exv10w6





Exhibit 10.6


SEPARATION AGREEMENT AND RELEASE




     This Separation Agreement and Release (the “Agreement”) is dated March 31, 2009, and is
effective on the date described in Section 15. This Agreement is made as a mutually agreed
compromise between the Parties (as defined below) for the complete and final settlement of all
claims, differences, and alleged causes of action existing between them as of the Effective Date.



PARTIES




     The Parties to this Agreement are Synthesis Energy Systems, Inc. (the “Company”) and Timothy
E. Vail (the “Executive”). The Company and the Executive are referred to collectively as the
“Parties.”



PREAMBLE




     WHEREAS, the Executive was previously employed as the President and Chief Executive Officer of
the Company, pursuant to that certain Employment Agreement dated May 30, 2006, as amended on
November 15, 2006 (as amended, the “Employment Agreement”);



     WHEREAS, the Executive and the Company also entered into that certain Indemnification
Agreement dated August 13, 2008 (the “Indemnification Agreement”);



     WHEREAS, the Parties intend to terminate the Employment Agreement as of the Effective Date
(except with respect to the Executive’s and the Company’s continuing obligations under Sections 4
— Restrictive Covenants, 9 — Waiver of Breach, 12 — Applicable Law, Jurisdiction, and 13 —
Attorney and Trial Costs of the Employment Agreement, as revised hereby) and enter into this
Agreement;



     WHEREAS, the Parties intend that this Agreement shall operate as a complete and final
settlement of all claims, differences and alleged causes of action existing between them as of the
Effective Date;



     WHEREAS, the Executive has had at least 21 days to consider this Agreement;



     WHEREAS, the Company has advised the Executive in writing to consult with independent legal
counsel and tax advisors respecting this Agreement;



     WHEREAS, the Executive has had an opportunity to consult with independent legal counsel and
tax advisors with respect to the terms, meaning and effect of this Agreement; and



     WHEREAS, the Executive understands that the Company regards the above representations as
material and that the Company is relying on these representations in entering into this Agreement.



     NOW, THEREFORE, in consideration of the mutual promises and obligations contained and
exchanged in this Agreement and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Parties agree as follows:



 









 




1. Definitions.




     1.1 “Code” shall mean the Internal Revenue Code of 1986, as amended, and the notices, rules
and regulations thereunder.



     1.2 “Company and/or its Affiliates” means and includes the Company, its Affiliates, and all of
their predecessors, successors and assigns and parents, subsidiaries, divisions or other affiliated
companies, partners, partnerships, present and former officers, directors, employees, stockholders,
agents, employee benefit plans or programs and their fiduciaries, whether in their individual or
official capacities and all of the successors and assigns of the foregoing. “Affiliates” also
includes a person or entity who, directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the Company.



     1.3 “Date of Termination” means March 31, 2009.


2. Termination of the Employment Agreement. The Parties agree that the Employment
Agreement is hereby terminated and of no further force and effect as of the Effective Date, except
with respect to the Executive’s and the Company’s obligations under Sections 4 — Restrictive
Covenants, 9 — Waiver of Breach, 12 — Applicable Law, Jurisdiction, and 13 — Attorney and Trial
Costs, all of which survive the termination of the Employment Agreement; provided, that the
following amendments are hereby made to the surviving provisions of the Employment Agreement: (i)
for purposes of Section 4(a) of the Employment Agreement, the non-public information of the Company
acquired by, or disclosed to, the Executive shall include, but not be limited to, all information
related to the Company’s intellectual property, including without limitation, its U-GAS fluidized
bed gasification technology, and (ii) the third sentence of Section 4(b) of the Employment
Agreement is replaced in its entirety with the following: “As of the date hereof, the Business of
the Corporation is to develop projects or provide the technology for projects that convert coal and
coal/biomass fuels through coal gasification technology to products for the chemicals,
transportation fuels, natural gas, and power markets.” This Agreement shall have no effect on the
Indemnification Agreement, which is hereby ratified and affirmed and shall remain in full force and
effect.



3. Exchange of Equity Incentive Awards. The Executive has surrendered for cancellation all
of his currently held options, as set on Schedule I hereto, and, in exchange, effective as of the
date hereof, the Company has issued a new stock option grant to purchase 960,000 shares of the
Company’s common stock, at an exercise price of $0.66 per share. Such stock option grant shall be
fully vested as of the date hereof and shall be exercisable until March 31, 2019, the tenth
anniversary of the date hereof. Such grant shall be granted under, and be subject to, the terms
of the Company’s Amended and Restated 2005 Incentive Plan, as amended.



4. Payments to the Executive.




     4.1 In satisfaction of the bonus earned by the Executive for his service to the Company during
the year ended December 31, 2008, effective as of the date hereof, the Company has issued to the
Executive a stock option grant to acquire 68,182 shares of the Company’s common stock at an
exercise price of $0.66 per share. Such stock option grant shall be fully vested as of the date
hereof and shall be exercisable until March 31, 2019, the tenth



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anniversary of the date hereof. Such grant shall be granted under, and be subject to, the
terms of the Company’s Amended and Restated 2005 Incentive Plan, as amended.



     4.2 Provided that the Executive elects COBRA within the time period required by law, the
Company shall reimburse his payment of his COBRA premiums through (i) December 31, 2009 or (ii)
until the Executive is eligible to participate in the health insurance plan of another employer,
whichever is sooner.


5. Pay Through Date of Termination. The Executive acknowledges that he has received all
salary, wages, bonuses, accrued and unpaid vacation time, sick time or other paid time off earned,
and other compensation earned on or before the Date of Termination.



6. Resignation and Acknowledgement by the Executive. Effective as of the Date of
Termination, the Executive hereby resigns from all positions he holds as an officer with the
Company and/or its Affiliates and as a director of the Company’s Affiliates, provided that the
Executive does not resign as a director of the Company. In connection with his resignation,
Executive acknowledges that he has disclosed all information to the Company and the Board of which
he has knowledge which could be expected to result in a material adverse effect on the Company, its
business or its results of operations after the Effective Date.



7. Future Services of Executive for the Company. If the Company so requests after the Date
of Termination, the Executive agrees to (i) assist the Company its contemplated transition plans,
including through service as a consultant to the Company, on such terms and conditions as the
Executive and the Company shall mutually agree; provided that, if Executive’s services as a
consultant shall be requested or required for any period longer than five days, Executive shall be
entitled to receive compensation for such services equal to a pro-rata portion of his annual base
salary as of the Effective Date, to be pro-rated based upon the portion of a calendar year that he
serves as a consultant, and (ii) cooperate with the Company in the resolution of any pending or
future litigation that relates to the time during which the Executive served as an employee of the
Company.



8. Releases




     8.1 Release by the Executive. The Executive unconditionally, fully and forever
waives, releases, discharges, agrees to hold harmless, and promises not to sue the Company and/or
its Affiliates, from and for any claim, action or right of any sort, known or unknown, arising on
or before the Effective Date.



          a. This release includes, but is not limited to, any claim arising out of or related to the
following: any claim for any wages, salary, compensation, sick time, vacation time, paid leave or
other remuneration of any kind; any claim for additional or different compensation or benefits of
any sort, including any participation in any severance pay plan; any claim under any stock option
grant issued by the Company to the Executive (other than the grants pursuant to Sections 3 and 4
hereof), the Company’s Amended and Restated 2005 Incentive Plan, as amended, or any other oral or
written agreement or plan regarding an equity incentive award of Executive; any claim of
discrimination or retaliation on the basis of age, race, sex, religion, marital status, sexual
preference, national origin, handicap or disability, veteran



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status, or special disabled veteran status; any claim arising under Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967,
the Executive Retirement Income Security Act of 1974, the Americans with Disabilities Act, the
Family and Medical Leave Act, the Fair Labor Standards Act of 1938, the Texas Commission on Human
Rights Act, Chapter 451 of the Texas Labor Code, or the Texas Payday Law, as such statutes may be
amended from time to time; any other claim based on any statutory prohibition; any claim arising
out of or related to an express or implied employment contract, any other contract affecting terms
and conditions of employment, or a covenant of good faith and fair dealing; any tort claim or other
claim for personal injury, death or property damage or loss; any claim for fraud or
misrepresentation; and any personal gain with respect to any claim arising under any whistleblower
or qui tam provisions of any state or federal law.



          b. The Executive represents that the Executive has read and understands this release provision
and that rights and claims under the Age Discrimination in Employment Act of 1967 are among the
rights and claims against the Company that the Executive is releasing. The Parties further
acknowledge and agree that the Executive is not releasing any of the following: (i) any rights or
claims arising after the Date of Termination, (ii) any rights or claims arising from or related to
any obligations that are stated or affirmed in this Agreement, (iii) any rights or claims for
indemnification pursuant to any applicable contract, policy, bylaw, or law (including but not
limited to the Indemnification Agreement), (iv) any rights or claims under any agreement or plan
governing the Executive’s stock option awards granted pursuant to Sections 3 and 4 hereof, and (v)
any rights or claims that may not be released as a matter of law (for example, claims for
unemployment insurance).



     8.2 Release by the Company. The Company unconditionally, fully and forever waives,
releases, discharges, agrees to hold harmless, and promises not to sue the Executive and/or any of
the Executive’s heirs, administrators, successors and/or assigns, from and for any claim, action or
right of any sort, known or unknown, arising on or before the Effective Date. The parties further
acknowledge and agree that the Company is not releasing any of the following: (i) any rights or
claims arising after the Date of Termination; (ii) any rights or claims arising from or related to
any obligations, agreements, representations or covenants that are stated or affirmed in this
Agreement; (iii) any rights or claims under any agreement or plan governing the Executive’s stock
option awards granted pursuant to Sections 3 and 4 hereof; and/or (iv) any rights or claims that
may not be released as a matter of law.


9. Consideration. As consideration for the Executive’s execution and performance of his
obligations under this Agreement, the Company (i) has granted the release set forth in Section 8.2
of this Agreement and (ii) will perform its remaining obligations pursuant to this Agreement. The
Executive agrees that the release set forth in Section 8.2 of this Agreement is in addition to
anything of value which the Executive is already entitled from the Company.



10. No Other Claims. The Executive represents that the Executive has not filed or
authorized the filing of any complaints, charges or lawsuits against the Company and/or its
Affiliates with any federal, state or local court, governmental agency, or administrative agency,
and that if, unbeknownst to the Executive, any such complaint has been filed on the Executive’s
behalf, the Executive will use the Executive’s best efforts to cause it to be withdrawn immediately
and dismissed with prejudice.




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11. Confidentiality. Both Parties shall keep strictly confidential all the terms and
conditions, including amounts payable, in the Agreement and shall not disclose them to any person
other than legal and/or financial advisors, government officials who seek such information in the
course of their official duties, individuals at the Company responsible for implementing the
Agreement, and the Executive’s spouse, unless compelled to do so by law or regulation, or business
necessity (including the requirement to file this Agreement with the Securities and Exchange
Commission or tax reporting obligations). Nothing in this Section is intended to prevent the
Executive from disclosing the fact that he was employed by the Company or from describing his
employment duties.



12. Consultation With Counsel. The Company advises the Executive to consult with
independent legal counsel and tax advisors prior to executing this Agreement, and the Executive
acknowledges being given that advice. The Executive acknowledges that Porter & Hedges, LLP is
acting solely as counsel to the Company with respect to this Agreement.



13. No Defamatory Statements. The Executive agrees that he will refrain from making any
representation, statement, comment or any other form of communication (hereinafter collectively
referred to as “representation”), whether written or oral, to any person or entity, including but
not limited to the principals, officers, directors, employees, advisors, agents, customers,
suppliers and competitors of the Company and/or its Affiliates, or any government officials, which
representation has the effect or tendency to disparage, denigrate, or otherwise reflect negatively
on the Company and/or its Affiliates and/or their business, officers, directors, shareholders,
employees, agents, advisors or investors. The Company agrees it will take all reasonable steps to
ensure that the Company and its officers, directors, and employees refrain from making any external
representation that would have the effect or tendency to disparage, denigrate, or otherwise reflect
negatively on the Executive.



14. Return of Company Materials. The Executive agrees to deliver to the Company promptly
after the Date of Termination all originals and copies of Company materials and all other property
of the Company and/or its Affiliates in the Executive’s possession, custody or control.



15. Revocation of Agreement; Effective Date. The Executive, at the Executive’s sole
discretion, may revoke this Agreement on or before the expiration of seven calendar days after
signing it. Revocation shall be in writing and effective upon dispatch to the following: Chief
Accounting Officer, Synthesis Energy Systems, Inc., Three Riverway, Suite 300, Houston, Texas
77056. If the Executive elects to revoke the Agreement, all of the provisions of the Agreement
shall be void and unenforceable. If the Executive does not so elect, the Agreement shall become
effective at the expiration of the revocation period (i.e., on the eighth day after the Executive
signs the Agreement) (the “Effective Date”).



16. Miscellaneous.




     16.1 The Parties acknowledge that this Agreement is the result of a compromise and shall never
be construed as, or said by either of them to be, an admission by the other of any liability,
wrongdoing, or responsibility. The Parties expressly disclaim any such liability, wrongdoing,
fault, or responsibility.



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     16.2 This Agreement constitutes the entire agreement between the Parties, except to the extent
that it expressly incorporates provisions of the Employment Agreement. This Agreement shall have
no effect on the Indemnification Agreement and any agreement or plan governing the Executive’s
equity incentive awards granted pursuant to Sections 3 and 4 hereof. This Agreement may be
executed in identical counterparts, each of which shall constitute an original and both of which
shall constitute one and the same agreement. Except as expressly provided herein, this Agreement
supersedes the Employment Agreement, each stock option grant issued by the Company to the Executive
(other than the grants pursuant to Sections 3 and 4 hereof), and any severance benefit plan or
program and any bonus program at the Company and/or its Affiliates.



     16.3 The Parties understand and agree that any breach of the terms of this Agreement may give
rise to liability for money damages and other legal or equitable relief.



     16.4 The Parties warrant that no representations have been made other than those contained in
the written provisions of this Agreement, and that they do not rely on any representations not
stated in this Agreement.



     16.5 The Parties further warrant that they or their undersigned representatives are legally
competent and fully authorized to execute and deliver this Agreement.



     16.6 The Parties confirm they have had the opportunity to have this Agreement explained to
them by independent legal counsel and tax advisors of their choice, and that they execute this
Agreement freely, knowingly and voluntarily. The Company is relying on its own judgment and on the
advice of its independent legal counsel and tax advisors and not upon any recommendation of the
Executive or his agents, independent counsel or other representatives. Likewise, the Executive is
relying on his own judgment and on the advice of his independent legal counsel and tax advisors,
and not upon any recommendation of the Company or its directors, officers, employees, agents,
independent counsel or other representatives. By voluntarily executing this Agreement, both
Parties confirm their competence to understand and do hereby accept the terms of this Agreement as
resolving fully all differences, disputes and claims that may exist within the scope of this
Agreement.



     16.7 This Agreement may not be modified or amended except by a writing signed by both Parties.
No waiver of this Agreement or of any of the promises, obligations, terms, or conditions contained
in it shall be valid unless it is in writing signed by the Party against whom the waiver is to be
enforced. The waiver by either Party hereto of a breach of any provision of this Agreement shall
neither operate nor be construed as a waiver of any subsequent breach by any Party. Except as
expressly provided for herein, the failure of either Party hereto to take any action by reason of
any breach will not deprive such Party of the right to take action at any time while such breach
occurs.



     16.8 If any part or any provision of this Agreement shall be finally determined to be invalid
or unenforceable under applicable law by a court of competent jurisdiction, that part shall be
ineffective to the extent of such invalidity or unenforceability only, without in any way affecting
the remaining parts of said provision or the remaining provisions of the Agreement.



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     16.9 The Parties have cooperated in the preparation of this Agreement. Hence, the Agreement
shall not be interpreted or construed against or in favor of either Party by virtue of the
identity, interest, or affiliation of its preparer.



     16.10 This Agreement is made and shall be enforced pursuant to the laws of the State of Texas,
without regard to its law governing conflicts of law.



     16.11 The payments under this Agreement shall be paid from the general assets of the Company
and there shall be no separate trust established to make any payments under this Agreement.



     16.12 All payments under this Agreement shall be subject to all applicable federal, state and
local taxes and tax requirements.



     16.13 This Agreement shall be binding on and inure to the benefit of the successors and
assigns of the Parties. No rights or obligations, benefits of or payments to the Executive under
this Agreement may be subject to claims of the Executive’s creditors, or in any manner may be
assigned or transferred by the Executive other than his rights to compensation and benefits that
are transferred by will or to his estate by operation of law.



     16.14 All notices and other communications required or permitted hereunder or necessary or
convenient in connection herewith shall be in writing and shall be deemed to have been given when
(i) delivered by hand or sent by facsimile, or (ii) on the third business day following deposit in
the United States mail by registered or certified mail, return receipt requested, to the addresses
as follows (provided that notice of change of address shall be deemed given only when received):


If to the Company to:



Synthesis Energy Systems, Inc.

Three Riverway, Suite 300

Houston, Texas 77056

Attention: Chief Accounting Officer

Facsimile No.: (713) 579-0610



If to the Executive to:



Timothy E. Vail

5106 Doliver

Houston, Texas 77056



or to such other addresses as the Company or the Executive, as the case may be, shall designate by
notice to the other party hereto in the manner specified in this Section 16.14.




     16.15 Titles and headings to Sections are for the purpose of reference only and shall in no
way limit, define or otherwise affect the provisions hereof. Any and all Exhibits referred to in
this Agreement are, by such reference, incorporated herein and made a part hereof for all



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purposes. The words “herein”, “hereof”, “hereunder” and other compounds of the word “here”
shall refer to the entire Agreement and not to any particular provision hereof.



     16.16 Wherever appropriate to the intention of the Parties, the respective rights and
obligations of said parties, including, but not limited to, the rights and obligations set forth in
Sections 10 through 13 hereof and this Section 16, shall survive any termination or expiration of
this Agreement.



[SIGNATURE PAGE FOLLOWS]




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     IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this
Agreement as of the date indicated below



	 	 	 	 	 	 	 	 	 	 	 
	TIMOTHY E. VAIL (“Executive”)
 	 	SYNTHESIS ENERGY SYSTEMS, INC.

(“Company”)
	 
	 	 	 	 	 	 	 	 	 	 
	/s/ Timothy E. Vail	 	By:	 	/s/ Robert W. Rigdon
	 
	 	 	 	Name:	 	Robert W. Rigdon
	Date: March 31, 2009 
	 	 	 	Title:	 	President and Chief Executive Officer
	 
	 	 	 	Date:	 	March 31, 2009







			
	THE STATE OF TEXAS
 
COUNTY OF HARRIS 	 	§

§

§





     BEFORE ME, the undersigned authority, on this day personally appeared Timothy E. Vail, who,
being by me first duly sworn, upon his oath deposed and stated that he has read the foregoing
Agreement; that he has been advised to discuss the provisions of this Agreement with an attorney of
his choice before signing it; that he fully understands the terms and conditions of this Agreement;
that he is legally competent to execute this Agreement; and that he has voluntarily executed this
Agreement for the purposes and consideration therein expressed.



     Given under my hand and seal of office on this 31st day of March, 2009.



	 	 	 	 	 
	 	 	 
	 	/s/ Jeanean Sirkel
 	 
	 	NOTARY PUBLIC IN AND FOR 	 
	 	THE STATE OF TEXAS 	 
	 




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	THE STATE OF TEXAS
 
COUNTY OF HARRIS 	 	§

§

§





     BEFORE ME, the undersigned authority, on this day personally appeared Robert W. Rigdon, who
being by me first duly sworn, upon his oath deposed and stated that he is the Chief Executive
Officer of Synthesis Energy Systems, Inc. (the “Company”); that he has read the foregoing
Agreement; that he has discussed the provisions of this Agreement with any attorney of his choice;
that he fully understands the terms and conditions of this Agreement; that he is legally competent
and fully authorized to execute this agreement on behalf of the Company; and that he has
voluntarily executed this Agreement for the purposes and consideration therein expressed.



     Given under my hand and seal of office on this 31st day of March, 2009.



	 	 	 	 	 
	 	 	 
	 	/s/ Jeanean Sirkel
 	 
	 	NOTARY PUBLIC IN AND FOR 	 
	 	THE STATE OF TEXAS 	 
	 




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SCHEDULE I





	 	•	 	Grant of 50,000 shares of common stock on November 7, 2005
	 
	 	•	 	Grant of 2,350,000 shares of common stock on May 30, 2006






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