Document:

CHINA
NATURAL GAS, INC.

    2009
EMPLOYEE STOCK OPTION AND STOCK AWARD PLAN

     

    1.            Purpose.

     

    The
purpose of the China Natural Gas, Inc. 2009 Employee Stock Option and Stock
Award Plan (the “Plan”) is
to enhance the long-term stockholder value of China Natural Gas, Inc., a
Delaware corporation (the “Company”),
by offering opportunities to employees,  directors, officers,
consultants, agents, advisors and independent contractors of the Company and its
Subsidiaries (as defined in Section  2) to participate in the
Company’s growth and success, and to encourage them to remain in the service of
the Company and its Subsidiaries and to acquire and maintain stock ownership in
the Company.

     

    2.           
Definitions.

     

    For
purposes of the Plan, the following terms shall be defined as set forth
below:

     

    2.1           “Award”
means an award or grant made pursuant to the Plan, including, awards or grants
of Options or Incentive Stock Awards.

     

    2.2           “Board”
means the Board of Directors of the Company.

     

    2.3           “Cause”
means dishonesty, fraud, misconduct, unauthorized use or disclosure of
confidential information or trade secrets, or conviction or confession of a
crime punishable by law (except minor violations), as provided under applicable
law, in each case as determined by the Plan Administrator, and its determination
shall be conclusive and binding.

     

    2.4           “Code”
means the United States Internal Revenue Code of 1986, as amended from time to
time.

     

    2.5           “Common
Stock” means the common stock, par value $.0001 per share, of the
Company.

     

    2.6           
“Disability”
means “permanent and total disability” as that term is defined for purposes of
Section 22(e)(3) of the Code.

     

    2.7           
“Exchange
Act” means the United States Securities Exchange Act of 1934, as
amended.

     

    2.8           “Fair Market
Value” shall be established in good faith by the Plan Administrator or if
the Common Stock is listed on the Nasdaq Global Market or the Nasdaq Capital
Market, the average of the high and low per share sales prices for the Common
Stock as reported by the Nasdaq Global Market or the Nasdaq Capital Market (as
the case may be) for a single trading.  If there is no such reported
price for the Common Stock for the date in question, then such price on the last
preceding date for which such price exists shall be determinative of the Fair
Market Value.  Notwithstanding anything in this Plan to the contrary,
to the extent applicable, the determination of the Fair Market Value of a share
of Common Stock shall be determined in a manner which complies with Section 409A
of the Code and the applicable Treasury Regulations promulgated
thereunder.

    
      
         

      

      
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    2.9           “Grant
Date” means the date the Plan Administrator adopted the granting
resolution and all conditions precedent to the grant have been satisfied;
provided that conditions to the exercisability or vesting of Awards shall not
defer the Grant Date. If, however, the Plan Administrator designates in a
resolution a later date as the date an Award is to be granted, then such later
date shall be the “Grant
Date.”

     

    2.10         “Incentive Stock
Award” means an Option to purchase Common Stock granted under Section 7
and as designated under Section 7.9.

     

    2.11         
“Nonqualified
Stock Option” means an Option to purchase Common Stock granted under
Section 7.

     

    2.12     
    “Option”
means the right to purchase Common Stock granted under Section 7.

     

    2.13      
   “Participant”
means (a) the person to whom an Award is granted; (b) for a Participant who has
died, the personal representative of the Participant’s estate, the person(s) to
whom the Participant’s rights under the Award have passed by will or by the
applicable laws of descent and distribution, or the beneficiary designated in
accordance with Section 8; or (c) person(s) to whom an Award has been
transferred in accordance with Section 8.

     

    2.14         
“Plan
Administrator” means the Compensation Committee of the Board or any
successor committee of the Board designated to administer the Plan under Section
3.1.

     

    2.15          “PRC” means
the People’s Republic of China.

     

    2.16          “Retirement”
means retirement on or after the individual’s normal retirement date under PRC
law or the law of such individual’s other jurisdiction of employment unless
otherwise defined by the Plan Administrator from time to time for purposes of
the Plan.

     

    2.17          “Securities
Act” means the United States Securities Act of 1933, as
amended.

     

    2.18          “Subsidiary”
means any entity that is directly or indirectly controlled by the Company or in
which the Company has a significant ownership interest, as determined by the
Plan Administrator, and any entity that may become a direct or indirect
subsidiary of the Company.

     

    
      
         

      

      
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    3.     
      Administration.

     

    3.1           Plan
Administrator.  The Plan shall be administered by the
Compensation Committee of the Board or a successor committee or committees
(which term includes subcommittees) appointed by, and consisting of two or more
members of, the Board. If and so long as the Common Stock is registered under
Section 12(b) or 12(g) of the Exchange Act, the Board shall consider in
selecting the Plan Administrator and the membership of any committee acting as
Plan Administrator, with respect to any persons subject or likely to become
subject to Section 16 of the Exchange Act, the provisions regarding “non
employee directors” as contemplated by Rule 16b-3 under the Exchange Act. The
Plan Administrator may delegate the responsibility for administering the Plan
with respect to designated classes of eligible persons to different committees
consisting of one or more members of the Board, subject to such limitations as
the Board deems appropriate. Committee members shall serve for such term as the
Board may determine, subject to removal by the Board at any time. To the extent
consistent with applicable law, the Plan Administrator may authorize one or more
officers of the Company to grant Awards to designated classes of eligible
persons, within the limits specifically prescribed by the Plan
Administrator.

     

    3.2           Administration and Interpretation by
the Plan Administrator.  Except for the terms and conditions
explicitly set forth in the Plan, the Plan Administrator shall have exclusive
authority, in its discretion, to determine all matters relating to Awards under
the Plan, including the selection of individuals to be granted Awards, the type
of Awards, the number of shares of Common Stock subject to an Award, all terms,
conditions, restrictions and limitations, if any, of an Award and the terms of
any instrument that evidences the Award. The Plan Administrator shall also have
exclusive authority to interpret the Plan and may from time to time adopt, and
change, rules and regulations of general application for the Plan’s
administration. The Plan Administrator’s interpretation of the Plan and its
rules and regulations, and all actions taken and determinations made by the Plan
Administrator pursuant to the Plan, shall be conclusive and binding on all
parties involved or affected. The Plan Administrator may delegate administrative
duties to such of the Company’s officers as it so determines.

     

    4.         
  Stock
Subject to the Plan.

     

    4.1           Authorized Number of
Shares.  Subject to adjustment from time to time as provided in
Section 9.1, the number of shares of Common Stock that shall be available for
issuance under the Plan shall be 2,920,000 shares.  The maximum
aggregate number of shares of  Common Stock that may be issued under
the Plan pursuant to the exercise or vesting of Awards shall be the number
determined pursuant to the preceding sentence, as adjusted from time to time
pursuant to Section 9.1.  Shares issued under the Plan shall be drawn
from authorized and unissued shares or shares now held or subsequently acquired
by the Company as treasury shares.

     

    4.2           Reuse of
Shares.  Any shares of Common Stock that have been made subject
to an Award that cease to be subject to the Award (other than by reason of
exercise or payment of the Award to the extent it is exercised for or settled in
shares), and/or shares of Common Stock subject to repurchase or forfeiture which
are subsequently reacquired by the Company, shall again be available for
issuance in connection with future grants of Awards under the Plan.

     

    5.         
  Eligibility.

     

    Awards
may be granted under the Plan to those officers, directors and employees of the
Company and its Subsidiaries as the Plan Administrator from time to time
selects. Awards may also be granted to consultants, agents, advisors and
independent contractors who provide services to the Company and its
Subsidiaries.

     

    
      
         

      

      
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    6.        
   Awards.

     

    6.1           Form and Grant of
Awards.  The Plan Administrator shall have the authority, in
its sole discretion, to determine the type or types of Awards to be made under
the Plan. Such Awards may include Nonqualified Stock Options or Incentive Stock
Awards. Awards may be granted singly or in combination.

     

    6.2           Settlement of
Awards.  The Company may settle Awards through the delivery of
shares of Common Stock, cash payments, the granting of replacement Awards or any
combination thereof as the Plan Administrator shall determine. Any Award
settlement, including payment deferrals, may be subject to such conditions,
restrictions and contingencies as the Plan Administrator shall determine. The
Plan Administrator may permit or require the deferral of any Award payment,
subject to such rules and procedures as it may establish, which may include
provisions for the payment or crediting of interest, or dividend equivalents,
including converting such credits into deferred stock equivalents.

     

    7.         
  Terms and
Conditions of Awards.

     

    7.1           Grant of
Awards.  The Plan Administrator is authorized under the Plan,
in its sole discretion, to issue Awards, which shall be appropriately
designated.

     

    7.2           Exercise Price.  The
exercise price for shares purchased under an Award shall be as determined by the
Plan Administrator.

     

    7.3           Term.  The term of
each Award shall be as established by the Plan Administrator or, if not so
established, shall be 10 years from the Grant Date.

     

    7.4           Exercise and
Vesting.  The Plan Administrator shall establish and set forth
in each instrument that evidences an Award the time at which, or the
installments in which, the Award shall vest and become exercisable, which
provisions may be waived or modified by the Plan Administrator at any time. To
the extent that an Award has become exercisable, the Award may be exercised from
time to time by written notice to the Company, in accordance with procedures
established by the Plan Administrator, setting forth the number of shares with
respect to which the Award is being exercised and accompanied by payment in full
as described in Section 7.6. The Plan Administrator may determine at any time
that an Award may not be exercised as to less than any number of shares at any
one time for vested shares and any number in its discretion for unvested shares
(or the lesser number of remaining shares covered by the Award).

     

    7.5           Performance
Conditions.  The Plan Administrator is authorized to subject an
Award to performance requirements (which may be based on continuous service with
the Company or the achievement of performance goals related to profits or loss,
revenue or profit growth or loss reduction, profit or loss related return
ratios, other balance sheet or income statement targets or ratios, market share,
project completion, operational or productivity efficiency gains, cash flow,
share price appreciation or total stockholder return, where such goals may be
stated in absolute terms or relative to comparison companies), as the Plan
Administrator shall determine, in its sole discretion, must be satisfied as a
condition of the Award becoming vested and exercisable.  Such
performance requirements shall be set forth in the instrument evidencing the
Award.

    
      
         

      

      
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    7.6           Payment of Exercise
Price.  The exercise price for shares purchased under an Award
shall be paid in full to the Company by delivery of consideration equal to the
product of the Award exercise price and the number of shares purchased. Such
consideration must be paid in cash.

     

    7.7           Post-Termination
Exercises.  The Plan Administrator shall establish and set
forth in each instrument that evidences an Award whether the Award will continue
to be exercisable, and the terms and conditions of such exercise, if a
Participant ceases to be employed by, or to provide services to, the Company or
its Subsidiaries, which provisions may be waived or modified by the Plan
Administrator at any time. If not so established in the instrument evidencing
the Award, the Award will be exercisable according to the following terms and
conditions, which may be waived or modified by the Plan Administrator at any
time.

     

    7.8           Prohibition on
Repricing.  An option issued under the Plan may not, without
prior approval of the Company’s stockholders at a duly-constituted meeting, be
repriced by lowering the exercise price or by cancellation of an outstanding
Award with a subsequent replacement or re-grant of an option with a lower
exercise price.

     

    7.9           Incentive Stock
Awards.  The Plan Administrator may designate an Award an
Incentive Stock Award, in which case it may not be subject to time-based vesting
but instead subject only to specific performance conditions to become vested and
exercisable, as designated by the Plan Administrator and forth in the instrument
evidencing the Award.  For removal of doubt, an Incentive Stock Award
is not intended to be an Incentive Stock Option under the Code.

     

    8.         
  Assignability.

     

    No Awards
granted under the Plan or any interest therein may be assigned, pledged or
transferred by the Participant other than by will or by the applicable laws of
descent and distribution, and, during the Participant’s lifetime, such Award may
be exercised only by the Participant or a permitted assignee or transferee of
the Participant (as provided below).

     

    9.      
     Adjustments.

     

    9.1           Adjustment of
Shares.  In the event that, at any time or from time to time, a
stock dividend, stock split, spin-off, combination or exchange of shares,
recapitalization, merger, consolidation, distribution to stockholders other than
a normal cash dividend, or other change in the Company’s corporate or capital
structure results in (a) the outstanding shares, or any securities exchanged
therefor or received in their place, being exchanged for a different number or
class of securities of the Company or of any other corporation or (b) new,
different or additional securities of the Company or of any other corporation
being received by the holders of shares of Common Stock of the Company, then the
Plan Administrator shall make proportional adjustments in (i) the maximum number
and kind of securities subject to the Plan as set forth in Sections 4.1; and
(ii) the number and kind of securities that are subject to any outstanding Award
and the per share price of such securities, without any change in the aggregate
price to be paid therefor. The determination by the Plan Administrator as to the
terms of any of the foregoing adjustments shall be conclusive and
binding.

    
      
         

      

      
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    9.2           Limitations.  The
grant of Awards will in no way affect the Company’s right to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

     

    9.3           Fractional
Shares.  In the event of any adjustment in the number of shares
covered by any Award, each such Award shall cover only the number of full shares
resulting from such adjustment.

     

    10.          Withholding.

     

    The
Company may require the Participant to pay to the Company the amount of any
taxes or social insurance contributions that the Company is required to withhold
with respect to the grant, vesting or exercise of any Award. Subject to the Plan
and applicable law, the Plan Administrator may, in its sole discretion, permit
the Participant to satisfy withholding obligations, in whole or in part, (a) by
paying cash, (b) by electing to have the Company withhold shares of Common Stock
(up to the minimum required federal withholding rate), or (c) by transferring
shares of Common Stock to the Company (already owned by the Participant for the
period necessary to avoid a charge to the Company’s earnings for financial
reporting purposes), in such amounts as are equivalent to the Fair Market Value
of the withholding obligation. The Company shall have the right to withhold from
any shares of Common Stock issuable pursuant to an Award or from any cash
amounts otherwise due or to become due from the Company to the Participant an
amount equal to such taxes or social insurance contributions. The Company may
also deduct from any Award any other amounts due from the Participant to the
Company or a Subsidiary.

     

    11.          Amendment and Termination of
Plan.

     

    11.1          Amendment of
Plan.  The Plan may be amended only by the Board in such
respects as it shall deem advisable; however, to the extent required for
compliance with any applicable law or regulation, stockholder approval will be
required for any amendment that will (a) increase the total number of shares
available for issuance under the Plan, (b) modify the class of persons eligible
to receive Awards, or (c) otherwise require stockholder approval under any
applicable law or regulation.

     

    11.2          Termination of
Plan.  The Board may suspend or terminate the Plan at any
time.

     

    11.3          Consent of
Participant.  The amendment or termination of the Plan shall
not, without the consent of the Participant, impair or diminish any rights or
obligations under any Award theretofore granted under the Plan.

     

    
      
         

      

      
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    12.          General.

     

    12.1          Evidence of
Awards.  Awards granted under the Plan shall be evidenced by a
written agreement that shall contain such terms, conditions, limitations and
restrictions as the Plan Administrator shall deem advisable and that are not
inconsistent with the Plan.

     

    12.2          Continued Employment or Services;
Rights in Awards.  None of the Plan, participation in the Plan
or any action of the Plan Administrator taken under the Plan shall be construed
as giving any person any right to be retained in the employ of the Company or
limit the Company’s right to terminate the employment or services of any
person.

     

    12.3          Registration.  The
Company shall be under no obligation to any Participant to register for offering
or resale or to qualify for exemption under the Securities Act, or to register
or qualify under state securities laws, any shares of Common Stock, security or
interest in a security paid or issued under, or created by, the Plan, or to
continue in effect any such registrations or qualifications if
made.

     

    The
Company may issue certificates for shares with such legends and subject to such
restrictions on transfer and stop-transfer instructions as counsel for the
Company deems necessary or desirable for compliance by the Company with U.S.
federal and state securities laws.

     

    Inability
of the Company to obtain, from any regulatory body having jurisdiction, the
authority deemed by the Company’s counsel to be necessary for the lawful
issuance and sale of any shares hereunder or the unavailability of an exemption
from registration for the issuance and sale of any shares hereunder shall
relieve the Company of any liability in respect of the nonissuance or sale of
such shares as to which such requisite authority shall not have been
obtained.

     

    As a
condition to the exercise of an Award, the Company may require the Participant
to represent and warrant at the time of any such exercise or receipt that such
shares are being purchased or received only for the Participant’s own account
and without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any
relevant provision of the aforementioned laws. At the option of the Company, a
stop-transfer order against any such shares may be placed on the official stock
books and records of the Company, and a legend indicating that such shares may
not be pledged, sold or otherwise transferred, unless an opinion of counsel is
provided (concurred in by counsel for the Company) stating that such transfer is
not in violation of any applicable law or regulation, may be stamped on stock
certificates to ensure exemption from registration. The Plan Administrator may
also require such other action or agreement by the Participant as may from time
to time be necessary to comply with the federal and state securities
laws.

     

    12.4          No Rights As A
Stockholder.  No Award shall entitle the Participant to any
dividend, voting or other right of a stockholder unless and until the date of
issuance under the Plan of the shares that are the subject of such Award, free
of all applicable restrictions.

     

    
      
         

      

      
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    12.5          Compliance With Laws And
Regulations.  No Shares of Common Stock shall be issued
pursuant to an Award unless such issuance complies with all applicable laws and
regulations. Notwithstanding anything in the Plan to the contrary, the Board, in
its sole discretion, may bifurcate the Plan so as to restrict, limit or
condition the use of any provision of the Plan to Participants who are officers
or directors subject to Section 16 of the Exchange Act without so restricting,
limiting or conditioning the Plan with respect to other
Participants.

     

    12.6          No Trust Or
Fund.  The Plan is intended to constitute an “unfunded” plan.
Nothing contained herein shall require the Company to segregate any monies or
other property, or shares of Common Stock, or to create any trusts, or to make
any special deposits for any immediate or deferred amounts payable to any
Participant, and no Participant shall have any rights that are greater than
those of a general unsecured creditor of the Company.

     

    12.7          Severability.  If
any provision of the Plan or any Award is determined to be invalid, illegal or
unenforceable in any jurisdiction, or as to any person, or would disqualify the
Plan or any Award under any law deemed applicable by the Plan Administrator,
such provision shall be construed or deemed amended to conform to applicable
laws, or, if it cannot be so construed or deemed amended without, in the Plan
Administrator’s determination, materially altering the intent of the Plan or the
Award, such provision shall be stricken as to such jurisdiction, person or
Award, and the remainder of the Plan and any such Award shall remain in full
force and effect.

     

    12.8          Participants In Foreign
Countries.  The Plan Administrator shall have the authority to
adopt such modifications, procedures and subplans as may be necessary or
desirable, after consideration of the provisions of the laws of the PRC or other
foreign countries in which the Company or its Subsidiaries may operate, to
ensure the viability of the benefits from Awards granted to Participants
employed in such countries and to meet the objectives of the
Plan.   The Plan Administrator may restrict the issuance of
shares of Common Stock pursuant to any Awards or delay the removal of
restrictions on shares of Common Stock pursuant to any Awards until it
determines in its discretion that  the Company or its Subsidiaries has
satisfied the legal or regulatory  procedures or requirements as may
be necessary or desirable to ensure the viability of the benefits of the
Awards.

     

    12.9          Choice Of Law.  The
Plan and all determinations made and actions taken pursuant hereto, to the
extent not otherwise governed by the federal laws of the United States, shall be
governed by the laws of the State of Delaware without giving effect to
principles of conflicts of laws.

     

    13.           Effective
Date.

     

    The
Plan’s effective date is the date on which it is adopted by the
Board.

     

    
      
         

      

      
        8Employment
Agreement

    

    This
EMPLOYMENT AGREEMENT (“Agreement”) is dated on January 1, 2009
between Qinan Ji (the
“Executive”), a citizen of China, ID number
612125195706230432,
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.

    

    WHEREAS,
the Company believes that Executive provides excellent management services for
the Company and wishes to retain Executive as its Chief Executive 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 1 commencing January 1, 2009;
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
      January 1,
      2009, the Company hereby agrees to the continued employment of
      Executive as the Chief Executive Officer ("CEO") 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
      CEO. The scope and responsibilities of the CEO position include the
      following:

            

    

    

    
      
        	
                
                

              	
                (a)

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

              

      

    

    

    
      	
              
              

            	
              (b)

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

            

    

    

    
      
        	
                
                

              	
                (c)

              	
                To
      establish a strong management system and strict internal control
      procedure;

              

      

    

    

    
      	
              
              

            	
              (d)

            	
              To
      supervise all business activities to ensure their compliance with law and
      the Company’s policy;

            

    

    

    
      
        	
                
                

              	
                (e)

              	
                To
      establish good management mode to improve the company’s outstanding
      achievement;

              

      

    

    

    
      
        	
                
                

              	
                (f)

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

              

      

    

    

    
      	
              
              

            	
              (g)

            	
              To
      be responsible for the Company’s long-term strategy
    planning;

            

    

    

    
      	
              
              

            	
              (h)

            	
              To
      participate in business development and strategic
  planning;

            

    

    

    
      
        	
                
                

              	
                (i)

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

              

      

    

    
      
         

      

      
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                (j)

              	
                To
      provide comments to the Management Team and the Board of Directors on
      management issues of the
Company;

              

      

    

    

    
      	
              
              

            	
              (k)

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

            

    

    

    
      
        	
                
                

              	
                (l)

              	
                Other
      responsibilities stipulated by the Board of
  Directors.

              

      

    

    

    Meanwhile,
the CEO is the primary consultant of the department directors with respect to
strategies and operations, and will be responsible for the Company’s
comprehensive management, including the following: (1) Company strategy; (2)
Development strategy; (3) business spread; and (4) direct of
business.

    

    Company
strategy

    

    The CEO
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,
the Executive should repeatedly research reasons and possibilities related to
changes in the Company’s operations and provide external references for value
creation (e.g., the value of certain business to other possible owners) and make
decisions;

     

    3.
Formulate criteria for business achievements 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;

     

    3.
Provide business evaluations regarding specific proposals.

     

    At the
same time, the CEO should perform other responsibility which belongs to him. The
CEO shall be responsible for the formulation and implementation of comprehensive
business 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;

     

    Company
Management

    
      
         

      

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

     

    (1)          Make
decisions on all the important business events, including the financial affairs,
business direction and business scope;

     

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

     

    (3)          Ensure
effective and efficient management of general events/ business /
operation;

     

    (4)          Maintain
close relationship with the Company’s business partners and
investors;

     

    (5)          Manage
the Risk Management Plan of the Company.

     

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

     

    1.4 Work
time. According to the Labor Law and policies of company, Executive works 8
hours per day, if there is any important issue or event to be solved, Executive
shall ensure the issue to be effectively completed in time.

     

    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 CEO of the Company.

    

    2.
Compensation and Benefits.

     

    2.1. The
Company shall pay to Executive a salary of USD 120,000 pre-tax annually and
receive 12 pays each year, equal to a monthly salary of USD10, 000, PLUS USD60,
000 when Executive works for the entire 12 months. In accordance with the
relevant provisions of the company executives salary according to 80% of the
month paid performer for(i.e. $8,000), remaining 20%
($2,000 per month, and a year, total $ 24,000) will payoff expire depending on
the executor of the ability to work and achievement one year. Salary by basic
wage, salary job housing and transportation three parts. Monthly salary payoff
form: basic wage $5,000, rental apartments housing and transport, the total
amount is $3,000 per month, monthly reimbursed.

     

    The
Executive is entitled to options to purchase 292,000 shares of common stock of
the Company vested in four years (73,000 shares each year), representing
approximately 1% of total shares outstanding of the Company. The Executive could
exercises the option at $2.45 per share on a cash basis after one year of
service and the option will be subject to specific terms of the Employee Stock
Option Plan.

     

    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 1 years beginning on January 1st, 2009
and terminating on December 31, 2009. 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. The Agreement
will then be extended for 1 year.

    
      
         

      

      
        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.

    

    3.2. The
Executive, by notice to the Company, may terminate this Agreement in writing no
less than 1 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

        
          

        

      

      
         

      

    

     

    
      

    

     

    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;

    

    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.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    
      

    

     

    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 including
attendance management system, various rules and regulations. The Executive shall
keep his/her Personal phone open 24 hours per day, ensure unblocked
communication at any time, and maintain effective communication with business
contactor and overseas investors. Otherwise, the Executive will be punished
pursuant to regulations of the Company. Meanwhile, the Chief Executive Officer
would report to the company chairman directly.

    

    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.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    
      

    

     

    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: 

              	
                 Address
      for: Room 102, Rongyuan, Maple New City, Hi-tech Zone, Xi’an
      710065

              

      

    

    

    
      
        	
              	
                If
      to the Company:

              	
                Address
      for: 19th
      Building B Van Metropolis, Tang Yan Road, Hi-tech Zone, Xi'an
      710065

              

      

    

    

    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
Xi'an, China.

    

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    
      

    

     

    Signature
Page Follows

     

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

     

    
      
        
          
            
              	 	
                      By:

                    	 
      
	 	 
      	
                      China
      Natural Gas, Inc.

                    
	 	 
      	 
      
	 	
                      By:

                    	 
      
	 	 
      	
                      Qinan
      Ji

                    

            

          

        

      

    
      
         

      

      
        8

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