Employment Agreement


 


 


This EMPLOYMENT
AGREEMENT (“Agreement”) is dated on May 2, 2012 between Zhaoyang Qiao (the “Executive”), a citizen
of People’s Republic of China, ID number 610123197407100819, and
China Natural Gas, Inc. (the “Company”), a Delaware Corporation, with primary business address of No. 35 Tangyan
Road, High-Tech Zone, Xi’an 710065, Shaanxi Province, China. The Executive will be employed as the Chief Financial Officer
(“CFO”).


 


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


 


WHEREAS, the Company and Executive have
reached the following understanding with respect to the Executive's employment by the Company for a period of one year commencing
May 2, 2012; and  


 


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


 


1. Employment, Duties and Acceptance.


 


		1.1.	Effective May 2, 2012, the Company hereby agrees to the continued employment of Executive as the
Chief Financial Officer ("CFO") and both parties hereby accept such employment on the terms and conditions contained
in this Agreement. During the term of this Agreement, the Executive shall make him / her 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 shall retain the Executive to serve as the Company’s full time CFO. The scope
and responsibilities of the CFO position include the following:



 


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



			



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



			



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



			



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



			



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



			



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



			



 






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



			



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



			



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



			



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



			



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



			



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



			



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



			



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






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



 


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


 


Company strategy


CFO shall play a major role in coordinating
a comprehensive strategy to maximize Company value:


 


(1) Ensure the existing plans are well based on the Company’s
current business to maximize the value to the Company;


 


1. Continuously assess the plan’s
value creation potential;


 


2. Ensure the plans are targeted towards
major problems faced by the Company. In doing so, Executive should repeatedly research reasons and possibilities related to changes
in the Company’s operations and provide external references for value creation (such as some business of value to other possible
owner);


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


 


4. Formulate criteria for financial control
and establish mechanism for progress assessment


 


(2) Assist in developing the Company’s expansion strategy
and creating shareholder value.


 


1. Comment on the current market opportunities closely related
to the Company’s business;


 


2. Evaluate the Company’s capacity and assets to capitalize
the market opportunity; propose proper remedies for capacities lacking;


 






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3. Provide business and financial evaluations regarding specific
proposals.


 


Financial Strategy


 


CFO shall be responsible for the formulation and implementation
of comprehensive financial plans and strategies to provide support for the company's business and create greatest value for shareholders.


 


(1) Propose capital and dividend policies
for value creation;


 


(2) Design and manage Company presentation
of the Company’s operations and plan to the financial community;


 


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


 


Budget and Control


 


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


 


(1)           
Coordinates short-term budget compilation.


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


(3)           
Ensure business units are properly authorized;


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


 


With CEO and the departments of the performance evaluation of
business unit.


 


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


 


(1)           
Ensure timely reporting and effective compliance;


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


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


(4)           
Perform all tax reporting and tax obligations;


(5)           
Seek opportunities to reduce the tax burden;


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


(7)           
 Risk management and plan of the Company.


 


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


 


1. Financial institutions (Banks and investment
Banks)


 






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2. External auditors.


 


3. Supervising authorities and tax
authorities.


 


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


 


1.4 Location. Except during periods of quarterly and annual
filings with Securities and Exchange Commission (“SEC”), CFO shall spend full of his time in Xi’an headquarter.


 


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


 


2. Compensation and Benefits.


 


2.1. The Company shall pay
to Executive a salary of ¥200,000  pre-tax annually and receive 12 pays each year, equal to a monthly salary of 
¥16,666.66 .


 


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 year
beginning on May 2, 2012 and terminating on May 1, 2013; 


 


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.


 






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


 


		(a)	a material adverse change in the nature of 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 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.



 






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		(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 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 memorandum, notes, records, reports, manuals, drawings, blue-prints and other
documents (and all copies thereof) relating to the business of the Company and all property associated therewith, which he may
then possess or have under his/her control;


 


4.4. During the period of employment: (A) 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 Executives should abide by the provisions of the company
law includes attendance management system, various rules and regulations, and in accordance with the relevant provisions of the
company card timing. Personal phone will remain open 24 hours, ensure unblocked communication at any time, maintain effective communication
with overseas investors, Otherwise, the company will be in accordance with the relevant system for punishment, Meanwhile, the chief
financial officer of the company chairman for reporting directly.


 






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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: Address for : 19th Building
B Van Metropolis, Tang Yan Road, Hi-tech Zone, Xian


 






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


 


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


 





	 	 By:  Shuwen Kang
		 
	 	          CEO of China Natural Gas Inc.
		 
	 	 
	 	 
	 	BY:  Zhaoyang Qiao







 






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