Unassociated Document


    SHARE
      ESCROW AGREEMENT

    


    THIS
      SHARE ESCROW AGREEMENT (“Agreement”),
      is
      made as of October 14, 2008, by and between China Bio Energy Holding Group
      Co.,
      Ltd. (the “Company”),
      the
      Purchaser whose name is set forth on Exhibit
      A
      to the
      Securities Purchase Agreement, dated this same date (the “Purchaser”
and
      together with the Company, the “Parties”),
      Redsky Group Limited, a British Virgin Islands company (“Redsky
      Group”),
      and
      Loeb & Loeb LLP, with offices at 345 Park Avenue, New York, NY 10154 (the
“Escrow
      Agent”).

    


    RECITALS:

    


    
      	 	
              (1)

            	
              Pursuant
                to that certain Securities Purchase Agreement, dated as of October
                14,
                2008, by and between the Company and the Purchaser (the “Purchase
                Agreement”),
                a copy of which is attached hereto as Exhibit
                A
                and incorporated herein by reference, the Company issued to the Purchaser
                a convertible debenture in the amount of $9,000,000, which is
                automatically convertible into 2,465,753 shares of the Company’s Series B
                Convertible Preferred Stock, subject to adjustment pursuant to the
                Certificate of Designation of the Relative Rights and Preferences
                of the
                Series B Convertible Preferred Stock, and is referred to herein as
                the
                “Convertible
                Debenture”).
                Capitalized terms used in this Agreement without definition, have
                the
                meaning assigned to those terms in the Purchase Agreement;
                

            


    

    


    
      	 	
              (2)

            	
              To
                induce the Purchaser to enter into the Purchase Agreement, Redsky
                Group
                Limited, a British Virgin Islands company (“Redsky
                Group”),
                the majority stockholder of the Company, has agreed to deposit 2,465,753
                shares of the Company’s Common Stock it owns (“Escrow
                Shares”),
                into an escrow account to be held by the Escrow Agent to be disbursed
                in
                accordance with the terms and conditions set forth herein, (the
                “Escrow
                Account”);
                

            


    

    


    
      	 	
              (3)

            	
              The
                Company and the Purchaser have requested that the Escrow Agent hold
                the
                Escrow Shares on the terms and conditions set forth in this Agreement
                and
                the Escrow Agent has agreed to act as escrow agent pursuant to the
                terms
                and conditions of this Agreement.

            


    

     

    NOW,
      THEREFORE, in consideration of the covenants and mutual promises contained
      herein and other good and valuable consideration, the receipt and legal
      sufficiency of which are hereby acknowledged and intending to be legally bound
      hereby, the Parties agree as follows:

    


    ARTICLE
      1

    TERMS
      OF
      THE ESCROW

    


    1.1  Appointment
      of Escrow Agent.
      The
      Parties hereby agree to have Loeb & Loeb LLP act as Escrow Agent to receive
      the Escrow Shares in escrow and distribute the same as set forth in this
      Agreement. 

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    1.2 Escrow
      Deposit.
      In
      accordance with the terms of the Purchase Agreement, immediately prior to the
      Closing, Redsky Group shall deliver the Escrow Shares to the Escrow Agent.
      The
      Escrow Agent shall hold the Escrow Shares in the Escrow Account at all times
      until such Escrow Shares are disbursed in accordance herewith; 

    


    1.3 Performance
      Thresholds

    


    (a) The
      performance thresholds for the fiscal year ended December 31, 2008 shall be
      audited Net Income equal to $28,000,000 and Fully Diluted Earnings Per Share
      (as
      defined below) equal to $0.73 (the “Performance
      Thresholds”).
      

    


    (b) Whether
      the Performance Thresholds have been met shall be determined on the date the
      Company’s audited financial statements for the corresponding fiscal year are
      filed with the Securities and Exchange Commission pursuant to the reporting
      requirements of the Securities Exchange Act of 1934 (the “Exchange
      Act”),
      as
      amended, which includes any extensions with respect thereof pursuant to Rule
      12b-25 of the Exchange Act (such date being hereinafter referred to as the
      “Audit
      Date”);
      and,
      if the Company is not required to file reports pursuant to Section 13(a) or
      15(d) of the Exchange Act, and therefore prepares and furnishes the documents
      required by Section 6 of the Registration Rights Agreement, the Performance
      Thresholds shall be determined in accordance with such prepared documents and
      at
      such time.

    


    (c) With
      respect to the Performance Thresholds, “Net Income” shall be defined in
      accordance with US GAAP and reported by the Company in its audited financial
      statements for 2008, plus
      any
      amounts that may have been recorded as non-cash charges or liabilities on the
      2008 financial statements, respectively, due to the application of EITF No.
      00-19 that are associated with (i) any outstanding Warrants of the Company,
      (ii)
      the transactions contemplated by this Agreement, including, without limitation
      the release of any Escrow Shares to Redsky Group, (iii) any issuance of shares
      of Common Stock or option grants under a performance based stock incentive
      plan
      that was in existence on the Closing Date, and (iv) the conversion of any shares
      of preferred stock. “Fully Diluted Earnings Per Share” means after tax Net
      Income divided by the number of shares of Common Stock outstanding on a fully
      diluted basis, which number of shares of Common Stock shall include, without
      limitation, (x) the number of shares of Common Stock issuable upon conversion
      of
      the Company’s then outstanding shares of Series A Preferred and Series B
      Preferred, and (y) the number of shares of Common Stock issuable upon the
      exercise of any then outstanding warrants, options or other securities
      convertible into shares of Common Stock of the Company, as of December 31,
      2008.

    


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    1.4 Escrow
      Release

    


    The
      Purchaser shall remit written instructions to the Escrow Agent two (2) business
      days after the Audit Date, in the form of Exhibit
      B
      attached
      hereto and made a part hereof, or in a form and substance satisfactory to the
      Escrow Agent (the “Release
      Notice”),
      directing the Escrow Agent to release the Escrow Shares within five (5) business
      days of the Escrow Agent’s receipt of the Release Notice as specified therein
      and in accordance with the following guidelines : 

    


    
      	 	
              (a)

            	
              If
                the Company achieves no more than 50% of the Performance Thresholds,
                the
                Escrow Agent shall disburse all of the Escrow Shares to the
                Purchaser.

            


    

    


    
      	 	
              (b)

            	
              If
                the Company achieves more than 50% and less than 100% of the Performance
                Thresholds, the Escrow Agent shall disburse to the Purchaser that
                number
                of Escrow Shares equal to two (2) times the percentage by which the
                Lowest
                Performance Threshold was not achieved. For purposes hereof, the
                “Lowest
                Threshold Percentage”
                means the percentage by which the lowest of the Performance Thresholds
                was
                not achieved. By way of example, if the Company’s Fully Diluted Earnings
                Per Share is an amount equal to 60% of the Performance Thresholds
                and the
                Company’s Net Income reported on is an amount equal to 70% of the
                Performance Thresholds, the Lowest Threshold Percentage would be
                40%
                (100%-60%). The Escrow Agent would disburse 80% of the Escrow Shares
                to
                the Purchasers (40*2).

            


    

    


    
      	 	
              (c)

            	
              In
                the event that the Company does not achieve the specified percentage
                of
                the Performance Thresholds as set forth in 1.4(a) and 1.4(b) above
                and the
                Purchaser sells any of its Series B Preferred Stock and/or Common
                Conversion Shares prior to the date of distribution of Escrow Shares,
                then
                the Purchaser shall only be entitled to receive that number of Escrow
                Shares equal to the sum of the number of shares of Series B Preferred
                Stock (on an as converted basis) and Common Conversion Shares owned
                by
                such Purchaser as of the date of distribution. Any Escrow Shares
                not
                delivered to the Purchaser because the Purchaser has sold any portion
                of
                such Purchaser’s Series B Preferred or Conversion Shares will be released
                to Redsky Group.

            


    

    


    
      	 	
              (d)

            	
              If
                the Performance Thresholds are achieved, all of the Escrow Shares
                shall be
                returned to Redsky Group.

            


    

    


    
      	 	
              (e)

            	
              In
                the event that the Closing of the transactions contemplated by the
                Purchase Agreement does not occur, and written notice of same, signed
                by
                all
                of
                the Parties hereto, is delivered to the Escrow Agent, the Escrow
                Agent
                shall return the Escrow Shares to Redsky Group.


            


    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (f)

            	
              Upon
                the Escrow Agent’s completion of its obligations under Sections 1.4, this
                Agreement shall terminate and the Escrow Agent shall have no further
                liability hereunder. 

            


    

    


    1.5 This
      Agreement may be altered or amended only with the written consent of all of
      the
      Parties hereto. Should any of the Parties attempt to change this Agreement
      in a
      manner, which, in the Escrow Agent’s discretion, shall be undesirable, the
      Escrow Agent may resign as Escrow Agent by notifying the Parties in writing
      five
      days in advance. In the case of the Escrow Agent’s resignation or removal
      pursuant to the foregoing, his only duty, until receipt of notice from the
      Parties that a successor escrow agent has been appointed, shall be to hold
      and
      preserve the Escrow Shares that are in his possession. Upon receipt by the
      Escrow Agent of said notice from the Parties of the appointment of a successor
      escrow agent, the name of a successor escrow account and a direction to transfer
      the Escrow Shares, the Escrow Agent shall promptly thereafter transfer all
      of
      the Escrow Shares that it is still holding in escrow, to said successor escrow
      agent. Immediately after said transfer of the Escrow Shares, the Escrow Agent
      shall furnish the Parties with proof of such transfer. The Escrow Agent is
      authorized to disregard any notices, requests, instructions or demands received
      by it from the Parties after the Escrow Agent promptly transfers all of the
      Escrow Shares that it is still holding in escrow, to the above said successor
      escrow agent. 


     

    1.6
      The
      Escrow Agent shall be reimbursed by the Parties for any reasonable expenses
      incurred in the event there is a conflict between the Parties and the Escrow
      Agent shall deem it necessary to retain counsel, upon whose advice the Escrow
      Agent may rely. The Escrow Agent shall not be liable for any action taken or
      omitted by him in good faith and in no event shall the Escrow Agent be liable
      or
      responsible except for the Escrow Agent’s own gross negligence or willful
      misconduct. The Escrow Agent has made no representations or warranties to the
      Parties in connection with this transaction. The Escrow Agent has no liability
      hereunder to either party other than to hold the Escrow Shares and to deliver
      them under the terms hereof. Each party hereto agrees to indemnify and hold
      harmless the Escrow Agent from and with respect to any suits, claims, actions
      or
      liabilities arising in any way out of this transaction including the obligation
      to defend any legal action brought which in any way arises out of or is related
      to this Agreement or the investment being made by Purchaser. The
      Escrow Agent has acted as legal counsel for the Company and may continue to
      act
      as legal counsel for the Company from time to time, notwithstanding its duties
      as the Escrow Agent hereunder. The Company and the Purchaser consent to the
      Escrow Agent in such capacity as legal counsel for the Company and waive any
      claim that such representation represents a conflict of interest on the part
      of
      the Escrow Agent. The Company and the Purchaser understand that the Escrow
      Agent
      is relying explicitly on the foregoing provision in entering into this Share
      Escrow Agreement.

    


    1.7 The
      Escrow Agent shall be obligated only for the performance of such duties as
      are
      specifically set forth herein and may rely and shall be protected in relying
      or
      refraining from acting on any instrument reasonably believed by the Escrow
      Agent
      to be genuine and to have been signed or presented by the proper Party or
      Parties. The Escrow Agent shall not be personally liable for any act the Escrow
      Agent may do or omit to do hereunder as the Escrow Agent while acting in good
      faith, and any act done or omitted by the Escrow Agent pursuant to the advice
      of
      the Escrow Agent's attorneys-at-law shall be conclusive evidence of such good
      faith.

    


    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

       

    

    1.8 The
      Escrow Agent is hereby expressly authorized to disregard any and all warnings
      given by any of the Parties hereto or by any other person or corporation,
      excepting only orders or process of courts of law and is hereby expressly
      authorized to comply with and obey orders, judgments or decrees of any court.
      In
      case the Escrow Agent obeys or complies with any such order, judgment or decree,
      the Escrow Agent shall not be liable to any of the Parties hereto or to any
      other person, firm or corporation by reason of such decree being subsequently
      reversed, modified, annulled, set aside, vacated or found to have been entered
      without jurisdiction.

    


    1.9 The
      Escrow Agent shall not be liable in any respect on account of the identity,
      authorities or rights of the Parties executing or delivering or purporting
      to
      execute or deliver the Agreement or any documents or papers deposited or called
      for hereunder.

    


    1.10 If
      the
      Escrow Agent reasonably requires other or further documents in connection with
      this Agreement, the necessary Parties hereto shall join in furnishing such
      documents.

    


    1.11 It
      is
      understood and agreed that should any dispute arise with respect to the delivery
      and/or ownership or right of possession of the documents, the Escrow Shares
      held
      by the Escrow Agent hereunder, the Escrow Agent is authorized and directed
      in
      the Escrow Agent's sole discretion (a) to retain in the Escrow Agent's
      possession without liability to anyone all or any part of said documents, the
      Escrow Shares until such disputes shall have been settled either by mutual
      written agreement of the Parties concerned or by a final order, decree or
      judgment of a court of competent jurisdiction after the time for appeal has
      expired and no appeal has been perfected, but the Escrow Agent shall be under
      no
      duty whatsoever to institute or defend any such proceedings or (b) to deliver
      the Escrow Shares and any other property and documents held by the Escrow Agent
      hereunder to a state or federal court having competent subject matter
      jurisdiction and located in the State of New York in accordance with the
      applicable procedure therefor.

    


    ARTICLE
      2

    MISCELLANEOUS

    


    2.1 No
      waiver
      of any breach of any covenant or provision herein contained shall be deemed
      a
      waiver of any preceding or succeeding breach thereof, or of any other covenant
      or provision herein contained. No extension of time for performance of any
      obligation or act shall be deemed any extension of the time for performance
      of
      any other obligation or act.

    


    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

       

    

    2.2 All
      notices, demands, consents, requests, instructions and other communications
      to
      be given or delivered or permitted under or by reason of the provisions of
      this
      Agreement or in connection with the transactions contemplated hereby shall
      be in
      writing and shall be deemed to be delivered and received by the intended
      recipient as follows: (i) if personally delivered, on the business day of such
      delivery (as evidenced by the receipt of the personal delivery service), (ii)
      if
      mailed certified or registered mail return receipt requested, two (2) business
      days after being mailed, (iii) if delivered by overnight courier (with all
      charges having been prepaid), on the business day of such delivery (as evidenced
      by the receipt of the overnight courier service of recognized standing), or
      (iv)
      if delivered by facsimile transmission, on the business day of such delivery
      if
      sent by 6:00 p.m. in the time zone of the recipient, or if sent after that
      time,
      on the next succeeding business day (as evidenced by the printed confirmation
      of
      delivery generated by the sending party’s telecopier machine). If any notice,
      demand, consent, request, instruction or other communication cannot be delivered
      because of a changed address of which no notice was given (in accordance with
      this Section 2.2), or the refusal to accept same, the notice, demand, consent,
      request, instruction or other communication shall be deemed received on the
      second business day the notice is sent (as evidenced by a sworn affidavit of
      the
      sender). All such notices, demands, consents, requests, instructions and other
      communications will be sent to the following addresses or facsimile numbers
      as
      applicable.

    


    
      	
              If
                to Escrow Agent: 

            
	 	 
	 	
              Loeb
                & Loeb LLP

            
	 	
              345
                Park Avenue

            
	 	
              New
                York, New York 10154

            
	 	
              Attention:
                Mitchell Nussbaum, Esq.

            
	 	
              Tel
                No.:212-407-4000

            
	 	
              Fax
                No.: 212-407-4990

            
	 
	
              If
                to the Company or Redsky Group:

            
	 	
              China
                Bio Energy Holding Group Co., Ltd.

            
	 	
              c/oXi'an
                Baorun Industrial Development Co. Ltd.

            
	 	
              Dongxin
                Century Square, 7th Floor

            
	 	
              Xi'an
                East City High-tech Industrial Development Park

            
	 	
              Shannxi
                Province, P.R. China

            
	 	
              Attn:
                Mr. Gao Xincheng

            
	 	
              Tel:
                86 29 82682019

            
	 	
              Fax:
                86 29 82683629

            
	 
	
              With
                a copy to:

            	
              Loeb
                & Loeb LLP

            
	 	
              345
                Park Avenue

            
	 	
              New
                York, New York 10154

            
	 	
              Attention:
                Mitchell Nussbaum, Esq

            
	 	
              Tel
                No.:212-407-4000

            
	 	
              Fax
                No.: 212-407-4990

            
	 
	
              If
                to the Purchaser

            	
              Vision
                Opportunity China LP

            
	 	
              20
                W. 55th Street, 5th Floor

            
	 	
              New
                York, New York 10019

            
	 	
              Attention:
                Kim Gabriel

            
	 	
              Tel.
                No.: 212-849-8242

            
	 	
              Fax
                No.: 212-867-1416

            


    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    or
      to
      such other address and to the attention of such other person as any of the
      above
      may have furnished to the other Parties in writing and delivered in accordance
      with the provisions set forth above.

    


    2.3  This
      Agreement shall be binding upon and shall inure to the benefit of the permitted
      successors and assigns of the Parties hereto.

    


    2.4
       This
      Agreement is the final expression of, and contains the entire agreement between,
      the Parties with respect to the subject matter hereof and supersedes all prior
      understandings with respect thereto. This Agreement may not be modified,
      changed, supplemented or terminated, nor may any obligations hereunder be
      waived, except by written instrument signed by the Parties to be charged or
      by
      its agent duly authorized in writing or as otherwise expressly permitted
      herein.

    


    2.5  Whenever
      required by the context of this Agreement, the singular shall include the plural
      and masculine shall include the feminine. This Agreement may be executed in
      two
      or more counterparts, all of which taken together shall constitute one
      instrument. Execution and delivery of this Agreement by exchange of facsimile
      copies bearing the facsimile signature of a party shall constitute a valid
      and
      binding execution and delivery of this Agreement by such party. Such facsimile
      copies shall constitute enforceable original documents.

    


    2.6  The
      Parties hereto expressly agree that this Agreement shall be governed by,
      interpreted under, and construed and enforced in accordance of the laws of
      the
      State of New York. The Parties agree that any dispute arising under or with
      respect to or in connection with this Agreement, whether during the term of
      this
      Agreement or at any subsequent time, shall be resolved fully and exclusively
      in
      the federal or state courts resident in New York County, New York. 

     

    2.7  By
      signing this Agreement, the Escrow Agent becomes a party hereto only for the
      purpose of this Agreement; the Escrow Agent does not become a party to the
      Purchase Agreement or any related agreements.

    


    2.8  Each
      party acknowledges and agrees that this Agreement shall not be deemed prepared
      or drafted by any one party. In the event of any dispute between the Parties
      concerning this Agreement, the Parties agree that any rule of construction,
      to
      the effect that any ambiguity in the language of the Agreement is to be resolved
      against the drafting party, shall not apply. 

    


    (Signature
      Page to Follow)

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
      date
      first set forth above.

    


    Executed:

    


    
      	
              China
                Bio Energy Holding Group Co., Ltd.

            
	 
	
              By:
                

            	 
              /s/ Gao Xincheng
	
              Name:
                Gao Xincheng

            
	
              Title:
                Chief Executive Officer

            
	 
	
              Vision
                Opportunity China LP

            
	 
	
              By:
                

            	 
              /s/ Adam Benowitz
	
              Name:
                Adam Benowitz

            
	
              Title:
                Authorized Signatory

            
	 
	
              Redsky
                Group Limited

            
	 
	
              By:
                

            	 
              /s/ Gao Xincheng
	
              Name:
                Gao Xincheng

            
	
              Title:
                Director

            
	 
	
              Escrow
                Agent:

            
	
              Loeb
                & Loeb LLP

            
	 
	
              By:
                

            	 
              /s/ Mitchell S. Nussbaum
	
              Name:
                Mitchell S. Nussbaum

            
	
              Title:
                Partner

            


    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    Exhibit
      A

    Vision
      Opportunity China LP

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    


    Exhibit
      B

    


    FORM
      OF ESCROW RELEASE NOTICE

    


    Date:
      

    


    Escrow
      Agent

    


    Dear
      Escrow Agent:

    


    In
      accordance with the terms of Article 1 of the Escrow Agreement dated as of
      October 14, 2008 (the "Escrow Agreement"), by and between China Bio Energy
      Holding Group Co., Ltd. (the “Company”), the Purchaser whose name is set forth
      on Exhibit A to the Securities Purchase Agreement dated October __, 2008 (the
      “Purchaser,”
and
      together with the Company, the “Parties”), the Purchaser hereby notify the
      Escrow Agent of the following: 

     

    
      	 	
              1.

            	
              The
                Audit Date was ___________ __, 200__; and


            


    

     

    
      	 	
              2.

            	
              The
                Company achieved __% of the Performance Thresholds.
                

            


    

     

    Accordingly,
      please distribute the Escrow Shares as follows: 

    


    
      	
              Recipient
                Information

            	 	
              Amount
                of Escrow Shares to be
delivered

            
	 	 	 
	 	 	 
	 	 	 
	 	 	 


    

     

    Very
      truly yours,

    


     

    VISION
      OPPORTUNITY CHINA LP

    


    By:_____________

    Name:__________

    Title:___________

    


    
      
        
        

      

      
        10