Exhibit 10.43

 

Operation and Management Agreement49

 

This operation and management agreement “the Agreement ”) was entered into on
June 13th, 2015 by the following parties in Shanghai, the People’s Republic of
China (the “PRC”).

Party A: Synthesis Energy Systems (Zaozhuang) New Gas Company LTD., a
Sino-foreign cooperative joint venture in the form of limited liability company
incorporated and existing in accordance with the laws of the PRC, with its
registered address at No. 2 Hengshan Road, Xuecheng District, Zaozhuang,
Shandong(“ZZ Plant”);

Party B: Shandong Saikong Automatic Equipment Company Ltd., a limited liability
company incorporated and existing in accordance with the laws of the PRC, with
its registered address as 2-301, No. 4 building, Weidongxindu No. 1 area,
Shizhong district, Jinan, Shandong (“Saikong”);

The above parties are referred to as a “Party” individually and as “Parties”
collectively in the Agreement.

 

Whereas

1.Synthesis Energy Systems Investments, Inc. (“SESI”) and Shandong Wejiao Group
Xuecheng Energy Co., Ltd. (“Xuecheng Energy) hold 98.05% and 1.95%ofshares of
the ZZ Plant respectively. The ZZ Plant owns the physical assets of the
gasification plant and also holds the operation rights of Shandong Xuejiao
Chemical Co. Ltd. (“Methanol Plant”)owned by Xuecheng Energy according to the
“Cooperation Agreement” signed with Xuecheng Energy which started performance on
September 2013. During the term the Methanol Plant is operated by the ZZ Plant,
the provisions related to operation and management of the ZZ Plant also apply to
the Methanol Plant.

2.Synthesis Energy Systems, Inc. (“SESBVI”) as SESI’s parent company, has
entered into a share purchase and investment agreement with Rui Feng Enterprises
Limited (“Rui Feng”) on June 14th, 2015. According to this agreement, SES will
sell 61% of the shares in SESI to Rui Feng, and Rui Feng will invest additional
funds into SESI to be used to expand the ZZ Plant by constructing an acetic
acid/acetic anhydride/propionic acid project (“New Project”) as well as improve
relevant facilities of the ZZ Plant (“Share Purchase And Investment
Agreement”).Unless otherwise stipulated, the terms in the Agreement have the
same meanings set forth in the Share Purchase and Investment Agreement.

3.Saikong is Rui Feng’s affiliated company. Rui Feng authorizes Saikong and
Saikong accepts the authorization to appoint a general manager (“GM”) and a
management team to be responsible for the overall operation and management of ZZ
Plant. Saikong will provide day to day management and supervision for ZZ Plant
operation and maintenance.

 

The Parties have reached the following terms through negotiation:

1Operation and management

The operation and management under the Agreement is to entrust GM and his/her
team (“Management Team”) appointed by Saikong to run the overall day to day
operation and management of ZZ Plant and Methanol Plant during the period set
forth in the Agreement. The Management Team shall exercise its management
function under the direction of the board of directors of ZZ Plant (“the
Board”). The compensation of the Management Team during the operation and
management period under the Agreement will be advanced by Saikong and will be
paid back only by products sales income of New Project. The compensation plan of
the Management Team will be formulated by Saikong and submitted to the Board for
approval. Vice chief engineer and chief financial officer will be appointed by
SESBVI. ZZ Plant shall continue to implement the financial management system and
accounting principles in effect prior to the effectiveness of the Agreement.
Chief financial officer shall perform the works under the Board authorization
and within duty scope, and perform the duty of supervising the Management Team.
If chief financial officer violates the laws and policies on financial
management or other company management policies, the Management Team has the
right to ask the Board to replace the chief financial officer. The seals such as
company stamp of ZZ Plant shall be controlled by the chief financial officer
during the term of the Agreement.

 

 

2Agreement term

The term of operation and management under the Agreement will begin from the
date of GM appointment letter being signed by the Board, and will terminate once
Rui Feng has obtained 52.46% shares of SESI.

3Rights and obligations of the Parties

During the term of the Agreement, the Parties shall perform their respective
obligations as agreed below:

3.1The GM appointed by Saikong shall be responsible for the daily operation and
management of ZZ Plant. ZZ Plant shall implement the general manager
responsibility system under the authorization of the Board. The Board shall give
written authorization to the GM, who may not conduct management exceeding the
authorization scope. The GM shall prepare plans on business, personnel and
operation fund usages based on the authorization and submit to the Board for
approval. Technical plan for innovation project and related fund usage shall be
submitted to the Board and implemented only after approval of the Board.

3.2Technical innovation of facilities in ZZ Plant and Methanol Plant, and the
transfer, lease, mortgage and provision of security of the existing assets in
the plants and other matters which will cause change of existing assets must be
submitted to the Board and implemented upon the approval of the Board.

3.3Under the condition of commissioning of the New Project after construction or
achieving profit from methanol production, the Parties agree to operate
gasification facilities in ZZ Plant upon satisfaction of one of the afore said
conditions.

3.4The original key production, administration and supporting personnel who
worked in ZZ Plant before the Agreement comes into effect will be retained in
principle, and all of the gasification shop floor employees will be retained in
principle so that there is no talent loss on gasification facility operation.
Their salary and benefits level in general would not be lower than those before
the Agreement comes into effect. Based on the concept of streamlined
administration, Management Team has the right to make adjustment on current
positions and personnel in its sole discretion, and has the right to dismiss any
redundant personnel according to applicable laws, company management policies
and labor contract.

3.5A project team will be established in ZZ Plant to be responsible for the New
Project preparation and project approval. The cost for project approval and
license and other expenses for the New Project will be paid by Saikong as loan,
and will be paid back only by products sales income of New Project.

3.6Saikong will assume all the fees, profits and losses of ZZ Plant and Methanol
Plant. The shortage of fund will be paid by Saikong as loan and paid on a
monthly basis, and will be paid back only by products sales income of New
Project. The profits can only be used for equipment purchase and production and
operation of ZZ Plant.

3.7Saikong shall be responsible for the production safety of the ZZ Plant and
Methanol Plant and assume all the losses of the ZZ Plant and Methanol Plant
caused by safety accidents except for those caused by force majeure.

3.8During the term of the Agreement, any extension given by one Party to the
other Party due to the other Party’s breach or delay in performance of the
Agreement, shall not affect, harm or limit the non-breaching party’s rights
under the Agreement and as a creditor according to any relevant laws and
regulations. Such extensions shall not be regarded as waiver of rights of the
non-breaching party to claim against the breach of contract by the breaching
party or any other similar breach in the future.

4Representations and Warranties

4.1During the term of the Agreement, ZZ Plant warrants to Saikong as follows:

(1)Cooperate with GM appointed by Saikong on daily production and operation;

(2)Not to dispose of any assets of the ZZ Plant and Methanol Plant, not to
allocate any funds, except for those approved by the Board;

(3)Not to use the license, permits and other materials of the ZZ Plant and
Methanol Plant to create any new debts on the ZZ Plant and Methanol Plant, in
the name of the ZZ Plant and Methanol Plant, other than as mutually agreed and
approved by the Board;

 

 

(4)To provide timely and adequate convenience for the production, operation, and
management of the ZZ Plant and Methanol Plant, and to help with the
communication and coordination with relevant regulatory authorities.

(5)To cooperate with necessary works of New Project approval.

4.2During the term of the Agreement, Saikong warrants to ZZ Plant as follows:

(1)To operate according to laws, to adopt good practices to run the ZZ Plant and
Methanol Plant and to maintain the ZZ Plant and Methanol Plant in good operating
condition;

(2)Not to conceal any production safety accidents and casualties of the ZZ Plant
and Methanol Plant;

(3)Not to conceal any debts or contingent liability of the ZZ Plant and Methanol
Plant;

(4)Not to dispose of any assets of the ZZ Plant and Methanol Plant, except for
the items being approved by the Board;

(5)Not to use the assets (including land, building, plant facilities, equipment,
intangible assets, etc.) of the ZZ Plant and Methanol Plant for mortgage or
provision of security to any other parties, except those approved by the Board;

(6)Not to conceal any litigation, arbitration (including labor arbitration),
administrative penalties of the ZZ Plant and Methanol Plant;

(7)Be responsible for the preparation and submission for approval of New
Project’s feasibility study report.

(8)Not to use the license, permits and other materials of the ZZ Plant and
Methanol Plant to create any new debts on the ZZ Plant and Methanol Plant, in
the name of the ZZ Plant and Methanol Plant, other than as mutually agreed and
approved by the Board;

4.3  If either Party breaches the representations and warranties stated in 4.1
and 4.2, the breaching party should rectify it in a timely manner after the
non-breaching party’s request for rectification, or the Parties shall negotiate
in good faith to find a solution. During such period the Parties shall continue
to perform the obligations according to the Agreement.

5 Confidentiality

Unless otherwise stipulated by the laws or relative regulatory authority,
Saikong may not provide or disclose any materials or information related to ZZ
Plant business to any company, enterprise, organization or individual without
the prior written consent of the other Party.

6 Termination

6.1 If any of the below issues occurs, and within 10 days of notice from one
Party the issue is not resolved, then the Party issuing notice (“Notifying
Party”) can issue a written notice to the other Party to terminate the Agreement
(“Termination Notice”).When the notice reaches the other Party the Agreement is
terminated:

(1)Fails to continue performing the Agreement substantively because of force
majeure;

(2)Loss is occurred during operation and management period under the Agreement,
and Saikong fails to advance payment as agreed in order to maintain the
operation of ZZ Plant and Methanol Plant;

(3)During operation and management period under the Agreement, the Management
Team violates safety, environment protection laws and any other related laws, or
violates the obligations under the Agreement, or acts exceeding the scope
authorized by the Board, resulting in loss of Plant and Methanol Plant.

6.2 If the Agreement is terminated pursuant to Article 6.1 or applicable laws,
the Agreement is no longer enforceable or effective on any Party. But each Party
shall not be exempted from any liabilities caused by its breach of the Agreement
or misrepresentation under the Agreement, and such termination shall not be
regarded as a waiver of any remedy (including specific performance, if
available) available for such breach of the Agreement or misrepresentation under
the Agreement.

 

 

7Notices

Notices under the Agreement issued by any Party shall be in writing, and shall
be deemed to have been effectively given to the following addresses upon
receiving or being handed over for delivery if delivered by regular mail
,express delivery or registered mail:　　

7.1 to the ZZ Plant, by the following address:

Attention: Hu Yifang

Address: Room 910, No. 2 building, No. 711, Yishan Road, Shanghai, PRC

Post code: 200233

Phone No.: (86-21) 5496 2299

7.2 to Saikong by the following address:

Attention: Liu Wei

Address: Room 506, Building A, Lushang Plaza, No. 19288Jingshi Road, Lixia
District, Jinan, PRC.

Phone No.: (86-531) 82562006

8Liability for Breach

8.1Either Party shall indemnify, defend and hold harmless the other Party from
and against any direct or indirect loss caused by the breach of obligations
under the Agreement by s2uch Party, including but not limited to related
benefits and reasonable legal expenses. Besides, the breaching party should
continue to perform other obligations in the Agreement.

8.2Either party shall indemnify, defend and hold harmless the other Party from
and against any direct or indirect loss caused by the breach of representations
and warranties under the Agreement by such Party, including but not limited to
related benefits and reasonable legal expenses.

8.3

8.4For any liability for breach of contract by Saikong under the Agreement, Rui
Feng shall assume joint liability for compensation with all of its assets,
rights and interests inside and outside the PRC.

9Force Majeure

9.1“Force Majeure Event” means an event that is unforeseeable at the execution
of the Agreement, the occurrence and result of which cannot be avoided and
overcome, and occurs after the execution of the Agreement, which interrupts the
performance of the Agreement in whole or in part. The Force Majeure Event shall
include earthquakes, typhoons, flood, fire, war, national or international
transportation disruption, acts of government or public body, epidemic, civil
war, strikes and any other instances which are accepted as Force Majeure Event
in general international commercial practice.

9.2If Force Majeure Event occurs, the Party affected by the event (“Affected
Party”) shall inform the other Party immediately and provide formal written
notice within 15 days including the description of the event, the reason why it
cannot fulfill its obligation, the estimated duration of the event and relevant
supporting documents. The Affected Party shall use all reasonable effort to
continue performing its obligations under the Agreement which is not affected by
the Force Majeure Event.

9.3If Force Majeure Event occurs, the Parties shall hold the meeting to find out
a fair solution immediately, and all reasonable effort to mitigate the
consequences of the Force Majeure Event.

10Applicable Law and Dispute Resolution

10.1The formation, execution, performance, termination and dispute resolution of
the Agreement shall be governed by and interpreted in accordance with the PRC
law.

10.2Any dispute arising from the Agreement, the Parties shall first try to solve
by friendly consultation and negotiation. If the dispute cannot be resolved
within 30 days after one Party issuing the written notice requesting for
consultation, the Party issuing the notice can submit the dispute to the
Shanghai International Economic and Trade Arbitration Commission (“Arbitration
Commission”) for arbitration in Shanghai in accordance with valid arbitration
rules at the time of the arbitration. The arbitration tribunal shall consist of
three arbitrators, one appointed by the applicant, one appointed by the other
Party, the third arbitrator (“Chief Arbitrator") appointed based on agreement
between the Parties, or by the Arbitration Commission if the Parties cannot
agree on the third arbitrator. Any decision or award of the arbitration tribunal
shall be final and binding upon both Parties.

 

 

11Effectiveness and miscellaneous

11.1The Agreement will come into force when all of the following conditions are
met:

(1)signed by legal representatives or authorized representatives of the Parties
and stamped by the Parties;

(2)Rui Feng becomes the shareholder of SESI

(3)As authorized by Rui Feng, Saikong appoints a GM and receives appointment
letter from the Board.

11.2The Parties may continue to negotiate and sign related supplement agreement,
memorandum or other binding documents on other matters not stipulated in the
Agreement after the execution of the Agreement in accordance with the basic
principles of the Agreement. Such documents constitute an integral part of the
Agreement and have same legal effect with the Agreement. If the contents of such
documents are inconsistent with the Agreement, the Agreement shall prevail.

11.3The Agreement is written in both Chinese and English with 4originals, 2 for
each party. The Chinese version shall prevail in the event of any discrepancy
between the Chinese and English versions.

 

 

 

Synthesis Energy Systems (Zaozhuang) New Gas Company LTD.

 

/s/ Huang Dali                                            

Name: Huang Dali

Title: Authorized Director

 

 

Shandong Saikong Automatic Equipment Company Ltd.

 

/s/ Li Qinghua                                             

Name: Li Qinghua

Title: Chairman