EMPLOYMENT
AGREEMENT


雇用协议





EMPLOYMENT
AGREEMENT, dated on October
1, 2008 between Richard Peidong Wu, a citizen of China, having an
identification number of  110108196411156413, residing at 301 Liu Yuan Road Capital
Paradise Shunyi District, Bejing, China(”Executive”)and China Natural
Gas, Inc., a Delaware corporation having its principal office at No.35 Tangyan
Road, Hi-tech Zone, Xi’an 710065, Shaanxi Province, P.R.
China.(“Company”).





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





WHEREAS,
the Company and Executive have reached an understanding with respect to the
extension of Executive's employment with the Company for a one
year period commencing as of  October 10, 2008 
and





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





IT IS AGREED:





1.
Employment, Duties and Acceptance.





1.1.
Effective as of October 10, 2008 , the Company
hereby agrees to the continued employment of Chief Financial Officer("CFO") and
hereby accepts such employment on the terms and conditions contained in the
Agreement. During the term of this Agreement, the Executive shall make himself
available to the Company to pursue the business of the Company subject to the
supervision and direction of the Board of Directors of the Company ("Board" or
"Board of Directors").





1.2. The
Company will employ the Executive to serve as the Company’s full time CFO based
on the Company’s business needs.  The scope and responsibilities of
the CFO job include the following:





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





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





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





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





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








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





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





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





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





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





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





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





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





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





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





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





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





2.
Compensation and Benefits.





2.1. The Company shall pay to
Executive an annual salary of US$250k pre-tax annually. The Executive shall
be responsible for relevant personal taxes. In addition to cash salary, the
Executive will be awarded an amount of stock options equivalent to 1.5% of the
company’s shares outstanding, which shall be 439,852 in total. The stock option
shall be vested over four years(109,963 shares per
year)and the
exercise price shall be $2.45 in cash per share. This stock option can only
be exercisable in cash annually after the Executive works for the company at
least one year. The company will pay for the medical and relevant insurances
equivalent to US$ 10k in total. During the Executive's employment salary will be
paid for the previous month at the twenty of each month without the
prior written consent of Executiveand, if the pay days are during
a holiday period, it will be the first working day after the holiday
period.





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








2.3. In
addition to what is provided for under the foregoing Article 2.2, the Company
shall have the right to deduct from the Executives’ salaries for other purposes
in accordance with laws and regulations of the State.





3. Term
and Termination.





3.1. The
term of this Agreement is for a period of one
years beginning onOctober 10, 2008 and terminating on October
9, 2009.





3.2. If both Parties desire to renew
this Agreement, each Party shall notify the other Party of its intent to renew
this Agreement thirty days prior to the expiration of this
Agreement.





3.3. The Company, by notice to
Executive, may terminate this Agreement for cause. As
used herein, "cause" shall include (a) the refusal in bad faith by Executive to carry out
specific written directions of the Board, (b) intentional fraud or dishonest
action by Executive in his/her relations with the Company ("dishonest" for these
purposes shall mean Executive's knowingly making of a material misstatement to
the Board for the purpose of obtaining direct personal benefit); or (c) the
conviction of Executive of any crime involving an act of significant moral
turpitude after appeal or the period for appeal has elapsed without an appeal
being filed by Executive. Notwithstanding
the foregoing, no "cause" for termination shall be deemed to exist with respect
to Executive's acts described in clause (a)or (b) above, unless the Board shall
have given written notice to Executive (after five ( 5)days
advance written notice to Executive and a reasonable opportunity to Executive to
present his/her views with respect to the existence of "cause"), specifying the
"cause" with particularity and , within twenty (20) business days after
such notice, Executive shall not have disputed the Board's determination or
in reasonably good faith taken action to cure or eliminate prospectively
the problem or thing giving rise to such "cause," provided, however, that a
repeated breach after notice and cure, of any provision of clause (a) or (b)
above, involving the same or substantially similar actions or conduct,
shall be grounds for termination
for cause upon not less than five (5) days additional notice from the
Company.





3.4. The Executive, by notice to the
Company, may terminate this Agreement in writing no less than 3 months if a
"Good Reason" exists. For purposes of this Agreement, "Good Reason" shall mean
the occurrence of any of the following circumstances without the Executive's
prior express written consent:





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





(b) a
material breach of this Agreement by the Company;





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





(d) a
liquidation, bankruptcy or receivership of the Company; or










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





4.
Protection of Confidential Information; Non-Competition.





4.1. Executive acknowledges
that:





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





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





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





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





4.3. Upon termination of his/her
employment with the Company, Executive will promptly deliver to the Company all
memoranda, notes, records, reports, manuals, drawings, blue-prints and other
documents (and all copies thereof) relating to the business of the Company and
all property associated therewith, which he may then possess or have under
his/her control; provided, however, that the Executive shall be entitled to
retain one copy of such documents for his/her personal use and
records.





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





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





5.
Rewards and Penalties





5.1.
Executive shall abide by various rules and regulations stipulated by the Company
under the law.





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





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





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





6.
Liability for Breach





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





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








(b) The
EXECUTIVE resigns without the Company’s consent.





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





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





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





7.
Miscellaneous Provisions.





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





If to Executive:





If to the
Company:





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





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








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





7.5. This Agreement shall inure to the
benefit of and be binding upon the successors
and assigns of the Company. This Agreement shall not be assignable by Executive,
but shall inure to the benefit of and be binding upon Executive's heirs and
legal representatives.





7.6. Should any provision of this
Agreement become legally unenforceable, no other
provision of this Agreement shall be affected, and this Agreement shall continue
as if the Agreement had been executed absent the unenforceable
provision.





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





By:
      Qinan JiCEO
      of China Natural Gas Inc.BY:
      Richard Peidong Wu