Unassociated Document


    Translation
of Qujing Gas Co. Ltd. Sponsors’ Agreement

    


    Parties:

    (1)
Yunnan Investment Group

    (2) Sino
Gas International Holdings, Inc.

    (3)
Qujing Development Investment Co. Ltd.

    


    According to PRC Company Law
(Company Law) and
PRC
Contract Law (Contract Law), three parties found Gas Co. (Company) ,in accordance with the
principles of equality and mutual benefit, in Qujing City, Yunan Province, China.
After negotiation, three Parties reach
the agreement.

    


    Chapter 1
Parties of Investment

    Section 1
Parties of the agreement

    The
following three parties will be bound by this agreement:

    (1)
Yunnan Investment Group, Chinese Corporate is established according to the laws
of the Peoples’ Republic of China

    Representative:
Bao Ming Hu

    Position:
Sole Board of Director

    Address:
No. 15 Tuodong Rd, Kunming, Yunnan

    Tel:
0871-3185874

    Fax:
0871-3171420

    


    (2) Sino
Gas International Holdings, Inc., Foreign Corporate is established according to
the laws of the Peoples’ Republic of China

    Representative:
Liu Yu Chuan

    Position:
Sole Board of Director

    Address:
Area A Caizhi Building, No. 18 Zhongguancun East Rd, Haidian,
Beijing

    Tel:
010-8260038

    Fax:
010-8260042

    


    (3)
Qujing Development Investment Co. Ltd., Chinese Corporate is established
according to the laws of the Peoples’ Republic of China

    Representative:
Zhan Hong Bin

    Position:
Sole Board of Director

    Address:
No. 183 Qilin South Rd, Qujing

    Tel:
0874-312388

    Fax:
0874-3124698

    


    Section 2
Parties of Investment

    Three
parties decide to invest in Qujing, Yunnan together, and found Gas Company. The
share held by Party (1) will be resolved and separate to the other parties.
After the separation, each shareholder’s total shares held can not excess the
shares hold by Party (2).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Chapter 2
Summary of the Company

    Section 3
Name and Address

    Chinese
Name: 曲靖燃气有限公司

    English
Name: Qujing Gas Co. Ltd

    Address:
Qujing, Yunnan

    


    Section 4
Legal Form of Company

    The legal
form of company is Co., Ltd. be response to liabilities as company’s assets. The
parties of the agreement are response to liabilities as the investment amount or
equivalent.

    


    Chapter 3
Registration Capital of Company

    Section 5
Registration Capital

    The
registration capital is ¥30,000,000.00.

    The
registration fund is ¥30,000,000.00 and
is 100% of the total registration capital

    


    Section 6
Investment of Shareholders

    The
followings are the name of shareholders, the amount of registration fund, the
manner of investment, the amount of first investment and the due date of
promised investment:

     

    
      
        
          
            
              
                
                  
                    	
                            shareholders

                          	
                            registration
      fund

                          	
                            percentage

                          	
                            first
      investment

                          	
                            manner
      of investment

                          	
                            due
      date

                          
	
                            Yunnan
      Investment Group

                          	
                            ¥15,300,000

                          	
                            51%

                          	
                            ¥15,300,000

                          	
                            cash
      in RMB

                          	
                            in
      60 days after sign the agreement and get the promise of open bank accounts
      from Trade and Industry Bureau

                          
	
                            Sino
      Gas International Holdings, Inc.

                          	
                            ¥11,700,000

                          	
                            39%

                          	
                            ¥11,700,000

                          	
                            cash
      in RMB

                          
	
                            Qujing
      Development Investment Co. Ltd.

                          	
                            ¥3,000,000

                          	
                            10%

                          	
                            ¥3,000,000

                          	
                            cash
      in
RMB

                          


                  

                

              

            

          

        

      

    

     

    Section 7
Responsibility about Breach of Contract for Registration
Fund

    The shareholders will pay certain amount of fine if do not follow the Section 6 of
this agreement. The party breach of contract
will pay the fine to the
other parties follow this agreement. The amount is calculate by the
formula, fine = the amount should be invest but
does not * 5‰ per day * days of late. If that party does not pay the investment
in 30 days after due date, the other parties have right to end this agreement
and have right to require the party breach of contract to compensate all the
losses.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    Chapter 4 Company’s Scale of Investment and Source of
Company’s Capital

    Section 8 Company’s Scale of
Investment

    The company should satisfy the increasing demand of gas in Qujing.
The project needs three terms investment. The total amount of three terms
investment is ¥399,990,000, which include ¥88250000 in first term, ¥99190000 in second term and ¥219750000 in third term

    


    Section 9 Source of Company’s Capital

    The
investment required for the project will be invested by shareholders base on the
percentage of shares owned according to the requirement of the project’s
construction. The excess part will be solved by company’s loan and each
shareholder will provide the warrants base on the percentage of shares
owned.

    


    Section
10 Founding of Shareholders’ Commitment

    Shareholders’
Commitment is the authorization of the company.

    When
shareholders meeting held, shareholders’ representative by law or by special authorization will
attend the meeting. However, the resolution should be available after stamped by each shareholder.

    


    Section
11 Responsibility of Shareholders’ Commitment

    The
following are the responsibilities of shareholders’ commitment:

    
      	
              1.  

            	
              decide
      company’s strategies , investment plans and significant
      adjustments

            


    

    
      	
              2.  

            	
              elect
      and replace the directors and supervisors, decide the payments to
      directors and supervisors

            


    

    
      	
              3.  

            	
              examine
      and approve the report of board of
directors

            


    

    
      	
              4.  

            	
              examine
      and approve the report of board of supervisors or
    supervisors

            


    

    
      	
              5.  

            	
              examine
      and approve company’s annual financial budget, actual plan and related
      significant adjustment

            


    

    
      	
              6.  

            	
              examine
      and approve the plan about company’s distribution of profit and recovery
      of loss

            


    

    
      	
              7.  

            	
              decide
      the decision about increase or reduce the registration capital of the
      company

            


    

    
      	
              8.  

            	
              decide
      the decision about issue of company’s
bond

            


    

    
      	
              9.  

            	
              decide
      the decision about the add or deduct the shareholders, merger, separate,
      discrete, liquate or change the
company

            


    

    
      	
              10.  

            	
              decide
      the decision about the company’s
rule

            


    

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    
      	
              11.  

            	
              examine
      and approve the warrants of Section
23

            


    

    
      	
              12.  

            	
              consider
      the purchasing and selling of company’s asset, which exceeds 30% of the
      company’s audited net asset in the current period within one
      year

            


    

    
      	
              13.  

            	
              consider
      CSOP (Compensation Stock Option
Plan)

            


    

    
      	
              14.  

            	
              consider
      administrative regulations, departmental rules and regulations, and other
      matters should be decide by board of directors set by the
      regulations

            


    

    No
meeting for shareholders’ commitment is required if shareholders unanimously
agree the item listed above in written form. Decision can be decided directly,
and signed or stamped by all shareholders on the decision.

    


    Section
12 Rules for Shareholders’ Commitment discussion

    
      	
              1.  

            	
              First
      meeting for shareholders’ commitment will be called and held by the
      shareholder who invests the most.

            


    

    
      	
              2.  

            	
              Meetings
      for shareholders’ commitment include scheduled meeting and temporary
      meeting. Scheduled meeting should be held on time according to the
      schedule set based on company’s regulation. Temporary meeting should be
      held when Representatives of more than one-tenth of the shareholders the
      right to vote, more than one third of the directors, the board of
      supervisors proposal to temporary
meetings

            


    

    
      	
              3.  

            	
              Shareholders
      meeting convened by the board of directors. Sole board of directors will
      hold. If sole board of directors cannot performing his duties or do not
      performing his duties, vice sole board of directors will hold. If vice
      sole board of directors cannot perform his duties or do not performing his
      duties, the director who appointed by more than half of directors will
      hold. The board of directors cannot or does not performing their duties,
      the board of supervisors will host the meeting. If board of supervisors do
      not host, representatives of more than one-tenth of the shareholders the
      right to vote, more than one third of the directors can
    host.

            


    

    
      	
              4.  

            	
              The
      annual meeting for shareholders’ commitment should be announced to all the
      shareholders’ 20 days before the meeting. The temporary meeting should be
      announced to shareholders 15 days before the
  meeting.

            


    

    
      	
              5.  

            	
              Shareholders’
      commitment should record all the decision about contains discussed during
      the meeting. All the participated shareholders’ should have signature on
      the record.

            


    

    
      	
              6.  

            	
              the
      decision discuss on meeting, about changing on the company’s regulation,
      increasing or decreasing the registration capital, and company’s merging,
      separating, or changing the format of company, and issuing company’s loan,
      must have 2/3 and above to agree.

            


    

    


    Section
13 Board of Directors’ Number of People and Appointment

    The board
of directors will have 5 people. 2 people from Party (1), 3 people from Party
(2).

    Board of
directors has one sole board of directors, and one vice sole board of directors.
The sole board of directors will be appointed by Party (1). Vice sole board of
directors will be appointed by Party (2).

    The day
company register will be the day of founding of board of directors.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    Section
14 Duties of Board of Directors

    Board of
directors is responsible to shareholders’ commitment and is responsible for the
following duties:

    
      	
              1.  

            	
              Call
      for the shareholders’ commitment meeting and report the
    work.

            


    

    
      	
              2.  

            	
              Executive
      the decision of shareholders’ commitment
  meeting.

            


    

    
      	
              3.  

            	
              Decide
      company’s operation plan and investment
plan.

            


    

    
      	
              4.  

            	
              Make
      company’s annual budget and actual financial
  plan.

            


    

    
      	
              5.  

            	
              Make
      company’s plan about the separation of profit and coverage of
      loss.

            


    

    
      	
              6.  

            	
              Make
      company’s plan about increasing or decreasing registration capital and
      issuing company’s loan.

            


    

    
      	
              7.  

            	
              Make
      company’s plan about separating, merging, diluting, and changing company’s
      format.

            


    

    
      	
              8.  

            	
              Decide
      the setting of company’s internal
  authorizations.

            


    

    
      	
              9.  

            	
              Appoint
      general manager of the company. According to managers’ require to appoint
      or dismiss vice general manager.

            


    

    
      	
              10.  

            	
              Develop the company's basic
      management system.

            


    

    
      	
              11.  

            	
              Develop
      charter amendment proposal.

            


    

    
      	
              12.  

            	
              Listen to reports on the work of manager, and
      inspect manager’s
  work

            


    

    
      	
              13.  

            	
              Laws and administrative
      regulations, departmental rules and regulations or the statute of the
      other powers conferred.

            


    

    


    Section 15 Board of Directors’ Rules for Procedure

    
      	
              1.  

            	
              Board
      of directors should have meeting at least twice per year. Sole board of
      directors will call, announce to all the directors and supervisors 10 work
      days before the meeting and deliver contains for the meeting. Representative of 1 / 3 or more than the right to vote,
      the shareholders, 1 /
      3 or more than the directors or board
      of supervisors can propose to hold temporary Board of Directors
      meeting. Sole board of directors should call and hold the meeting in 10
      days from the day gets the
proposal.

            


    

    
      	
              2.  

            	
              Board of directors meeting will be called and held by
      sole board of directors. If sole board of directors cannot
      performing his duties or do not performing his duties, vice sole board of
      directors will hold. If vice sole board of directors cannot perform his
      duties or do not performing his duties, the director who appointed by more
      than half of directors will hold.

            


    

    
      	
              3.  

            	
              Board
      of directors should record items for discussion should be on the meeting
      made the decision.

            


    

    
      	
              4.  

            	
              voting
      for board of directors’ decision is one vote per
  person

            


    

    
      	
              5.  

            	
              Board
      of directors’ decision will be available after more than half of the
      directors agree.

            


    

    
      	
              6.  

            	
              The meeting for board of directors
      will be announcing 10 work days before the meeting
      and deliver contains for the
meeting.

            


    

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    Section 16 Duties for General Manager

       1. Company management implemented under the
leadership of the board of directors, general manager responsibility system.
General Manager is responsible for
company’s regular operation and
management.

    
      	
              2.  

            	
              General Manager for company will be
      appointed by Party (2).

            


    

    
      	
              3.  

            	
              General Manager is responsible to the
      following duties:

            


    

    
      	
              a)  

            	
              Host company’s production, operation and
      management. Organize and executive the decision
      of the board of directors.

            


    

    
      	
              b)  

            	
              Organize and executive
      company’s annual operation plan and investment
      plan.

            


    

    
      	
              c)  

            	
              Develop internal management authorizations set up plan.

            


    

    
      	
              d)  

            	
              Develop company’s internal basic management
      rules.

            


    

    
      	
              e)  

            	
              Set company’s
    regulation.

            


    

    
      	
              f)  

            	
              Require
      to appoint or dismiss vice manager, CFO, and chief
    accountant

            


    

    
      	
              g)  

            	
              Decide
      to appoint or dismiss the other managers not decide by board of
      directors

            


    

    
      	
              h)  

            	
              The other duties given by this
      agreement or board of
directors.

            


    

    


    Section 17 Managers for Finance

    
      	
              1.  

            	
              Company set CFO and chief accountant as
      mangers for finance.

            


    

    
      	
              2.  

            	
              Chief accountant will be appointed by
      Party (1), CFO will be appointed by Party (2).

            


    

    
      	
              3.  

            	
              When party (2) needs to provide
      financial statement according to the requirement of foreign authorization,
      CFO will be sign and be responsible as managers for finance; otherwise, chief accountant will
      be responsible for company’s regular financial job.

            


    

    


    Section 18 Board of Supervisors’ Number of people and
Appointment

    Board of supervisors will have 5
supervisors. Party (1) appoints 2 supervisors, Party (2) appoint 1, and Party
(3) appoints 1

    Board of supervisors will have one
president, which will be appointed by Party (3) and will bee
voted more than half supervisors. President will call and hold meetings for board of supervisors.
If president cannot or do not perform his
duties, another supervisors who appointed by more than half of supervisors will
call and hold meetings for
board of supervisors.

    


    Section 19 Duties for Board of
Supervisors

    Board of supervisors performs the
following duties:

    
      	
              1.  

            	
              Check company’s finance.

            


    

    
      	
              2.  

            	
              Monitor
      directors and senior managers in the execution of the duties of the
      company. Recall directors and senior managers who are in violation of the law,
      Administrative regulations, this agreement and
      shareholders’ commitment’s
  decision.

            


    

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    
      	
              3.  

            	
              When directors and senior managers’ action harm the company, require them to correct
      it.

            


    

    
      	
              4.  

            	
              Propose the convening of temporary
      shareholders’ meeting. When the board of directors
      does not perform
      their duties set by Company’s
      Law, hold and call
      for the shareholders’
  meeting.

            


    

    
      	
              5.  

            	
              Sue directors and senior managers
      according to Company’s
      Law.

            


    

    
      	
              6.  

            	
              Do the research when
      they find abnormal
      operation of the company. Require accounting firm and lawyer
      firm to provide
      assistance, the cost will be paid by
  company.

            


    

    


    Section 20 Board of Supervisors’
Rules of Procedure

    
      	
              1.  

            	
              Board
      of supervisors will call for a meeting at least every 6 months.
      Supervisors can propose for temporary supervisors’
  meeting.

            


    

    
      	
              2.  

            	
              Board
      of supervisors will set board of supervisors’ rules of procedure, clear the board of supervisors of
      procedure and voting procedures and make sure work
      efficiency and scientific decision-making of the board of
      supervisors.

            


    

    
      	
              3.  

            	
              Board of supervisors under the
      rules of procedure of the board of supervisors held and voting procedures
      will be approved by shareholders as annex of this
      section.

            


    

    
      	
              4.  

            	
              Board of supervisors should record all the decision
      discussed during the meeting.
      All the supervisors who
      participated should sign on the
record.

            


    

    
      	
              5.  

            	
              Supervisors have right to require a
      described record for his speak during the
      meeting on the record. Board of supervisors’ meeting record will be saved as
      company’s document for at least 10
      years.

            


    

    
      	
              6.  

            	
              announcements for board of supervisors’ meeting should include the
      following items:

            


    

    
      	
              (1)  

            	
              date, place and meeting
      deadline

            


    

    
      	
              (2)  

            	
              subject and
      topic

            


    

    
      	
              (3)  

            	
              date of issue the
      notice

            


    

    


    Chapter 6 Finance, Accounting, Auditing and Separation of Profit of the Company

    Section 21

    Company will pay the tax and expense according
to the law

    


    Section 22

    The financial years for the company begin
on January 1st each year until year end December
31st.

    


    Section 23

    Net profit of the company will
separate at
January of next year
according to shareholders’ share percentage.

    


    Section 24

    The company’s financial audit request outsourcing,
and audited by the accounting firm appointed by board of
directors.

    One month before financial year end of
each year, general manager
will organize to prepare balance sheet and income statement of the year, and
provide to accounting firm for auditing. After getting the auditors’ report from accounting firm, it will be
provide to directors with balance sheet and income statement for pre-auditing, and in the review by the
board of directors.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    Section 25

    All the shareholders have right to audit and check
company’s account and
operation.

    


    Chapter 7 Set up Limited

    Section 26 Company Preparatory
Committee

    
      	
              1.  

            	
              In 3 days of sign this agreement,
      Party (1), Party (2)
      and Party (3) agree to found “Qujing Gas Co. Ltd
      Preparatory Committee”.

            


    

    
      	
              2.  

            	
              Preparatory committee’s member will be appointed by
      Party (1), Party (2) and Party
(3).

            


    

    
      	
              3.  

            	
              Preparatory committee is responsible to all
      the services relate to found company.

            


    

    
      	
              4.  

            	
              The expenses related to found company
      will borrow from Party (1), Party (2) and Party (3), and will be
      committed by company after found. If the company cannot found, the
      expenses will be committed by Party (1), Party (2) and Party (3) according
      to the shares
      percentage.

            


    

    
      	
              5.  

            	
              Members of preparatory committee do not count wages,
      after company set up will give appropriate subsidies.

            


    

    
      	
              6.  

            	
              When the company meets resistance for
      set up, preparatory committee bring to Party (1), Party (2) and Party
      (3)’s resolution. Only when Party (1), Party (2) and
      Party (3) agree to do not set up the company, the company preparatory
      committee can stop set up the
company

            


    

    
      	
              7.  

            	
              When company get license, the preparatory committee will
      dissolute.

            


    

    


    Section 27 Security of Registration
Fund

    
      	
              1.  

            	
              Since the formal signing of this
      Agreement after the entry into force, Party (1), Party (2) and Party
      (3) or their representatives will open a
      common bank account after reach the agreement.
      If all the shareholders or their
      representatives do not sign, no one allow using the funds in the bank
      account.

            


    

    
      	
              2.  

            	
              Party (1), Party (2) and Party (3)
      should follow Section 6 of this agreement, and put first payment into the
      bank account

            


    

    
      	
              3.  

            	
              In 3 days of the company set up,
      Party (1), Party (2) and Party (3) or their representatives
      will dissolute manage
      the common account. People from company preparatory
      committee will transfer registration fund to company’s basic
    account

            


    

    
      	
              4.  

            	
              If Limited Co. cannot set up, in 2
      days Party (1), Party (2) and Party (3) decide not to set up the company,
      Party (1), Party (2)
      and Party (3) or their representatives will dissolute manage the common
      account. People from company preparatory
      committee will return registration fund to Party (1), Party (2) and Party
      (3)’s basic
      account.

            


    

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    Section 28 Privacy

    Each party of this agreement has obligation to keep
the privacy due to knowing the secret of the business

    


    Section 29 Change and
disarmament

    
      	
              1.  

            	
              This agreement can be changed
      according to
      changes in existing
      laws, sets in new
      laws, new local regulations and agreement reached by parties after equal
      negotiation. If one party proposes to change this agreement, it
      should announce other parties in written documents in 30 days, only after Party (1),
      Party (2) and Party
      (3)’s negotiation and reach agreement,
      this agreement can be
      changed.

            


    

    
      	
              2.  

            	
              this agreement can be disarmament
      before the Limited Co. because of the following
      situation:

            


    

    
      	
              a)  

            	
              the parties reach agreement after
      negotiation, disarm the
    agreement

            


    

    
      	
              b)  

            	
              any parties cannot
      perform their duties
      and obligations In accordance with the manner and timing of this
      agreement

            


    

    
      	
              c)  

            	
              After
      disarmament of this agreement, each party’s duties and obligations under
      this agreement ended immediately, however, the parties which cause the
      disarmament of this agreement will be responsible for
      defaulting.

            


    

    


    Section 30 Irresistible Factors

    
      	
              1.  

            	
              “Irresistible factors” mean the factors cannot be
      avoided causing any parties cannot fully
      or partially perform their duties set by this agreement before sign this
      agreement. This kind of factors include
      earthquake, typhoon, flood, fire, war, domestic or international traffic accident, government or public authority’s behaviors, disease, civil unrest, strike, and
      unpredictable, unavoidable, unfeasible
  situation.

            


    

    
      	
              2.  

            	
              When irresistible factors happen, the
      party’s duties is affected by the
      irresistible
      factors and causing
      delay of the duties. The duties should be extension automatically. The
      party will not be responsible for breach of contract
      responsibility.

            


    

    
      	
              3.  

            	
              The party relates to irresistible
      factors should announce to the other parties
      immediately in
      written form, and provide the proof of causing and period of irresistible
      factors.

            


    

    
      	
              4.  

            	
              When irresistible factors happen, each
      party should
      negotiate for find fair plan of solution in time, and try best to reduce
      the effect to the lowest
level.

            


    

    


    Section 31 Dispute Resolution and Applicable Law

    
      	
              1.  

            	
              This agreement applies the law in the
      People’s Republic of China.

            


    

    
      	
              2.  

            	
              In the course of the agreement to
      the dispute, the parties should first be resolved through
      consultation.
      If the consultation is
      not
      successful, any
      parties can propose arbitration to China International Economic and Trade
      Arbitration Commission. The outcome of arbitration have the force of
      law to all investment
      parties

            


    

    
      	
              3.  

            	
              The result of arbitration will be executive by
      People’s
  court.

            


    

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    Section 32 Notice and Service

    
      	
              1.  

            	
              The
      parties to this agreement due to the implementation of this agreement is
      made or to provide each other all the notice, documents, data, are send to
      the address and fax list on Section 1 of this agreement. If one party
      change address and phone number, the party should notice to other parties
      in 3 days in written form. The loss due to delaying notice, the party made
      mistake will be responsible for the
mistake.

            


    

    
      	
              2.  

            	
              Personally delivered the document
      considered in the delivery of service. Served in a fax served as by facsimile. Service delivered by mail will be
      considered at when registered sent or post for the
    day.

            


    

    


    Section
33 Agreement’s Validation

    This
agreement will be valid since the day sign by all parties and will be end when
stop set up the company or when lifting of this agreement.

    


    Section
34 Appendix Agreement

    The
contain does not cover in this agreement, can be signed an appendix agreement by
Party (1), Party (2) and Party (3), and has equal force of law as this
agreement.

    


    Section
35 Text

    This
agreement has 6 copies, and each party has 2 copies. All of 6 copies has equal
force of law.

    


    Dated:
April 22, 2008

    


    /s/ Yuannan Investment
Group

    Yunnan
Investment Group

    


    /s/ Sino Gas International
Holdings, Inc.

    Sino Gas
International Holdings, Inc.

    


    


    /s/ Qujing Development
Investment Co. Ltd.

    Qujing
Development Investment Co. Ltd.

     

    
      
         

      

      
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