Employment Agreement

Employment Agreement

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

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

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

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

1. Employment, Duties and Acceptance.

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

Company strategy

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

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

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

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

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

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

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

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

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

3. Provide business and financial evaluations regarding specific proposals.

Financial Strategy

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

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

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

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

Budget and Control

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

(1)            Coordinates short-term budget compilation.

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

(3)            Ensure business units are properly authorized;

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

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

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

(1)            Ensure timely reporting and effective compliance;

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

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

(4)            Perform all tax reporting and tax obligations;

(5)            Seek opportunities to reduce the tax burden;

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

(7)            Risk management and plan of the Company.

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

1. Financial institutions (Banks and investment Banks)

2. External auditors.

3. Supervising authorities and tax authorities.

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

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

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

2. Compensation and Benefits.

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

2.2. The Executive shall pay personal income taxes pursuant to regulations of the government tax agency, and the Company shall deduct a corresponding amount from the monthly salary of the Executive and pay that amount on behalf of the Executive to the relevant tax agency.

2.3. In addition to what is provided for under the foregoing Article 2.2, the Company shall have the right to deduct from the Executives’ salaries for other purposes in accordance with laws and regulations of the State.

3. Term and Termination.

3.1. The term of this Agreement is for a period of one year beginning on May 2, 2012 and terminating on May 1, 2013;

3.2 If both Parties desire to renew this Agreement, each Party shall notify the other Party of its intent to renew this Agreement thirty days prior to the expiration of this Agreement.

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

carry out specific written directions of the Board, (b) intentional fraud or dishonest action by Executive in his/her relations with the Company ("dishonest" for these purposes shall mean Executive's knowingly making of a material misstatement to the Board for the purpose of obtaining direct personal benefit); or (c) the conviction of Executive of any crime involving an act of significant moral turpitude after appeal or the period for appeal has elapsed without an appeal being filed by Executive.

Notwithstanding the foregoing, no "cause" for termination shall be deemed to exist with respect to Executive's acts described in clause (a)or (b) above, unless the Board shall have given written notice to Executive (after five (5)days advance written notice to Executive and a reasonable opportunity to Executive to present his/her views with respect to the existence of "cause"), specifying the "cause" with particularity and , within twenty (20) business days after such notice, Executive shall not have disputed the Board's determination or in reasonably good faith taken action to cure or eliminate prospectively the problem or thing giving rise to such "cause," provided, however, that a repeated breach after notice and cure, of any provision of clause (a) or (b) above, involving the same or substantially similar actions or conduct, shall be grounds for termination for cause upon not less than five (5) days additional notice from the Company.

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:

4. Protection of Confidential Information; Non-Competition.

4.1. Executive acknowledges that:

4.2. Executive agrees that he will not at any time, either during the term of this Agreement or thereafter, divulge to any person or entity any Confidential Information obtained or learned by him as a result of his/her employment with the Company, except (i) in the course of performing his/her duties hereunder, (ii) to the extent that any such information is in the public domain other than as a result of Executive's breach of any of his/her obligations hereunder, (iii) where required to be disclosed by court order, subpoena or other government process or (iv) if such disclosure is made without Executive's knowing intent to cause material harm to the Company. If Executive shall be required to make disclosure pursuant to the provisions of clause (iii) of the preceding sentence, Executive promptly, but in no event more than 72 hours after learning of such subpoena, court order, or other government process, shall notify, by personal delivery or by electronic means, confirmed by mail, the Company and, at the Company's expense, Executive shall: (a) take reasonably necessary and lawful steps required by the Company to defend against the enforcement of such subpoena, court order or other government process, and (b) permit the Company to intervene and participate with counsel of its choice in any proceeding relating to the enforcement thereof.

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

4.4. During the period of employment: (A) Executive, without the prior written permission of the Company, shall not, anywhere in the People’s Republic of China, (i) enter into the employ of or render any services to any person, firm or corporation engaged in any business which is directly in competition with the Company's principal existing business at the time of termination ("Competitive Business"); (ii) engage in any Competitive Business as an individual, partner, shareholder, creditor, director, officer, principal, agent, employee, trustee consultant, advisor or in any other relationship or capacity; (iv) employ, or have or cause any other person or entity to employ, any person who was employed by the Company at the time of termination of Executive's employment by the Company (other than Executive's personal secretary and assistant); or (v) solicit, interfere with, or endeavor to entice away from the Company, for the benefit of a Competitive Business, any of its customers. Notwithstanding the foregoing, in the event the Company terminates this Agreement without "cause" or if Executive terminates this Agreement for Good Reason under Article 3.5 hereof, Executive's obligations under this Article 4.4 shall terminate one month following termination.

4.5. If Executive commits a breach of any of the provisions of Articles 4.2 or 4.4, the Company shall have the right to have the provisions of this Agreement specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed by Executive that the services being rendered hereunder to the Company are of a special, unique and extraordinary character and that any breach or threatened breach will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company.

5. Rewards and Penalties

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

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:

6.2. Either Party in breach of this Agreement shall pay the other Party liquidated damages. The standard liquidated damages shall be equal to twice of the salary Executive has actually received in the month prior to the date of the breach.

6.3. If the liquidated damages provided for under the foregoing Article 6.2 is not enough to cover the losses of the other Party, then the breaching Party shall compensate the other Party for the actual losses caused by the breach.

6.4. Executive warrants (1) that all the relevant information he provides to the Company, including without limitations his/her identification, address, academic credentials, work experiences and professional skills are true; (2) that, by working for the Company and by entering into this Agreement with the Company, Executive does not violate any agreement on confidentiality or non-competition entered into with his/her previous employer or any other company or individual. If Executive breaches this warranty, the Company has the right to rescind this Agreement and demand that Executive compensate the Company for any losses due to the breach.

7. Miscellaneous Provisions.

7.1. All notices provided for in this Agreement shall be in writing, and shall be

deemed to have been duly given when delivered personally to the party to receive the same, when transmitted by electronic means, or when mailed first class postage prepared, by certified mail, return receipt requested, addressed to the party to receive the same at his/her or its address set forth below, or such other address as the party to receive the same shall have specified by written notice given in the manner provided for in this Article 7.1. All notices shall be deemed to have been given as of the date of personal delivery, transmittal or mailing thereof.

If to Executive: _________________________________________________

If to the Company: Address for : 19^th 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 Executive shall reimburse the Company for all such costs if it is determined by a non-appealable final decision of a court of law that the Executive shall have acted in bad faith with the intent to cause material damage to the Company in connection with any such claim, litigation or proceeding.

7.3. The Company, shall to the fullest extent permitted by law, indemnify Executive for any liability, damages, losses, costs and expenses arising out of alleged or actual claims (collectively, "Claims") made against Executive for any actions or omissions as an officer and/or director of the Company or its subsidiary. To the extent that the Company obtains director and officers insurance coverage for any period in which Executive was an officer, director or consultant to the Company, Executive shall be a named insured and shall be entitled to coverage thereunder.

7.4. All questions with respect to the construction of this Agreement, and the rights and obligations of the parties hereunder, shall be determined in accordance with the law of China applicable to agreements made and to be performed entirely in China.

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

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