Translated from the original Mandarin

Warranty Deed 




2005-M-531 



Lien holder: Song Yuan
City
Wu Lan Da Jie Cheng Shi Xin Yong She

Mortgager: Wang Hongjun, Sun Jishuang 






In order to ensure the fulfilment of
lien holder’s rights, borrower: Song Yuan Yu Qiao Qian’an Hong Xiang
Petroleum and Gas Development Co., Ltd. asks the mortgagers to provide
hypothecation. Mortgagers fully understand the financial situation of borrower, and
willingly provide such hypothecation according to the mortgage contract of 2005-M-531
(“Contract”). In order to specify the rights and obligations of both parties,
according to “China contract law” and “China hypothecation law,” this
contract is agreed and signed by both parties. 






Article 1 Category of
Lien and Value 




The category of mortgage of this
contract is the loan, which lien holder shall provide the loan according to the contract,
and total value of such loan is RMB 2,000,000. 




Article 2 Bounds of
Hypothecation 






The bounds of hypothecation which
apply to mortgagers are: principle of the loan, interest, overdue interest, amercement,
penalty of breach, compensation of breach, legal cost, attorney cost, guaranty disposal
fee, transfer fee etc. which could happen to lien holders in fulfilling his rights.


 


Article 3 Guaranty 


 

     	 	1. 	
          Mortgager agrees to provide such properties set forth in the list of guaranty,
          which is a part of this contract. 



          


     
     	 	 	 
	 	2. 	
          The above guaranty is evaluated as RMB 2,932,757 and only be treated as a
          reference to lien holder in providing the loan, but cannot be the gist to lien
          holder in disposing such guaranty or limit to lien holder to fulfil his rights.
          The final value of guaranty refers to the net income which will occur in selling
          such guaranty. 



          Article 4 Force of
Hypothecation 






The force of hypothecation is
extended to the affiliation of guaranty, accessory right, right of Subrogation, appendix,
mixture, process and other articles. 






Article 5 Register of
Guaranty 






According to China laws and
regulations or the agreement between both parties, any guaranty which needs register shall
be registered in local mortgage registering administration department within 15 days of
singing this contract, and the certificate of guaranty ownership, the original copy of
register and other property certificate shall be kept by lien holder. 

 










Article 6 Occupancy of
Guarantor 

 

     	 	1. 	
          The guaranties under this contract will be occupied by mortgager, and mortgager
          shall be responsible for the safety of guaranty and ensure such guaranty is in
          good condition and minimise the damage which could happen to guaranty. The lien
          holder has right to inspect the condition and usage of guaranty. 



     	 	2. 	
          If there is damage and lose to the guaranty, mortgager shall inform lien holder,
          and provide the report for explaining the reasons of happening such damage and
          lose. The compensation to the lien holder shall has priority to be account as
          repayment to the loan of this contract 



          


Article 7 Insurance of
Guarantor 


 

     	 	1. 	
          After signing this contract, the mortgager shall fully insure the guaranty, the
          term of insurance shall be no shorter than the term of contract, and the insured
          value shall be no less than the principle and interest of contract. 



     	 	2. 	
          The lien holder must be specified as primary beneficiary under the insurance
          agreement.  



     	 	
          3.	
The original copy of insurance agreement shall be kept by lien
          holder. 
	 	4. 	
          Within the term of this contract, the mortgager shall not halt or terminate the
          insurance agreement. In case of insurance agreement is terminated, lien holder
          reserves the right to insure the guaranty, and all occurred cost shall be
          compensated by mortgager. 



     	 	5. 	
          Within the term of this contract, if there is any accident happened to guaranty,
          the insurance compensation shall be accounted as repayment of loan to lien
          holder. 



          Article 8 Rights and
Obligations of Mortgager 

     	 	1. 	
          After the contract taking effects, without the formal written agreement of lien
          holder, mortgager cannot give away, transfer, sell, lease, remortgage or other
          forms of disposal to the guaranty. 



     	 	2. 	
          Within the term of this contract, if the value of guaranty decreased, the
          mortgager shall increase the value of relevant guaranty, or provide the new
          guaranty which equal to the decreased value. 



     	 	3. 	
          Unless increasing the value of loan, when lien holder and borrower renegotiate
          the terms of contract, there is no need to inform the mortgager and mortgager
          still shall be responsible for the hypothecation under the contract. 



     	 	4. 	
          The cost of evaluation, register, insurance, appraisal, and notarization shall
          be paid by mortgager.  

	 	
          5.	
If any situations in the list happened, the lien holder
          shall be informed in time: 


               	 	
          i.	 	

          There is a dispute arising which relates to the
          ownership of the guaranty, the lien holder shall be informed within 5
days. 
	 	ii. 	  	
                    There is a change of company organization, such as buy out, merge, set up
                    subsidiary, change the stock share structure, etc. shall inform lien holder
                    within 30 days. 



                     





               
               	 	
iii. 
	  	
                    There is change of scope of business, registered capital, change of management
                    shall inform lien holder within 30 days. 



               	 	
iv. 
	  	
                    In the event of exacerbation of financial situation or involvement of financial
                    conflicts, any material fact that might have impact on the pledgor’s
                    ability to fulfil its obligation, the pledgor must notify the lien holder within
                    5 days. 



               	 	
v. 
	  	
                    In the event of bankruptcy, interruption of operation, ceasing operation for
                    reconstruction, business registration withdrawal and revocation and etc, the
                    pledgor must notify the lien holder within 5 days. 



                    
Article 9
Lienholder’s Rights and Obligations 

          	 	1. 	  	
               After fulfilment of major covenant, if the pledgor did not repay the principle,
               interest and other associated expenses, lien holder has the right to process the
               pawn. 



          	 	2. 	  	
               In case of any of the following events, lien holder has the right to take the
               pawn, and get preferred interest from the pawn. 



          	 	a) 	  	
               Based on the major covenant, law or regulation to end the covenant, 



          	 	b) 	  	
               Based on the major covenant, or other situation to receive the loan, the
               pledger’s obligation is not fulfilled under the major covenant. 



          	 	3. 	  	
               Fully cooperate with the lien holder to fulfil its recourse after pledged  

	 	
               4.	 	
The
               remaining from the proceeds of pawn should go to the pledger. 


               Article 10 Lien Rights 





               
               	1. 	  	
                    After the term of this covenant ends when the lien holder execute its lien, the
                    lien holder is entitled to sell the pawn at certain discount or auction it, the
                    lien holder has preferred claim. 



               	2. 	  	
                    Pledger is defined to be two or more persons. The lien holder has the right to
                    dispose the lien. 



                    
Article 11 Changes in
Covenants 





               
               	1. 	  	
                    This covenant is effective upon signing or seal. If registration needed, it is
                    effective upon completion of registration. 



               	2. 	  	
                    This covenant is independent, not revocable even the major covenant revoked. If
                    change or revocation needed, there must be mutual agreement by both parties.
                    Before written agreement, this covenant is still effective. 



               	3. 	  	
                    After this contract takes into effect, either party can’t alter or
                    terminate without authorization. It ccould be altered or terminated when
                    consulting all the time and reaching the written agreement through both sides.
                    Before the written agreement is reached, the contract still comes into force. 



                    
Article 12 Breach of
Covenants 



     
     	1. 	
          After this covenant takes into effect, lien holder and pledger should fulfil the
          obligation described within this covenant. The party failed to fulfil its
          obligation must bear corresponding responsibilities, and indemnify the other
          party’s loss. 



     	2. 	
          In case the pledger takes any action as follows along with any economical
          losses, the pledger should indemnify the lien holder in full. 



          
          



     



 


     	 	 
	3. 	
          Any misconduct of the pledger makes this covenant invalid. 



     	4. 	
          Failed to disclose the lien’s nature, such as, shared property, conflict,
          under custody, detained, or existing lien and etc. 



     	5. 	
          Treatment of the lien without the agreement of lien holder 



          Article 13 Miscellaneous 






[Intentionally left
blank] 






Article 14 Settlement of
Conflicts 






Any conflict, arising during the
fulfilment of this agreement, can be either settled by negotiation by both parties or be
the jurisdiction of the lien holder’s local court. 






Article 15 Copy of
Agreement 






Two copies of this agreement, each
party has one copy, which has the same force and effect. 






Article 16 Announcements 






The lien holder has requested the
pledger to understand this covenant accurately and fully. The lien holder also explained
per pledger’s request. Both parties reached the same understanding with respect to
this covenant. 






Pledger: Song Yuan Wu
Lan
Avenue credit union 


                                              

                   [Seal of Lienholderl



/s/ Hong Jun Wang 






/s/ Ji Shuang Sun 






Signing Date: July
15th, 2005