MANAGEMENT ESCROW AGREEMENT

THIS MANAGEMENT ESCROW AGREEMENT (“Agreement”) is made as of October 14, 2008 by and among 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”) 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 Purchaser purchased 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 Preferred Stock. The Company received proceeds in the amount of $9,000,000 (the “Gross Proceeds”). 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, the Company agreed to deposit $750,000 of the Gross Proceeds (the “Escrow Funds”) into an escrow account at the Closing, to be held by the Escrow Agent for disbursement in accordance with the terms and conditions set forth herein;

(3)

This Agreement constitutes the Management Escrow Agreement referred to in the Purchase Agreement pursuant to which the Escrow Agent shall receive and disburse the Escrow Funds.

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:

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 Funds in escrow and distribute the same as set forth in this Agreement.

1.2 Escrow Deposit

(a) In accordance with the terms of the Purchase Agreement, immediately after the Closing, the Escrow Funds shall be wired to the Escrow Agent; and

(b) The Escrow Agent shall hold the Escrow Funds at all times until such Escrow Funds are disbursed in accordance herewith.

1.3 Escrow Release. The Escrow Agent will hold and disburse the Escrow Funds received by it pursuant to the terms of this Agreement, as follows:

 

(a) The Escrow Funds shall remain in the escrow account and shall only be released by the Escrow Agent in accordance with Section 1.3(b) below upon the Escrow Agent’s receipt of joint written notice in the forms of Exhibits B, C and D hereto, as applicable, from the Company and Purchaser.

 

(b) Pursuant to Section 3.14 of the Purchase Agreement, upon the Escrow Agent’s receipt of notice as provided in Section 1.3(a) above (i) Two Hundred Fifty Thousand Dollars ($250,000) shall be released from the Escrow Funds to the Company at such time that the Company appoints a new Chief Financial Officer, (ii) Two Hundred Fifty Thousand Dollars ($250,000) shall be released from the Escrow Funds to the Company at such time that the Company fulfills NASDAQ’s corporate governance requirements including, but not limited to, appointing three (3) independent directors to serve on its Board of Directors, as well as forming the Audit Committee and Compensation Committee, and (iii) Two Hundred Fifty Thousand Dollars ($250,000) shall be released from the Escrow Funds to the Company at such time that the Company appoints a new Vice President of Investor Relations.

 

(c) In the event this Agreement, the Escrow Funds, or the Escrow Agent, in its capacity as the escrow agent under this Agreement, becomes the subject of litigation, or if the Escrow Agent determines it is necessary to do so for any other reason relating to litigation arising out of this Agreement or the Purchase Agreement, each of the Company and the Purchaser authorizes the Escrow Agent, at its option if not otherwise so required, to deposit the Escrow Funds with the clerk of the court in which the litigation is pending, and thereupon the Escrow Agent shall be relieved and discharged of any further responsibility with regard thereto to the extent determined by any such court. Each of the Company and the Purchaser further authorizes the Escrow Agent, if it receives conflicting claims to any of the Escrow Funds, is threatened with litigation, in its capacity as escrow agent under this Agreement, or if the Escrow Agent determines it is necessary to do so for any other reason relating to this Agreement, to interplead all interested parties in any court of competent jurisdiction and to deposit the Escrow Funds with the clerk of that court and thereupon the Escrow Agent shall be relieved and discharged of any further responsibility hereunder to the parties from which they were received to the extent determined by such court.

(d) Upon receipt of the notice provided in Section 1.3(b) above, the Escrow Agent shall release the Escrow Funds as specified therein. The names and true signatures of each individual authorized to act singly on behalf of each of the Parties are stated in Exhibit E, which is attached hereto and made a part hereof. The Parties may each remove or add one or more of its authorized signers stated on Exhibit E by notifying the Escrow Agent of such change in accordance with this Agreement, which notice shall include the true signature for any new authorized signatories

 

(e) Upon the Escrow Agent’s completion of its obligations under Section 1.3, this Agreement shall terminate and the Escrow Agent shall have no further liability hereunder.

1.4 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, its 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 Funds 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 Funds, the Escrow Agent shall promptly thereafter transfer all of the Escrow Funds that it is still holding in escrow, to said successor escrow agent. Immediately after said transfer of the Escrow Funds, 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 Funds that it is still holding in escrow, to the above said successor escrow agent.

1.5 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 it 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 Funds 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 Seller. The Purchaser acknowledges and represents that it is not being represented in a legal capacity by Loeb & Loeb LLP and has had the opportunity to consult with its own legal advisors prior to the signing of this Agreement. The Purchaser acknowledges that the Escrow Agent is not rendering securities advice to it with respect to this Agreement. The Escrow Agent is acting as legal counsel for the Company in connection with the Purchase Agreement and related Transaction Documents and may continue to act as legal counsel for the Company, from time to time, notwithstanding its duties as the Escrow Agent hereunder. The Purchaser consents to the Escrow Agent acting in such capacity as legal counsel for the Company and waives any claim that such representation represents a conflict of interest on the part of the Escrow Agent. The Purchaser understands that the Escrow Agent is relying explicitly on the foregoing provisions contained in this Section 1.5 in entering into this Agreement.

1.6 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.

1.7 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.

1.8 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.

1.9 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.

1.10 It is understood and agreed that should any dispute arise with respect to the Escrow Funds 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 , the Escrow Funds 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 Funds 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.

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.

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

2.3  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 their respective agents duly authorized in writing or as otherwise expressly permitted herein.

2.4  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.

2.5 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.

 

2.6 Any notice required or permitted hereunder shall be in writing and shall be effective (a) upon hand delivery by telex (with correct answer back received), telecopy, email or facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) sent by commercial overnight courier such as UPS or Fedex The addresses for such communications shall be:

If to the Company:

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 copies to (which shall not constitute notice):	Loeb & Loeb 345 Park Avenue New York, NY10154 Attn: Mitchell S. Nussbaum Tel: 212 ###-###-#### Fax: 212 ###-###-####
If to the Purchaser:	Vision Opportunity China LP 20 West 55th Street 5th Floor New York, NY 10019 Attn: Kim Gabriel Tel: 212 ###-###-#### Fax: 212 ###-###-#### Email:  ***@***
If to the Escrow Agent:	Loeb & Loeb LLP 345 Park Avenue New York, NY 10154 Attention: Mitchell S. Nussbaum. Esq. Telephone Number: 212 ###-###-#### Facsimile Number: 212-4-7-4990

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.

 

 

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
Escrow Agent
Loeb & Loeb LLP
By:	/s/ Mitchell S. Nussbaum
Name: Mitchell S. Nussbaum
Title: Partner

 

 

 

 

 

 

Pursuant to that Management Escrow Agreement dated as of October 14, 2008, by and among China Bio Energy Holding Group Co., Ltd. (the “Company”), the Purchaser whose name is set forth on Exhibit A to Securities Purchase Agreement dated as of the date thereof (the “Purchaser”), and Loeb & Loeb, LLP, as Escrow Agent, the Company hereby certifies that the Company has hired a Chief Financial Officer, and hereby requests disbursement of funds in the amount and manner described below (wire instructions attached).

Please disburse to:
Amount to disburse:
Form of distribution:
Payee:
	Name:
	Address:
	City/State:
	Zip:

				CHINA BIO ENERGY HOLDING GROUP CO., LTD.
Date:				By:
				Name:
				Title:
				VISION OPPORTUNITY CHINA LP
Date:				By:
				Name:
				Title:

 

 

 

 

Pursuant to that Management Escrow Agreement dated as of October 14, 2008, by and among 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 as of the date thereof (the “Purchaser”), and Loeb & Loeb, LLP, as Escrow Agent, the Company hereby certifies that the Company has complied with all of the NASDAQ corporate governance requirements, and hereby requests disbursement of funds in the amount and manner described below (wire instructions attached).

 

Please disburse to:
Amount to disburse:
Form of distribution:
Payee:
	Name:
	Address:
	City/State:
	Zip:

				CHINA BIO ENERGY HOLDING GROUP CO., LTD.
Date:				By:
				Name:
				Title:
				VISION OPPORTUNITY CHINA LP
Date:				By:
				Name:
				Title:

 

 

 

 

Pursuant to that Management Escrow Agreement dated as of October 14, 2008, by and among 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 as of the same date thereof (the “Purchaser”), and Loeb & Loeb, LLP, as Escrow Agent, the Company hereby certifies that the Company has hired an Investor Relations Officer, and hereby requests disbursement of funds in the amount and manner described below (wire instructions attached).

 

Please disburse to:
Amount to disburse:
Form of distribution:
Payee:
	Name:
	Address:
	City/State:
	Zip:

				CHINA BIO ENERGY HOLDING GROUP CO., LTD.
Date:				By:
				Name:
				Title:
				VISION OPPORTUNITY CHINA LP
Date:				By:
				Name:
				Title:

 

 

 

The Escrow Agent is authorized to accept instructions signed or believed by the Escrow Agent to be signed by any or all of the following individuals on behalf of each of the Company and Purchaser:

 

Name		True Signature
COMPANY AUTHORIZED SIGNATORY
Name		True Signature
Gao Xincheng
Li Gaihong
PURCHASER AUTHORIZED SIGNATORY
Name		True Signature
Adam Benowitz