Unassociated Document


    


    Equity
Transfer Agreement

    


    This
Agreement is entered by and between the Transferor and the Transferee
in   on the
day of March 8, 2010.

    


    Transferor:

    


      Tang
Zhixiang (ID No._______________)

    


    Transferee:

    


    China New
Energy Group Company

    


    Authorized
Representative:

    


    ID
No.:

    


     (Transferor
and the Transferee shall hereinafter be referred to individually as the "Party"
and collectively as the "Parties".)

    


    Target
Company:

    


    Beijing
Century Dadi Gas Engineering Co., Ltd.  (hereinafter referred to as
“CENTURY DADI” or the “Target Company”), a limited company established and
existing under the laws of China, with its registered address at
[        Huairou District, Beijing],
with its legal representative of [Tang Zhixiang].


    


    
      
        
           


        

        
          1

          
            

          

        

        
           


        

      

    

    


    Whereas:

    


    1)The shareholding
structure of the Target Company is as follows:

     

    
      	
                 Name

            	 	
              Percentage
      of Equity 

              Holding(%)

            
	
              Beijing
      Dadi Gas Engineering Co., Ltd.

            	 	
              20%

            
	
               Tang
      Zhixiang (Transferor)

            	 	
              28.16%

            
	
               Gao
      Chao

            	 	
              3.55%

            
	
               Tang
      Jianguo

            	 	
              3.89%

            
	
               Zhou
      Donglai

            	 	
              2.4%

            
	
               Xie
      Aifeng

            	 	
              2.1%

            
	
               Fang
      Xueqing

            	 	
              5.86%

            
	
               Cao
      Jianqiang

            	 	
              3.72%

            
	
               Feng
      Chunming

            	 	
              3.57%

            
	
               Wang
      Zhihai

            	 	
              3.54%

            
	
               Other
      individuals (18 persons)

            	 	
              23.20%

            
	
               Total

            	 	
              100%

            


    

     

    2)The Transferor is
the actual controller of the Target Company and subsidiary companies
wholly-owned, controlled, equity affiliates of Target Company (“the Target
Company and subsidiary companies wholly-owned, controlled, equity affiliates of
Target Company” only referred to the companies listed in Annex I List of Target Company,
Subsidiary Companies wholly-owned, controlled, equity affiliates of Target
Company and Subsidiary Companies wholly-owned, controlled of DADI GAS); The
Transferor is the actual controller of Beijing Dadi Gas Engineering Co., Ltd.
(hereinafter referred to as “DADI GAS”) and its subsidiary companies
wholly-owned, controlled (“Subsidiary Companies wholly-owned, controlled of DADI
GAS” only referred to the companies listed specified in Annex I List of Target Company,
Subsidiary Companies wholly-owned, controlled, equity affiliates of Target
Company and Subsidiary Companies wholly-owned, controlled of DADI
GAS)

    


    3)The Transferor
undertakes that after the execution of this Agreement he will increase his
equity holding of the Target Company by purchasing the equity. By such equity
purchase he will hold no less than 70% equity of the Target
Company.

    


    4)The Transferee
agrees that after such Transferor’s equity increase, the Transferee will
purchase 70% equity of the Target Company from the Transferor.

     

    
      
        
           


        

        
          2

          
            

          

        

        
           


        

      

    

     

    5)The Transferee
will consider entrusting the Transferor to purchase the equity of the Target
Company and its subsidiary companies controlled, equity affiliates which are not
held by the Transferor at some suitable time. Both parties agree that the
payment will be made in a form of stock and relevant issues (including but not
limited to the price of stock and realization) in connection with the purchase
of outstanding equity are to be agreed by both
parties.  .

    


    6)The Transferor
undertakes that the Transferee and the Target Company may use all resources of
DADI GAS
(including but not limited to qualifications).

    


    7)Target Company,
Subsidiary Companies wholly-owned, controlled, equity affiliates of Target
Company and Subsidiary Companies wholly-owned, controlled of DADI GAS intend to
invest projects listed in Annex V.

    


    8)The Transferor
provides the separate and consolidated financial statements (including balance
sheet and income statement) of Target Company, Subsidiary Companies
wholly-owned, controlled, equity affiliates of Target Company; and the separate
financial statements (including balance sheet and income statement) respectively
of Subsidiary Companies wholly-owned, controlled of DADI GAS, as indicated in
Annex VI.

    


    


    
      
        
           


        

        
          3

          
            

          

        

        
           


        

      

    

     

    Pursuant
to the Company Law of the
People's Republic of China and Contract Law of the People's
Republic of China and other applicable laws and regulations the
Transferor and the Transferee, after friendly consultations, conclude this
Agreement regarding the equity transfer as follows:

    


    1.
Transferred Equity

    


    1.1 The
Transferor agrees that after the execution of this Agreement he will increase
his equity holding of the Target Company by purchasing the equity. By such
equity purchase he will hold no less than 70% equity (hereinafter collectively
referred to as "Transferred Equity") of the Target Company. The Transferor
agrees to sell 70% equity interest of the Target Company held by him to the
Transferee.

    


    1.2 The
Transferee agrees to purchase the equity interest of the Target Company held by
the Transferor after its equity increase aforesaid from the Transferor, namely
70% equity interest of the Target Company.

    


    1.3 After
the transfer of equity the Transferee will enjoy the shareholder's rights, and
undertake obligations and responsibilities of shareholder in accordance with
applicable China laws and the provisions of the Articles of Association of the
Target Company.

    


    
      2.
Principles
of Transfer of Equity

    

    


    2.1 The
Parties agree that the respective obligations of the Parties to effect the sale
and purchase of the Transferred Equity and the Completion shall comply with the
following principles:

    


    (1)that all necessary
permissions, instructions, consents, licenses, approval or authorization of any governmental
authority, bureau, agency or other body required in connection with the
legality, validity or enforceability of the sale and purchase of the Transferred
Equity have been obtained or made;

     

    
      
        
           


        

        
          4

          
            

          

        

        
           


        

      

    

     

    (2)that all necessary
procedures, formalities and steps and regulatory requirements relating to the
sale and purchase of the Transferred Equity have been completed or complied
with;

    


    (3)that this transfer
of equity shall not result in the deprivation of operating right of Urban Gas
Pipeline Project of the Target Company and its subsidiary companies
wholly-owned, controlled, equity affiliates, DADI GAS and its subsidiary
companies wholly-owned, controlled (specified list in Annex I List of Target Company,
Subsidiary Companies wholly-owned, controlled, equity affiliates of Target
Company and Subsidiary Companies wholly-owned, controlled of DADI
GAS).

    


    2.2 The
Transferee may at any time in writing waive any of the above principles, and
such waiver may be made subject to such terms and conditions as determined by
the Transferee.

    


    2.3 The
Parties agree that unless otherwise provided in this Agreement, the Transferee
shall be entitled to terminate this Agreement unilaterally without any liability
of breach of this Agreement if some or all of the principles have not been
complied with before the completion of the transfer. In the event of such
termination by the Transferee, Deposit together with any installments of the
purchase price previously paid shall be returned to the Transferee and the
Transferee is entitled to a penalty of 10 million RMB. If the penalty can not
cover the damages or losses suffered by the Transferee hereby, the Transferor
shall compensate the shortfall of such losses of the Transferee. If the
Transferee suffers from damages or losses hereby, the Transferor shall
compensation such losses to the Transferee.

    


    3. Arrangement of Transaction
Deposit

    


    3.1 Both
the Transferee and the Transferor mutually agree that the Parties will open a
mutual managed bank account within 10 working days after the execution of this
Agreement. Transferee shall pay RMB10,000,000.00 to the mutual managed bank
account within 15 working days after the execution of this Agreement as the
Transaction Deposit.

     

    
      
        
           


        

        
          5

          
            

          

        

        
           


        

      

    

    


    3.2 With
respect to the Transaction Deposit aforesaid, both Transferee and Transferor
mutually agree that,

    


    3.2.1 in
the case when the Transferee making the first installment payment to the
Transferor pursuant to this Agreement, the aforesaid Transaction Deposit and the
relating interest of bank deposit shall be converted into the entire or partial
first installment payment which shall be paid by Transferee to Transferor. The
part of which exceeding the first installment payment (if any) shall be remained
in mutual managed bank account. When the Transferee making the second
installment payment to the Transferor pursuant to this Agreement, such remaining
Transaction Deposit and the relating interest of bank deposit shall be converted
into the entire or partial second installment payment which shall be paid by
Transferee to Transferor;

    


    3.2.2
before the entire Transaction Deposit is converted to the Consideration which
shall be paid to the Transferor by the Transferee pursuant to this Agreement, in
the case when the Parties or either party terminate this Agreement pursuant to
the provisions of this Agreement, the aforesaid Transaction Deposit and the
relating interest of bank deposit shall be refunded without any delay to the
bank account appointed by Transferee. The aforesaid Transaction Deposit
refunding shall be completed within 3 working days upon the termination of this
Agreement;

    


    3.2.3
before the entire Transaction Deposit is converted to the Consideration which
shall be paid to the Transferor by the Transferee pursuant to this Agreement, in
the case when Transferee violates this Agreement, after the amount of penalty
which shall be imposed by Transferee as set forth in Section
4.2.1  and Section 9.8 is deducted from the Transaction Deposit and
the relating interest of bank deposit, when this Agreement is not terminated due
to such violation, the remaining amount shall be continuously converted to the
Consideration which shall be paid to the Transferor by the Transferee pursuant
to this Agreement; when this Agreement is terminated due to such violation, the
remaining amount shall be refunded without any delay to the bank account
appointed by Transferee. The aforesaid Transaction Deposit refunding shall be
completed within 3 working days upon the termination of this Agreement;
and

    


    


    
      
        
           


        

        
          6

          
            

          

        

        
           


        

      

    

    


    3.2.4
before the entire Transaction Deposit is converted to the Consideration which
shall be paid to the Transferor by the Transferee pursuant to this Agreement,
unless otherwise provided under this Agreement, in the case when Transferor
terminates this Agreement without the consent of Transferee, Transferor shall
coordinate Transferee to refund the Transaction Deposit and the relating
interest of bank deposit to the bank account appointed by Transferee without any
delay. The aforesaid Transaction Deposit refunding shall be completed within 3
working days upon the termination of this Agreement. In addition, Transferor
shall be subject to the liabilities and penalties for of breach according the
provisions of this Agreement.

    


    4.
Consideration and Payment Schedule

    


    4.1 The
Parties agree that the consideration of 70% equity of the Target Company
(hereinafter referred to as the "Consideration") shall be: [ · ] times actual
Net Profits for the fiscal year ended December 31, 2009 of the Target Company
and subsidiary companies wholly-owned, controlled, equity affiliates of Target
Company, as determined in accordance with U.S. Generally Accepted Accounting
Principles, consistently applied; provided, however, that in no event shall the
Consideration be greater than RMB 392,150,000
Yuan. The Consideration paid in RMB in China or equivalent US dollar overseas by
installments.

     

    
      
        
           


        

        
          7

          
            

          

        

        
           


        

      

    

    


    4.1.1
“Net Profits”
referred in Section 4.1 means the net profits indicated in the consolidated
financial statement of the Target Company based on the day of December 31, 2009
and confirmed by the accountants or auditors of Transferee or appointed by
Transferee under the condition that all the subsidiary companies wholly-owned,
controlled of DADI GAS listed in Annex I are considered as the subsidiary
companies wholly-owned, controlled of the Target Company with the same equity
proportion of the Target Company respectively.

    


     4.1.2
The Parties further agree that aforesaid Consideration shall be deducted in
accordance with the findings of the situations of assets, liabilities, the
qualifications obtained and etc. of the Target Company and subsidiary companies
wholly-owned, controlled of Target Company and subsidiary companies
wholly-owned, controlled of DADI GAS during the due diligence investigations and
audit by the Transferee.

    


    
       (1) If
the actual assets and liabilities vary from the management assets and
liabilities, the corresponding variance shall be deducted;

    

    


    (2)The money paid on
the purpose of solving or remedy the problems found in the due diligence and
audit shall be deduced from the Consideration;

    


    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (3)In the event that
there is any problem found in the due diligence and audit which cannot be solved
or remedied, the amount of deduction from the Consideration shall be confirmed
by the Parties in accordance with the specific situation.

    


    4.1.3 The
aforesaid deduction of the Consideration shall be confirmed by the Parties
before the Transferee’s payment of first installment or second installment
respectively. In the event that the Parties cannot reach a mutual agreement on
the issue of such deduction of the Consideration within 15 days after the
Transferee’s written notice on this issue to the Transferor, the Transferee is
entitled to terminate this Agreement and require the Transferor to refund any
payment paid by the Transferee (including but not limited to, Transaction
Deposit, payment of Consideration, etc.). The Transferee is entitled to a
penalty of RMB 10 million as well. If the penalty can not cover the damages or
losses suffered by the Transferee hereby, the Transferor shall compensate the
shortfall of such losses of the Transferee..

    


    The
Parties agree that, notwithstanding the provisions of Section 4.2 of this
Agreement, before the Parties reach the mutual agreement on the issue of such
deduction of the Consideration, the Transferee is entitled to hold any payment
to the Transferor without any liabilities of breach until the Parties reach the
mutual agreement on such issue of deduction of the
Consideration.


     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    4.2
Payment Schedule

    


    The
Parties agree that the Consideration shall be paid according to the following
Payment Schedule:

    


    4.2.1 The
amount of the first installment is 50% of the Consideration. The Transferee
shall make the first installment payment to the Transferor within 10 working days after
the satisfaction of following payment preconditions. At this time, the “actual
Net Profits for the fiscal year ended December 31, 2009 of the Target Company
and subsidiary companies wholly-owned, controlled, equity affiliates of Target
Company, as determined in accordance with U.S. Generally Accepted Accounting
Principles, consistently applied” shall be temporarily be replaced by “actual
Net Profits for the fiscal year ended December 31, 2009 of the Target Company
and subsidiary companies wholly-owned, controlled, equity affiliates of Target
Company, as determined by the due diligence”.

    


    (1)
Transferor owns 70% equity of the Target Company by purchasing equity and has
completed the corresponding alteration of AIC registration, namely after such
alteration the Transferee shall hold 70% equity of the Target
Company.;

    


    (2)
Articles of Associations of the Target Company and subsidiaries wholly-owned,
controlled, equity affiliates of Target Company and subsidiary companies
wholly-owned, controlled of DADI GAS shall satisfy that: (i) resolutions of the
shareholders’ meeting with respect to decision of amending the articles of the
association of the company, increasing or decreasing the registered capital, and
merge, split, dissolution or alteration of the company form, shall be passed by
the shareholders which represent two-thirds of the approving votes; and (ii) the
Transferor has the right to appoint all the directors of the Target Company and
in the case when the Transferor transfer its 70% equity of the Target Company,
such right of director appointment shall be still be valid to the transferee of
such equity. Futher more, any alteration of the category of the Target Company
shall not affect such right of director appointment.

     

    
      
        
           


        

        
          10

          
            

          

        

        
           


        

      

    

     

    (3)
Transferor obtains a written commitment in which the shareholders who hold
outstanding 30% equity of the Target Company waive the right to appoint any
member in the Broad of the Target Company after this Transfer;

    


    (4)
During the due diligence investigation of the Transferee, the Transferor has
provided entire materials of the Target Companies and subsidiary companies
wholly-owned, controlled, equity affiliates of Target Company and the subsidiary
companies wholly-owned, controlled of DADI GAS which are true, accurate and
sufficient and necessary to the investigation to the Transferee.

    


    (5) The
accounting firm, law firm, the engineering designing institute and evaluation
entity appointed by the Transferee has made due diligence investigation on site
of the Target Company and subsidiary companies wholly-owned, controlled, equity
affiliates of Target Company and subsidiary companies wholly-owned, controlled
of DADI GAS which are specified in Annex I and provided relevant opinions or
reports to the Transferee after investigation;

    


    (6) This
Equity Transfer is approved by the board of directors of the
Transferee.

    


    The
Transferor shall submit original certificate or documents on satisfaction of
above conditions after obtained. After the Transferee has received all the
certificates and documents and the Transferee’s satisfaction on precondition (5)
and (6) above-mentioned, the Transferee shall issue a written confirmation
immediately. The day on which such written confirmation is issued is the
satisfaction day of such payment precondition. Notwithstanding aforesaid, unless
the above-mentioned precondition (5) and (6) cannot be satisfied by the
Transferee, the Transferee shall not refuse to issue the written confirmation
unreasonably when such certificates and documents submitted by the Transferor
are true, necessary and sufficient.  Above-mentioned payment
preconditions shall be satisfied or fulfilled within 3 months after the
execution of this Agreement. Otherwise the Transferee is entitled to take any of
the following action:

    


    i.  terminate
this Agreement, have the Deposit returned and require the Transferor to pay the
Transferee RMB10,000,000 Yuan as penalty.


    


    
      
        
           


        

        
          11

          
            

          

        

        
           


        

      

    

     

    ii.  deduct
RMB10,000,000 Yuan for the failed item from the first installment
payment;

    


    iii.
require the Transferor to make an undertaking on the failed item which is
satisfied by the Transferee and require the Transferor to pay the Transferee no
less than RMB 2,000,000 Yuan as penalty; or

    


    iv. delay
the first installment payment until all the items are satisfied and require the
Transferor to pay the Transferee no less than RMB _3,000,000 Yuan as
penalty.

    


    If the
transferee failed to pay the agreed amount within   10  
days after the date when all the preconditions of first installment are
satisfied while in accordance with this Agreement, the Transferee will be in a
45 days grace period. During the grace period, the Transferee shall pay overdue
penalties at the amount of 1‰ of the amount payable to the Transferors per day.
Transferors may exempt the overdue penalties above mentioned after mutual
consultation. After such grace period expired, if the transferee still failed to
pay the agreed amount in accordance with this Agreement, the Transferee shall
pay overdue penalties at the amount of 1‰ of the amount payable to the
Transferors per day. However, that in no event shall the penalty of the late
payment of first installment payment be greater than RMB 10,000,000
Yuan.


    


    
      
        
           


        

        
          12

          
            

          

        

        
           


        

      

    

     

    4.2.2 The
amount of the second installment is 45% of the Consideration. The Transferee
shall make the second installment payment to the Transferor within 10 working days after
the satisfaction of following payment preconditions. If the first installment is
below or above the 50% of the Consideration, the amount of the second
installment of Consideration shall be adjusted so as to the amount of the first
and second installment reach to 95% of the Consideration.

    


    (1) The
Target Company has carried out necessary internal decision making procedure
according to its Articles of Association and relevant laws and regulations,
including but not limited to obtaining resolutions of Broad of Directors and
Shareholder's Meeting for approving equity transfer;

    


    (2) The
Transferor has completed the alteration of AIC registration for the equity
transfer of the Target Company and subsidiary companies controlled of the Target
Company (during which the Transferee shall provide necessary assistance), namely
after such alteration the Transferee shall hold 70% equity of the Target Company
and the Target Company shall hold no less than 70% equity of subsidiary
companies controlled of the Target Company. All the directors of the Board of
the Target Company after such alteration of AIC registration shall be appointed
by the Transferee. The Target Company has obtained the new Business License and
the business scope of all the Target Company and subsidiary companies
wholly-owned, controlled, equity affiliates of Target Company (including all
subsidiary companies wholly-owned, controlled of DADI GAS listed in Annex I)
(not including Beijing Century Dadi Transportation Ltd., Co.) shall include the
investment, operation, management and services of urban gas
pipeline.

    


    
      
        
           


        

        
          13

          
            

          

        

        
           


        

      

    

     

    (3) The
auditor of Transferee or appointed by Transferee has determined that the
financial records of the Target Company and subsidiaries wholly-owned,
controlled, equity affiliates of Target Company are sufficient such that it may
complete an audit of the financial statements of each Target Company and
subsidiary wholly-owned, controlled, equity affiliates of Target Company and
subsidiary companies wholly-owned, controlled of DADI GAS;

    


    (4) The
Transferor has completed other alteration registration procedures other than AIC
alteration registration for the equity transfer of the Target Companies,
including but not limited to alteration of tax registration, bank and other
procedures that other relevant departments request;

    


    (5) The
Target Company has accomplish the equity purchase of the entire equity of the
subsidiary companies wholly-owned, controlled of DADI GAS listed in Annex I held
by DADI GAS (the purchase price shall be set according to the formula and
principles provided in Section 4.1 of this Agreement) and completed the
corresponding alteration registration of AIC. The Target Company has
accomplished the target of owning no less than 70% equity of each of its
controlled subsidiaries (including the subsidiary companies wholly-owned,
controlled of DADI GAS listed in Annex I) or any other shareholding structure of
such controlled subsidiaries (including the subsidiary companies wholly-owned,
controlled of DADI GAS listed in Annex I) accepted by the Transferee by the
Transferor’s causing the Target Company’ purchasing equity of its controlled
subsidiaries or any other manner accepted by the Transferee and completed the
corresponding alteration registration of AIC (the Transferee shall provide
necessary assistance (if any)). In order to avoid ambiguity, both parties agree
that the consideration of the equity transfer which the Target Company purchase
from DADI GAS
shall be included in the Consideration of this Agreement and the Transferor
shall be in charge of making relevant payment of such consideration of the
equity transfer to DADI GAS and ensure
that there will not be any liability incurred by the Target Company
hereby.


    


    
      
        
           


        

        
          14

          
            

          

        

        
           


        

      

    

     

    (6) The
Transferor and the Target Company   shall assist the Transferee
to inspect and check the fixed assets of the Target Company and subsidiary
companies wholly-owned, controlled, equity affiliates of Target Company
(including the subsidiary companies wholly-owned, controlled of DADI GAS listed
in Annex I);

    


    (7) The
Transferor shall procure the Target Company and subsidiary companies
wholly-owned, controlled, equity affiliates of Target Company (including the
subsidiary companies wholly-owned, controlled of DADI GAS listed in Annex I) to
complete to transfer following materials to the Transferee, including but not
limited to, company stamps, certificates, licenses, government permits and
documents and materials of engineering, finance, human resources and business
contracts of operation of the Target Companies, no matter in writing or in
electronic;

    


    (8)
Completion of the Transfer; and

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    


    (9)
Before the completion of the delivery, Transferor has entered into an agreement
involving all following the contents by and between all the shareholders (other
than the Target Company Transferee and Transferor) of the Target Company and
Subsidiary Companies wholly-owned, controlled of Target Company (including the
subsidiary companies wholly-owned, controlled of DADI GAS listed in Annex
I)

    


    
      	
               
      

            	
              (i)  The
      Transferor undertakes that (A) he will not take part in any day-to-day
      operation and management (including but not limited to, taking the
      position of director, supervisor, senior officer, etc.) (B) waives any
      right to be a Director and agrees to vote his shares for the director
      nominees of the Transferee and (C) waives the first right of refusal (if
      any) to purchase any equity sold by other shareholders of any Target
      Company and Subsidiary Company wholly-owned, controlled, equity affiliates
      of Target Company (including the subsidiary companies wholly-owned,
      controlled of DADI GAS listed in Annex I) any more. Transferor shall only
      have the rights to enjoy the dividends and vote for the resolution of
      shareholder’s meeting according to his equity proportion;
    and

            


    

    


    
      	
               
      

            	
              (ii)
      Other shareholders (other than the Target Company Transferee and
      Transferor) of the Target Company and Subsidiary Companies wholly-owned,
      controlled of Target Company (including the subsidiary companies
      wholly-owned, controlled of DADI GAS listed in Annex
      I)  undertake that after the Transferee completed the Equity
      Transfer (A) they will not take part in any day-to-day operation and
      management (including but not limited to, take the position of director,
      supervisor, senior officer, etc.) (B) waives any right to be a Director
      and agrees to vote his shares for the director nominees of the Transferee
      and (C) waives have the first right of refusal (if any) to purchase any
      equity sold by other shareholders of any Target Companies and Subsidiary
      Companies wholly-owned, controlled of Target Company (including the
      subsidiary companies wholly-owned, controlled of DADI GAS listed in Annex
      I) any more. Such other shareholders shall only have the rights to enjoy
      the dividends and vote for the resolution of shareholder’s meeting
      according to their equity
proportion.

            


    

     

    
      
        
           


        

        
          16

          
            

          

        

        
           


        

      

    

     

    The
Transferor shall submit original certificates or documents on satisfaction of
above conditions after obtained. After the Transferee has received all the
certificates and documents, the Transferee shall issue a written confirmation
immediately. The day on which such written confirmation is issued is the
satisfaction day of such payment precondition. Notwithstanding aforesaid, the
Transferee shall not refuse to issue the written confirmation unreasonably when
such certificates and documents submitted by the Transferor are true, necessary
and sufficient.  Above-mentioned payment preconditions shall be
satisfied or fulfilled within 6 weeks after the payment of first installment of
the Consideration. Otherwise the Transferee is entitled to take any of the
following action:

    


    i.
terminate this Agreement and require the Transferor to pay the Transferee RMB
10,000,000 Yuan as penalty.

    


    ii.
deduct RMB_10,000,000_ Yuan for the failed item from the second installment
payment;

    


    iii.
require the Transferor to make an undertaking on the failed item which is
satisfied by the Transferee and require the Transferor to pay the Transferee no
less than RMB 2,000,000 Yuan as penalty; or

    


    iv. delay
the second installment payment until all the items are satisfied and require the
Transferor to pay the Transferee no less than RMB _3,000,000 Yuan as
penalty.

     

    
      
        
           


        

        
          17

          
            

          

        

        
           


        

      

    

     

    If the
transferee failed to pay the agreed amount within   10  
days after the date when all the preconditions of second installment are
satisfied while in accordance with this Agreement, the Transferee will be in a
45 days grace period. During the grace period, the Transferee shall pay overdue
penalties at the amount of 1‰ of the amount payable to the Transferors per day.
Transferors may exempt the overdue penalties above mentioned after mutual
consultation. After such grace period expired, if the transferee still failed to
pay the agreed amount in accordance with this Agreement, the Transferee shall
pay overdue penalties at the amount of 1‰ of the amount payable to the
Transferors per day. However, that in no event shall the penalty of the late
payment of second installment payment be greater than RMB 10,000,000
Yuan.

    


    4.2.3  The
amount of the third installment is 5% of the Consideration. For the purpose of
smoothly transition and stable operating of the Target Company, the third
installment shall be considered as the reserved payment of this transaction and
will be paid to the Transferor within 10 days after the expiration of 12 months
period after the Completion of the Transaction under the condition that the
Transferor are free of any liabilities.

    


    
      
        	
              	
                (i) 

              	
                 If
      the transferee failed to pay the agreed amount within 10 days in
      accordance with this Agreement, the Transferee will be in a 45 days grace
      period. During the grace period, the Transferee shall pay overdue
      penalties at the amount of 1‰ of the amount payable to the Transferors per
      day. Transferors may exempt the overdue penalties above mentioned after
      mutual consultation. After such grace period expired, if the transferee
      still failed to pay the agreed amount in accordance with this Agreement,
      the Transferee shall pay overdue penalties at the amount of 1‰ of the
      amount payable to the Transferors per day. However, that in no event shall
      the penalty of the late payment of third installment payment be greater
      than RMB
      10,000,000 Yuan.

              


      

    

     

    
      
        
           


        

        
          18

          
            

          

        

        
           


        

      

    

     

    
      
        	
              	
                (ii)

              	
                The
      third installment payment shall be paid by the Transferee to a mutual
      management bank account opened under the name of the Transferor. Within 3
      years after the payment arriving at the mutual management bank account, in
      the event that the Transferor breaches any provisions of this Agreement,
      the Transferee is entitled to require to transfer the penalty in such
      mutual management bank account to the bank account appointed by the
      Transferee. If it is not sufficient, the Transferor shall pay the
      outstanding penalty to the Transferee immediately. In the event that the
      Transferor does not breach this Agreement or has already complete the
      remedy (including but not limited to payment of the penalty of breaching)
      of its breach of this Agreement, the Transferee shall withdraw its
      management of such mutual management bank account after the expiration of
      such period of 3 years.

              


      

    

    


    4.3 The
Transferor agree that when the Transferee makes payment to the Transferor, the
Transferee is entitled to deduct any of the remaining payables (if any) owed by
the Transferor on its own discretion without any prior consent of the
Transferor.

    


    4.4 The
Transferee agrees that, except as otherwise provided in this Agreement, when
making the payment of the consideration to the Transferor, the Transferee will
make the payment to the bank account instructed by the Transferor. The
Transferor agrees that, such payment following the Transferor’s payment
instruction shall be considered as the payment to the Transferor.

     

    
      
        
           


        

        
          19

          
            

          

        

        
           


        

      

    

     

    5.
Business Operation before the Completion

    


    5.1 The
Transferor undertakes that the Target Company, subsidiary companies
wholly-owned, controlled, equity affiliates of Target Company and subsidiary
companies wholly-owned, controlled of DADI GAS and the shareholder’s meeting and
the board of directors appointed by the Target Company, subsidiary companies
wholly-owned, controlled, equity affiliates of Target Company and subsidiary
companies wholly-owned, controlled of DADI GAS will procure that the business of
the Target Company and subsidiary companies wholly-owned, controlled, equity
affiliates of Target Company and subsidiary companies wholly-owned, controlled
of DADI GAS respectively will be operated in a normal and prudent basis and in
the ordinary course of day-to-day operations and, will not do or omit to do (or
allow to be done) or to be omitted to be done any act or thing (in either case
whether or not in the ordinary course of day-to-day operations) which is
material and in particular (but without limiting the generality of the
foregoing) the Transferor will procure that the Target Company and subsidiary
companies wholly-owned, controlled, equity affiliates of Target Company and
subsidiary companies wholly-owned, controlled of DADI GAS shall NOT prior to
Completion, without the prior written consent of the Transferee:

    


    (1) issue
or agree to issue any shares or loan capitals, or; offer or agree to offer or
withdraw any option of purchase, or; amend any existing terms concerning the
acquisition or subscription of the option or right of any shares or loan
capital;

    


    (2) make
a loan or raise money;

    


    (3)
terminate any Agreements, arrangements or Agreements of great value, or; waive
any rights of material value;

    


    (4)
create or permit to arise any mortgage, charge, lien, pledge, other form of
security or encumbrance of equity of whatsoever nature, whether similar to the
foregoing or not, on or in respect of any part of its undertaking, property or
assets other than liens arising by operation of law in amounts which are not
material;


    


    
      
        
           


        

        
          20

          
            

          

        

        
           


        

      

    

     

    (5) give
any guarantee, indemnity, surety or security to any third party;

    


    (6)
dispose or agree to dispose of or acquire or agree to acquire any material
asset;

    


    (7)
dispose of the ownership, possession, custody or control of any corporate or
other books or records;

    


    (8) other
than in the ordinary and usual course of its business, compromise, settle,
release, discharge or compound any material civil, criminal, arbitration or
other proceedings or any material liability, claim, action, demand or dispute or
waive any right in relation to any of the foregoing;

    


    (9) other
than in the ordinary course of its business, release compromise or write off any
material amount recorded in the books of account of the company as owing by any
debtors of the company;

    


    (10) let
or agree to let the company to transfer the possession or ownership of the whole
or any part of the Property, or take on lease or assume possession of any real
property;

    


    (11)
terminate any or allow to lapse any material insurance policy now in effect or
defaulting under any provision thereof.

    


    6.
Matters prior to Completion

    


    6.1
Transferor confirms that, in order to enhance the work efficiency of the
transaction, within 3 days after the Transaction Deposit provided in this
Agreement is received by the mutual managed bank account, the Parties will
designate personnel to form a working team respectively. The Parties shall
coordinate to cause the working team perform its duty. The main duty of the
working team includes: (1) coordinating and assisting the due diligence of
Transferee on the purpose of completing Transferee’s transaction; (2) ensuring
the normal day-to-day operation of Target Company and Subsidiary Companies
wholly-owned, controlled, equity affiliates of Target Company and Subsidiary
Companies wholly-owned, controlled of DADI GAS before the delivery of
transaction; (3) any other responsibilities agreed by the Parties.

     

    
      
        
           


        

        
          21

          
            

          

        

        
           


        

      

    

     

    6.2 To
ensure the steady handover, the Parties mutually agree to make the corresponding
arrangement for the work during the period from the execution of this Agreement
to Completion.

    


    6.3 The
working team shall arrange the personnel of Transferee to take part in the
management and operation (will not disturb the decision making of management of
operation) of Target Company according to the requirements of
Transferee.

    


    6.4 The
period during which Transferee’s personnel take part in the management and
operation will no be longer than 3 months. The specific working time and working
requirements of Transferee’s personnel shall be decided by Transferee at its
sole discretion, but such working time and working requirements shall be
reasonable and with respect with the transaction. Transferor undertakes that the
personnel of Target Company and Subsidiary Companies wholly-owned, controlled,
equity affiliates of Target Company and Subsidiary Companies wholly-owned,
controlled of DADI GAS will not obstruct the work of Transferee’s personnel in
any active or negative manners.

    


    6.5
Contingent liabilities or other liabilities of the Target Company and subsidiary
companies wholly-owned, controlled, equity affiliates of Target Company and
subsidiary companies wholly-owned, controlled of DADI GAS before the completion
which the Transferor do not disclosed shall be assumed by the Transferor. If the
corresponding Target Company or subsidiary companies wholly-owned, controlled,
equity affiliates of Target Company or subsidiary companies wholly-owned,
controlled of DADI GAS assumes or pays such liabilities in advance and are
subject to losses, the Transferor shall compensate all losses to the
corresponding Target Company or subsidiary companies wholly-owned, controlled,
equity affiliates of the Target Company or subsidiary companies wholly-owned,
controlled of DADI GAS within 5 working days after the occurrence of actual
losses. In the event any such liabilities arise within three years after the
third payment, Transferee shall have to right to be paid the amount of any such
liability out of the third payment instalment held in the mutually managed
account set forth in Section4.2.3(ii).

     

    
      
        
           


        

        
          22

          
            

          

        

        
           


        

      

    

     

    7.
Completion of the Transfer

    


    7.1 The
Parties agree that after the Transferee made the first installment payment
provided in this Agreement they will establish a “transfer team” ("Transfer
Team") jointly to deliver the Target Company (including the Target Company and
subsidiary companies wholly-owned, controlled, equity affiliates of Target
Company and subsidiary companies wholly-owned, controlled of DADI GAS) within 3
working days. The day when Transfer Team is established is the Delivery
Day.

    


    7.2 The
Transferor shall prepare a list of transfer for the Transfer Team. The list
shall show all the assets, corporate books required by the law, account books,
documents, agreements, and contracts and so on of the Target Company and
subsidiary companies wholly-owned, controlled, equity affiliates of Target
Company and subsidiary companies wholly-owned, controlled of DADI
GAS.

     

    
      
        
           


        

        
          23

          
            

          

        

        
           


        

      

    

     

    7.3 If
the Transferor provide reports or data of the Target Company and subsidiary
companies wholly-owned, controlled, equity affiliates of Target Company and
subsidiary companies wholly-owned, controlled of DADI GAS which are not in
compliance with actual situations, the Transferor shall be considered as in
breach of this Agreement, the Transferee is entitled to terminate this
Agreement(whereupon Transferor will be entitled to a refund of the purchase
price paid and/ the return of the  Deposit) and require the Transferor
to compensate relevant damages and losses. In the event that these
misrepresentations are discovered within three years after the closing
Transferee may request that any losses incurred shall may be paid out of the
third installment held in the bank account.

    


    7.4 To
facilitate the Completion of the Transfer, the Transferor shall submit the
following documents to the Transferee:

    


    (1)
Permits and approvals in writing for the alteration registration of equity
transfer of the Target Company and subsidiary companies wholly-owned,
controlled, equity affiliates of Target Company and subsidiary companies
wholly-owned, controlled of DADI GAS (if any) from Committees of Foreign Trade
and Economic Cooperation and AIC;

    


    (2)
Certificates of ownership of the Transferred Equity (including register of
shareholders of the Target Company and subsidiary companies wholly-owned,
controlled of Target Company and subsidiary companies wholly-owned, controlled
of DADI GAS);

    


    (3)
Certificates or documents which proves that the Target Company and subsidiary
companies wholly-owned, controlled, equity affiliates of Target Company and
subsidiary companies wholly-owned, controlled of DADI GAS have legally and
validly owned the operation right of gas pipeline, the qualification of gas
operation and the charging right of gas. The certificates or documents include
but not limited to the agreement of operation right of gas pipeline entered into
by and between the local government or authority of the local government,
administrative permit of the qualification of gas enterprise, certificate of gas
charging.

     

    
      
        
           


        

        
          24

          
            

          

        

        
           


        

      

    

     

    (4) The
true, necessary and sufficient certificates or documents which proves that the
Transferor has transferred all trademark, patent, know-how and other intangible
asset right (if any) which is owned by third party but currently using by the
Target Company and subsidiary companies wholly-owned, controlled, equity
affiliates of Target Company and subsidiary companies wholly-owned, controlled
of DADI GAS from the owner to the Target Company.

    


    (5)
Letters of resignation from all the current directors, supervisors of the Target
Company and subsidiary companies wholly-owned, controlled of Target Company and
subsidiary companies wholly-owned, controlled of DADI GAS, in which confirm that
none of them have involved corresponding Target Company or subsidiary companies
wholly-owned, controlled of Target Company or subsidiary companies wholly-owned,
controlled of DADI GAS respectively in any claims (no matter on the basis of the
compensation for resignation or any other reasons). The resignation shall be
effective upon the delivery day;

    


    (6)
Confirmation letters of senior management of the Target Company and subsidiary
companies wholly-owned, controlled of Target Company and subsidiary companies
wholly-owned, controlled of DADI GAS to confirm that none of the them have
claims against the corresponding Target Company and subsidiary companies
wholly-owned, controlled of Target Company or subsidiary companies wholly-owned,
controlled of DADI GAS respectively (no matter on the basis of the compensation
for resignation or any other reasons);

     

    
      
        
           


        

        
          25

          
            

          

        

        
           


        

      

    

     

    (7)
Certificates that prove property right alteration registration procedures
concerning the selling and purchasing of Transferred Equity have been duly
completed;

    


    (8)
Certificates that prove the authorization orders of existing bank accounts of
all the Target Company and subsidiary companies wholly-owned, controlled of
Target Company and subsidiary companies wholly-owned, controlled of DADI GAS
have been rendered void and new authorization orders have been issued to
personnel appointed by the Transferee;

    


    (9)
Certificates of ownership of the assets of all the Target Company and subsidiary
companies wholly-owned, controlled of Target Company and subsidiary companies
wholly-owned, controlled of DADI GAS; and

    


    (10)
Certificates issued by the banks of the Target Company and subsidiary companies
wholly-owned, controlled, equity affiliates of Target Company and subsidiary
companies wholly-owned, controlled of DADI GAS stating the amount of the debit
or credit of such accounts at close of business on the day of Completion of the
Transfer.

    


    The
Parties agree that the transfer shall be deemed to be completed upon the day
when the Transferee confirms that all works of delivery has completed and the
Transferor have fulfilled its obligations under Section 7.4. The day on which
such written confirmation is issued is the satisfaction day of Completion of the
Transfer. Notwithstanding aforesaid, the Transferee shall not refuse to issue
the written confirmation unreasonably when such certificates and documents
submitted by the Transferor are true, necessary and sufficient.

     

    
      
        
           


        

        
          26

          
            

          

        

        
           


        

      

    

     

    8.
Undertakings and Warranties

    


    8.1 The
Transferor undertake and warrant that:

    


    8.1.1 The
Transferor shall increase its equity holding of in the shortest duration at its
best effort to reach the target of holding no less than 70% equity of the Target
Company by purchasing the equity interest. After the completion of such equity
purchase, the Transferor shall legally own 70% of the equity of the Target
Company. Should any third Party claim any ownership or other interest in the
aforesaid equity, the Transferor shall assume full responsibility and shall be
liable to compensate the Transferee for any loss incurred hereof.

    


    8.1.2 The
Transferred Equity shall not subject to any restriction under any laws and
agreements beyond the ones stipulated expressly in this Agreement. Should any
third Party produce effective evidence that the transfer by the Transferor is
subject to any restriction under any laws and agreements, the Transferor shall
assume full responsibility and shall be liable to compensate the Transferee for
any loss incurred hereof.

    


    8.1.3
Upon the performance of this Agreement, the Transferred Equity purchased by the
Transferee and its subsidiary rights and interests or those to be generated from
the equity are free of any rights and interests of any third Party.

    


    8.1.4 The
Target Company and subsidiary companies wholly-owned, controlled, equity
affiliates of Target Company and subsidiary companies wholly-owned, controlled
of DADI GAS are established and legally existing under the laws of
China.

    


    
      
        
           


        

        
          27

          
            

          

        

        
           


        

      

    

     

    8.1.5 The
Target Company and subsidiary companies wholly-owned, controlled, equity
affiliates of Target Company and subsidiary companies wholly-owned, controlled
of DADI GAS own and have acquired all the effective authorization letters,
licenses, approvals and permits to manage existing assets and carry out all the
business operations (specified in Annex IV " The production and operation
information of Target Company and Subsidiary Companies wholly-owned, controlled,
equity affiliates of Target Company and subsidiary companies wholly-owned,
controlled of DADI GAS"). The above-mentioned authorization letters, licenses,
approvals and permits have been registered and recorded in relevant authorities
in accordance with applicable laws and regulations. The Transferor shall explain
for any exceptional case (if has) in advance and ensure to settle such
case.

    


    8.1.6 The
Target Company and subsidiary companies wholly-owned, controlled, equity
affiliates of Target Company and subsidiary companies wholly-owned, controlled
of DADI GAS have legally and validly owned the operation right of gas pipeline,
the qualification of gas operation and the charging right of gas. The
certificates or documents include but not limited to the agreement of operation
right of gas pipeline entered into by and between the local government or
authority of the local government, administrative permit of the qualification of
gas enterprise, certificate of gas charging. The Transferor shall explain for
any exceptional case (if has) in advance and ensure to settle such
case.

    


    8.1.7 The
Target Company and subsidiary companies wholly-owned, controlled, equity
affiliates of Target Company and subsidiary companies wholly-owned, controlled
of DADI GAS have completed the corresponding comprehensive acceptance inspection
for the vaporizing station and completed pipeline (including examination and
filing procedures of Construction Bureau, Quality Supervision Bureau,
Environmental Protection Bureau and Security Supervision Bureau) and obtain the
acceptance inspection report for relevant authorities. The Transferor shall
explain for any exceptional case (if has) in advance and ensure to settle such
case;


    


    
      
        
           


        

        
          28

          
            

          

        

        
           


        

      

    

     

    8.1.8
Except disclosure to the Transferee in writing, the assets of the Target Company
and subsidiary companies wholly-owned, controlled, equity affiliates of Target
Company and subsidiary companies wholly-owned, controlled of DADI GAS are free
of any guarantees or any right of third Party or any other limitations that
might have adverse affect to the execution of rights concerning the
above-mentioned assets or interests values. As of the execution day of the
Agreement, nobody has executed or claimed to execute any rights that might have
significantly adverse affect the conditions of the transferred assets, or raised
any disputes directly or indirectly involving the transferred
assets.

    


    8.1.9
Upon execution by the Parties, this Agreement will be binding upon the
Transferor.

    


    8.1.10
Except disclosure to the Transferee in writing, there exists no litigation,
arbitration or administrative procedures involving any relevant enterprises or
its subsidiaries of the Target Company and subsidiary companies wholly-owned,
controlled, equity affiliates of Target Company and subsidiary companies
wholly-owned, controlled of DADI GAS.

    


    8.1.11  Except
explicit disclosure, the assets of the Target Company and subsidiary companies
wholly-owned, controlled, equity affiliates of Target Company and subsidiary
companies wholly-owned, controlled of DADI GAS are free of any other loans to be
paid or debts of any forms.

    


    8.1.12
Before the execution day of the Agreement, there is no written notice from
creditors that will cause a mandatory disposal of assets of the Target Company
and subsidiary companies wholly-owned, controlled, equity affiliates of Target
Company and subsidiary companies wholly-owned, controlled of DADI
GAS.

     

    
      
        
           


        

        
          29

          
            

          

        

        
           


        

      

    

     

    8.1.13 As
of the execution day of the Agreement, as far as the Transferor’s knowledge, no
material adverse affect occurs or might occur on the basis of reasonable
judgment to the existing business, finance or operation on the Target Company
and subsidiary companies wholly-owned, controlled, equity affiliates of Target
Company and subsidiary companies wholly-owned, controlled of DADI
GAS.

    


    8.1.14  The
Assets Confirmation List (specified in Annex V) of the Target Company and
subsidiary companies wholly-owned, controlled, equity affiliates of Target
Company and subsidiary companies wholly-owned, controlled of DADI GAS provided
by Transferor to Transferee is true, accurate and complete.

    


    8.1.15 On
the Date of audit, the Target Company and subsidiary companies wholly-owned,
controlled, equity affiliates of Target Company and subsidiary companies
wholly-owned, controlled of DADI GAS have effective and tradable ownership for
all the fixed assets stipulated in Assets Confirmation List, including but not
limited to all the machines, constructions, on-going projects, gas pipeline,
land and other fixed and current assets. Moreover, the Target Company will still
have effective and tradable ownership in the above-mentioned assets and all the
acquired assets upon the date of the Completion of the Transfer.

    


    8.1.16  Upon
the delivery day, major assets in operation of the Target Company and subsidiary
companies wholly-owned, controlled, equity affiliates of Target Company and
subsidiary companies wholly-owned, controlled of DADI GAS shall be in good
condition and comply with normal standards of gas industry after periodical and
proper maintenance.


    


    
      
        
           


        

        
          30

          
            

          

        

        
           


        

      

    

     

    8.1.17  The
operations (including but not limited to the operation of business involved in
the business scope, financial, taxation, environment protection, labor and human
resources, security manufaction, etc )of the Target Company and subsidiary
companies wholly-owned, controlled, equity affiliates of Target Company and
subsidiary companies wholly-owned, controlled of DADI GAS have never gone
against rules and regulations of China , never received any written notice from
relevant management or public service department that indicates authorizations,
licenses, approvals and permits awarded to the Target Company before have been
revoked due to its delinquent behaviors and the revocation of the
above-mentioned documents, compliance with relevant regulations or remedial
measures adopted have made material adverse affects to the business operation of
the Target Company and subsidiary companies wholly-owned, controlled, equity
affiliates of Target Company and subsidiary companies wholly-owned, controlled
of DADI GAS.

    


    8.1.18  The
Obligations Transfer List (please refer to Annex VI) of the Target Company and
subsidiary companies wholly-owned, controlled, equity affiliates of Target
Company and subsidiary companies wholly-owned, controlled of DADI GAS provided
by Transferor to Transferee is true, accurate and complete.

    


    8.1.19
Before the delivery day, all the debts owed by the Target Company and subsidiary
companies wholly-owned, controlled, equity affiliates of Target Company and
subsidiary companies wholly-owned, controlled of DADI GAS have been shown in the
Debt Transfer List (specified in Annex VI).

     

    
      
        
           


        

        
          31

          
            

          

        

        
           


        

      

    

     

    8.1.20  Except
for debts shown in the Debt Transfer List (please refer to Annex VI), there is
no other debt owed by the Target Company and subsidiary companies wholly-owned,
controlled, equity affiliates of Target Company and subsidiary companies
wholly-owned, controlled of DADI GAS before the Date of Completion.

    


    8.1.21  The
Transferor will negotiate with the Transferee on matters concerning equity
transfer not mentioned herein in accordance with PRC laws and regulations and
relevant policies.

    


    8.1.22  The
Transferor acknowledges that the Transferee is entering into this Agreement in
reliance upon the accuracy of each of the Warranties.

    


    8.1.23  If
the Transferee has reasonable grounds to believe that a breach of any of the
Warranties has occurred then the Transferor shall ensure that for a period of
three (3) years after the date of Completion the Transferee and its advisers and
representatives shall be given all facilities which they may reasonably request
and in particular shall allow them full access to all accounting and other
records of the Transferor in order that they might ascertain whether a breach of
the Warranties has occurred.

    


    8.1.24  The
Transferor undertakes that all the shareholders other than Transferor of Target
Company and Subsidiary Companies wholly-owned, controlled, equity affiliates of
Target Company and subsidiary companies wholly-owned, controlled of DADI
GAS  (hereinafter referred to as "Non-Transferor Shareholders") shall
completely cooperate with Transferor and obey the instructions of
Transferor on the matters of this transaction (including but not limited to ,
waiver of right of first refusal, etc.). Non-Transferor Shareholders do not hold
any substantive rights to control any Target Company and Subsidiary Companies
wholly-owned, controlled, equity affiliates of Target Company and subsidiary
companies wholly-owned, controlled of DADI GAS; to control or dispose of any
assets or take action on behalf of any Target Company and Subsidiary Companies
wholly-owned, controlled, equity affiliates of Target Company and subsidiary
companies wholly-owned, controlled of DADI GAS; or to acquire a greater interest
in any Target Company and Subsidiary Companies wholly-owned, controlled, equity
affiliates of Target Company and subsidiary companies wholly-owned, controlled
of DADI GAS with more preferred condition than Transferee. Further more;
Non-Transferor Shareholders shall not cause any obstacles to the
transaction.


    


    
      
        
           


        

        
          32

          
            

          

        

        
           


        

      

    

     

    8.1.25  The
Transferor undertakes that during the operation term of the Target Company and
subsidiary companies wholly-owned, controlled, equity affiliates of Target
Company, all the brand name which is currently using by the Target Company and
subsidiary companies wholly-owned, controlled, equity affiliates of Target
Company and subsidiary companies wholly-owned, controlled of DADI GAS shall be
continuously used for free until the company cancels its registration in
AIC.

    


    8.1.26
The Transferor undertakes that upon the execution of the Agreement, it will
terminate any negotiation in connection with the equity transfer of the Target
Company with any third Party except the Transferee and it will not carry out new
negotiations in connection with the equity transfer of the Target Company with
any third Party except the Transferee.

    


    8.1.27
The Transferor undertakes, after the completion of the Transfer of equity, in
the period that the Transferor still holds any equity of the Target Company
and/or subsidiary companies wholly-owned, controlled, equity affiliates of
Target Company and subsidiary companies wholly-owned, controlled of DADI GAS and
within 3 years after the Transferor does not hold such equity any more, the
Transferor and the companies controlled by the Transferor shall NOT conduct the
business of urban gas, or hold any post in any company conducting the business
of urban gas, or take any measures to disrupt
any potential projects of the Target Company and subsidiary companies
wholly-owned, controlled, equity affiliates of Target Company and subsidiary
companies wholly-owned, controlled of DADI GAS.


    


    
      
        
           


        

        
          33

          
            

          

        

        
           


        

      

    

     

    8.1.28
The above-mentioned undertakings and warranties shall remain effective after the
delivery day.

    


    8.2  The
Transferee undertakes and warrants that:

    


    8.2.1 The
Transferee is a legal entity established and legally existing under the laws of
United States.

    


    8.2.2 The
Transferee will negotiate with the Transferor on matters concerning equity
transfer not mentioned herein in accordance with PRC laws and regulations and
relevant policies.

    


    8.2.3 The
Transferee shall be responsible for the above mentioned undertakings and
warranties. If the Transferor have fulfilled its obligations under the
Agreement, the Transferee shall also bear relevant obligations and pay
Consideration to the Transferor as stipulated in this Agreement.

    


    8.2.4 The
Transferee undertakes that the Transferee may consider offering Transferor a
proper position in Transferee upon the request of Transferor. And for purpose
successful delivery and smoothly transition the Transferee may consider offering
the Senior Management of the Target Company a proper position in
Transferee.

     

    
      
        
           


        

        
          34

          
            

          

        

        
           


        

      

    

    


    9.
Liability for breach of the Agreement

    


    9.1 In
the event that there is any material omission or severe fraud in the documents
or data submitted by the Transferor, the Agreement may be terminated by the
Transferee. The Transferor shall take the liabilities of breaching and indemnify
the Transferee for the damages for the breach thereof.

    


    9.2 The
Parties mutually agree that, unless otherwise provided under this Agreement, if
a Party is in material breach of this Agreement ("breaching Party"), then the
other Party (“observant Party”) has the right to terminate this Agreement
according to the Contract Law of People's Republic of China and applicable
judicatory interpretations and claims damages arising from the
breach.

    


    9.3 If
the Transferor makes explanations for any exceptional case for undertakings and
warranties in Section 8.1.5, Section 8.1.6 and Section 8.1.7, the Transferor
shall settle such cases within the time limit approved by the Transferee. If
failed to do so, the Transferee is entitle to choose any of following
measures:

    


    9.3.1
terminate this Agreement and require the Transferor to pay the Transferee RMB
10,000,000 Yuan as penalty.

    


    9.3.2
deduct no less than RMB_10,000,000_ Yuan from payables of the
Transferee.

    


    9.4  The
Parties confirm simultaneously that, unless otherwise provided in this
Agreement, if a Party is in breach of their undertakings, warranties and facts
stated in the Section 8 under the Agreement,the observant
Party has the right to terminate this Agreement and claim damages arising from
the breach.

     

    
      
        
           


        

        
          35

          
            

          

        

        
           


        

      

    

     

    9.5  After
Completion of the Transfer, the Transferor shall take positive measures to solve
all disputes or debts caused by the operation of the Target Company before the
Date of Completion, or unforeseeable disputes before the Date of Delivery. The
Transferor shall compensate for the direct or indirect damages rising
thereof.

    


    9.6  If
the Transferor fail to fulfill their undertakings on time under the Agreement,
the Transferor are in breach of the Agreement and the Transferee has the right
to delay the following payments to the Transferor or to terminate this Agreement
and claim damages rising thereof.

    


    9.7  Unless
this Agreement is otherwise provided, if the Transferor have performed all the
provisions of this Agreement strictly; however the Transferee unilaterally
terminates by violating this Agreement, the Transferee shall compensate the
Transferor for their direct damages rising hereby.

    


    9.8  Unless
otherwise provided under this Agreement, each Party shall not terminate this
Agreement without the consent of the other Party; otherwise the termination
party shall pay the other Party RMB 10,000,000 Yuan as penalty.

    


    9.9  The
Parties agree that, under any of a situation or situations under Section 10.2.4
to Section 10.2.10 of the Agreement, Transferee has the right to terminate this
Agreement at its own discretion without taking any liability and has the right
to request Transferor to pay it RMB 10,000,000Yuan as
penalty.

     

    
      
        
           


        

        
          36

          
            

          

        

        
           


        

      

    

     

    10.
Termination of this Agreement

    


    The
Parties mutually agree that unless otherwise provided in this Agreement, this
Agreement shall be terminated only under following situations:

    


    10.1 This
Agreement shall be terminated upon the consent of the Parties;

    


    10.2
Transferee is entitle to terminate this Agreement at its own discretion under
any of the following situations:

    


    10.2.1
Transferee is unable to complete the transaction due to relevant policies and
rules of the State;

    


    10.2.2
Necessary governmental approvals are unable to obtain for this transaction (if
necessary);

    


    10.2.3
Transferee discovers that the accountant or auditor of Transferee or appointed
by Transferee determines that a US GAAP audit of the Target Company and
Subsidiary Companies wholly-owned, controlled, equity affiliates of Target
Company (including the subsidiary companies wholly-owned, controlled of DADI GAS
listed in Annex I) may not be completed.

    


    10.2.4
Transferee discovers that there are material defects of the Transferred Equity
or Transferor and/or Non-Transferor Shareholders are unable to transfer the
Targets of this transaction;

    


    10.2.5
Transferee discovers that there is any conceal, omission or fraud in the
documents or data submitted by Transferor in connection with the Target Company
and Subsidiary Companies wholly-owned, controlled, equity affiliates of Target
Company (including the subsidiary companies wholly-owned, controlled of DADI GAS
listed in Annex I);

     

    
      
        
           


        

        
          37

          
            

          

        

        
           


        

      

    

     

    10.2.6
Transferee discovers that there are martial barriers for the Target Company and
Subsidiary Companies wholly-owned, controlled, equity affiliates of Target
Company (including the subsidiary companies wholly-owned, controlled of DADI GAS
listed in Annex I) which will result in disability for conducting their business
in further   3  
years;

    


    10.2.7
Transferee discovers that Transferor fails to ensure the Work Group and the
staff of Transferee to smoothly work together with relevant staff from the
Target Company and Subsidiary Companies wholly-owned, controlled, equity
affiliates of Target Company (including the subsidiary companies wholly-owned,
controlled of DADI GAS listed in Annex I), which result in Transferee is unable
to complete its prospective work requirements for continuous 5 days;

    


    10.2.8
Transferee discovers that Transferor consults or negotiates relevant issues in
connection with the transfer of part and/or all Transferred Equity or signs
relevant written documents with any third party other than
Transferee;

    


    10.2.9
Non-Transferor Shareholders fail to comply with the instructions of Transferor
in connection with the transaction of the Target Company and Subsidiary
Companies wholly-owned, controlled, equity affiliates of Target Company
(including the subsidiary companies wholly-owned, controlled of DADI GAS listed
in Annex I) (including but not limited to the percentage of the transfer, the
price of the transfer etc.), which results in any obstacle for such proposed
transaction of Transferee by Non-Transferor Shareholders;or

     

    
      
        
           


        

        
          38

          
            

          

        

        
           


        

      

    

     

    10.2.10
The Transferor fails to complete or satisfy one or more Transferee’s payment
preconditions within the time limit provided in this Agreement.

    


    10.3  Unless
otherwise provided under this Agreement, in the case when the Transferee
terminate this Agreement pursuant to the provisions of this Agreement, the
Transferee is entitled not only to claim the liabilities of breach against the
breaching party, but also to require the Transferor to fully return any payment
paid (including deposit and any installments of the purchase price previously
paid) to the Transferor from the Transferee.

    


    10.4
Transferor is entitle to terminate this Agreement at its own discretion under
any of the following situations:

    


    10.4.1 On
conditions that there
is no freeze, distrain, pledge, mortgage, or other right limitations against the
Transferred Equity, Transferor is unable to complete the transaction due to
relevant policies and rules of the State;

    


    10.4.2
Necessary governmental approvals are unable to obtain for this transaction (if
necessary).

    


    11.
Assignment of this Agreement

    


    Transferor
agrees that, Transferee is entitled to transfer its entire or partial rights
and/or obligations to any third party designated by Transferee who is affiliated
with Transferee without Transferor’s consent for such transfer. Transferor
further agrees that, such third Transferee aforesaid may be person, legal entity
or other economic organizations. Transferee has the right to designate one
natural person, legal entity or other economic organization or two or more
natural persons, legal entities or other economic organizations as such third
Transferee its own discretion.

     

    
      
        
           


        

        
          39

          
            

          

        

        
           


        

      

    

     

    12. Tax Issues

    


    12.1
Unless otherwise provided under this Agreement, Transferee and Transferor shall
bear relevant payable taxes and expenses in connection with the performance of
this Agreement and this transaction respectively. If required by law, Transferee
will withhold and remit tax when making payment (if any).

    


    12.2
Before the completion of delivery, Transferor shall be in charge of the tax
issues of the Target Company and Subsidiary Companies wholly-owned, controlled,
equity affiliates of the Target Company (including the subsidiary companies
wholly-owned, controlled of DADI GAS listed in Annex I). After completion, in
case of economic damages and losses arising hereof, Transferee has the right to
claim for such damages and losses against Transferor.

    


    13.
Force Majeure

    


    Neither
Party shall be prevented from failure of performance of any of its obligations
under this Agreement due to an event of Force Majeure outside the reasonable
control of that Party. The Party affected by such event of force majeure shall
notify the other Party immediately in convenient way, and shall no later than 15
days after the commencement of such event submit the documentary evidence
notarized by local notary organ to the other Party. The Parties shall negotiate
the way of dealing with the aftermath such event in time.

    


    14.
Confidentiality

    


    Either
Party of this Agreement shall not disclose any information related to this
Agreement to any person、entity or company
during the term of the Agreement or five years after the expiration of the
Agreement, no matter the person、entity or company
has a competitive relationship with the other Party or not. In case any Party is
in breach of the provision of the confidentiality and causes the other Party
suffering from economic damages and losses, the breaching Party shall assume
relevant liabilities of such breach to the other Party. But the information
disclosed pursuant to the applicable law or compulsory requirements of the court
or any other authorities will not be applied.


    


    
      
        
           


        

        
          40

          
            

          

        

        
           


        

      

    

     

    15.
Notices

    


    15.1 Any
and all notices shall be delivered in writing, including by facsimile、letter、courier service
delivered letter, and notices shall be deemed to have been delivered at the
7th
days after the written notice delivered. The notifying date of unwritten notice
(telephone or email, etc) shall be the date of written confirmation of the
receiver.

    


    15.2
Either Party may change its particulars for receipt of notices by notice given
to the other Party within 3 days after such change. If the Party fails to notice
the other party its changes on its particulars for receipt of notices, it shall
take all legal liability for all results rising hereof.

     

    If to the
Transferor, notices shall be delivered as follows:

     

    Addressee:__________
Position:__________

     

    Address:__________ Post
Code:__________

    


    Facsimile:__________
Email:_______________
_____


     

    If to the
Transferee, notices shall be delivered as follows:

     

    Addressee:__________  Position:__________

    


    Address:__________
Post Code:__________

    


    Facsimile:__________
Email:__________

    


    15.3 All
notices and relevant expenses under this Agreement shall be processed by either
Party respectively in accordance with laws and regulations at their own
cost.

     

    
      
        
           


        

        
          41

          
            

          

        

        
           


        

      

    

     

    16.
Governing Law

    


    本协议的成立、效力、解释和履行,应以中华人民共和国法律为准。

    


    The
formation、validity、interpretation
and/or performance of this Agreement shall be governed by PRC LAWS.

    


    17.
Settlement of Dispute

    


    Any
disputes arising from or in connection with this Agreement shall be settled
through friendly negotiation between the Parties. If the dispute cannot be
resolved by negotiation, then any Party may submit the dispute to China
International Economic and Trade Arbitration Committee located in Beijing for
arbitration according to and regulations in effect at the time of applying for
arbitration. The arbitration award shall be final and binding on all
parties.

    


    18.
Severability

    


    Any
provision of the Agreement shall be deemed as severable. If any provision of the
Agreement is invalid, it shall not affect the validity of the rest of the
provisions of this Agreement.

    


    19.
Non-waiver

    


    Either
Party's failure to insist the other Party on the performance of any provision of
the Agreement at any time shall not be deemed to waive such provision or waive
the right to request the other Party on execution of such provision in
future.

    


    20.
Transcript

    


    The
formal text of the Agreement shall be written in CHINESE. Any provision of such
Agreement shall be interpreted under the usual meaning of the words in the
Chinese version.

     

    
      
        
           


        

        
          42

          
            

          

        

        
           


        

      

    

    


    21.
Title and Subtitles

    


    All tile
and subtitles of the Agreement are in the convenience of the reference only and
shall not limit or affect any provision provided in the Agreement.

    


    22.
Entire agreement

    


    22.1 This
Agreement includes all agreements and memorandums related to the subject of this
Agreement and supersede any and all previous written or oral agreements and/or
memorandums concluded by any consultation relating to the subject of this
Agreement. Unless this Agreement is otherwise provided expressly, any other
condition, definition, guarantee or statement related to the subject of this
Agreement shall not be binding on the Parties.

    


    22.2 Any
correction、amendment、replacing or
modification of this Agreement shall be made in writing and shall be ascertained
that it is relevant to the Agreement and shall be signed by the representatives
or designated person(s) of the Parties of the Agreement.

    


    22.3 The
Parties of the Agreement mutually agree that in the convenience of processing
the procedure of the alteration registration related to the equity transfer
hereof with the local industry and commercial bureau, the Parties may enter into
a simpler equity transfer agreement. The content of such simple equity transfer
agreement shall not be controversial with this Agreement hereof. In case of any
controversy, this Agreement shall prevail.

    


    23. This Agreement shall
become into effective upon the signature or seal of the Parties.

    


    24. This Agreement is executed
in [   ] counterparts. Each transferor holds [  ] and
the transferee holds [   ].

     

    
      
        
           


        

        
          43

          
            

          

        

        
           


        

      

    

     

    
      Annexes:

      


      Annex I
List of Target Company, Subsidiary Companies wholly-owned, controlled, equity
affiliates of Target Company and Subsidiary Companies wholly-owned, controlled
of DADI GAS

      


      Annex  ÿIV   The
production and operation information of Target Company and Subsidiary Companies
wholly-owned, controlled, equity affiliates of Target Company and Subsidiary
Companies wholly-owned, controlled of DADI GAS

      


      Annex
V  Assets Confirmation List

      


      Annex
VI   Obligations transfer list

      


      Annex V
List of Projects Planned of Target Company and Subsidiary Companies
wholly-owned, controlled, equity affiliates of Target Company and Subsidiary
Companies wholly-owned, controlled of DADI GAS

      


      Annex VI
Financial Statements of Target Company and Subsidiary Companies wholly-owned,
controlled, equity affiliates of Target Company and Subsidiary Companies
wholly-owned, controlled of DADI GAS

      


       (This
page is blank below)

       

      
        
          
          

        

        
          44

          
            

          

        

        
          
          

        

      

Signature
Page

    
       

       

      Transferor:

      


      Tang
Zhixiang (Singature)

       

       

      Transferee:

      


      China New
Energy Group Company

       

       

      Authorized
Representative:

       

       

      Date:

       

      
        
           


        

        
          45

          
            

          

        

        
           


        

      

       

        Annex I List of Target Companies
and Subsidiary Companies wholly-owned, controlled, equity affiliates of Target
Companies

       

      1. The
wholly-owned subsidiary companies of the Target Company include:

      


        (1)  Beijing
Century Dadi Transportation Ltd., Co.; and

      


        (2)  Beijing
Xiadu Dadi Gas Ltd., Co..

      


      2. Name
of Subsidiary Companies controlled by the Target Company and the equity
proportion held by the Target Companyinclude:

      


       (1)
Huanghua Port Dadi Lihua Gas Ltd., Co. (80%)

      


       (2)
Suizhong Dadi Gas Ltd., Co. (60%);

      


       (3)
Jiaozuo Hualong Petrochemical Ltd., Co. (60%)

      


       (4)
Huojia Hualong Petrochemical Ltd., Co. (54%); and

      


       (5)
Dadi Huayou Gas Ltd., Co. (51%).

      


      3. Name
of Equity affiliates of the Target Companies and the equity proportion held by
the Target Company include:

      


       (1)  Fuhua
Dadi Gas Ltd., Co(40%).

      


      4. The
wholly-owned subsidiary companies of the DADI GAS include:

      


      (1)   Zhuolu
Dadi Gas Ltd., Co.; and

      


      (2)   Xian
County Dadi Gas Ltd., Co..

      


      5. Name
of Subsidiary Companies controlled by DADI GAS and the equity proportion held
byDADI GAS include:

      


       (1)
Tianjin Dadi Gas Technology Development Ltd., Co. (70%)

      


       (2)
Dadi Xingying Gas Ltd., Co. (80%)

      


       (3)
Shijiazhuang Dadi Gas Ltd., Co. (80%);

      


       (4)
Chengde Dadi Gas Ltd., Co. (60%); and

      


       (5)
Baigou Dadi Gas Ltd., Co. (80%).

    


    
      
         


      

      
        46

        
          

        

      

      
         


      

    

     

    Annex III
The production and operation information of Target Company and Subsidiary
Companies wholly-owned, controlled, equity affiliates of Target Company and
subsidiary companies wholly-owned, controlled of DADI GAS

     

    Part one
Basic Information of Target Company

    


    Business
License

    


    Business
License No.:

    


    Registration
No.:

    


    Issuing
Date:

    


    Address:

    


    Type
of Enterprise

    


    Registered
Capital

    


    Business
Scope:

    


    Business
Term:

    


    Board
of Directors:

    


    Name                                              Designated
by                                                   Position

     

    
      
         


      

      
        47

        
          

        

      

      
         


      

    

     

    Board of
Supervisors

    


    Name                                              Designated
by



    
      
         


      

      
        48

        
          

        

      

      
         


      

    

     

    Part
2 Certificates and Licenses of Operations

     

    
      
         


      

      
        49

        
          

        

      

      
         


      

    

     

    Annex IV
Assets Confirmation List


    
      
         


      

      
        50

        
          

        

      

      
         


      

    

     

    Annex V
Obligations transfer list


    
      
         


      

      
        51

        
          

        

      

      
         


      

    

     

    Annex V
List of Projects Planned of Target Company and Subsidiary Companies
wholly-owned, controlled, equity affiliates of Target Company and Subsidiary
Companies wholly-owned, controlled of DADI GAS

     

    
      
         


      

      
        52

        
          

        

      

      
         


      

    

    
Annex
VI Financial Statements of Target Company and Subsidiary Companies wholly-owned,
controlled, equity affiliates of Target Company and Subsidiary Companies
wholly-owned, controlled of DADI GAS


    
      
         


      

      
        53