CHINA
        CLEAN ENERGY INC.

      2008
        EQUITY INCENTIVE PLAN

      


      FORM
        OF

      NONQUALIFIED
        STOCK OPTION AGREEMENT

      


      


      This
        NONQUALIFIED STOCK OPTION AGREEMENT (the “Option Agreement”), dated as of the
  _ 
        day of
        ______, 20__ (the “Grant Date”), is between China Clean Energy Inc., a Delaware
        corporation (the “Company”), and                    
        (the
“Optionee”), a [choose
        one]
        [key
        employee, director, advisor and/or consultant] of the Company or of a Subsidiary
        of the Company (a “Related Corporation”), pursuant to the China Clean Energy
        Inc. 2008 EQUITY INCENTIVE PLAN (the “Plan”).

      


      WHEREAS,
        the Company desires to give the Optionee the opportunity to purchase shares
        of
        common stock of the Company, par value $0.001 (“Common Shares”) in accordance
        with the provisions of the Plan, a copy of which is attached
        hereto;

      


      NOW,
        THEREFORE, in consideration of the mutual covenants hereinafter set forth
        and
        for other good and valuable consideration, the parties hereto, intending
        to be
        legally bound hereby, agree as follows:

      


      1. Grant
        of Option.
        The
        Company hereby grants to the Optionee the right and option (the “Option”) to
        purchase all or any part of an aggregate of ________ Common Shares. The Option
        is in all respects limited and conditioned as hereinafter provided, and is
        subject in all respects to the terms and conditions of the Plan now in effect
        and as it may be amended from time to time (but only to the extent that such
        amendments apply to outstanding options). Such terms and conditions are
        incorporated herein by reference, made a part hereof, and shall control in
        the
        event of any conflict with any other terms of this Option Agreement. The
        Option
        granted hereunder is intended to be a nonqualified stock option (“NQSO”) and
not
        an
        incentive stock option (“ISO”) as such term is defined in section 422 of the
        Internal Revenue Code of 1986, as amended (the “Code”).

      


      2. Exercise
        Price.
        The
        exercise price of the Common Shares covered by this Option shall be $1.00
        per
        share. It is the determination of the committee administering the Plan (the
        “Committee”) that on the Grant Date the exercise price was not less than the
        greater of (i) 100% of the “Fair Market Value” (as defined in the Plan) of a
        Common Share, or (ii) the par value of a Common Share.

      


         3. Term.
        Unless
        earlier terminated pursuant to any provision of the Plan or of this Option
        Agreement, this Option shall expire on __________ __, 20__ (the “Expiration
        Date”). This Option shall not be exercisable on or after the Expiration
        Date.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      4.
         Exercise
        of Option.
        The
        Optionee shall have the right to purchase from the Company, on and after
        the
        following dates, the following number of Common Shares, provided the Optionee
        has not terminated his or her service as of the applicable vesting
        date:

      


      
        	
                Date
                  Installment Becomes
                  Exercisable

              	 	
                Number
                  of Option Shares 

              
	 	 	 
	
                 

              	 	
                ________
                  Shares

              
	
                 

              	 	
                an
                  additional ________ Shares

              
	
                 

              	 	
                an
                  additional ________ Shares

              
	
                 

              	 	
                an
                  additional ________ Shares

              


      

       

      The
        Committee may accelerate any exercise date of the Option, in its discretion,
        if
        it deems such acceleration to be desirable. Once the Option becomes exercisable,
        it will remain exercisable until it is exercised or until it
        terminates.

      


      5. Method
        of Exercising Option.
        Subject
        to the terms and conditions of this Option Agreement and the Plan, the Option
        may be exercised by written notice to the Company at its principal office.
        The
        form of such notice is attached hereto and shall state the election to exercise
        the Option and the number of whole shares with respect to which it is being
        exercised; shall be signed by the person or persons so exercising the Option;
        and shall be accompanied by payment of the full exercise price of such shares.
        Only full shares will be issued. 

      


      [The
        Committee should select which of the following methods of payment will be
        permitted:]

      


      The
        exercise price shall be paid to the Company -

      


      (a) in
        cash,
        or by certified check, bank draft, or postal or express money
        order;

      


      (b) through
        the delivery of Common Shares;

      


      (c) by
        delivering a properly executed notice of exercise of the Option to the Company
        and a broker, with irrevocable instructions to the broker promptly to deliver
        to
        the Company the amount necessary to pay the exercise price of the
        Option;

      


      (d) in
        Common
        Shares newly acquired by the Optionee upon the exercise of the Option;
        or

      


      (e) in
        any
        combination of (a), (b), (c), or (d) above.

      


      [In
        the
        event the exercise price is paid, in whole or in part, with Common Shares,
        the
        portion of the exercise price so paid shall be equal to the Fair Market Value
        of
        the Common Shares surrendered on the date of exercise.]

       

      
        
          
          

        

        
          -
            2 -

          
            

          

        

        
          
          

        

      

       

      Upon
        receipt of notice of exercise and payment, the Company shall deliver a
        certificate or certificates representing the Common Shares with respect to
        which
        the Option is so exercised. The Optionee shall obtain the rights of a
        shareholder upon receipt of a certificate(s) representing such Common
        Shares.

      


      Such
        certificate(s) shall be registered in the name of the person so exercising
        the
        Option (or, if the Option is exercised by the Optionee and if the Optionee
        so
        requests in the notice exercising the Option, shall be registered in the
        name of
        the Optionee and the Optionee’s spouse, jointly, with right of survivorship) and
        shall be delivered as provided above to, or upon the written order of, the
        person exercising the Option. In the event the Option is exercised by any
        person
        or persons after the death or disability (as determined in accordance with
        section 22(e)(3) of the Code) of the Optionee, the notice shall be accompanied
        by appropriate proof of the right of such person or persons to exercise the
        Option. All Common Shares that are purchased upon exercise of the Option
        as
        provided herein shall be fully paid and non-assessable.

      


      Upon
        exercise of the Option, Optionee shall be responsible for all employment
        and
        income taxes then or thereafter due (whether Federal, State or local), and
        if
        the Optionee does not remit to the Company sufficient cash (or, with the
        consent
        of the Committee, Common Shares to satisfy all applicable withholding
        requirements, the Company shall be entitled to satisfy any withholding
        requirements for any such tax by disposing of Common Shares at exercise,
        withholding cash from Optionee’s salary or other compensation or such other
        means as the Committee considers appropriate to the fullest extent permitted
        by
        applicable law. Nothing in the preceding sentence shall impair or limit the
        Company’s rights with respect to satisfying withholding obligations under
        Section 10 of the Plan.

      


      6. Transferability
        of Option.
        This
        Option is not assignable or transferable, in whole or in part, by the Optionee
        other than by will or by the laws of descent and distribution. During the
        lifetime of the Optionee, the Option shall be exercisable only by the Optionee
        or, in the event of his or her disability, by his or her guardian or legal
        representative.

      


      7. Termination
        of Service by Optionee.
        If the
        Optionee’s service with the Company and all Related Corporations is terminated
        by the Optionee for any reason other than death or disability prior to the
        Expiration Date, this Option may be exercised, to the extent of the number
        of
        Common Shares with respect to which the Optionee could have exercised it
        on the
        date of such termination of service by the Optionee at any time prior to
        the
        earlier of (i) the Expiration Date or (ii) ninety (90) days after the date
        of
        such termination of service. [The
        Plan provides for this period as a default. The Committee may provide for
        different exercise periods in any particular NQSO.]
        Any part
        of the Option that was not exercisable immediately before the Optionee’s
        termination of service shall terminate at that time.

       

      
        
          
          

        

        
          -
            3 -

          
            

          

        

        
          
          

        

      

       

      8. Disability.
        If the
        Optionee becomes disabled (as determined in accordance with section 22(e)(3)
        of
        the Code) during his or her service and, prior to the Expiration Date, the
        Optionee’s service is terminated as a consequence of such disability, this
        Option may be exercised, to the extent of the number of Common Shares with
        respect to which the Optionee could have exercised it on the date of such
        termination of service by the Optionee or by the optionee’s legal
        representative, at any time prior to the earlier of (i) the Expiration Date
        or
        (ii) ninety (90) days after such termination of service. Any part of the
        Option
        that was not exercisable immediately before the Optionee’s termination of
        service shall terminate at that time.

      


      9. Termination
        of Service by Company without Cause or by Optionee with Good
        Reason.
        If the
        Optionee’s service with the Company and all Related Corporations is terminated
        by the Company for any reason other than Cause (or is terminated by the Optionee
        for Good Reason) prior to the Expiration Date, this Option may be exercised,
        to
        the extent of the number of Common Shares with respect to which the Optionee
        could have exercised it on the date of such termination of employment by
        the
        Optionee at any time prior to the earlier of (i) the Expiration Date, or
        (ii)
        one year after such termination of service. Any part of the Option that was
        not
        exercisable immediately before the Optionee’s termination of employment shall
        terminate at that time.

      


      10. Death.
        If the
        Optionee dies during his or her service and prior to the Expiration Date,
        or if
        the Optionee’s service is terminated for any reason (as described in Paragraphs
        7, 8 and 9) and the Optionee dies following his or her termination of service
        but prior to the earlier of the Expiration Date or the expiration of the
        period
        determined under Paragraph 7, 8 or 9 (as applicable to the Optionee), this
        Option may be exercised, to the extent of the number of Common Shares with
        respect to which the Optionee could have exercised it on the date of his
        or her
        death by the Optionee’s estate, personal representative or beneficiary who
        acquired the right to exercise this Option by bequest or inheritance or by
        reason of the Optionee’s death, at any time prior to the earlier of (i) the
        Expiration Date or (ii) one year after the date of the Optionee’s death. Any
        part of the Option that was not exercisable immediately before the Optionee’s
        death shall terminate at that time. 

      


      11. Termination
        for Cause.
        If the
        Optionee’s service with the Company and all Related Corporations is terminated
        by the Company for Cause prior to the Expiration Date, any unexercised portion
        of this Option shall immediately terminate at that time.

      


      12. Securities
        Matters.
        (a) If,
        at any time, counsel to the Company shall determine that the listing,
        registration or qualification of the Common Shares subject to the Option
        upon
        any securities exchange or under any state or federal law, or the consent
        or
        approval of any governmental or regulatory body, or that the disclosure of
        non-public information or the satisfaction of any other condition is necessary
        as a condition of, or in connection with, the issuance or purchase of Common
        Shares hereunder, such Option may not be exercised, in whole or in part,
        unless
        such listing, registration, qualification, consent or approval, or satisfaction
        of such condition shall have been effected or obtained on conditions acceptable
        to the Board of Directors. The Company shall be under no obligation to apply
        for
        or to obtain such listing, registration or qualification, or to satisfy such
        condition. The Committee shall inform the Optionee in writing of any decision
        to
        defer or prohibit the exercise of an Option. During the period that the
        effectiveness of the exercise of an Option has been deferred or prohibited,
        the
        Optionee may, by written notice, withdraw the Optionee’s decision to exercise
        and obtain a refund of any amount paid with respect thereto.

       

      
        
          
          

        

        
          -
            4 -

          
            

          

        

        
          
          

        

      

       

      (b) The
        Company may require: (i) the Optionee (or any other person exercising the
        Option
        in the case of the Optionee’s death or Disability) as a condition of exercising
        the Option, to give written assurances, in substance and form satisfactory
        to
        the Company, to the effect that such person is acquiring the Common Shares
        subject to the Option for his or her own account for investment and not with
        any
        present intention of selling or otherwise distributing the same, and to make
        such other representations or covenants; and (ii) that any certificates for
        Common Shares delivered in connection with the exercise of the Option bear
        such
        legends, in each case as the Company deems necessary or appropriate, in order
        to
        comply with federal and applicable state securities laws, to comply with
        covenants or representations made by the Company in connection with any public
        offering of its Common Shares or otherwise. The Optionee specifically
        understands and agrees that the Common Shares, if and when issued upon exercise
        of the Option, may be “restricted securities,” as that term is defined in Rule
        144 under the Securities Act of 1933 and, accordingly, the Optionee may be
        required to hold the shares indefinitely unless they are registered under
        such
        Securities Act of 1933, as amended, or an exemption from such registration
        is
        available.

      


      (c) The
        Optionee shall have no rights as a shareholder with respect to any Common
        Shares
        covered by the Option (including, without limitation, any rights to receive
        dividends or non-cash distributions with respect to such shares) until the
        date
        of issue of a stock certificate to the Optionee for such Common Shares. No
        adjustment shall be made for dividends or other rights for which the record
        date
        is prior to the date such stock certificate is issued.

      


      13. Governing
        Law.
        This
        Option Agreement shall be governed by the applicable Code provisions to the
        maximum extent possible. Otherwise, the laws of the State of Delaware (without
        reference to the principles of conflict of laws) shall govern the operation
        of,
        and the rights of the Optionee under, the Plan and Options granted
        thereunder.

       

      
        
          
          

        

        
          -
            5 -

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF, the Company has caused this Nonqualified Stock Option Agreement
        to be duly executed by its duly authorized officer, and the Optionee has
        hereunto set his or her hand and seal, all as of the ____ day of __________,
        200_.

       

      
        	 	 	 
	 	China
                Clean Energy
                Inc.
	 
 	 
 	 
 
	 	By:  	 
	 	
                

                Name:

                Title:

              
	 	
              	 
	 	
                

                Optionee

              
	 	
                 

              




      
        
          
          

        

        
          -
            6 -

          
            

          

        

        
          
          

        

      

       

      CHINA
        CLEAN ENERGY INC.

      2008
        EQUITY INCENTIVE PLAN

      


      Notice
        of
        Exercise of Nonqualified Stock Option

      


      


      I
        hereby
        exercise the nonqualified stock option granted to me pursuant to the
        Nonqualified Stock Option Agreement dated as of _________ __, 200_, by China
        Clean Energy Inc. (the “Company”), with respect to the following number of
        shares of the Company’s common stock (“Shares”), par value $0.001 per Share,
        covered by said option:

      
        


        
          	
                  Number
                    of Shares to be purchased:

                	
                  _______

                
	 	 
	
                  Purchase
                    price per Share:

                	
                  $_______

                
	 	 
	
                  Total
                    purchase price:

                	
                  $_______

                


        

        

          
            	
                    o

                  	
                    A.

                  	
                    
                      Enclosed
                        is cash or my certified check, bank draft, or postal or express
                        money
                        order in the amount of $__________ in full/partial [circle
                        one]
                        payment for such Shares;

                    

                  


          

          


          and/or

          


          
            	
                    
                      o

                    

                  	
                    B.

                  	
                    
                      Enclosed
                        is/are       
                           Share(s)
                        with a total fair market value of $                
                         on
                        the date hereof in full/partial [circle
                        one]
                        payment for such Shares;

                    

                  


          

          


          and/or

          


          
            	
                    
                      o

                    

                  	
                    C.

                  	
                    
                      I
                        have provided notice to                      
                         [insert
                        name of broker],
                        a
                        broker, who will render full/partial [circle
                        one]
                        payment for such Shares.
                        [Optionee should attach to the notice of exercise provided
                        to such broker
                        a copy of this Notice of Exercise and irrevocable instructions
                        to pay to
                        the Company the full exercise
                        price.]

                    

                  


          

          


          and/or

          


          
            	
                    
                      o

                    

                  	
                    D.

                  	
                    I
                      elect to satisfy the payment for Shares purchased hereunder
                      by having the
                      Company withhold newly acquired Shares pursuant to the exercise
                      of the
                      Option.

                  


          

           

          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

            

          

        

      

       

      Please
        have the certificate or certificates representing the purchased Shares
        registered in the following name or names* :
                                                   ;
        and
        sent to                                                 .

      
        


        


        
          	
                  DATED:                 ___,
                    20__

                	
                   

                
	 	
                  Optionee’s
                    Signature

                


        

        

          
*Certificates
          may be registered in the name of the Optionee alone or in the joint names
          (with
          right of survivorship) of the Optionee and his or her
          spouse.

      

    

     

    
      
        
        

      

      
        -
          2 -