon immediately become vested and this Stock
Option shall become fully exercisable, if not previously so exercisable.]

4.           Term; Forfeiture.

a.           Except as otherwise provided in this Agreement, to the extent the
unexercised portion of the Stock Option relates to Optioned Shares which are not
vested on the date of the Participant’s Termination of Service, the Stock Option
will be terminated on that date.  The unexercised portion of the Stock Option
that relates to Optioned Shares which are vested will terminate at the first of
the following to occur:

i.           5 p.m. on the date the Option Period terminates;

ii.           5 p.m. on the date which is twelve (12) months following the date
of the Participant’s Termination of Service due to death or Total and Permanent
Disability;

iii.           5 p.m. on the date of the Participant’s Termination of Service by
the Company for Cause (as defined herein);

iv.           5 p.m. on the date which is ninety (90) days following the date of
the Participant’s Termination of Service for any reason not otherwise specified
in this Section 4.a.;

v.           5 p.m. on the date the Company causes any portion of the Stock
Option to be forfeited pursuant to Section 7 hereof.

b.           For purposes hereof, “Cause” shall mean  (i) the Participant’s
commission of a dishonest or fraudulent act in connection with the Participant’s
employment, or the misappropriation of Company property; (ii) the Participant’s
conviction of, or plea of nolo contendere to, a felony or crime involving
dishonesty; (iii) the Participant’s inattention to duties, unsatisfactory
performance, or failure to perform the Participant duties hereunder, provided in
each case the Company gives the Participant written notice and thirty (30) days
to correct the Participant’s performance to the Company’s satisfaction; (iv) a
substantial failure to comply with the Company’s policies; (v) a material and
willful breach of the Participant’s fiduciary duties in any material respect,
provided in each case the Company gives the Participant written notice and
thirty (30) days to correct; (vi) the Participant’s failure to comply in any
material respect with any legal written directive of the Board; or (vii) any act
or omission of the Participant which is of substantial detriment to the Company
because of the Participant’s intentional failure to comply with any statute,
rule or regulation, except any act or omission believed by the Participant in
good faith to have been in or not opposed to the best interest of the Company
(without intent of the Participant to gain, directly or indirectly, a profit to
which the Participant was not legally entitled).  Any determination of whether
an the Participant should be terminated for Cause pursuant to this Agreement
shall be made in the sole, good faith discretion of the Board, and shall be
binding upon all parties affected thereby.
 
 
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5.           Who May Exercise.  Subject to the terms and conditions set forth in
Sections 3 and 4 above, during the lifetime of the Participant, the Stock Option
may be exercised only by the Participant, or by the Participant’s guardian or
personal or legal representative.  If the Participant’s Termination of Service
is due to his death prior to the dates specified in Section 4.a. hereof, and the
Participant has not exercised the Stock Option as to the maximum number of
vested Optioned Shares as set forth in Section 3 hereof as of the date of death,
the following persons may exercise the exercisable portion of the Stock Option
on behalf of the Participant at any time prior to the earliest of the dates
specified in Section 4.a. hereof: the personal representative of his estate, or
the person who acquired the right to exercise the Stock Option by bequest or
inheritance or by reason of the death of the Participant; provided that the
Stock Option shall remain subject to the other terms of this Agreement, the
Plan, and Applicable Laws, rules, and regulations.

6.           No Fractional Shares.  The Stock Option may be exercised only with
respect to full shares, and no fractional share of stock shall be issued.

7.           Manner of Exercise.  Subject to such administrative regulations as
the Committee may from time to time adopt, the Stock Option may be exercised by
the delivery of written notice to the Committee setting forth the number of
shares of Common Stock with respect to which the Stock Option is to be
exercised, the date of exercise thereof (the “Exercise Date”) which shall be at
least three (3) days after giving such notice unless an earlier time shall have
been mutually agreed upon.  On the Exercise Date, the Participant shall deliver
to the Company consideration with a value equal to the total Option Price of the
shares to be purchased, payable as follows:  (a) cash, check, bank draft, or
money order payable to the order of the Company, (b) if the Company, in its sole
discretion, so consents in writing, Common Stock (including Restricted Stock)
owned by the Participant on the Exercise Date, valued at its Fair Market Value
on the Exercise Date, and which the Participant has not acquired from the
Company within six (6) months prior to the Exercise Date, (c) if the Company, in
its sole discretion, so consents in writing, by delivery (including by FAX) to
the Company or its designated agent of an executed irrevocable option exercise
form together with irrevocable instructions from the Participant to a broker or
dealer, reasonably acceptable to the Company, to sell certain of the shares of
Common Stock purchased upon exercise of the Stock Option or to pledge such
shares as collateral for a loan and promptly deliver to the Company the amount
of sale or loan proceeds necessary to pay such purchase price, and/or (d) in any
other form of valid consideration that is acceptable to the Committee in its
sole discretion.  In the event that shares of Restricted Stock are tendered as
consideration for the exercise of a Stock Option, a number of shares of Common
Stock issued upon the exercise of the Stock Option equal to the number of shares
of Restricted Stock used as consideration therefor shall be subject to the same
restrictions and provisions as the Restricted Stock so tendered.

Upon payment of all amounts due from the Participant, the Company shall cause
certificates for the Optioned Shares then being purchased to be delivered to the
Participant (or the person exercising the Participant’s Stock Option in the
event of his death) at its principal business office promptly after the Exercise
Date.  The obligation of the Company to deliver shares of Common Stock shall,
however, be subject to the condition that if at any time the Company shall
determine in its discretion that the listing, registration, or qualification of
the Stock Option or the Optioned Shares upon any securities exchange or under
any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary as a condition of, or in connection with, the
Stock Option or the issuance or purchase of shares of Common Stock thereunder,
then the Stock Option may not be exercised in whole or in part unless such
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not reasonably acceptable to the
Committee.
 
 
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If the Participant fails to pay for any of the Optioned Shares specified in such
notice or fails to accept delivery thereof, then the Stock Option, and right to
purchase such Optioned Shares may be forfeited by the Participant.

8.           Nonassignability.  The Stock Option is not assignable or
transferable by the Participant except by will or by the laws of descent and
distribution.

9.           Rights as Stockholder.  The Participant will have no rights as a
stockholder with respect to the Optioned Shares until the issuance of a
certificate or certificates to the Participant or the registration of such
shares in the Participant’s name for the shares of Common Stock.  The Optioned
Shares shall be subject to the terms and conditions of this Agreement.  Except
as otherwise provided in Section 10 hereof, no adjustment shall be made for
dividends or other rights for which the record date is prior to the issuance of
such certificate or certificates.  The Participant, by his or her execution of
this Agreement, agrees to execute any documents requested by the Company in
connection with the issuance of a certificate or certificates for the shares of
Common Stock.

10.           Adjustment of Number of Optioned Shares and Related Matters.  The
number of shares of Common Stock covered by the Stock Option, and the Option
Prices thereof, shall be subject to adjustment in accordance with Articles 11 -
13 of the Plan.

11.           Nonqualified Stock Option.  The Stock Option shall not be treated
as an Incentive Stock Option.

12.           Voting.  The Participant, as record holder of some or all of the
Optioned Shares following exercise of this Stock Option, has the exclusive right
to vote, or consent with respect to, such Optioned Shares until such time as the
Optioned Shares are transferred in accordance with this Agreement; provided,
however, that this Section shall not create any voting right where the holders
of such Optioned Shares otherwise have no such right.

13.           Specific Performance. The parties acknowledge that remedies at law
will be inadequate remedies for breach of this Agreement and consequently agree
that this Agreement shall be enforceable by specific performance.  The remedy of
specific performance shall be cumulative of all of the rights and remedies at
law or in equity of the parties under this Agreement.

14.           Participant’s Representations.  Notwithstanding any of the
provisions hereof, the Participant hereby agrees that he will not exercise the
Stock Option granted hereby, and that the Company will not be obligated to issue
any shares to the Participant hereunder, if the exercise thereof or the issuance
of such shares shall constitute a violation by the Participant or the Company of
any provision of any law or regulation of any governmental authority.  Any
determination in this connection by the Company shall be final, binding, and
conclusive.  The obligations of the Company and the rights of the Participant
are subject to all Applicable Laws, rules, and regulations.

15.           Investment Representation.  Unless the shares of Common Stock are
issued to the Participant in a transaction registered under applicable federal,
provincial and state securities laws, by his execution hereof, the Participant
represents and warrants to the Company that all Common Stock which may be
purchased hereunder will be acquired by the Participant for investment purposes
for his own account and not with any intent for resale or distribution in
violation of federal, provincial or state securities laws.  Unless the Common
Stock is issued to him in a transaction registered under the applicable federal,
provincial and state securities laws, all certificates issued with respect to
the Common Stock shall bear an appropriate restrictive investment legend and
shall be held indefinitely, unless they are subsequently registered under the
applicable federal, provincial and state securities laws or the Participant
obtains an opinion of counsel, in form and substance satisfactory to the Company
and its counsel, that such registration is not required.
 
 
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16.           Participant’s Acknowledgments.  The Participant acknowledges that
a copy of the Plan has been made available for his or her review by the Company,
and represents that he or she is familiar with the terms and provisions thereof,
and hereby accepts this Stock Option subject to all the terms and provisions
thereof.  The Participant hereby agrees to accept as binding, conclusive, and
final all decisions or interpretations of the Committee or the Board, as
appropriate, upon any questions arising under the Plan or this Agreement.

17.           Law Governing.  This Agreement shall be governed by, construed,
and enforced in accordance with the laws of the State of Delaware (excluding any
conflict of laws rule or principle of Delaware law that might refer the
governance, construction, or interpretation of this agreement to the laws of
another state).

18.           No Right to Continue Service or Employment.  Nothing herein shall
be construed to confer upon the Participant the right to continue in the employ
or to provide services to the Company or any Subsidiary, whether as an Employee
or as a Contractor or as an Outside Director, or interfere with or restrict in
any way the right of the Company or any Subsidiary to discharge the Participant
as an Employee, Contractor or Outside Director at any time.

19.           Legal Construction.  In the event that any one or more of the
terms, provisions, or agreements that are contained in this Agreement shall be
held by a court of competent jurisdiction to be invalid, illegal, or
unenforceable in any respect for any reason, the invalid, illegal, or
unenforceable term, provision, or agreement shall not affect any other term,
provision, or agreement that is contained in this Agreement and this Agreement
shall be construed in all respects as if the invalid, illegal, or unenforceable
term, provision, or agreement had never been contained herein.

20.           Covenants and Agreements as Independent Agreements. Each of the
covenants and agreements that is set forth in this Agreement shall be construed
as a covenant and agreement independent of any other provision of this
Agreement.  The existence of any claim or cause of action of the Participant
against the Company, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Company of the covenants and
agreements that are set forth in this Agreement.

21.           Entire Agreement.  This Agreement together with the Plan supersede
any and all other prior understandings and agreements, either oral or in
writing, between the parties with respect to the subject matter hereof and
constitute the sole and only agreements between the parties with respect to the
said subject matter.  All prior negotiations and agreements between the parties
with respect to the subject matter hereof are merged into this Agreement.  Each
party to this Agreement acknowledges that no representations, inducements,
promises, or agreements, orally or otherwise, have been made by any party or by
anyone acting on behalf of any party, which are not embodied in this Agreement
or the Plan and that any agreement, statement or promise that is not contained
in this Agreement or the Plan shall not be valid or binding or of any force or
effect.

22.           Parties Bound.  The terms, provisions, and agreements that are
contained in this Agreement shall apply to, be binding upon, and inure to the
benefit of the parties and their respective heirs, executors, administrators,
legal representatives, and permitted successors and assigns, subject to the
limitation on assignment expressly set forth herein.
 
 
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23.           Modification.  No change or modification of this Agreement shall
be valid or binding upon the parties unless the change or modification is in
writing and signed by the parties; provided, however, that the Company may
change or modify this Agreement without the Participant’s consent or signature
if the Company determines, in its sole discretion, that such change or
modification is necessary for purposes of compliance with or exemption from the
requirements of Section 409A of the Code or any regulations or other guidance
issued thereunder.  Notwithstanding the preceding sentence, the Company may
amend the Plan to the extent permitted by the Plan.

24.           Headings.  The headings that are used in this Agreement are used
for reference and convenience purposes only and do not constitute substantive
matters to be considered in construing the terms and provisions of this
Agreement.

25.           Gender and Number.  Words of any gender used in this Agreement
shall be held and construed to include any other gender, and words in the
singular number shall be held to include the plural, and vice versa, unless the
context requires otherwise.

26.           Notice.  Any notice required or permitted to be delivered
hereunder shall be deemed to be delivered only when actually received by the
Company or by the Participant, as the case may be, at the addresses set forth
below, or at such other addresses as they have theretofore specified by written
notice delivered in accordance herewith:

a.           Notice to the Company shall be addressed and delivered as follows:
 
China Clean Energy Inc.
_________________________________
_________________________________
Attn: _____________________________
Facsimile: _________________________
 
b.           Notice to the Participant shall be addressed and delivered as set
forth on the signature page.

27.           Tax Requirements.  The Participant is hereby advised to consult
immediately with his or her own tax advisor regarding the tax consequences of
this Agreement.  The Company or, if applicable, any Subsidiary (for purposes of
this Section 27, the term “Company” shall be deemed to include any applicable
Subsidiary), shall have the right to deduct from all amounts paid in cash or
other form in connection with the Plan, any Federal, state, provincial, local,
or other taxes required by law to be withheld in connection with this
Award.  The Company may, in its sole discretion, also require the Participant
receiving shares of Common Stock issued under the Plan to pay the Company the
amount of any taxes that the Company is required to withhold in connection with
the Participant’s income arising with respect to this Award.  Such payments
shall be required to be made when requested by Company and may be required to be
made prior to the delivery of any certificate representing shares of Common
Stock.  Such payment may be made (i) by the delivery of cash to the Company in
an amount that equals or exceeds (to avoid the issuance of fractional shares
under (iii) below) the required tax withholding obligations of the Company; (ii)
if the Company, in its sole discretion, so consents in writing, the actual
delivery by the exercising Participant to the Company of shares of Common Stock
that the Participant has not acquired from the Company within six (6) months
prior to the date of exercise, which shares so delivered have an aggregate Fair
Market Value that equals or exceeds (to avoid the issuance of fractional shares
under (iii) below) the required tax withholding payment; (iii) if the Company,
in its sole discretion, so consents in writing, the Company’s withholding of a
number of shares to be delivered upon the exercise of this Stock Option, which
shares so withheld have an aggregate Fair Market Value that equals (but does not
exceed) the required tax withholding payment; or (iv) any combination of (i),
(ii), or (iii).  The Company may, in its sole discretion, withhold any such
taxes from any other cash remuneration otherwise paid by the Company to the
Participant.

 
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* * * * * * * *

[Remainder of Page Intentionally Left Blank
Signature Page Follows.]
 
 
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer, and the Participant, to evidence his consent and
approval of all the terms hereof, has duly executed this Agreement, as of the
date specified in Section 1 hereof.

COMPANY:

CHINA CLEAN ENERGY INC.

 
By: ____________________________________
Name: __________________________________                                                                          
Title: ___________________________________

PARTICIPANT:

 
_______________________________________
Signature

Name: __________________________________
Address: ________________________________

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