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EXCLUSIVE DISTRIBUTION FRAMEWORK AGREEMENT
 

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By and among
 
Sunsi Energies Hong Kong Limited

And

Zibo Baokai Commerce and Trade Co., Ltd.

And

Zibo Baoyun Chemical Plant
 
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December 12, 2009
 
THIS EXCLUSIVE DISTRIBUTION AGREEMENT (this Agreement) is entered into on
12 December 2009 in Zibo, the People’s Republic of China (PRC) by and among

SUNSI ENERGIES HONG KONG LIMITED (the Global Distributor), a private company
with limited liability duly incorporated and validly existing under the laws of
Hong Kong with its legal address at 401 Jardine House, 1 Connaught Place,
Central, Hong Kong;

AND

ZIBO BAOKAI COMMERCE AND TRADE Co., Ltd. (the PRC Distributor) a limited
liability company duly incorporated and validly existing under the laws of PRC
with its legal address at Shangzhuang Village, Sibaoshan Sub-District Office,
Hi-Tech Zone, Zibo City, PRC;

AND

ZIBO BAOYUN CHEMICAL PLANT (the Supplier), an enterprise duly established and
validly existing under the laws of PRC with its legal address at Shangzhuang
Village, Sibaoshan Sub-District Office, Hi-Tech Zone, Zibo City, PRC;

Global Distributor, PRC Distributor and Supplier are hereinafter individually
referred to as the Party and collectively as the Parties; Global Distributor and
PRC Distributor are hereinafter individually also referred to as the Distributor
and collectively as the Distributors.

WHEREAS

(1)
Global Distributor and Supplier had agreed to establish a joint venture company
to manufacture trichlorosilane in Zibo, PRC and had signed a joint venture
contract and articles of association for the joint venture company on 8
September 2009 respectively, under which Global Distributor holds 90% shares and
Supplier holds 10% shares in the joint venture with its registered capital of
USD 9,600,000 and total investment of USD 20,000,000.

(2)
In reasonable reliance on Supplier’s representations and commitment to the
establishment of the joint venture, up to 10 November 2009, the Global
Distributor and its parent company had invested funds in good faith and as
necessary in the previous ten (10) months in, among others, disclosure in the US
of the joint venture, negotiation with Supplier, test and inspection of the
Product, financial audit on Supplier, attorney fees, etc. for the establishment
of the joint venture.

(3)
Up to the date of this Agreement, the establishment of the joint venture still
has not been approved by the villagers’ meeting of the villagers’ collective as
required by relevant applicable laws and regulations.

(4)
In consideration of the above, Supplier and Global Distributor agree to sign
this Agreement in the interim changing their cooperation model from
establishment of a joint venture to an exclusive distribution arrangement, under
which Global Distributor will exclusively distribute the Product of Supplier in
overseas market, and PRC Distributor which will be acquired by the Global
Distributor concurrently will exclusively distribute the Product in PRC market.

 
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(5)
The Distributors have already worked on new market and clients that will be
beneficial for the Supplier.  The Supplier will continue assisting Distributors
in this development.

NOW THEREFORE, under the principles of good faith, fairness, equality and
voluntariness, and mutual benefits, after friendly and sufficient discussions,
the Parties hereby agree as follows:
 
1.
Definitions

Unless otherwise specified in this Agreement or defined by the context, the
following terms shall have the following meaning:

1.1
Affiliate means any company which is directly or indirectly controlling, or
controlled by, or under the same control with, or jointly controls another
company with, each Party. (The term “control” as used in this Article 1.1 means,
with respect to a corporation, the right to exercise, directly or indirectly,
fifty percent (50%) or more of the voting rights attributable to the shares of
such corporation.)

1.2
Loss means any and all damages, fines, fees, taxes, penalties, deficiencies,
losses (including lost profits or diminution in value) and expenses, including
interest, reasonable expenses of investigation, court costs, reasonable fees and
expenses of attorneys, accountants and other experts or other expenses of any
proceedings or of any claim, default or assessment (such fees and expenses to
include all fees and expenses, including fees and expenses of attorneys,
incurred in connection with (i) the investigation or defense of any third party
claims, (ii) asserting or disputing any rights under this Agreement against any
Party hereto or otherwise, or (iii) settling any action or proceeding or
threatened action or proceeding).

1.3
Order(s) means the order issued by relevant Distributor to purchase the Product
from Supplier which shall be in the form set forth in Exhibit A.

1.4
Product means the trichlorosilane manufactured by Supplier.

1.5
Product Price means the price for Product supplied by Supplier to Distributors
under this Agreement.

1.6
Purchaser means the person and/or entity that purchases the Product from
Distributors.

 
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2.
Exclusive Distribution

2.1
Subject to the terms and conditions of this Agreement, Supplier hereby
irrevocably agrees to appoint Global Distributor as its exclusive distributor
marketing and reselling Product to Purchasers outside the territory of the
PRC.  Global Distributor hereby agrees to serve as Supplier’s exclusive
distributor for Product to Purchasers outside the territory of the PRC.

2.2
Subject to the terms and conditions of this Agreement, Supplier hereby
irrevocably agrees to appoint PRC Distributor as its exclusive distributor
marketing and reselling Product to Purchasers within the territory of the
PRC.  PRC Distributor hereby agrees to serve as Supplier’s exclusive distributor
for Product to Purchasers within the territory of the PRC.

2.3
Except for supplying Product to Global Distributor and PRC Distributor under
this Agreement, Supplier shall not supply Product to any other person or entity
by itself or through any third party in or outside PRC.

3.
Duties of Supplier

3.1
Supplier shall whenever reasonably requested by relevant Distributor provide
relevant Distributor with such information (comprising written or other
materials excluding business secrets) as may be necessary for the promotion and
sale of the Product.

3.2
Supplier shall manufacture Products at Distributors’ request in an Order or
other specific request in writing to meet Purchasers’ demand and Distributor’s
market development.

3.3
Subject to the terms and conditions of this Agreement, Supplier shall:

 
(a)
supply and deliver the Product in accordance with any Order duly submitted by
relevant Distributor;

 
(b)
notify Distributors promptly in writing of any changes in the Product or any
technical specification of the Product so that Distributors can effectively
promote and resell the Product;

 
(c)
inform Distributors immediately of any technical problems, failures and quality
problems related to Product and support Distributors to solve any such problems;

 
(d)
ensure that the Product complies with the Purchaser’s Specifications (as defined
below) and relevant applicable laws and regulations regarding the manufacture,
packaging or labeling of the Product;

 
(e)
respond to any third party enquiry relating to Product that is directly
addressed to relevant Distributor and for those enquiries not addressed to any
Distributor, respond when Global Distributor confirms to; and

 
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(f)
immediately forward any order of Product which is directly addressed to Supplier
or inform any business opportunity in relation to Product which the Supplier is
aware of to Distributors, and also ask the relevant party who orders Product or
provide business opportunity in relation to Product directly to Supplier to
contact Distributors directly.

3.4
Supplier shall take all necessary measures and provide all the necessary
assistances as requested by Global Distributor and PRC Distributor to pursue the
liability of such person or entity, and immediately stop directly or indirectly
providing Product to such person or entity selling Product outside and/or within
the territory of PRC without prior consent from Supplier and Global Distributor
or PRC Distributor.

3.5
Any sale of Products by Supplier to any third party other than Global
Distributor or PRC Distributor shall be credited to the appropriate Distributor
depending on whether such sale occurs outside or within the territory of PRC.

 
4.
Duties of Distributors

4.1
Throughout the term of this Agreement, Distributors shall act in good faith
towards Supplier with regard to the performance of this Agreement.

4.2
Distributors shall submit to Supplier, as soon as reasonably possible, details
of all complaints or enquiries given to Supplier in respect of the Product to
allow Supplier to respond or help to respond to such complaints or enquiries.

4.3
Distributors will develop the market of trichlorosilane and promote this Product
inside and outside of PRC for the duration of this agreement.

 
5.
Product

5.1
Specifications of Product

Supplier shall manufacture and supply Product complying with the Purchaser’s
specifications of the Product provided by Global Distributor and such
specifications shall be agreed by Global Distributor and Supplier (the
Specifications).  The Supplier shall not unreasonably refuse to agree on the
Purchaser’s Specifications provided by Global Distributor.
 
6.
Order

6.1
Distributors may initiate the purchase of Product by issuing a duly executed
order to Supplier (the Order) from time to time in the form set forth in Exhibit
A of this Agreement.

6.2
The Order(s) shall specify the quantities of Product to be supplied and may
specify the location of delivery and/or the schedule of delivery.  The Global
Distributor shall provide an annual sales quantity estimate to Supplier, and the
Global Distributor shall adjust and confirm the annual estimate on a quarterly
basis.

 
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7.
Delivery and Acceptance of Product

7.1
Shipping, inspection and Transportation

The Product supplied by Supplier shall be packed for transportation and storage
in a proper and safe way in accordance with the common practice within the
industry and any special requirements required by the Distributors or provided
in the laws and regulations.

7.2
Schedule and Destination of Delivery

 
(a)
Supplier shall deliver Product in accordance with the delivery schedule
specified in each Order.  Supplier shall give written notice to relevant
Distributor at least two (2) working days in advance of the commencement of
delivery of the Product in accordance with each Order.  Supplier shall specify
in such notice the quantity to be delivered, the carrier and the estimated date
of arrival of Product.

 
(b)
In the event no schedules of delivery are specified in relevant Order, Supplier
shall deliver Product within fifteen (15) working days upon receipt of such
Order.

 
(c)
Products for Purchaser within PRC shall be delivered to the Purchaser’s
designated location.  The Products for the Purchaser outside PRC shall be
delivered to a port designated by relevant Purchaser.

 
(d)
Supplier shall inform relevant Distributor in writing immediately about any
difficulties in meeting the Distributor’s Order(s).  Upon written confirmation
from the relevant Distributor, Supplier may delay the delivery of Product,
otherwise Supplier shall be responsible for any Loss suffered by relevant
Distributor due to the delay or failure of the delivery of Product.

7.3
Inspection and Acceptance

 
(a)
In the event the Product is delivered directly to the Distributors, upon receipt
of the Product, relevant Distributor shall inspect and accept such Product and
relevant Invoice without any delay.  If the Product supplied by Supplier are not
in compliance with the Purchaser’s Specifications and/or any of the terms of the
Order, relevant Distributor shall be entitled to reject the Product which do not
conform to the Specifications and/or any of the terms of the Order and the
relevant Invoice and/or demand Supplier to replace the Product within a
designated period.  Latent or concealed defects in the Product shall not be
deemed accepted when such Product are received.

 
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(b)
In the event the Product is delivered to relevant Purchaser or other party
designated in the relevant Order, Supplier should have such Purchaser or other
party designated in the relevant Order issue a written confirmation with
official seal or authorized signature of such Purchaser or other party
designated in the relevant Order upon acceptance of the Product.  Supplier shall
provide relevant Distributor of such written confirmation together with relevant
Invoice, otherwise relevant Distributor may refuse to accept such Invoice or pay
for the Product.

 
8.
Pricing of Product

8.1
The Product Price shall be determined in accordance with the cost-plus method
(i.e. the costs incurred by Supplier for manufacturing the Products plus ten
percent to fifteen percent (10%-15%) profit margin, and the Product Price shall
be the FOB price, i.e., the price includes the costs, profits, freight from
Supplier to the shipping port/place, insurance and all other fees.), and the
Product Price shall not higher than the then market price.

8.2
The resale price at which the Product will be resold shall be determined by
Distributors at their own discretion.

 
9.
Invoicing and Payment

9.1
Invoicing

Supplier shall issue corresponding invoice to relevant Distributor at the total
Product Price of the Product in each Order (the Invoice) and shall deliver the
Invoice to relevant Distributor according to Article 7.3.

9.2
Payment

 
(a)
For the Product to be resold by PRC Distributor to Purchaser within PRC, PRC
Distributor shall pay the Invoices accepted by it within thirty (30) days after
it has sold out the relevant Product under such Invoice and receive the full
payment for such Product from relevant Purchaser.

 
(b)
For the Product to be resold by Global Distributor to Purchaser outside PRC,
Global Distributor shall pay 20% of the total Product Price in relevant Invoice
within fifteen (15) days upon receipt of the Invoice issued by the Supplier for
the Order placed by Global Distributor.  The remaining 80% of the total Product
Price in such Invoice shall be paid by Global Distributor within thirty (30)
days after receipt of such Invoice from Supplier.

 
(c)
All payments for the Invoice shall be paid to the bank account then designated
by the Supplier in the currency decided by relevant Distributor but in most
cases shall be in RMB.  Supplier shall procure that the bank account designated
by it shall be applicable for the payment in the currency decided by relevant
Distributor.

 
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10.
Liabilities for Breach

10.1
Liabilities for breach by Supplier

 
(a)
During the term of this Agreement, Supplier shall not sell any Product to any
third party without prior written consent of both Distributors.  Otherwise,
Supplier shall be deemed having committed a breach of this Agreement.  Supplier
shall immediately stop selling Products to such third party.  In addition, all
the proceeds for Supplier selling the Product to any third party outside the PRC
shall be paid by Supplier to Global Distributor and all the proceeds for
Supplier selling the Product to any third party within the PRC shall be paid by
Supplier to PRC Distributor.

 
(b)
Supplier will protect, defend, indemnify, assume any liability, save and hold
Distributors harmless from and against any allegations, claims, demands, suits,
liabilities, penalties, losses, damages, or charges, settlements, judgments,
costs and expenses including attorney’s fees (the Claim) incurred which at any
time may be imposed upon, brought against, incurred by, asserted or awarded
against any Distributor relating to:

 
(i)
any Product supplied by Supplier under this Agreement, including but not limited
to allegations or liabilities arising out of, or allegedly based on any defects,
failures to perform, breaches of the quality standard;

 
(ii)
any Product supplied by Supplier that violates any third party’s intellectual
property rights or any other rights as recognized by relevant applicable laws
and regulations; or

 
(iii)
any failure of Supplier to comply with the Specifications, quantities, schedule
of delivery and/or any other requirements specified in this Agreement and/or
each Order.

In the event that there is any Claim, Supplier shall provide all the necessary
assistances as requested by relevant Distributor for handling such Claim,
including providing the requisite Product and/or appointing an expert who shall
provide his/her expert opinion regarding the Claim in respect of any Product (if
exists).  All fees and expenses related to Supplier’s assistance shall be borne
by Supplier.

10.2
Liabilities for breach by Distributors

In the event relevant Distributor fails to make the payment for the Invoice
according to this Agreement, a delay penalty of 0.03% of the unpaid amount per
day shall be paid by relevant Distributor to Supplier, and such delayed period
shall not exceed forty five (45) days the maximum.
 
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11.
Term and Termination

11.1
The term of this Agreement shall be eighteen (18) months since execution of the
Agreement by the Parties (the Original Term) and shall automatically renew for
any other eighteen (18) months (the Renewed Term) at the end of the Original
Term and each Renewed Term unless Global Distributor serves on the other Parties
a written notice no less than thirty (30) days prior to the date of expiry of
the Original Term or each Renewed Term of this Agreement.

11.2
Global Distributor may terminate the Agreement by a thirty (30) days prior
written notice to the other Parties upon the occurrence of any of the following
events:

 
(a)
Supplier committed a material breach or violate any of its obligation under this
Agreement;

 
(b)
Product supplied by Supplier fails to meet the Specifications and Supplier fails
to cure such default within thirty (30) days upon receiving the written notice
from Global Distributor;

 
(c)
Global Distributor changed its business strategy and will no longer sell the
Product; or

 
(d)
In the event the market price of Products is changed by more than ten percent
(10%) within consecutive three (3) months.

11.3
Supplier may terminate the Agreement by a thirty (30) days prior written notice
to the other Parties in the following circumstances:

 
(a)
Distributor materially breaches this Agreement or the duties thereunder; or

 
(b)
Supplier is encountered with significant events or adjustments, including change
of business scope due to government requirements, government intervention, and
force majeure.  For any other type of significant events or adjustments, the
Parties shall discuss separately on whether to continue to perform this
Agreement.

11.4
The termination of this Agreement due to any reason shall not affect a Party’s
right to be compensated by any defaulting Party under this Agreement or relevant
laws or regulations.

12.
Governing Law and Dispute Resolution

This Agreement shall be governed by the laws of PRC.  If any dispute,
controversy or claim arises out of or in connection with this Agreement,
including any question regarding its existence, validity or termination, the
Parties shall first attempt to resolve the matter through friendly
consultation.  If the dispute is not resolved within sixty (60) days, then
either Party may submit the dispute to the China International Economic and
Trade Arbitration Commission (the CIETAC) in Beijing for arbitration in
accordance with its then effective arbitration rules.  The arbitration tribunal
shall consist of three (3) arbitrators among whom each Party shall appoint one
within twenty (20) days after its giving or receiving a request for arbitration
and the third arbitrator shall be appointed by the chairperson of Shanghai
Sub-commission.
 
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13.
Miscellaneous

13.1
This Agreement shall not be assigned in part or in total to any third party
without written agreement by all of the Parties.

13.2
This Agreement is made in the English and Chinese versions, and both language
versions shall have equal legal force and effect.  In case of any discrepancy
between the two language versions, the Chinese  version shall prevail.

13.3
This Agreement shall be signed in six (6) copies in each language version, and
Supplier shall keep two (2), Global Distributor shall keep two (2) and PRC
Distributor shall keep two (2) originals for each language version
respectively.  Each original shall be equally authentic and effective.

 
(THE BELOW OF THIS PAGE IS LEFT BLANK INTENTIONALLY, SIGNATURE PAGE TO FOLLOW)
(SIGNATURE PAGE)
 
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IN WITNESS WHEREOF, the Parties hereto have duly authorized their
representatives to execute this Agreement which shall come into effect as of the
date first written above.

Global Distributor:

SUNSI ENERGIES HONG KONG LIMITED

Authorized Representative:
 

 
                     (Signature)
 
Name:
Richard St. Julien
 
Title:
President
 

PRC Distributor:

ZIBO BAOKAI COMMERCE AND TRADE Co., Ltd. (Company Seal)

Authorized Representative:
 

 
                 (Signature)
 
Name:
Song Yihua
 
Title:
Legal Representative
 
Nationality:
China
 

Supplier:

ZIBO BAOYUN CHEMICAL PLANT (Company Seal)

Authorized Representative:
 

 
         (Signature)
 
Name:
Song Yihua
 
Title:
Legal Representative
 
Nationality:
China
 

 
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Exhibit A Order

To: 
ZIBO BAOYUN CHEMICAL PLANT

 
Date:

All the Product supplied by Zibo Baoyun Chemical Plant (the Supplier) to Sunsi
Energies Hong Kong Limited (the Global Distributor) or Zibo Baokai Commerce And
Trade Co., Ltd. (the PRC Distributor) under this order (the Order) will be
governed by the terms and conditions specified in this Order and the Exclusive
Distribution Agreement entered into by and among Global Distributor, PRC
Distributor and Supplier as of [ • ] (the Agreement).

Capitalized terms in this Order shall have the same meanings in the Agreement,
unless otherwise defined in this Order.

1.
Ordering Party:

 
2.
Quantity of Product

Total Quantity of Product Ordered:
 

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Remark:
 

 
3.
Schedule of Delivery
 

 
3.1
Date of delivery:
         
. 

 
3.2
Period of validity of this Order:
    
.

 
4.
Location of Delivery
 

 
4.1
Location of delivery:
       .

 
SUNSI ENERGIES HONG KONG LIMITED/ZIBO BAOKAI COMMERCE AND TRADE Co., Ltd.
 
By:
                 
Name:
   
Title:
   

 
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