Employment
Agreement





This
EMPLOYMENT AGREEMENT (“Agreement”) is dated on May 1, 2009 between Veronica J.
Chen (the “Executive”), a citizen of China, ID number 120106196601157029, 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, PRC.





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





WHEREAS,
the Company and the Executive have reached the following understanding with
respect to the Executive's employment by the Company for a period of one year
commencing on  May 1, 2009; and





WHEREAS,
the Company and the Executive desire to evidence their agreement in writing and
to retain the Executive by the Company on terms set forth herein.





1.
Employment, Duties and Acceptance.





1.1.
            Effective
      as of May 1, 2009, the Company hereby agrees to the employment of the
      Executive as the Chief Financial Officer ("CFO") and both parties hereby
      accept such employment on the terms and conditions contained in this
      Agreement. During the term of this Agreement, the Executive shall devote
      herself to the business of the Company and she is subject to the
      supervision and direction of the Board of Directors of the Company
      ("Board" or "Board of Directors").





1.2.
            The
      Company retains the Executive to serve as the Company’s full time CFO. The
      scope of work and responsibilities of the CFO include the
      following:





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





(b)
              To
      provide accurate information on the financial resources, obligations and
      current activities of the Company to the relevant external parties,
      including banks, funds, and
investors;





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





(d)
              To
      establish a strong financial system and strict internal control
      procedure;




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(e)
              To
      supervise all financial activities to ensure their compliance with law and
      the Company’s policy;





(f)
              To
      be responsible for quality and timely filing of accurate US GAAP financial
      reports;





(g)
              To
      establish and direct a mechanism to timely solve financial
      problems;





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





(i)
              To
      be responsible for the Company’s financial
  planning;





(j)
              To
      participate in business development and strategic
  planning;





(k)
              To
      recommend investment policies, implement investment strategies based on
      approved investment guidelines, and to manage investment
      transactions;





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





(m)
              To
      provide comments to the Executive Management Team and the Board of
      Directors on financial issues of the
Company;





(n)
              To
      actively aware of the changing rules and regulations in the US and
      China;





(o)
              Other
      responsibilities stipulated by the Board of
  Directors.





Meanwhile,
the CFO is the primary resource of the Chief Executive Officer (“CEO”) and
department directors with respect to strategies and operations, and will be
responsible for the Company’s financial management and planning, including the
following: (1) Company strategy; (2) financial strategy; (3) budget and
management control; and (4) financial management.





Company
strategy





CFO shall
play a major role in coordinating 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, Executive should
repeatedly research reasons and possibilities related to changes in the
Company’s operations and provide external references for value creation (such as
some business of value to other possible owner);




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3. Advise the CEO and department
directors regarding major proposals;




4. Formulate criteria for financial
control 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 and financial evaluations regarding specific
proposals.





Financial
Strategy




CFO shall
be responsible for the formulation and implementation of comprehensive financial
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;




(3)
              Negotiate
      major financial transactions, including loans, stock offerings and
      buybacks;




Budget
and Management Control




CFO shall
formulate and implement a program to ensure the management obtains correct
information for goal setting, decision making and operation
supervising:




(1)
            Coordinates
      short-term budget compilation.




(2)
            Evaluate
      main performance standards of each business
  unit.




(3)
            Ensure
      business units are properly
authorized;




(4)
              Assess
      performance of business units with CEO and department directors of the
      performance evaluation of business
unit.




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.Financial
Management




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




(1)         Ensure
timely reporting and effective compliance;




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




(3)         Ensure
effective and efficient management of cash / accounts receivables / accounts
payable;




(4)         Perform
all tax reporting and tax obligations;




(5)         Seek
opportunities to reduce the tax burden;




(6)         Maintaining
close relationship with the Company’s banks;




(7)         
Risk management and plan of the Company.




CFO shall
be responsible for maintaining and management of important external relations,
including:




1.
Financial institutions (Banks and investment Banks)




2.
External auditors.




3.
Supervising authorities and tax authorities.




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




1.4
Working times: Except during periods of quarterly and annual filings with
Securities and Exchange Commission (“SEC”), CFO shall spend half of his / her
time in the Xi’an headquarter and half at the Company’s subsidiary in
Beijing.




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 the Executive's position as CFO of the Company.





2.
Compensation and Benefits.




2.1. The
Company shall pay to the Executive a salary of RMB 650,000 pre-tax annually
which equal to monthly salary of RMB 54,166. According to relevant provisions of
the Company, 80% of the salary (RMB 43,333) is paid monthly and the remaining
20% (RMB 10,833 monthly / RMB 129,996) is paid one time after the Executive
serves the Company for one year. Salary of the Executive consist of three parts:
base salary, housing, and transportation. Each month, RMB 34,166 is paid as base
salary; since the Executive resides in Tianjin, Company shall provide housing
and business vehicle for the Executive which represents RMB 20,000 each month.
There is a three-month probation period for the Executive. During the probation
period, the Company shall pay the Executive a monthly salary of RMB 34,666.
During the probation period, if not informed by written notice, monthly salary
is paid on the 20th of next
month. If the payment date coincides with a holiday, the salary will be paid on
the first business day after the holiday.




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Since the
Executive works in Beijing for half of his / her employment period, the
Executive shall be entitled to at least six round-trip air tickets from Xi’an to
Beijing, excluding business trips. Besides holidays and vacations, the Executive
shall work in the Company’s Beijing subsidiary with the traveling day be deemed
a working day.




The
Company shall provide the Executive with health insurance in Beijing or Xi’an.
Other benefits the Executive is entitled to will be determined according to
relevant policies of the Company.




The
Executive is entitled to options to purchase 150,000 shares of common stock of
the Company vested in four years, representing approximately 0.514% 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 ESOP (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. In
addition to what is provided for under the foregoing Article 2.2, the Company
shall have the right to deduct from the Executive's 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 for a period
of    1   years beginning
on   May 1, 2009 and terminating
on     APRIL 30, 2010.


3.2 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.





3.3. The
Company, by notice to the Executive, may terminate this Agreement
for  cause. As used herein, "cause" shall include (a) the refusal in
bad faith by the Executive to


carry out
specific written directions of the Board, (b) intentional fraud or dishonest
action by the Executive in his/her relations with the Company ("dishonest" for
these purposes shall mean the Executive's knowingly making of a material
misstatement to the Board for the purpose of obtaining direct personal benefit);
or (c) the conviction of the 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 the Executive.


Notwithstanding
the foregoing, no "cause" for termination shall be deemed to exist with respect
to the Executive's acts described in clause (a)or (b) above, unless the Board
shall have given written notice to the Executive (after five (5)days advance
written notice to the Executive and a reasonable opportunity to the Executive to
present his/her views with respect to the existence of "cause"), specifying the
"cause" with particularity and , within twenty (20) business days after such
notice, the 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.




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3.4. The
Executive, by notice to the Company, may terminate this Agreement in writing no
less than 3 months 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 the Executive's title, duties or
      responsibilities with the Company that represents a demotion from his/her
      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 the 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 the 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 the 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
the  Executive.




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4.
Protection of Confidential Information; Non-Competition.


4.1. The
Executive acknowledges that:





(a)
              As
      a result of his/her current employment with the Company, the 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, the 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. The
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 the
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 the Executive's knowing intent to cause material
harm to the Company. If the Executive shall be required to make disclosure
pursuant to the provisions of clause (iii) of the preceding sentence, the
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, the 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/her employment with the Company, the 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/her control;





4.4.
During the period of employment: (A) the Executive, without the prior written
permission of the Company, shall not, anywhere in the People’s Republic of
China, (i) enter into the employ 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 the Executive's employment by the
Company (other than the Executive's personal secretary and assistant); or (v)
solicit, interfere with, or endeavor 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 the Executive terminates this Agreement for Good Reason under Article 3.5
hereof, the Executive's obligations under this Article 4.4 shall terminate one
month following termination.




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4.5. If
the 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 equity jurisdiction, it being
acknowledged and agreed by the 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 The
Executive should abide by the provisions of the company law includes attendance
management system, various rules and regulations, and in accordance with the
relevant provisions of the company card timing. Personal phone will remain open
24 hours, ensure unblocked communication at any time, maintain effective
communication with overseas investors, Otherwise, the company will be in
accordance with the relevant system for punishment, Meanwhile, the chief
financial officer of the company chairman for reporting directly.





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





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





5.4. The
Company shall impose penalties on the Executive pursuant to regulations of the
Company, if the 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, the
Party shall be liable for breach of the Agreement:




8




(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. The
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,
the 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 the Executive breaches this warranty, the Company
has the right to rescind this Agreement and demand that the 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 the
Executive:  Address: Room 603, Unit 3, Building 2, Architecture
Science Academe, Peace Street, Zhaoyang District, Beijing 100013





If to the
Company:   Address: 19th
Building B Van Metropolis, Tang Yan Road, Hi-tech Zone, Xian





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 the 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.




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7.3. The
Company, shall to the fullest extent permitted by law, indemnify the Executive
for any liability, damages, losses, costs and expenses arising out of alleged or
actual claims (collectively, "Claims") made against the 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 officer's
insurance coverage for any period in which the Executive was an officer,
director or consultant to the Company, the 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
China.





7.5 This
Agreement is unenforceable in some terms of legal force, by which no other terms
in this agreement will be affected, the agreement will continue to be executed,
as there is no provision of the agreement shall not force has been carried
out.





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




By:
      Qinan JiCEO of China Natural Gas Inc.BY:
      Veronica Chenjing




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