Unassociated Document


    Employment
Agreement

    


    This
EMPLOYMENT AGREEMENT (the “Agreement”) is executed on January 1, 2010
between Qinan Ji (the
“Executive”), a citizen of China, ID number
612125195706230432,
and China
Natural Gas, Inc. (the “Company”), a Delaware Corporation, with primary
business address of No. 35 Tangyan Road, High-Tech Zone, Xi’an 710065, Shaanxi
Province, China.

    


    WHEREAS,
the Company believes that Executive provides excellent management services for
the Company and wishes to retain Executive as its Chief Executive Officer;
and

    


    WHEREAS,
the Company and Executive have reached the following understanding with respect
to the Executive's employment by the Company for a period of one (1) year
commencing from January 1, 2010;
and

    


    WHEREAS,
the Company and Executive desire to evidence their agreement in writing as to
the following terms and conditions:

    


    1.
Employment, Obligations and Covenants.

    


    
      	
              1.1.

            	
              The
      Company hereby agrees that this Agreement for employment of the Chief
      Executive Officer ("CEO") shall take effect on January 1, 2010
      and both parties hereby accept the terms and conditions contained in this
      Agreement. During the term of this Agreement, the Executive shall make
      him/her available to the Company to pursue the business of the Company
      subject to the supervision and direction of the Board of Directors of the
      Company ("Board" or "Board of
Directors").

            


    

    


    
      	
              1.2.

            	
              The
      Company shall retain the Executive to serve as the Company's full time
      CEO. The Executive shall not hold concurrently posts in any other
      entities. The scope and responsibilities of the CEO position include the
      following:

            


    

    


    
      	
               
      

            	
              (a)

            	
              To
      contact and market the company to the investment community; set up good
      relationship and communicate effectively with current and potential
      investors;

            


    

    


    
      	
               
      

            	
              (b)

            	
              To
      formulate and implement relevant policies, procedures and strategies to
      ensure the realization of the Company’s
  strategy;

            


    

    


    
      	
               
      

            	
              (c)

            	
              To
      establish a strong management system and strict internal control
      procedure;

            


    

    


    
      	
               
      

            	
              (d)

            	
              To
      supervise all business activities to ensure their compliance with law and
      the Company’s policy;

            


    

    


    
      	
               
      

            	
              (e)

            	
              To
      establish good management mode to promote the development
      of  the company’s
activities;

            


    

    


    
      	
               
      

            	
              (f)

            	
              To
      establish and direct a mechanism for reducing costs and increasing
      efficiency;

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    
      	
               
      

            	
              (g)

            	
              To
      be responsible for the Company’s long-term strategy
    planning;

            


    

    


    
      	
               
      

            	
              (h)

            	
              To
      participate in business development and strategic
  planning;

            


    

    


    
      	
               
      

            	
              (i)

            	
              To
      carry out strategic acquisition, capital management, financing etc.
      pursuant to the requirements of the Board of
  Directors;

            


    

    


    
      	
               
      

            	
              (j)

            	
              To
      make proposals to the Management Team and the Board of Directors on the
      management issues of the Company;

            


    

    


    
      	
               
      

            	
              (k)

            	
              To
      be aware of  any changes in laws and regulations in the US and
      China;

            


    

    


    
      	
               
      

            	
              (l)

            	
              Other
      responsibilities stipulated by the Board of
  Directors.

            


    

    


    The CEO
is also the primary consultant of each department director for determining the
operation strategies and plans and shall be responsible for the Company’s
comprehensive management. The CEO shall determine (1) the Company's strategy;
(2) the development strategy; (3) the business expansion; and (4) the direction
of development.

    


    Company
strategy

    


    The CEO
shall play a major role in preparing a comprehensive strategy to maximize
Company value:

     

    (1)  Ensure
the existing plans are well based on the Company’s current business to maximize
the value to the Company;

     

    1.
Continuously assess the plan’s value creation potential;

     

    2. Ensure
the plans are targeted towards major problems faced by the Company. In doing so,
the Executive should repeatedly research reasons and possibilities related to
changes in the Company’s operations and provide external references for value
creation (e.g., the value of certain business to other possible owners) and make
decisions;

     

    3.
Formulate criteria for business achievements and establish mechanism for
progress assessment

     

    (2)
Assist in developing the Company’s expansion strategy and creating shareholder
value.

     

    1.
Comment on the current market opportunities closely related to the Company’s
business;

     

    2.
Evaluate the Company’s capacity and assets to capitalize the market opportunity;
propose proper remedies for capacities lacking;

     

    3.
Provide business evaluations regarding specific proposals.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    At the
same time, the CEO should perform other responsibility which belongs to him. The
CEO shall be responsible for the formulation and implementation of comprehensive
business plans and strategies to provide support for the company's business and
create greatest value for shareholders.

     

    (1)
Propose capital and dividend policies for value creation;

     

    (2)
Design and manage Company presentation of the Company’s operations and plan to
the financial community;

     

    Company
Management 

     

    CEO shall
ensure effective management of the Company’s financial issues:

     

    (1)          Make
decisions on all the important business events, including the financial affairs,
business direction and business scope;

     

    (2)          Establish
internal control system to ensure the safety of the company's
assets;

     

    (3)          Ensure
effective and efficient management of general events/ business /
operation;

     

    (4)          Maintain
close relationship with the Company’s business partners and
investors;

     

    (5)          Manage
the Risk Management Plan of the Company.

     

    1.3. The
Executive shall perform his duties diligently and competently pursuant to the
requirements for the position.

     

    1.4 Work
time. According to the Labor Law and policies of company, Executive works 8
hours per day, if there is any important issue or event to be solved, Executive
shall ensure the issue to be effectively completed in time.

     

    1.5 The
Board may assign the Executive such general management and supervisory
responsibilities and executive duties for the Company as are appropriate and
commensurate with Executive's position as CEO of the Company.

    


    2.
Compensation and Benefits.

     

    2.1. The
Company shall pay to Executive a salary of USD 120,000 pre-tax annually in 12
monthly instalments, i.e. a monthly salary of USD10, 000, PLUS USD60, 000 when
Executive works for the entire 12 months. In accordance with the relevant
provisions, the company will pay each month 80% of his monthly salary (i.e.
$8,000), the remaining portion (i.e. $2,000 per month, and$ 24,000 in one year)
will be paid in one instalment upon the expiry of one year period. The annual
salary of the Executive shall be composed of the basic salary, housing and
transportation expenses. The basic salary of each month shall be $5000 and the
expenses for the housing and transportation representing $3000 shall be
reimbursed based on the supporting vouchers.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    The
Executive is entitled to options to purchase 292,000 shares of common stock of
the Company vested in four years (73,000 shares each year), representing
approximately 1% of total shares outstanding of the Company. The Executive could
exercises the option at $2.45 per share on a cash basis after one year of
service and the option will be subject to specific terms of the Employee Stock
Option Plan.

     

    2.2. The
Executive shall pay personal income taxes pursuant to regulations of the
government tax agency, and the Company shall deduct a corresponding amount from
the monthly salary of the Executive and pay that amount on behalf of the
Executive to the relevant tax agency.

     

    2.3.
Subject to Article 2.2, the Company shall have the right to deduct from the
Executives’ salaries for other purposes in accordance with laws and regulations
of the State.

    


    3. Term
and Termination.

    


    3.1. The
term of this Agreement is one year beginning on January 1st, 2010
and ending on December 31, 2010. If both Parties desire to renew this Agreement,
each Party shall notify the other Party of its intent to renew this Agreement
thirty days prior to the expiration of this Agreement. The Agreement will then
be extended for 1 year.

    


    The
Company, by notice to Executive, may terminate this Agreement for cause. As used
herein, "cause" shall include (a) the refusal in bad faith by Executive to carry
out specific written directions of the Board, (b) intentional fraud or dishonest
action by Executive in his relations with the Company ("dishonest" for these
purposes shall mean Executive's knowingly making of a material misstatement to
the Board for the purpose of obtaining direct personal benefit); or (c) the
conviction of Executive of any crime involving an act of significant moral
turpitude after appeal or the period for appeal has elapsed without an appeal
being filed by Executive.

    


    Notwithstanding
the foregoing, no "cause" for termination shall be deemed to exist with respect
to Executive's acts described in clause (a)or (b) above, unless the Board shall
have given written notice to Executive (after five (5)days advance written
notice to Executive and a reasonable opportunity to Executive to present his
views with respect to the existence of "cause"), specifying the "cause" with
particularity and , within twenty (20) business days after such notice,
Executive shall not have disputed the Board's determination or in reasonably
good faith taken action to cure or eliminate prospectively the problem or thing
giving rise to such "cause," provided, however, that a repeated breach after
notice and cure, of any provision of clause (a) or (b) above, involving the same
or substantially similar actions or conduct, shall be grounds for

    termination
for cause upon not less than five (5) days additional notice from the
Company.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    3.2. The
Executive, by notice to the Company, may terminate this Agreement in writing no
less than 1 month if a "Good Reason" exists. For purposes of this Agreement,
"Good Reason" shall mean the occurrence of any of the following circumstances
without the Executive's prior express written consent:

    


    
      	
               
      

            	
              (a)

            	
              a
      material adverse change in the nature of Executive's title, duties or
      responsibilities with the Company that represents a demotion from his
      title, duties or responsibilities as in effect immediately prior to such
      change;

            


    

    


    
      	
               
      

            	
              (b)

            	
              a
      material breach of this Agreement by the
  Company;

            


    

    


    
      	
               
      

            	
              (c)

            	
              a
      failure by the Company to make any payment to Executive when due, unless
      the payment is not material and is being contested by the Company, in good
      faith;

            


    

    


    
      	
               
      

            	
              (d)

            	
              a
      liquidation, bankruptcy or receivership of the Company;
  or

            


    

    


    
      	
               
      

            	
              (e)

            	
              any
      person or entity other than the Company and/or any officers or directors
      of the Company as of the date of this Agreement acquires securities of the
      Company other than from Executive or his/her affiliates (in one or more
      transactions) having 51% or more of the total voting power of all the
      Company's securities then outstanding. Notwithstanding the foregoing, no
      Good Reason shall be deemed to exist with respect to the Company's acts
      described in clauses (a), (b) or (c) above, unless Executive shall have
      given written notice to the Company specifying the Good Reason with
      reasonable particularity and, within twenty (20) business days after such
      notice, the Company shall not have cured or eliminated the problem or
      thing giving rise to such Good Reason; provided, however, that a repeated
      breach after notice and cure of any provision of clauses (a), (b) or (c)
      above involving the same or substantially similar actions or conduct,
      shall be grounds for termination for Good Reason without any additional
      notice from Executive.

            


    

    


    4.
Protection of Confidential Information; Non-Competition.

    


    4.1.
Executive acknowledges that:

    


    
      	
               
      

            	
              (a)

            	
              As
      a result of his/her current employment with the Company, Executive will
      obtain secret and confidential information concerning the business of the
      Company and its subsidiaries and affiliates (referred to collectively in
      this Article 4 as the "Company"), including, without limitations,
      financial information, designs and other proprietary rights, trade secrets
      and "know-how," customers and sources ("Confidential
      Information").

            


    

    
      	
               
      

            	
              (b)

            	
              The
      Company will suffer substantial damage which will be difficult to compute
      if, during the period of his/her employment with the Company or
      thereafter, Executive should enter a business competitive with the Company
      or divulge Confidential
Information.

            


    

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    
      	
               
      

            	
              (c)

            	
              The
      provisions of this Agreement are reasonable and necessary for the
      protection of the business of the
Company.

            


    

    


    4.2.
Executive agrees that he will not at any time, either during the term of this
Agreement or thereafter, divulge to any person or entity any Confidential
Information obtained or learned by him/her as a result of his/her employment
with the Company, except (i) in the course of performing his/her duties
hereunder, (ii) to the extent that any such information is in the public domain
other than as a result of Executive's breach of any of his/her obligations
hereunder, (iii) where required to be disclosed by court order, subpoena or
other government process or (iv) if such disclosure is made without Executive's
knowing intent to cause material harm to the Company. If Executive shall be
required to make disclosure pursuant to the provisions of clause (iii) of the
preceding sentence, Executive promptly, but in no event more than 72 hours after
learning of such subpoena, court order, or other government process, shall
notify, by personal delivery or by electronic means, confirmed by mail, the
Company and, at the Company's expense, Executive shall: (a) take reasonably
necessary and lawful steps required by the Company to defend against the
enforcement of such subpoena, court order or other government process, and (b)
permit the Company to intervene and participate with counsel of its choice in
any proceeding relating to the enforcement thereof.

    


    4.3. Upon
termination of his employment with the Company, Executive will promptly deliver
to the Company all memoranda, notes, records, reports, manuals, drawings,
blue-prints and other documents (and all copies thereof) relating to the
business of the Company and all property associated therewith, which he may then
possess or have under his control;

    


    4.4.
During the period of employment: (A) Executive, without the prior written
permission of the Company, shall not, anywhere in the People’s Republic of
China, (i) enter into any employment agreement of or render any services to any
person, firm or corporation engaged in any business which is directly in
competition with the Company's principal existing business at the time of
termination ("Competitive Business"); (ii) engage in any Competitive Business as
an individual, partner, shareholder, creditor, director, officer, principal,
agent, employee, trustee consultant, advisor or in any other relationship or
capacity; (iv) employ, or have or cause any other person or entity to employ,
any person who was employed by the Company at the time of termination of
Executive's employment by the Company (other than Executive's personal secretary
and assistant); or (v) solicit, interfere with, or endeavour to entice away from
the Company, for the benefit of a Competitive Business, any of its customers.
Notwithstanding the foregoing, in the event the Company terminates this
Agreement without "cause" or if Executive terminates this Agreement for Good
Reason under Article 3.5 hereof, Executive's obligations under this Article 4.4
shall terminate one month following termination.

     

    4.5. If
Executive commits a breach of any of the provisions of Articles 4.2 or 4.4, the
Company shall have the right to have the provisions of this Agreement
specifically enforced by any court having jurisdiction, it being acknowledged
and agreed by Executive that the services being rendered hereunder to the
Company are of a special, unique and extraordinary character and that any breach
or threatened breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    5.
Rewards and Penalties

    


    5.1
Executives should abide by the provisions of the company law including
attendance management system, various rules and regulations. The Executive shall
keep his Personal phone open 24 hours per day, ensure unblocked communication at
any time, and maintain effective communication with business contactor and
overseas investors. Otherwise, the Executive will be punished pursuant to
regulations of the Company. Meanwhile, the Chief Executive Officer would report
to the company chairman directly.

    


    5.2.
Without written consent of the Company, Executive shall not accept money, gift
or any other kinds of benefits from any customer, collaborating company or other
related company.

    


    5.3.
Executive shall serve the Company faithfully and competently during the term of
employment, and shall not engage in any other job during the term of
employment.

    


    5.4. The
Company shall impose penalties on Executive pursuant to regulations of the
Company, if Executive violates the Company’s rules or regulations.

    


    6.
Liability for Breach

    


    6.1 If
either Party to this Agreement is under any of the following circumstances, such
Party shall be liable for breach of the Agreement:

    


    
      	
               
      

            	
              (a)

            	
              The
      Company violates the provisions of this Agreement and unilaterally
      rescinds this Agreement, unless otherwise provided by this
      Agreement;

            


    

    
      	
               
      

            	
              (b)

            	
              The
      EXECUTIVE resigns without the Company’s
consent.

            


    

    


    6.2.
Either Party in breach of this Agreement shall pay the other Party liquidated
damages.  The standard liquidated damages shall be equal to twice of
the salary Executive has actually received in the month prior to the date of the
breach.

    


    6.3. If
the liquidated damages provided for under the foregoing Article 6.2 is not
enough to cover the losses of the other Party, then the breaching Party shall
compensate the other Party for the actual losses caused by the
breach.

    


    6.4.
Executive warrants (1) that all the relevant information he provides to the
Company, including without limitations his/her identification, address, academic
credentials, work experiences and professional skills are true; (2) that, by
working for the Company and by entering into this Agreement with the Company,
Executive does not violate any agreement on confidentiality or non-competition
entered into with his/her previous employer or any other company or
individual.  If Executive breaches this warranty, the Company has the
right to rescind this Agreement and demand that Executive compensate the Company
for any losses due to the breach.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    7.
Miscellaneous Provisions.

    


    7.1. All
notices provided for in this Agreement shall be in writing, and shall be
deemed to
have been duly given when delivered personally to the party to receive the same,
when transmitted by electronic means, or when mailed first class postage
prepared, by certified mail, return receipt requested, addressed to the party to
receive the same at his/her or its address set forth below, or such other
address as the party to receive the same shall have specified by written notice
given in the manner provided for in this Article 7.1. All notices shall be
deemed to have been given as of the date of personal delivery, transmittal or
mailing thereof.

    


    
      	
               
      

            	
              If
      to Executive:

            	
              Address
      for: Room 102, Rongyuan, Maple New City, Hi-tech Zone, Xi’an
      710065

            


    

    


    
      	
            	
              If
      to the Company:

            	
              Address
      for: 19th
      Building B Van Metropolis, Tang Yan Road, Hi-tech Zone, Xi'an
      710065

            


    

    


    7.2. In
the event of any claims, litigation or other proceedings arising under this
Agreement (including, among others, arbitration under Article 3.4), the
Executive shall be reimbursed by the Company within thirty (30) days after
delivery to the Company of statements for the costs incurred by the Executive in
connection with the analysis, defense and prosecution thereof, including
reasonable attorneys' fees and expenses; provided, however, that Executive shall
reimburse the Company for all such costs if it is determined by a non-appealable
final decision of a court of law that the Executive shall have acted in bad
faith with the intent to cause material damage to the Company in connection with
any such claim, litigation or proceeding.

    


    7.3. The
Company shall, to the fullest extent permitted by law, indemnify Executive
for any liability, damages, losses, costs and expenses arising out of alleged or
actual claims (collectively, "Claims") made against Executive for any actions or
omissions as an officer and/or director of the Company or its subsidiary. To the
extent that the Company obtains director and officers insurance coverage for any
period in which Executive was an officer, director or consultant to the Company,
Executive shall be a named insured and shall be entitled to coverage
thereunder.

    


    7.4. All
questions with respect to the construction of this Agreement, and the rights and
obligations of the parties hereunder, shall be determined in accordance with the
law of China applicable to agreements made and to be performed entirely in
Xi'an, China.

    


    Signature
Page Follows


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.

     

    
      
        
          
            
              
                
                  	 
      	
                          By:

                        	 
      
	 
      	 
      	
                          China
      Natural Gas, Inc.

                        
	 
      	 
      	 
      
	 
      	
                          By:

                        	  
      
	 
      	 
      	
                          Qinan
      Ji