Contract for Purchase and Sales of Coal-Bed Gas
1
 
 
     
 Contract of Purchase and Sales of Coal-Bed Gas between
Qinshui Lanyan Coalbed Methane Co., Ltd. and Xi’an Xi
Lan Natural Gas Company Henan Branch.
 
 January 2009
 
 
  
 
 
 
 Contract for Purchase and Sales of Coal-Bed Gas
2
 
 Article I Definition and Interpretation
 Definitions and terms in this Contract are defined as follows (except as otherwise specified in this Contract):
 1.1 Supplier: Qinshui Lanyan Coalbed Methane Co., Ltd.
 1.2 Purchaser: Xi’an Xi Lan Natural Gas Company Henan Branch.
 1.3 Both Parties: Supplier and Purchaser mentioned above that have signed this Contract of Purchase and Sales.
 1.4 Working Day: any calendar days except the Saturday, Sunday and statutory holidays. If the expiration date of any term stated in this Contract happens to be a Saturday, Sunday or statutory holiday, then such term will last to the subsequent first working day.
 1.5 Point of Delivery: delivery point of coal-bed gas agreed upon by both Parties.
 1.6 Coal-Bed Gas: hydrocarbon or the mixture of hydrocarbon with other substances that presents in gas state under the condition of 20 Celsius degrees and 1 atmosphere.
 1.7 Standard Cubic Meter: quantity of coal-bed gas, this quantity is the volume of dry coal-bed gas in one cubic meter under the condition of 20 Celsius degrees and 1 atmosphere.
 1.8 Facilities: equipments and pipelines needed for production, processing, delivery, metering, extraction and transportation of coal-bed gas in this Contract.
 1.9 Supplier Facilities: facilities owned, operated or controlled by Supplier.
 1.10 Purchaser Facilities: facilities owned, operated or controlled by Purchaser.
 1.11 Daily Supply and Extraction: volume of coal-bed gas delivered and extracted between Purchaser and Supplier each day.
 1.12 Contract Period: the period from the commencement date of gas supply specified in the contract to the expiration date of the contract.
 
 Article II Undertaking of Both Parties
 2.1 Supplier undertakes to deliver coal-bed gas to Purchaser through the primary filling station in accordance with the terms and conditions specified in the Contract of Purchase and Sales, except in the case of any force majeure events.
 2.2 Purchaser undertakes to purchase the coal-bed gas in the specified quantity in accordance with the terms and conditions specified in the Contract of Purchase and Sales.
 2.3 Purchaser undertakes to strictly abide by the relevant regulations on safety production, labor discipline, civilization and sanitation and others, and provisions established by Supplier within Supplier’s production area.
 2.4 Both Parties of the Contract are legally existing companies who have the right to execute this contract as well as the capability to perform their rights and obligations under this contract in a smooth way.
 2.5 All governmental approvals and permissions needed for the execution of this contract have been acquired, and are legal and valid.
 2.6 When executing the contract, no people’s court, arbitration agency or administrative organ has generated any judgment, adjudication, verdict or any specific administrative acts or other legal proceedings that are sufficiently enough to impose major adverse impacts on their capabilities in fulfilling the contract.
 2.7 All internal authorization procedures needed by both Parties for execution of the contract have been completed; this contract has been executed by representatives duly authorized by both Parties.
 Contract for Purchase and Sales of Coal-Bed Gas
3
 Article III Contract Period
 3.1 This Contract of Purchase and Sales starts from January 01, 2009 and ends on December 31, 2015.
 3.2 The period of this Contract can be extended subject to the following terms and conditions:
 (1) The Party that wants to extend the contract period shall make such notification to the other Party in written at least three months prior to the expiration date of this Contract;
 (2) After expiration of the Contract, if Purchaser wants to continue to purchase coal-bed gas from Supplier, then Supplier shall give Purchaser the right of first refusal.
 
 Article IV Supply and Reception of Coal-bed Gas
 4.1 If Purchaser cannot normally receive and extract the coal-bed gas due to the reason of its own facilities, Purchaser shall take charge to eliminate such problems, and immediately inform Supplier of that in written.
 4.2 If Supplier cannot normally supply the coal-bed gas due to the reason of its own facilities, Supplier shall take immediate measures to ensure its facilities to resume the normal gas supply within 24 hours, and at the same time inform Purchaser of that in written as soon as possible.
 4.3 Supplier shall send the notification to Purchaser regarding the normal maintenance & repair of Supplier’s gas supply facilities at least 72 hours in advance, and take proper measures to ensure the normal gas supply.
 4.4 Notwithstanding the provisions in above Article 4.1 and 4.2, both Parties shall inform each other any known situations that may cause suspension or reduce Supplier’s delivery and/or Purchaser’s extraction of coal-bed gas as soon as possible within the foreseeable time.
 
 Article V Delivery Place of Coal-bed Gas
 5.1 The delivery point of coal-bed gas is subject to the Supplier’s gauging instrument (agreed upon by both Parties).
 5.2 Place of delivery: any place designated by Party B.
 
 Article VI Security Risks
 6.1 Security Risks refer to the following: malfunction of equipment valves, impact and damage of gauges and facilities due to pressure build-up; personal injuries & death and damage of equipments & facilities due to explosion caused by accumulation of methane gas resulting from leakage of pipeline valve and connector and gauge connector; and the liabilities and compensation caused by production halt or breakdown.
 6.2 Purchaser’s facilities shall not be put into use before being registered at the Company’s Security Supervision Department with the security certificates.
 6.3 Supplier shall assume the liability for compensation for any production breakdown or damage of gauge or any facilities and pipelines under the ownership of Supplier for more than 12 hours due to malfunction of Supplier’s facilities or that the supply gas pressure exceeds the pressure-bearing range of gauge.
 6.4 Any personal injuries and/or death and damage of equipments and facilities caused by explosion of accumulated coal-bed gas within the respective property range of both Parties due to improper management or insufficient protection facilities of either Party, as well as the liability for causing the other Party unable to supply or use gas (production breakdown), shall be borne solely by the Party of accident.
 Contract for Purchase and Sales of Coal-Bed Gas
4
 7. Metering
  7.1 Both Parties shall abide by theRules For The Implementation Of The Metrology Law Of The People's
  Republic Of China.
  7.2 Supplier shall build, install, maintain, operate and monitor the equipments and instruments needed for metering the coal-bed gas (abbreviated as “metering instruments of both Parties” hereafter”) authorized by both Parties at the place of delivery as specified in above Article V.
  7.3 The unit of quantity for coal-bed gas measurement shall be the standard cubic meters as defined in above Article 1.7.
  7.4 If either party requires to test, adjust and calibrate the metering facilities, a 48 hours prior notification shall be given to the other party to make relevant preparation works. Supplier or Purchaser may assign a representative to the field to observe the ongoing situation of the above operations. The other Party shall, within five days after observing such operation, indicate to the other Party in written form whether the whole process of such operation is acceptable. If the other Party does not accept a certain operation, relevant reasons for refusal shall be provided, and such Party shall carry out such operation again.
  If Supplier or Purchaser, after observing such operation, failed to inform its acceptance of the whole process of such operation to the other Party in written within the above specified time, then Purchaser or Supplier shall be deemed as having accepted the whole process of such operation, which shall be taken as the result of having accepted such operation.
  7.5 Both Parties agree to invite a third party with national metering qualification to carry out periodical test & calibration to the metering instrument if necessary, thus to ensure the accuracy of metering quantity.
  Article VIII Daily Supply and Extraction
  Both Parties agree that the daily supply and extraction shall be no less than 200,000 cubic meters per day, and agree to increase the gas supply to Purchaser based on the increase of productivity.
  Article IX Quality
  Implemented as per the criteria for coal-bed gas quality of Jing Coal Mining Group, the criterion is consistent with the quality criteria of GB18047-2000 National Compressed natural gas for Vehicles.
  Article X Price of Coal-bed Gas
  According to the quality of coal-bed gas specified in Article IX of this Contract of Purchase and Sales, the price of coal-bed gas sold by Supplier to Purchaser is calculated at the price of RMB 1.3 Yuan/m3 (tax-included price). (Note: ¥1.3 Yuan/ m3 is the price of compressed and processed gas).
  Article XI Settlement and Payment
 Contract for Purchase and Sales of Coal-Bed Gas
5
 Purchaser settles accounts with Supplier by bank transfer in the method of prepayment per month; the sum of money for purchasing gas is calculated by multiplying the monthly accumulated extraction of gas by the unit price, such sum of money will be deducted from the prepayment.
  Article XII Time for Gas Supply
  Supplier shall take charge to transport the coal-bed gas to the place designated by Purchaser, and Purchaser shall inform the start time of gas supply to Supplier in written or by telephone. Purchaser shall first make RMB Ten Thousand (¥100,000) Yuan payment to Supplier as prepayment, and deduct the sum of money for purchasing gas after the gas supply is commenced.
  Article XIIIPurchaser’s extraction of coal-bed gas shall be implemented within the amount of prepayments; and Supplier has the right to stop the gas supply when the balance prepayment is insufficient.
  Article XIV Liability for Breach
  Both Parties shall strictly abide by the relevant provisions of this Contract; either Party shall assume the relevant liabilities for breach.
  Article XV Force Majeure
  15.1 Force Majeure: any unpredictable, unavoidable and unvanquishable objective events occurred to either Party when such party has performed his due obligations. And such events are not in control of and unavoidable by the affected Party as the rational and prudent operator, including but not limited to (but subject to change of national policies) flood, typhoon, hurricane, earthquake, landslide, breakage of the only way that must be passed, soil corrosion or subsidence and so on.
  15.2 This Contract becomes enforceable or cannot be executed according to the agreed terms and conditions due to the force majeure events, the Party encountering the above force majeure events shall immediately inform the other Party of this Contract and provide details of such force majeure events as well as the valid certificates certifying the reason for the execution of the contract to become impossible as a whole or in part or needs to be delayed within five (5) working days. During the duration period that the affected party has no means to perform his due obligations due to force majeure events, such affected Party may delay the execution of the Contract or not to execute the Contract in part or as a whole, and his liability for failure in execution of the contract during such period is exempted, but such
Party shall make reasonable efforts to take remedial measures for his incapability to perform the obligations to the extent possible.
  15.3 The Party encountering the above force majeure events shall inform the other Party of the estimated time needed to remedy the force majeure events and the estimated coal-bed gas deliverable or extractable during the force majeure period as soon as possible within the term of this Contract. If the force majeure event is estimated to last more than ten (10) days, Both Parties shall strive to work out a mutually acceptable solution. Once the force majeure events specified in this Article have been remedied, the Party encountering the force majeure events shall again become obliged to perform the obligations specified in this Contract.
 Contract for Purchase and Sales of Coal-Bed Gas
6
 15.4 For the Party failed to perform the Contract on time due to fault, if any force majeure events occurred during the overdue period that made the execution of the Contract become impossible in part or as a whole or has to be delayed, such Party still have to assume the liability for breach of contract.
    Article XVI Transfer
  Unless upon written permission of the other Party, neither Party of this Contract shall transfer his rights and interests under this Contract to any third party in part or as a whole.
  Article XVII Confidentiality
  Both Parties agree on the contents of this Contract and that either Party shall obtain all the information of the other Party in accordance with the provisions of this Contract, unless prior written permission from both Parties, no such contents shall be disclosed to any other persons except the following:
  (1)
The bank and financial organization or other borrowing organizations that provide funds to both Parties of this Contract; and the discloser shall obtain the written commitment on confidentiality from the above bank and financial organization or other borrowing organizations.
  (2)
The third party consultant designated by either Party of this Contract; and the discloser shall obtain the written commitment on confidentiality from the third party consultant.
  (3)
The government authorities or superior supervision department having jurisdiction over both Parties of this Contract.
  (4)
Supplier can disclose the relevant information to the following organizations:
  (a)
Any affiliate company of Supplier, such company must agree to be bound by the confidentiality provisions.
  (b)
All borrowing or financial organizations engaged by Supplier, and such organization must agree to be bound by the confidentiality provisions.
  (c)
Any party that is in good faith negotiation with the Supplier on the purchase of Supplier’s rights and interests in Supplier’s facilities in part or as a whole; and such party must agree to Supplier to be bound by the confidentiality provisions.
   Article XVIII Settlement and Arbitration of Dispute
 Contract for Purchase and Sales of Coal-Bed Gas
7
 Any disputes arisen between both Parties as to execution of the Contract shall be resolved through negotiations; in case no solution is reached, it shall be submitted to Jincheng Municipal Arbitration Committee for arbitration in accordance with the arbitral rules of procedure of such arbitration agency. The arbitration award shall be final and binding on both Parties.
  Article XIXSupplementary provisions shall be made for any matters not mentioned in this Contract through negotiations by both Parties, such supplementary provisions shall be agreed upon by both Parties, and have equal legal effect with this Contract upon signed by authorized representatives of both Parties.
  Article XXThis Contract becomes effective upon signature and stamp by authorized representatives of both Parties.
  Article XXIThis Contract of Purchase and Sales is prepared in octuplicate, which will be held by both Parties respectively.
  (This is the end of the contract; the attached sheet is only for signature).
  (Signature page)
  Supplier: Qinshui Lanyan Coalbed Methane Co., Ltd. (common seal)
  Legal representative (or authorized representative):
   January 12, 2009
   
   Purchaser: Xi’an Xi Lan Natural Gas Company Henan Branch (common seal)
   Legal representative (or authorized representative):
   January 12, 2009