Document:

Employment
Agreement

    

    This
EMPLOYMENT AGREEMENT (“Agreement”) is dated on May 1, 2009 between Veronica J.
Chen (the “Executive”), a citizen of China, ID number 120106196601157029, 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, PRC.

    

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

    

    WHEREAS,
the Company and the Executive have reached the following understanding with
respect to the Executive's employment by the Company for a period of one year
commencing on  May 1, 2009; and

    

    WHEREAS,
the Company and the 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
      as of May 1, 2009, the Company hereby agrees to the employment of the
      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 devote
      herself to the business of the Company and she is subject to the
      supervision and direction of the Board of Directors of the Company
      ("Board" or "Board of Directors").

            

    

    

    
      	
              1.2.

            	
              The
      Company retains the Executive to serve as the Company’s full time CFO. The
      scope of work and responsibilities of the CFO 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;

              

      

    

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    
      
        	
                
                

              	
                (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;

              

      

    

    

    
      
        	
                
                

              	
                (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
management 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);

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    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;

     

    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 Management Control

     

    CFO shall
formulate and implement a program to ensure the management obtains 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 of the
      performance evaluation of business
unit.

              

      

    

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    .Financial
Management

     

    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)

     

    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
Working times: Except during periods of quarterly and annual filings with
Securities and Exchange Commission (“SEC”), CFO shall spend half of his / her
time in the Xi’an headquarter and half at the Company’s subsidiary in
Beijing.

     

    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 the Executive's position as CFO of the Company.

    

    2.
Compensation and Benefits.

     

    2.1. The
Company shall pay to the Executive a salary of RMB 650,000 pre-tax annually
which equal to monthly salary of RMB 54,166. According to relevant provisions of
the Company, 80% of the salary (RMB 43,333) is paid monthly and the remaining
20% (RMB 10,833 monthly / RMB 129,996) is paid one time after the Executive
serves the Company for one year. Salary of the Executive consist of three parts:
base salary, housing, and transportation. Each month, RMB 34,166 is paid as base
salary; since the Executive resides in Tianjin, Company shall provide housing
and business vehicle for the Executive which represents RMB 20,000 each month.
There is a three-month probation period for the Executive. During the probation
period, the Company shall pay the Executive a monthly salary of RMB 34,666.
During the probation period, if not informed by written notice, monthly salary
is paid on the 20th of next
month. If the payment date coincides with a holiday, the salary will be paid on
the first business day after the holiday.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    Since the
Executive works in Beijing for half of his / her employment period, the
Executive shall be entitled to at least six round-trip air tickets from Xi’an to
Beijing, excluding business trips. Besides holidays and vacations, the Executive
shall work in the Company’s Beijing subsidiary with the traveling day be deemed
a working day.

     

    The
Company shall provide the Executive with health insurance in Beijing or Xi’an.
Other benefits the Executive is entitled to will be determined according to
relevant policies of the Company.

     

    The
Executive is entitled to options to purchase 150,000 shares of common stock of
the Company vested in four years, representing approximately 0.514% 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 ESOP (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 Executive's 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   May 1, 2009 and terminating
on     APRIL 30, 2010.

    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 the Executive, may terminate this Agreement
for  cause. As used herein, "cause" shall include (a) the refusal in
bad faith by the Executive to

    carry out
specific written directions of the Board, (b) intentional fraud or dishonest
action by the Executive in his/her relations with the Company ("dishonest" for
these purposes shall mean the Executive's knowingly making of a material
misstatement to the Board for the purpose of obtaining direct personal benefit);
or (c) the conviction of the 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 the Executive.

    Notwithstanding
the foregoing, no "cause" for termination shall be deemed to exist with respect
to the Executive's acts described in clause (a)or (b) above, unless the Board
shall have given written notice to the Executive (after five (5)days advance
written notice to the Executive and a reasonable opportunity to the 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, the 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.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    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 the 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 the 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 the 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 the 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
the  Executive.

                

        

      

    

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    4.
Protection of Confidential Information; Non-Competition.

    4.1. The
Executive acknowledges that:

    

    
      
        	
              	
                (a)

              	
                As
      a result of his/her current employment with the Company, the 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, the 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. The
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 the
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 the Executive's knowing intent to cause material
harm to the Company. If the Executive shall be required to make disclosure
pursuant to the provisions of clause (iii) of the preceding sentence, the
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, the 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, the 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) the 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 the Executive's employment by the
Company (other than the 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 the Executive terminates this Agreement for Good Reason under Article 3.5
hereof, the Executive's obligations under this Article 4.4 shall terminate one
month following termination.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    4.5. If
the 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 the 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 The
Executive 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.

    

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

    

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

    

    5.4. The
Company shall impose penalties on the Executive pursuant to regulations of the
Company, if the 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:

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    
      
        	
                
                

              	
                (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. The
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,
the 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 the Executive breaches this warranty, the Company
has the right to rescind this Agreement and demand that the 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 the
Executive:  Address: Room 603, Unit 3, Building 2, Architecture
Science Academe, Peace Street, Zhaoyang District, Beijing 100013

    

    If to the
Company:   Address: 19th
Building B Van Metropolis, Tang Yan Road, Hi-tech Zone, Xian

    

    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 the 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.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    7.3. The
Company, shall to the fullest extent permitted by law, indemnify the Executive
for any liability, damages, losses, costs and expenses arising out of alleged or
actual claims (collectively, "Claims") made against the 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 officer's
insurance coverage for any period in which the Executive was an officer,
director or consultant to the Company, the 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:
      Qinan Ji

            
	 
      	 
      
	 
      	
                    
      CEO of China Natural Gas Inc.

            
	 
      	 
      
	 
      	
              BY:
      Veronica Chenjing

            

    

     

    
      
         

      

      
        10For
Use in China

     

    CHINA
NATURAL GAS, INC.

     

    2009
EMPLOYEE STOCK OPTION AND STOCK AWARD PLAN

     

    AWARD
AGREEMENT

     

    China
Natural Gas, Inc., a Delaware corporation (the “Company”), has granted to the
Participant named on the Notice of Grant of Options (the “Notice of Grant”),
which is attached hereto, an option (the “Option”) to purchase that number of
Shares set forth on the Notice of Grant at the exercise price per Share set
forth on the Notice of Grant (the “Exercise Price”), subject to all of the
terms, definitions and provisions in this Agreement and the Company’s 2009
Employee Stock Option and Stock Award Plan (as applicable, the “Plan”), which is
incorporated herein by reference.  In the event of a conflict between
the terms and conditions of the Plan and the terms and conditions of this
Agreement, the terms and conditions of the Plan shall prevail.  The
terms defined in the Plan shall have the same defined meanings in this
Agreement.

     

    1.           Nature of
Option.  This Option is not intended to qualify as an Incentive
Stock Option under Section 422 of the Code. This Option is intended to be a
Nonstatutory Stock Option.

     

    2.           Vesting
Schedule.  Subject to the Performance Conditions provided in
Section 3, the Option awarded by this Agreement shall vest in accordance with
the vesting provisions set forth in the Notice of Grant.  Shares
scheduled to vest on a certain date or upon the occurrence of a certain
condition shall not vest in Participant in accordance with any of the provisions
of this Agreement, unless Participant shall have been continuously an Employee
from the Grant Date until the date such vesting occurs.

     

    3.           Performance
Conditions.  The Option is subject to the performance
requirements set forth in Appendix I, which must be
satisfied as a condition of the Option becoming vested and
exercisable.

     

    4.           Administrator
Discretion.  The Plan Administrator, in its discretion, may
accelerate the vesting of the balance, or some lesser portion of the balance, of
the unvested Option at any time, subject to the terms of the Plan.  If
so accelerated, such Option shall be considered as having vested as of the date
specified by the Plan Administrator.

     

    5.           Exercise of
Option.  This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Agreement.

     

    6.           Method of
Payment.  The exercise price for Shares purchased under an
Option shall be paid in full to the Company by delivery of consideration equal
to the product of the Option exercise price and the number of Shares purchased.
Such consideration must be paid in cash.

     

    7.           Termination
Period.   Subject to applicable laws, if the Participant
ceases to be an Employee, he or she may, but only within three (3) months after
the date Participant ceases to be an Employee, exercise this Option to the
extent that he or she was entitled to exercise it as of the date of such
cessation.  To the extent he or she was not entitled to exercise this
Option as of the date of such cessation, or if he or she does not exercise the
Option within the time specified herein, the Option shall
terminate.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Notwithstanding the provisions above,
if Participant ceases to be an employee as a result of his or her Disability, he
or she may, but only within twelve (12) months from the
date of such cessation, exercise his or her Option to the extent he or she was
entitled to exercise it at the date of cessation.  To the extent that
he or she was not entitled to exercise this Option at the date of such
cessation, or if he or she does not exercise such Option within the time
specified herein, the Option shall terminate.

     

    In the event of the death of the
Participant during the term of this Option and while an employee, the Option
shall become fully exercisable, including as to Shares for which it would not
otherwise be exercisable, and may be exercised, at any time within twelve (12) months following
the date of death, by Participant’s estate or by a person who acquired the right
to exercise the Option by bequest or inheritance.

     

    Notwithstanding
the foregoing, in no event may this Option be exercised after the expiration
date as provided above.

     

    8.           Tax
Obligations.   The Company and its Subsidiaries shall
assess tax and social insurance contribution liability and requirements in
connection with the Participant’s participation in the Plan, including, without
limitation, tax liability and social insurance contribution liability associated
with the grant or exercise of the Option or sale of the underlying Shares (the
“Tax Liability”).  These requirements may change from time to time as
laws or interpretations change.  Regardless of the Company’s or any
Subsidiary’s  actions in this regard, the Participant hereby
acknowledges and agrees that the Tax Liability shall be the Participant’s
ultimate responsibility and liability.  The Participant agrees as a
condition of his or her participation in the Plan to make arrangements
satisfactory to the Company and its Subsidiaries to enable it to satisfy all
withholding, payment and/or collection requirements associated with the
satisfaction of the Tax Liability, including authorizing the Company or the
Subsidiary to: (i) withhold all applicable amounts from the Participant’s wages
or other cash compensation due to the Participant, in accordance with any
requirements under the laws, rules, and regulations of the country of which the
Participant is a resident, and/or (ii) act as the Participant’s agent to sell
sufficient Shares for the proceeds to settle such
requirements.  Furthermore, the Participant agrees to pay the Company
or the Subsidiary any amount the Company or any Subsidiary may be required to
withhold, collect or pay as a result of the Participant’s participation in the
Plan or that cannot be satisfied by deduction from the Participant’s wages or
other cash compensation paid to the Participant by the Company or the Subsidiary
or sale of the Shares acquired under the Plan. The Participant acknowledges that
he or she may not participate in the Plan and the Company and the
Subsidiary  shall have no obligation to deliver Shares until the Tax
Liability has been satisfied by the Participant.

     

    9.           Rights as
Stockholder.  Neither Participant nor any person claiming under
or through Participant shall have any of the rights or privileges of a
stockholder of the Company in respect of any Shares deliverable hereunder unless
and until certificates representing such Shares shall have been issued, recorded
on the records of the Company or its transfer agents or registrars, and
delivered to Participant.  After such issuance, recordation and
delivery, Participant shall have all the rights of a stockholder of the Company
with respect to voting such Shares and receipt of dividends and distributions on
such Shares.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    10.           Acknowledgments.  In accepting the
Option, the Participant acknowledges that:

     

    (a)           Any
notice period mandated under applicable laws shall not be treated as continuous
service for the purpose of determining the vesting of the Option; and the
Participant’s right to receive Shares in settlement of the Option after
termination of service, if any, will be measured by the date of termination of
the Participant’s service and will not be extended by any notice period mandated
under applicable laws.  Subject to the foregoing and the provisions of
the Plan, the Company, in its sole discretion, shall determine whether the
Participant’s service has terminated and the effective date of such
termination.

     

    (b)           The
Plan is established voluntarily by the Company.  It is discretionary
in nature and it may be modified, amended, suspended or terminated by the
Company at any time, unless otherwise provided in the Plan and this
Agreement.

     

    (c)           All
decisions with respect to future Option grants, if any, will be at the sole
discretion of the Company.

     

    (d)           The
Participant’s participation in the Plan shall not create a right to continued
service with the Company (or any Subsidiary).

     

    (e)           The
Participant is voluntarily participating in the Plan.

     

    (f)           The
Option is an extraordinary item that does not constitute compensation of any
kind for service of any kind rendered to the Company (or any Subsidiary), and
which is outside the scope of the Participant’s employment contract, if
any.

     

    (g)           The
Option is not part of normal or expected compensation or salary for any purpose,
including, but not limited to, calculating any severance payments, resignation,
termination, redundancy, end-of-service payments, bonuses, long-service awards,
pension or retirement benefits or similar payments.  This applies to
any payment even in those jurisdictions requiring such payments upon termination
of employment.

     

    (h)           In
the event that the Participant is not an employee of the Company, the Option
grant will not be interpreted to form an employment contract or relationship
with the Company; and furthermore the Option grant will not be interpreted to
form an employment contract with any Subsidiary .

     

    (i)           The
future value of the underlying Shares is unknown and cannot be predicted with
certainty.  If the Participant obtains Shares upon exercise of the
Option, the value of those Shares may increase or decrease.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    11.           Address for
Notices.  Any notice to be given to the Company under the terms
of this Agreement shall be addressed to the Company at [insert] or at such other
address as the Company may hereafter designate in writing.

     

    12.           Grant is Not
Transferable.  This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution and may be
exercised during the lifetime of Participant only by Participant.

     

    13.           Binding
Agreement.  Subject to the limitation on the transferability of
this grant contained herein, this Agreement shall be binding upon and inure to
the benefit of the heirs, legatees, legal representatives, successors and
assigns of the parties hereto.

     

    14.           Data Privacy Consent.
The Participant hereby
explicitly and unambiguously consents to the collection, use and transfer, in
electronic or other form, of the Participant’s personal data as described in
this document by and among the Company and each Subsidiary for the exclusive
purpose of implementing, administering and managing the
Participant’s  participation in the Plan.

     

    (a)           The
Participant understands that the Company (or any Subsidiary) holds certain
personal information about the Participant, including, but not limited to, the
Participant’s name, home address and telephone number, date of birth, social
insurance number or other identification number, salary, nationality, job title,
any shares or directorships held in the Company, details of all Options or any
other entitlement to Shares awarded, canceled, exercised, vested, unvested or
outstanding in the Participant’s favor, for the purpose of implementing,
administering and managing the Plan (“Data”).

     

    (b)           
The Participant understands that Data may be transferred to any third parties
assisting in the implementation, administration and management of the Plan, that
these recipients may be located in the Participant’s country or elsewhere, and
that the recipient’s country may have different data privacy laws and
protections than the Participant’s country.  The Participant
understands that he or she may request a list with the names and addresses of
any potential recipients of the Data by contacting the Participant’s local human
resources representative.  The Participant authorizes the recipients
to receive, possess, use, retain and transfer the Data, in electronic or other
form, for the purposes of implementing, administering and managing the
Participant’s participation in the Plan, including any requisite transfer of
such Data as may be required to a broker or other third party with whom the
Participant may elect to deposit any Shares acquired upon settlement of the
Option.  The Participant understands that Data will be held only as
long as is necessary to implement, administer and manage the Participant’s
participation in the Plan.  The Participant understands that he or she
may, at any time, view Data, request additional information about the storage
and processing of Data, require any necessary amendments to Data or refuse or
withdraw the consents herein, in any case without cost, by contacting in writing
the Participant’s local human resources representative.  The
Participant understands, however, that refusing or withdrawing the Participant’s
consent may affect the Participant’s ability to participate in the
Plan.  For more information on the consequences of the Participant’s
refusal to consent or withdrawal of consent, the Participant understands that he
or she may contact the Participant’s local human resources
representative.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    15.           Additional Conditions to
Issuance of Stock.  If at any time the Company shall determine,
in its discretion, that the listing, registration or qualification of the Shares
upon any securities exchange or under any national, local or applicable law, or
the consent or approval of any governmental regulatory authority is necessary or
desirable as a condition to the issuance of Shares to Participant (or his or her
estate), such issuance shall not occur unless and until such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.  The
Company shall make all reasonable efforts to meet the requirements of any such
state or federal law or securities exchange and to obtain any such consent or
approval of any such governmental authority.

    
       

      16.           Special Administration in
China.  The grant of the Option, the Participant ’s ability to
exercise the Option and sale of the Shares may be contingent upon the Company or
any Subsidiary obtaining approval from SAFE for the related foreign exchange
transaction and the establishment of a SAFE-approved bank account. The receipt
of funds by the Participant  from the sale of the Shares and the
conversion of those funds to the local currency must be approved by SAFE.
 In order to comply with the SAFE regulations, the proceeds from the sale
of the Shares must be repatriated into China through a SAFE-approved bank
account set up and monitored by the Company.  

    

     

    17.           Currency Exchange
Risk.          The
Participant agrees and acknowledges that the Participant shall bear any and all
risk associated with the exchange or fluctuation of currency associated with the
Option, including without limitation the exercise of the Option or sale of the
Shares (the “Currency Exchange Risk”).  The Participant waives and
releases the Company and its Subsidiaries from any potential claims arising out
of the Currency Exchange Risk.

     

    18.           Exchange Control
Requirements.  The Participant agrees and acknowledges that the
Participant shall comply with any and all exchange control requirements
applicable to the Option and the sale of Shares and any resulting funds
including, without limitation, reporting or repatriation
requirements.

     

    19.           Plan
Governs.  This Agreement is subject to all terms and provisions
of the Plan.  In the event of a conflict between one or more
provisions of this Agreement and one or more provisions of the Plan, the
provisions of the Plan shall govern.  Capitalized terms used and not
defined in this Agreement shall have the meaning set forth in the
Plan.

     

    20.           Administrator
Authority.  The Plan Administrator shall have the power to
interpret the Plan and this Agreement and to adopt such rules for the
administration, interpretation and application of the Plan as are consistent
therewith and to interpret or revoke any such rules (including, but not limited
to, the determination of whether or not any Shares subject to the Option have
vested).  All actions taken and all interpretations and determinations
made by the Plan Administrator
in good faith shall be final and binding upon Participant, the Company and all
other interested persons.  The Plan Administrator shall not be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or this Agreement.  The Plan
Administrator shall, in its absolute discretion, determine when such conditions
have been fulfilled.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    21.           Electronic
Delivery.  The Company may, in its sole discretion, decide to
deliver any documents related to Options awarded under the Plan or future
Options that may be awarded under the Plan by electronic means or request
Participant’s consent to participate in the Plan by electronic
means.  Participant hereby consents to receive such documents by
electronic delivery and agrees to participate in the Plan through any on-line or
electronic system established and maintained by the Company or another third
party designated by the Company.

     

    22.           Captions.  Captions
provided herein are for convenience only and are not to serve as a basis for
interpretation or construction of this Agreement.

     

    23.           Agreement
Severable.  In the event that any provision in this Agreement
shall be held invalid or unenforceable, such provision shall be severable from,
and such invalidity or unenforceability shall not be construed to have any
effect on, the remaining provisions of this Agreement.

     

    24.           Modifications to the
Agreement.  This Agreement constitutes the entire understanding
of the parties on the subjects covered.  Participant expressly
warrants that he or she is not accepting this Agreement in reliance on any
promises, representations, or inducements other than those contained
herein.  Modifications to this Agreement or the Plan can be made only
in an express written contract executed by a duly authorized officer of the
Company.

     

    25.           Amendment, Suspension or
Termination of the Plan.  By accepting this Award, Participant
expressly warrants that he or she has received an Option under the Plan, and has
received, read and understood a description of the Plan.  Participant
understands that the Plan is discretionary in nature and may be amended,
suspended or terminated by the Company at any time.

     

    26.           Governing
Law.  Subject to applicable laws, this Agreement 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.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    APPENDIX
I

     

    PERFORMANCE
CONDITIONS

     

    None.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    CHINA
NATURAL GAS, INC.

     

    2009
EMPLOYEE STOCK OPTION AND STOCK AWARD PLAN

     

    NOTICE
OF GRANT

     

    Unless
otherwise defined herein, the terms defined in the China Natural Gas, Inc. 2009
Employee Stock Option and Stock Award Plan (the “Plan”) will have the same
defined meanings in this Notice of Grant (the “Notice of Grant”) and the China
Natural Gas, Inc. 2009 Employee Stock Option and Stock Award Award Agreement
(together, the “Agreement”).

    

    
      
        
          
            
              
                
                  
                    	
                            Participant:

                          	  
      
	 	 
	
                            Address:

                          	  
      
	 
      	 
      
	 	  

                  

                

              

            

          

        

      

    

    

     

    Participant
has been granted an Option to purchase Shares of common stock, subject to the
terms and conditions of the Plan and this Agreement, as follows:

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      	
                                              Grant
      Number

                                            	 
      
	 	 
	
                                              Date
      of Grant

                                            	 
      
	 	 
	
                                              Vesting
      Commencement Date

                                            	 
      
	 	 
	
                                              Number
      of Shares Granted

                                            	 
      
	 	 
	
                                              Exercise
      Price per Share

                                            	
                                              $

                                            
	 	 
	
                                              Total
      Exercise Price

                                            	
                                              $

                                            
	 	 
	
                                              Type
      of Option

                                            	
                                              Nonstatutory
      Option

                                            
	 	 
	
                                              Term/Expiration
      Date

                                            	 
      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Vesting
Schedule:

     

    Subject
to the terms of the Plan and the Participant's continued status as an employee
of the Company through each of the applicable vesting dates, this Option will be
exercisable, in whole or in part, in accordance with the vesting schedule set
forth below.

     

    As of
each vesting date, the number of shares that become exercisable under this
Option shall be the product of (i) the number of shares set forth above
corresponding to the heading “Number of Shares Granted” and (ii) the percentage
corresponding to the relevant vesting date set forth in the table below under
the heading “Vesting Percentage”.

     

    
      
        
          
            
              
                	
                        Vesting
      Date

                      	 	
                        Vesting
      Percentage

                      	 
	
                        April
      1, 2010

                      	 	 	25	%
	
                        April
      1, 2011

                      	 	 	25	%
	
                        April
      1, 2012

                      	 	 	25	%
	
                        April
      1, 2013

                      	 	 	25	%

              

            

          

        

      

    

     

    By
Participant’s signature and the signature of the Company’s representative below,
Participant and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this
Agreement.  Participant has reviewed the Plan and this Agreement in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Agreement and fully understands all provisions of the Plan and
Agreement.  Participant hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Administrator upon any
questions relating to the Plan and Agreement.  Participant further
agrees to notify the Company upon any change in the residence address indicated
below.

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              	
                                      PARTICIPANT

                                    	 
      	
                                      CHINA
      NATURAL GAS, INC.

                                    
	 
      	 
      	 
      
	  
      	 
      	   
      
	
                                      Signature

                                    	 
      	
                                      By

                                    
	 
      	 
      	 
      
	  
      	 	  
      
	
                                      Print
      Name

                                    	 
      	
                                      Title

                                    
	 	 	 
	
                                      Address:

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