Document:

exv10w5

 

Exhibit 10.5

AMENDMENT

TO

Cooperative Joint Venture Contract and Articles of Association of

SES (Zaozhuang) New Gas Company Ltd

between

Shandong Hai Hua Coal & Chemical Company Ltd

and

Synthesis
Energy Systems Investments, Inc.

 

 

Amendment to Cooperative Joint Venture Contract and Articles of Association of SES (Zaozhuang) New
Gas Company Ltd (the “JV Company”) between Shandong Hai Hua Coal & Chemical Company Ltd (“Hai
Hua”) and Synthesis Energy Systems Investments, Inc. (“SES”)

WITNESSETH:

WHEREAS, Hai Hua and SES have entered into a joint venture contract dated 6 July 2006 and articles
of association dated 27 July 2006 (hereinafter called the
“JV Contract” and the “Articles”);
and

WHEREAS, Hai Hua and SES wish to clarify certain sections of the JV Contract and Articles.

NOW, THEREFORE, it is mutually agreed by and between the Parties hereto as follows:

	 	1.	 	Delete Articles 9, 10 and 11 of the JV Contract and Articles in their entirety and
substitute the following in lieu thereof:

Article 9
The total investment in the JV Company shall be US Dollar $24,015,155
(approximately an equivalent RMB189,837,400).

Article 10 The registered capital of the JV Company shall be US Dollar $9,606,062,
approximately an equivalent RMB 75,934,960, 40% of the total investment).

	 	(1)	 	SES shall contribute US Dollar $9,125,759, (approximately RMB 72,138,212) in
cash as its registered capital contribution to the JV Company for a 95%
Ownership Share in the JV Company; and
	 
	 	(2)	 	Hai Hua shall contribute the following assets and cooperative conditions as its
registered capital contribution to the JV Company: Hai Hua shall set aside 10 mu
of cleared, level land on its site that the Company will use to build a covered coal
storage facility for the Project (“Coal Storage Facility”) during the operation period.
Hai Hua shall be responsible for investing in and building syngas and coke oven
gas & steam pipelines from Hai Hua’s plant to the Plant’s fence line, and Hai Hua
shall provide to the JV Company, only during the first year of Commercial
Operation, free coke oven gas and coke which the Plant shall use as its start-up
fuel (up to a maximum amount to be agreed by the Parties in the Contract for
Synthesis Gas Purchase and Sales). Hai Hua shall also provide suitable office
building on Hai Hua’s site for the JV Company’s project preparation office. The

 

 

	 	 	 	Parties have agreed that the value of the above mentioned assets and cooperative conditions equal
US Dollar $480,303 (approximately equivalent RMB 3,796,748) for a 5% Ownership Share in the JV
Company.

Article 11 SES’s registered capital will be contributed in separate instalments. A first
instalment of 15% of the registered capital will be made by SES within ninety (90) days of the
date of issuance of the business licence of the JV Company. Further instalments will be
contributed in less than two years of the date of issuance of the
business licence of the JV
Company, as required by the Plant’s construction schedule. Hai Hua shall complete
construction of the coal storage facility and piping interconnections within 180 days of the
date of issuance of the business licence of the JV Company, and provide to the JV Company,
only during the first year of Commercial Operation, free coke oven gas and coke which the
Plant shall use as its start-up fuel as its registered capital contribution.

	 	2.	 	Add a new Article 64 to the Articles.

Article 64 Supervisor (Inspector)

In lieu of a supervision committee, the JV Company shall appoint one individual to act as the
JV Company’s supervisor (the “Supervisor”). The Supervisor shall be appointed by a majority
vote of the JV Company’s Board. Neither members of the JV Company’s Board nor senior managers
of the JV Company may serve as the Supervisor. The Supervisor’s term shall be three (3)
years. The Supervisor’s responsibilities shall include:

	 	(i)	 	Reviewing the JV Company’s accounting;
	 
	 	(ii)	 	Reviewing the work performance of the JV Company’s Board members and senior
managers and, if the situation warrants, providing suggestions for dismissing Board
members or senior managers for violations of laws, administrative
regulations, these
Articles or any Board resolutions;
	 
	 	(iii)	 	If a Board member or senior manager of the JV Company harms the JV Company’s
interests, the Supervisor may recommend corrective actions; and
	 
	 	(iv)	 	The
Supervisor may recommend dates for Board meetings.
	 
	 	3.	 	In the JV Contract and Articles delete all references to “Tolling Contract” and
substitute “Contract for Synthesis Gas Purchase and Sales” in lieu thereof.

 

 

Except as expressly revised and amended by this Amendment to the JV Contract and Articles,
the JV Contract and Articles in all other respects are ratified, confirmed, and shall continue in
full force and effect in accordance with the original agreements and their attachments.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly
authorized representatives on November 8, 2006 in Zaozhuang City Shandong Province. PRC by
the authorized representatives of the Parties to.

	 	 	 	 	 	 	 
	Shandong Hai Hua Coal
& Chemical Company
Ltd.	 	Synthesis Energy
Systems Investments, Inc.
	 
	 	 	 	 	 	 
	By:

	 	/s/ Ding Zhongmin
	 	By:
	 	/s/ Donald P. Bunnell
	 

	 	 
	 	 	 	 
	 

	 	Name: Ding Zhongmin
	 	 	 	Name: Donald P. Bunnell
	 

	 	Title: Chairman
	 	 	 	Title: Authorized Representative

 

[SEAL]exv10w6

 

Exhibit 10.6

Contract for Synthesis Gas Purchase and Sales

By and Between

SHANDONG HAI HUA COAL & CHEMICAL COMPANY LTD

AND

SYNTHESIS ENERGY SYSTEMS (ZAOZHUANG) NEW GAS COMPANY LTD

 

 

This Contract is executed on October 22, 2006 by and between the following parties:

	(1)	 	Synthesis Energy Systems (Zaozhuang) New Gas Company Ltd (the “Company”); and

	(2)	 	Shandong Hai Hua Coal & Chemical Company Ltd (“Hai Hua”)

WHEREAS:

	(A)	 	Hai Hua has a need for economical synthesis gas to produce methanol and other products, and
the Company wishes to develop, construct, own, operate and manage a gasification production
plant to produce economical synthesis gas utilizing low quality coal (the “Project”);

	(B)	 	Hai Hua and SES have executed the joint venture contract and articles of association of the
Company and the Parties are in the process of obtaining all required approvals for the formal
establishment of the Company;

	(C)	 	An affiliate of the Company owns a gasification technology from the U.S. Gas Technology
Institute that can effectively utilize low value fuels such as low quality coal for the
production of synthesis gas;

	(D)	 	Hai Hua has large amounts of low quality coal available from its coal washing facility and
would like to make more economic use of such low quality coal and is willing to provide such
low quality coal to the Company;

	(E)	 	Hai Hua is willing to provide assistance to the Company for government approvals of the
Project;

	(F)	 	Hai Hua is willing to provide part of the Project Company facilities and assist with the
Company’s land acquisition procedures;

	(G)	 	GTI’s gasification technology utilizes low quality coal to produce environmentally-friendly
synthesis gas and other commodities, which is in line with China’s industrial policies and
encouraged by the Chinese government;

	(H)	 	The Company is willing to invest in, design, construct, own and manage a synthesis gas
production plant (the “Plant”) in Xue Cheng District, Zao Zhuang City, Shandong Province, PRC
with an initial nominal synthesis gas output of 28,000 Ncum/hour of raw, dry synthesis gas;
and

	(I)	 	The Parties wish to expand the capacity of the Plant in the future to meet Hai Hua’s
anticipated synthesis gas demand growth.

Now, therefore, the Parties agree as follows:

1. Definitions and Construction

	 	1.1	 	The terms defined in Appendix I shall have the same meaning when used in this
Contract (including the Preface).

	 	1.2	 	In this Contract:

	 	1.2.1	 	The headings shall not influence interpretation of this Contract;
	 
	 	1.2.2	 	References to the “Contract” or any other agreement or document
shall mean this Contract or to the other agreement or document as amended from
time to time;

EXECUTION VERSION

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	1.2.3	 	References to “Sections” or “Appendices” are to Sections of or
Appendices to this Contract; and
	 
	1.2.4	 	The Appendices are an integral part of this Contract.

	2.	 	Term of Operation

	 	2.1	 	This Contract shall bind the Parties immediately upon execution (“Commencement
Date”).
	 
	 	2.2	 	However, other than this section and sections 12, 15.8 and 15.9, this Contract
shall have no effect unless all of the following conditions precedent are fulfilled on
or before 31 December 2006 or another date agreed by the Parties in writing:

	 	(a)	 	approval of the Feasibility Study of the Project by the Relevant
State Agencies;
	 
	 	(b)	 	approval of the Environmental Impact Assessment report of the
Project by the Relevant State Agencies;
	 
	 	(c)	 	approval of the joint venture contract and articles of association
of the Company by the Relevant State Agencies; and
	 
	 	(d)	 	approval of the land required for project construction by the
Relevant State Agencies.

	 	 	 	If the fulfilment of any condition precedent above requires or would be assisted by
conduct of a Party, that Party must use its best efforts to ensure that the condition
is fulfilled.
	 
	 	2.3	 	This Contract shall expire 20 years after the Commercial Operation Date of the
Plant.

	3.	 	Operation and Maintenance

	 	3.1	 	The Company and Its Obligations
	 
	 	 	 	During the Term of this Contract, the Company, or an SES affiliated Company, shall:

	 	3.1.1	 	Design the Plant, procure equipment for the Plant, and supervise
construction of the Plant;
	 
	 	3.1.2	 	Be responsible for the production, operation, maintenance and
management of the Plant;
	 
	 	3.1.3	 	Perform its obligations hereunder in accordance with the Annual
Synthesis Gas Generation Plan and Maintenance Plan prepared in accordance with
Sections 3.3.2 and 3.3.3 (respectively) and coordinate its operations, planned
shut downs and maintenance with the Hai Hua’s operations, planned shut downs and
maintenance so as to minimize interruptions to Hai Hua, and to minimise the
effects of unplanned shut downs;
	 
	 	3.1.4	 	Recruit and retain qualified staff and workers to perform Plant operations; and

EXECUTION VERSION

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	 	3.1.5	 	Sell all ash, sulphur and other products of the Plant and to keep
the proceeds of sale thereof.

	 	3.2	 	Obligations of Hai Hua
	 
	 	 	 	During the Term of this Contract, Hai Hua shall:

	 	3.2.1	 	Pay the Capacity Fee and Energy Fee pursuant to the terms of this Contract;
	 
	 	3.2.2	 	Provide at the Plant’s boundary, piping for the Plant’s acceptance
of steam and coke oven gas from Hai Hua and for the delivery of synthesis gas to
Hai Hua;
	 
	 	3.2.3	 	Provide the Input Commodities and coal storage facilities as
described in Section 4.1.5 of this Contract; and
	 
	 	3.2.4	 	Coordinate its operations, planned shut downs and maintenance with
the Plant’s operations, planned shut downs and maintenance, so as to ensure that
Hai Hua purchases as much synthesis gas as possible from the Company.

	 	3.3	 	Exchange of Information

	 	3.3.1	 	Preparation of preliminary synthesis gas usage plan: To ensure
efficient operation of the Plant, Hai Hua shall prepare, by 1 October of each
Year, a preliminary synthesis gas usage plan for the following Year stating the
expected synthesis gas (in Ncum/hour) requirements of Hai Hua. Each synthesis
gas usage plan shall describe in reasonable detail Hai Hua’s expected
requirements for each month of the following Year, operational changes at Hai Hua
which may affect Hai Hua’s requirements, and expected maintenance and outages;
and
	 
	 	 	 	In respect of the first Year of Commercial Operation, a preliminary synthesis
gas usage plan in respect of that Year shall be prepared by Hai Hua and
submitted to the Company at least 40 days before the Commercial Operation
Date of this Contract.
	 
	 	 	 	In any event Hai Hua shall not in any of its synthesis gas usage plans
require less than 19,000 Ncum/hour of Net Syngas.
	 
	 	3.3.2	 	Annual Synthesis Gas Generation Plan: By no later than 1 November
of each Year, the Company shall prepare and finalise the Annual Synthesis Gas
Generation Plan and shall set out the anticipated generation of the Plant (broken
down on a monthly basis) for the following Year, and shall submit such plans to
Hai Hua. The Company shall make its best efforts to ensure that its Annual
Synthesis Gas Generation plan matches Hai Hua’s synthesis gas usage plan.
	 
	 	 	 	In respect of the first Year of Commercial Operation, the Annual Synthesis
Gas Generation Plan in respect of that Year shall be submitted to Hai Hua
within 30 days of the receipt of Hai Hua’s first synthesis gas usage plan.
	 
	 	3.3.3	 	Maintenance Plan: Hai Hua shall, by 1 October of each Year,
prepare the Maintenance Plan (which shall set out the maintenance schedule and
all scheduled outages of the Hai Hua facilities) for the following Year, which
shall be submitted to the Company. The Maintenance Plan shall include equipment
maintenance and repair plan.

EXECUTION VERSION

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	 	3.3.4	 	Hai Hua shall regularly consult with the Company about its
synthesis gas demand and provide the Company with as much advance notice as
possible regarding a reduction or interruption in synthesis gas usage.
	 
	 	3.3.5	 	The Company and Hai Hua will cooperate to minimize the impact of
scheduled and unscheduled outages on operations. The Company shall make its best
efforts to ensure that its scheduled outages match Hai Hua’s Maintenance Plan.
Every Year, the Company may identify up to 35 days in which the Plant will be
down for scheduled maintenance (“Planned Outage”). A Planned Outage is any
outage where the Company has given Hai Hua at least three (3) days notice of an
outage and the duration of such outages have not exceeded a total of 35 days in a
Year.

	4.	 	Synthesis Gas Production

	 	4.1	 	Purchase of Coal and Other Consumables, Delivery of Input Commodities and Coal
Storage Services

	 	4.1.1	 	The Company shall be responsible for procuring coal, power, water
and all other consumables except for the Input Commodities. The Company shall be
entitled to recover such costs (including transportation costs where applicable)
through payment by Hai Hua of the Energy Fee outlined in Appendix III. Hai Hua
shall offer to sell low quality coal to the Company on the basis the Company
shall have the right of first refusal to purchase low quality coal from Hai Hua.
For the avoidance of doubt, the Company shall have the right to decide the type
and quality of coal to be purchased and used in the Plant to produce synthesis
gas in accordance with Appendix II, and the actual costs of the coal shall have
no effect on the Energy Fee calculated pursuant to Appendix III, except to the
extent Energy Fee is adjusted under Appendix III.
	 
	 	4.1.2	 	During the twelve (12) months after the Commercial Operation Date,
any time that Hai Hua requires synthesis gas, Hai Hua shall deliver coke and coke
oven gas to the Company free of charge, at the Delivery Point. If during the
first twelve (12) months after the Commercial Operation Date the Company’s usage
of coke oven gas exceeds 100,000 Ncum, then the Company shall pay Hai Hua for any
amounts of coke oven gas consumed above 100,000Ncum, as outlined in Appendix III.
If during the first twelve (12) after the Commercial Operation Date the
Company’s usage of coke exceeds 600 tons, then the Company shall pay Hai Hua for
any amounts of coke consumed above 600 tons, as outlined in Appendix III. After
the first twelve (12) months of commercial operations, the Company shall pay for
such Input Commodities as outlined in Appendix III.
	 
	 	4.1.3	 	The Company is unable to produce synthesis gas for Hai Hua if Hai
Hua does not deliver the Input Commodities to the Company. During such period(s)
when the Plant is not producing synthesis gas due to Hai Hua’s failure to deliver
Input Commodities under this Section 4.1.3, the Plant shall be deemed to be
available to produce synthesis gas at the Guaranteed Capacity, Hai Hua shall not
be relieved from its payment obligations as outlined in Section 6 and the
Capacity Fee shall not be affected in any way by this non delivery.
	 
	 	4.1.4	 	Within 30 days of the execution of this Contract, the Parties
shall meet to agree on a suitable Delivery Point for the Input Commodities, and
such Delivery Point shall be at the Plant’s boundary.

EXECUTION VERSION

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	 	4.1.5	 	Coal Storage Facilities
	 
	 	 	 	by 1 January 2007, Hai Hua shall set aside approximately 10 mu of cleared
land on its site that the Company will use to build a covered coal storage
facility for the Project (“Coal Storage Facility”), as outlined in the map in
Appendix VI.
	 
	 	 	 	Hai Hua shall provide all necessary access and rights of way to the Coal
Storage Facility. During the Term of Operations, Hai Hua shall allow the
Company to control the Coal Storage Facility site and to install boundary
fencing, draining systems, guard houses, warehouses and other service
buildings, storage and assembly yards, and obtain any permits necessary for
the installation and safe and efficient use of Coal Storage Facility. The
Coal Storage Facility shall be under the sole control of the Company who may
operate it with its own personnel and who may make improvements and
modifications to it, including without limitation a conveyor system.
	 
	 	4.1.6	 	Input Commodities (Coke and Coke Oven Gas)
	 
	 	 	 	Input commodities in the form of coke oven gas shall be provided by Hai Hua
to the Company for start-up of the Plant’s gasifier and shall be of the same
quality as the gas Hai Hua provides to the city gas loop. Hai Hua shall also
provide coke oven gas to the Company for its coal drying system. Other than
the free coke oven gas to be provided by Hai Hua as outlined under Section
4.1.2, the Company shall pay for the coke oven gas at the price outlined in
Appendix III.
	 
	 	 	 	Input commodities in the form of Coke shall be provided by Hai Hua to the
Company as a secondary start-up of fuel for the Plant’s gasifiers and shall
be of the same quality as the coke Hai Hua provides to its customers and
shall be provided by Hai Hua at the sizing specified by the Company. Within
60 days of execution of this Contract, the Company shall provide Hai Hua with
the sizing specifications for such coke. Other than free coke to be provided
by Hai Hua as outlined under Section 4.1.2, the Company shall pay for the
coke at the price outlined in Appendix III.
	 
	 	 	 	In addition to the Input Commodities, Hai Hua shall
make its best efforts to supply the Company steam not exceeding ten (10)
tonnes/hour for start-up of the Plant’s gasifiers and paid for by the
Company at the price outlined in Appendix III. Hai Hua shall provide
steam at 0.7 MPa(g) and at 260 degrees C. If Hai Hua has made its best
efforts but is unable to meet all the steam requirements of the Company
for start-up, this shall not be construed as Hai Hua not providing Input
Commodities to the Company in accordance with this Contract.
	 
	 	4.1.7	 	The Parties agree, the value of various items to be provided by
Hai Hua to the Company shall not exceed five (5) percent of the final registered
capital of the Company. These items include but are not limited to:

	 	(i)	 	providing synthesis gas, coke oven gas and steam
piping to connect between the boundary of Hai Hua and the boundary of
the Company as described in Section 3.2.2;
	 
	 	(ii)	 	providing free coke oven gas and coke to the
Company as described in Section 4.1.2 and Section 4.5; and

EXECUTION VERSION

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	 	(iii)	 	providing 10 mu of land as described in Section
4.1.5.

	 	4.2	 	Synthesis Gas Production

	 	4.2.1	 	The Company shall make reasonable efforts to keep synthesis gas
supply interruptions to a minimum and whenever reasonably practicable, provide
Hai Hua with notice prior to an interruption. The Company’s only liability for
interruptions in synthesis gas supply (including a failure to supply gas when
requested by Hai Hua) shall be the reduction of the Capacity Fee as outlined in
Appendix IV.
	 
	 	4.2.2	 	So long as Hai Hua delivers the Input Commodities to the Delivery
Point the Company shall produce synthesis gas, in accordance with the
specifications outlined in Appendix II, and deliver such synthesis gas to Hai Hua
at the Delivery Point. The Company shall produce and shall deliver to Hai Hua up
to 22,000 Ncum/hour of Net Syngas. The ash, sulfur and other by-products that
are produced from the conversion of coal into synthesis gas (including the
proceeds of sale thereof) shall be the property of the Company.
	 
	 	4.2.3	 	The Company is entitled to sell at its discretion other products
to third parties or provide other services which the Company is capable of
producing or providing, but Hai Hua shall have right of first refusal.

	 	4.3	 	Effect of Force Majeure
	 
	 	 	 	In the event of the occurrence of an event of Force Majeure, the Party affected by the
Force Majeure event (“Affected Party”) shall notify the other Party immediately and
shall provide formal notice thereof in writing within 15 days together with documents
providing sufficient evidence of the cause of the event, and an estimate of (1) the
downtime period and/or (2) the reduction in Hai Hua’s ability to supply the Input
Commodities or the Company’s ability to produce synthesis gas, as the case may be. The
Affected Party’s obligation to perform its obligations shall be suspended for the
duration of the actual delay arising directly out of the Force Majeure event.
	 
	 	 	 	The Parties shall immediately meet to find a fair solution and shall make all
practical and possible efforts to mitigate the consequences of the event of Force
Majeure.
	 
	 	4.4	 	Definitions
	 
	 	 	 	In this Contract:

An event of “Force Majeure” shall mean the following events affecting the
Plant, the Site or Hai Hua, the occurrence of which affects the ability of a
Party to perform its obligations under this Contract despite such Party using
its best efforts to prevent and/or overcome the consequences thereof:

	 	(a)	 	thunder and lightning, windstorm, flood, fire,
earthquake, war;
	 
	 	(b)	 	other natural disasters which are unforeseeable
or unpreventable by the Parties under normal circumstances.

A Party affected by an event of Force Majeure shall have the responsibility
to demonstrate to the other Party that any failure to make a payment
hereunder Fee was attributable to an event of Force Majeure.

EXECUTION VERSION

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	 	4.5	 	Testing Synthesis Gas: Prior to the Commercial Operation Date, the Company will
test and commission the Plant and the Plant will produce synthesis gas. Hai Hua shall
accept, use and pay for such synthesis gas at the price set out in Section 6.3 below.
During such testing and commission period, Hai Hua shall have an obligation to deliver
the Input Commodities free of charge.

	5.	 	Construction, Supply of Utilities, Rights of Way, and Coordination

	 	5.1	 	Construction of the Plant: The Company shall be responsible for the financing,
design and construction of the Plant and the procurement, installation and commissioning
of equipment therein. The Company shall make all reasonable efforts to begin initial
syngas production by June/July 2007 and enter Commercial Operation in August/September
2007.
	 
	 	5.2	 	Coordination in Respect of the Construction of the Plant: The Company shall be
responsible for the construction of the Plant and shall assume all costs and risks with
respect to the construction of the Plant.
	 
	 	5.3	 	Construction Coordinating Committee: Immediately following execution of this
Contract, the Parties shall establish the construction coordinating committee (the
“Construction Coordinating Committee” comprising two (2) representatives of the
Company and two (2) representative of Hai Hua. Such representatives shall determine by
consensus the venue and frequency of their meetings, as well as other formalities such
as the keeping of minutes and communication among the representatives.
	 
	 	5.4	 	Coordination of Testing and Commissioning: The Parties shall coordinate the
construction of the interfaces between the Plant and the Hai Hua Plant, and the carrying
out of commissioning and testing of the Plant through the Construction Coordinating
Committee. The objective of such coordination shall be to minimise any delays to the
commissioning and testing of the Plant and the Parties shall use reasonable efforts to
ensure that each of them supplies and/or takes receipt of utilities (in the case of Hai
Hua taking synthesis gas and supplying the Input Commodities) in such amounts and at
such times as may be reasonably required by the other Party for the purpose of such
commissioning and testing subject to the payment of charges as set forth in this
Contract.
	 
	 	5.5	 	Supply of Water and Power during Construction: During the construction of the
Plant, Hai Hua shall supply power and water to the Company and the Company shall
reimburse Hai Hua for the actual cost of power and water consumed by the Company. Hai
Hua shall invoice the Company on a monthly basis for such costs and the Company shall
pay Hai Hua within 14 days after issuance of Hai Hua’s invoice.

	6.	 	Synthesis Gas Price and Payment

	 	6.1	 	Capacity Fee and Energy Fee Payments: From the Commercial Operation Date until
the end of the Term of this Contract, Hai Hua shall pay a monthly Capacity Fee (the
“Capacity Fee”), as outlined in Appendix IV and shall pay the Company a monthly Energy
Fee (the “Energy Fee”) as outlined in Appendix III which shall cover at least all of its
costs of purchasing coal, power, water, steam, the Input Commodities, and waste water
treatment costs utilized in synthesis gas production for Hai Hua. The Capacity Fee and
Energy Fee shall be invoiced by the Company and paid by Hai Hua on a monthly basis
within 14 days after issuance of the Company’s invoice.

EXECUTION VERSION

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	 	6.2	 	Initial Synthesis Gas Price: The initial synthesis gas price (the “Initial
Syngas Price”) shall be the total of the Capacity Fee, per Ncum, for the first twelve
(12) months of Commercial Operation plus the Energy Fee, per Ncum, based on the input
prices outlined in Appendix III on the date of signing this Contract:

	 	 	 	 	 
	 

	 	Energy Fee
	 	* Ncum of Net Syngas
	 

	 	Capacity Payment
	 	* Ncum of Net Syngas
	 

	 	Total Syngas Fee
	 	* Ncum of Net Syngas

	 	 	 	The Capacity Fee shall be escalated over the Contract Term as outlined in Appendix IV
and the Energy Fee shall be adjusted as outlined in Appendix III. However, if the
Parties have agreed to make adjustments to the synthesis gas prices in accordance
with Appendix VII, the Parties shall adopt the newly adjusted prices.
	 
	 	6.3	 	Testing/Commissioning Synthesis Gas Price: Prior to the Commercial Operation
Date of the Plant, the Company shall produce synthesis gas as part of its start up and
commissioning work. Provided that the quality of synthesis gas produced complies with
Appendix II, the Company may at any time prior to the Commercial Operation Date, by
notice in writing from the Company to Hai Hua, supply synthesis gas to Hai Hua in such
amounts and in such periods as may be specified in such notices. During this
pre-commercial operation period, Hai Hua shall pay 50% of the Capacity Fee to the
Company and 100% of the Energy Fee.
	 
	 	6.4	 	Excess Amounts: If the Company’s first phase is able to produce Net Syngas in
excess of 22,000 Ncum an hour, then the Company shall offer to sell to Hai Hua all such
excess synthesis gas, at the rates set out in Appendix V.
	 
	 	 	 	If Hai Hua does not exercise that right to purchase the excess synthesis gas, the
Company may sell such additional quantities to a third party, provided such additional
synthesis gas shall not be sold at a price lower than the prevailing price of
synthesis gas sold to Hai Hua.
	 
	 	6.5	 	As outlined in Section 4.1.3 above, after the Commercial Operation Date, if Hai
Hua does not provide the Input Commodities to the Project, then the Company shall be
unable to produce synthesis gas, but Hai Hua shall still be obligated to pay the
Capacity Fee.
	 
	 	6.6	 	Unless the Plant is affected by an event of Force Majeure, provided that the
synthesis gas meets the quality requirements of Appendix II, the responsibility of Hai
Hua to pay the Capacity Fee, as outlined in Appendix IV, shall not be affected by any
circumstances whatsoever and howsoever caused.
	 
	 	6.7	 	Financing Guarantee: Upon the execution of this Contract and after SES’
contribution of 15 percent of its registered capital to the Company, if the Company
applies with a bank, in a single or in multiple tranches, for medium to long-term loans
(not exceeding ten (10) years) and not exceeding 60 percent of the Company’s total
investment, if such bank requires a corporate guarantee to secure such loan(s), Hai Hua
shall be obliged to provide a corporate guarantee to such bank in such form and to such
extent as such bank may require for the Company to secure such loan(s). However, Hai
Hua’s guarantee shall not contain restrictive clauses on Hai Hua’s operations, funds
management, etc. that are additional to those normally required for corporate
guarantees. The Company shall provide such co-operation and provide such

EXECUTION VERSION

	[*]	 	This information has been omitted in reliance upon Rule 24b-2
under the Securities Exchange Act of 1934, as amended, and has been filed separately with the Securities
and Exchange Commission.

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	 	 	 	information and assistance as may be reasonably required by the bank. The Company
may, at its discretion, agree to grant such security to the bank as may be reasonable
in order to secure the loan, provided any such security shall be subordinate to any
other security that the Company has granted or may grant to its other financiers,
banks and/or Affiliates. The Company shall provide a counter-guarantee of equal value
to Hai Hua which is acceptable to the bank.
	 
	 	 	 	If the Company can not obtain such financing based on Hai Hua’s guarantee in
accordance with the above paragraph, the Company shall have the option to choose
other sources of financing for project construction in order to continue the
performance its obligations under this Contract.
	 
	 	6.8	 	Payment Method

	 	6.8.1	 	A Party shall make payment of the full amount stated in the other
Party’s invoice no later than 15 days from the date of the invoice.
	 
	 	6.8.2	 	If the due date for any payment falls on a day other than a
Business Day, then such payment shall be due on the following Business Day.

	7.	 	Tax

	 	7.1	 	All payments stated in this Contract do not include value-added tax which is
additional and shall be paid together with the payments.
	 
	 	7.2	 	If after the Commencement Date, any new taxes, duties, levies, rates, charges and
fees are levied in the PRC (“New Taxes”), and if the Company is required to pay the New
Taxes, then Hai Hua shall pay the Company, in addition to the Capacity Fee and/or Energy
Fee, as the case may be, such additional amounts so that after the deduction on account
of the New Taxes, the Company receives the Capacity Fee and/or Energy Fee, as the case
may be, net of the New Taxes. If after the Commencement Date, any New Taxes come into
effect, and if such New Taxes reduce the Company’s costs, the Capacity Fee and/or Energy
Fee, as the case may be, shall be reduced so that after such reduction on account of the
New Taxes, the Company receives the Capacity Fee and/or Energy Fee, as the case may be,
after factoring in the cost reduction of the New Taxes. The above shall not include
future tax and fee increases already known to the Company.

	8.	 	Late Payment
	 
	 	 	Should either Party fail to pay any sum as it falls due, it shall pay, in addition to such
sum, interest on such sum from the date payable until the date of actual payment at a rate of
0.1% a day.
	 
	9.	 	Setoff, Taxes, Etc.
	 
	 	 	Each Party shall pay all sums payable to the other Party in full and shall, under no
circumstances, make any deduction, setoff or withholding of any nature.

EXECUTION VERSION

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	10.	 	Metering

	 	10.1	 	Installation
	 
	 	 	 	Before the Scheduled Commercial Operation Date, the Company shall install metering
equipment at the Delivery Points in order to measure the amount of Input Commodities
supplied by Hai Hua and synthesis gas delivered by the Company to Hai Hua and such
meter shall be checked by the Relevant State Agency for accuracy.
	 
	 	10.2	 	Accuracy

	 	10.2.1	 	The Company shall, in the presence of a representative of Hai Hua and a
representative of the Relevant State Agency, calibrate the meters, bring the margin of
error of each component of each meter to 0.2% or less than 0.2%, and have the meters
sealed.
	 
	 	10.2.2	 	Calibration of the meters shall be carried out once every six months or at any
time when a Party disputes the accuracy thereof.
	 
	 	10.2.3	 	The Company shall be responsible for all expenses incurred in any tests of the
meters and any re-calibration (including replacement, reparation and adjustment)
in order to maintain the accuracy of the meters.

	 	10.3	 	Meter Reading
	 
	 	 	 	After the Commercial Operation Date, Hai Hua and the Company shall jointly read the
meters in accordance with a pre-agreed schedule.
	 
	 	 	 	A representative of each Party shall be present at the readings scheduled by the
Parties and shall sign their names on the reading statement. Should either Party’s
representative be absent at a scheduled reading, then the readings made by the other
Party shall be deemed true and correct.

	11.	 	Termination

	 	11.1	 	Term of Operation
	 
	 	 	 	This Contract shall expire twenty (20) years after the first day of the Commercial
Operation Date.
	 
	 	11.2	 	Termination by the Company
	 
	 	 	 	The Company may terminate this Contract if:

	 	11.2.1	 	Hai Hua fails to pay any amounts due and payable hereunder within 30 days after
it becomes payable (except where Hai Hua’s failure to pay is caused by the
Company’s material breach of any of the Project Documents or by the Company’s
failure to pay amounts due hereunder in full and in a timely manner in accordance
with the provisions of this Contract);
	 
	 	11.2.2	 	Hai Hua becomes insolvent or is dissolved or restructured;
	 
	 	11.2.3	 	Hai Hua fails to perform any of its other material obligations hereunder,

EXECUTION VERSION

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	 	 	 	which (unless it is incapable of remedy) is not remedied within 30 days of written
notice from the Company specifying the default and requiring Hai Hua to remedy such
default. If the default is not remedied within that 30 day period, the Company may
terminate this Contract by serving a further 30 day notice of termination on Hai Hua.
Termination becomes effective on expiry of that second notice.

	 	11.3	 	Termination by Hai Hua
	 
	 	 	 	Hai Hua may terminate this Contract if:

	 	11.3.1	 	The Company fails to pay Hai Hua any amount due and payable hereunder within
30 days after it becomes due and payable (except where Company’s failure to pay
is caused by Hai Hua’s material breach of any of the Project Documents or by Hai
Hua’s failure to pay for synthesis gas to the Company in full and in a timely
manner in accordance with the provisions of this Contract).
	 
	 	11.3.2	 	The Company is dissolved;
	 
	 	11.3.3	 	The Company fails to perform any of its other material obligations hereunder,
which (unless it is incapable of remedy) is not remedied within 30 days of written
notice from Hai Hua specifying the default and requiring the Company to remedy such
default. If the default is not remedied within that 30 day period, Hai Hua may
terminate this Contract by serving a further 30 day notice of termination on the
Company. Termination becomes effective on expiry of that second notice.

	 	11.4	 	Other Grounds for Termination
	 
	 	 	 	Either Party may terminate this Contract on 30 days’ written notice to the other
Party: if an event of Force Majeure prevents the Plant from generating any synthesis
gas for a continuous period of 360 days, and the Board has decided it is not
technically or commercially feasible to continue with this Contract.
	 
	 	11.5	 	Liability for Termination
	 
	 	 	 	If this Contract is terminated in advance due to a material default by either Party,
then the breaching Party shall be liable to the non-breaching Party for all damages
and in accordance with relevant PRC law.
	 
	 	11.6	 	General
	 
	 	 	 	Termination of this Contract (for any reason) shall not affect the accrued rights of
the Parties.
	 
	 	11.7	 	Removal of the Plant
	 
	 	 	 	Upon termination for any reason whatsoever (except for the expiry of the Term), the
Company shall have the right to dismantle and to remove the Plant, and to use the
Plant elsewhere in relation to other projects. The exercise of this right shall be
without prejudice to the damages payable under Section 11.5 above.
	 
	 	 	 	The cost of dismantling and removal shall be recoverable by the Company as damages
against Hai Hua if the termination was effected pursuant to Section 11.2 above.
	 
	 	 	 	If this Contract is terminated in accordance with Section 11.3 above, Hai Hua shall
have the right to apply to the relevant court to freeze certain equipment as a
guarantee for any compensation that may be due to Hai Hua.

EXECUTION VERSION

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	12.	 	Applicable Laws and Dispute Settlement

	 	12.1	 	Governing Law
	 
	 	 	 	This Contract shall be governed by the laws of the PRC and construed in accordance
therewith.
	 
	 	12.2	 	Disputes

	 	12.2.1	 	The Parties shall first attempt to settle any dispute arising under this
Contract through friendly consultation and negotiation, provided that nothing in
this Section 12.2.1 shall:-

	 	(a)	 	oblige or require either of the Parties to
commence or to continue any such friendly consultation or negotiation
(if, in its sole discretion and judgement, that Party does not wish to
commence or to continue any such friendly consultation or negotiation);
or
	 
	 	(b)	 	preclude, prevent, delay or constitute a
condition precedent or bar to the entitlement of either of the Parties
to commence an arbitration in accordance with the provisions of Section
12.2.2 (whether or not any such friendly consultation or negotiation
concerns or relates to, in whole or in part, any Dispute).

	 	12.2.2	 	Any dispute, difference or claim (in each such case, of whatsoever nature)
arising out of, in connection with or relating to (in each such case, in any
manner whatsoever) this Contract (each a “Dispute”) shall be referred to CIETAC
and shall be determined by arbitration in accordance with the provisions of this
Section 12.2.2:

	 	(a)	 	any arbitration shall be conducted in accordance
with the CIETAC Arbitration Rules and the provisions of this Section
12.2.2;
	 
	 	(b)	 	Either Party may refer a dispute to CIETAC for
arbitration regardless of whether or not it has exercised its
termination rights under Section 11 above.
	 
	 	(c)	 	the arbitration tribunal shall consist of three
arbitrators, one appointed by the Company, one by Hai Hua and the third
arbitrator (the “Presiding Arbitrator”) appointed by agreement between
the Parties, or, if the Parties cannot agree, by the Chairman of CIETAC;
	 
	 	(d)	 	no arbitrator may be (i) a national of the PRC or
of the United States of America or (ii) a permanent resident of the Hong
Kong Special Administrative Region or Macau Special Administrative
Region or Taiwan Province and if either of the Parties fails to appoint
an arbitrator within the time specified in Article 16 of the CIETAC
Arbitration Rules, the Chairman of CIETAC shall make such appointment
taking into consideration the criteria set out in this Section
12.2.2(c);
	 
	 	(e)	 	the Presiding Arbitrator (and any successor or
replacement appointed in place of any Presiding Arbitrator initially
appointed) shall be a national of one of the following countries:

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	 	(1)	 	Australia
	 
	 	(2)	 	Belgium
	 
	 	(3)	 	The Philippines
	 
	 	(4)	 	The Netherlands
	 
	 	(5)	 	Sweden
	 
	 	(6)	 	Switzerland
	 
	 	(7)	 	India
	 
	 	(8)	 	New Zealand

	 	 	 	and, the Chairman of CIETAC shall make the appointment of the
Presiding Arbitrator taking into consideration the criteria set out
in Section 12.2.2(c) and in this Section 12.2.2(d);
	 
	 	(f)	 	the place of arbitration shall be Beijing and the
arbitration shall be conducted in the English and Chinese languages;
	 
	 	(g)	 	the Parties undertake:

	 	(i)	 	to comply strictly with the time
limits specified in the CIETAC Arbitration Rules for the taking
of any step or the performance of any act in or in connection
with any arbitration; and
	 
	 	(ii)	 	to comply with and to carry out, in
full and without delay, any procedural orders (including, without
limitation, any interim measures of protection ordered) or any
award (interim or final) made by the arbitral tribunal;

	 	(h)	 	each of the Parties irrevocably:

	 	(i)	 	agrees that any arbitral award
shall be final and binding;
	 
	 	(ii)	 	undertakes that it will execute and
perform the arbitral award fully and without delay;
	 
	 	(iii)	 	waives any right which it may have
to contest the validity of the arbitration agreement set forth in
this Section 12.2.2 or the jurisdiction of CIETAC to hear and to
determine any arbitration begun pursuant to this Section 12.2.2;

	 	(i)	 	the costs of the arbitration, the arbitration
fees and the liability for other expenses shall be borne by the losing
Party, unless otherwise determined by the arbitration tribunal;
	 
	 	(j)	 	the provisions of Chapter III of the CIETAC
Arbitration Rules (concerning summary procedure) are excluded to the
maximum extent permissible.

	 	12.2.3	 	During any dispute, both Parties shall continue to comply with their
obligations under this Contract.

	 	12.3	 	Change in Existing Regulations
	 
	 	 	 	If a Change in Existing Regulations occurs and this requires an increase in a Party’s
capital cost required to perform this Contract, or this change will increase a Party’s
operating costs or decrease a Party’s revenues under this Contract, then the Parties
shall make their best efforts and negotiate a solution acceptable to both Parties to
try to restore the Parties to the same position prior to such change in Existing
Regulations.

	 	13.	 	Indemnities

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	 	 	 	During the Term of Operation, the Company shall defend, indemnify and hold harmless
Hai Hua from and against any claims, costs, losses, liabilities, taxes, suits,
damages or expenses it may suffer as a result of any default, negligence or breach of
obligations by the Company committed hereunder. If, in the operation of the Plant,
the Company causes Hai Hua to incur any claims, losses and expenses under any
Existing Regulations or Future Regulations, the Company shall defend, indemnify and
hold harmless Hai Hua against the same.
	 
	 	 	 	During the Term of Operation, Hai Hua shall defend, indemnify and hold harmless the
Company from and against any claims, costs, losses, liabilities, taxes, suits,
damages or expenses it may suffer as a result of any default, negligence or
breach of obligations by Hai Hua committed hereunder. If, in the operation of the
Hai Hua Plant, Hai Hua causes the Company to incur any claims, losses and
expenses under any Existing Regulations or Future Regulations, Hai Hua shall
defend, indemnify and hold harmless the Company against the same.
	 
	 	14.	 	Insurance

	 	14.1	 	Company to Insure
	 
	 	 	 	The Company shall take out and maintain insurances as are required by the Board in
connection with the Plant.
	 
	 	14.2	 	Assistance with Claims
	 
	 	 	 	Hai Hua shall provide the Company with information it may require to make or process
claims under its insurances.

	15.	 	Miscellaneous

	 	15.1	 	Entire Agreement
	 
	 	 	 	This Contract constitutes the entire agreement between the Parties with respect to the
subject matter hereof and shall supersede all prior agreements of the Parties.
	 
	 	15.2	 	Amendment and Waiver

	 	15.2.1	 	Amendments to this Contract shall be made in writing and become effective only
after execution by the authorised representatives of the Parties.
	 
	 	15.2.2	 	Any waiver by a Party of any of its rights under the Contract must be made in
writing and shall be without prejudice to its rights in respect of any subsequent
breach.

	 	15.3	 	No Agency
	 
	 	 	 	Neither Party shall have the right to bind the other, enter into contracts in the name
of the other or incur liabilities for the other for any purpose or in any manner.
	 
	 	15.4	 	Communications
	 
	 	 	 	Notices or other communication required to be given by any Party shall be given by
registered mail or facsimile to the following addresses or such other addresses as
designated by the Parties from time to time:

EXECUTION VERSION

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	 	To:
	 	Synthesis Energy Systems (Zaozhuang) New Gas Company Ltd
	 
	 	 	 	 
	 

	 	Address:
	 	To be provided to Hai Hua later
	 
	 	 	 	 
	 

	 	Fax:
	 	To be provided to Hai Hua later
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Synthesis Energy Systems, Inc., Attention: Huang Dali
	 
	 	 	 	 
	 

	 	Address:
	 	526 Pine City, 777 Zhaojiabang Road, Shanghai 200031, China
	 
	 	 	 	 
	 

	 	Fax:
	 	(86) 021-6422-0869
	 
	 	 	 	 
	 

	 	To:
	 	Shandong Hai Hua Coal & Chemical Company Ltd
	 

	 	 	 	Address: 68 Linquan Road, Xue Cheng District, Zao Zhuang City, Shandong
	 

	 	 	 	Province, Post
	 

	 	 	 	Code: 277000
	 

	 	Fax:
	 	(86) 0634-4461-691

	 	15.5	 	Language
	 
	 	 	 	This Contract shall be executed in Chinese and English. Both versions have equal legal
effect.
	 
	 	15.6	 	Assignment
	 
	 	 	 	Without prior written consent of the other Party, neither Party shall assign its
rights and obligations under this Contract, provided that the Company may assign its
rights to lenders or guarantors providing finance or finance guarantees to the Company
(“Lenders”) in connection with the Plant without Hai Hua’s consent being required, so
long as the Company provides written notice to Hai Hua of such assignment. Any such
assignment shall not affect Hai Hua’s rights under this Contract.
	 
	 	 	 	Hai Hua may assign its rights to an affiliate so long as the Company agrees in writing
to such assignment.
	 
	 	 	 	Any assignments under this Contract shall not affect the Parties obligations hereunder.

	 
	 	15.7	 	Partial Invalidity
	 
	 	 	 	If a provision in this Contract is or become illegal, invalid, or unenforceable in any
jurisdiction, that shall not affect the legality, validity or enforceability and other
jurisdictions of that or any other provision whatsoever of this Contract.
	 
	 	15.8	 	Confidentiality and Intellectual Property
	 
	 	 	 	During the Term of Operation:

	 	15.8.1	 	upon reasonable request, the Parties shall provide to each other confidential
information necessary for the performance of this Contract;
	 
	 	15.8.2	 	the Parties agree that all confidential information (regardless of whether such
information is in writing or otherwise) provided (directly or indirectly) by the
Parties to each other must be kept confidential, information required to be
disclosed by this Contract or information disclosed in accordance with the
provisions of the laws excepted;

EXECUTION VERSION

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	 	15.8.3	 	the Parties are hereby authorised to disclose any confidential information
obtained from each other to their respective Affiliates and professional
advisers, subject to procuring that such Affiliates and professional advisers
observe a duty of confidentiality as provided herein;
	 
	 	15.8.4	 	“confidential information” as referred to in this Section 15.8 shall include
all information and data disclosed (regardless of whether such information is in
writing or otherwise, or whether provided directly or indirectly) by the Parties
or their Affiliates to the other Party or its Affiliates prior or after the
execution of this Contract, including but not limited to information related to
their products, plan, proprietary technology, design rights, commercial secrets,
confidential market information and any information relating to their businesses.
However, this Section shall not apply to (a) any information in the public domain
otherwise than by breach of this Contract; (b) information in the possession of
the receiving party before divulgence as aforesaid, and which was not obtained
under any obligation of confidentiality; (c) information obtained from a third
party who is free to divulge the same, and which is not obtained under any
obligation of confidentiality; and (d) and information required to be disclosed
by applicable law, a judicial order or the rules of a recognised stock exchange.
	 
	 	15.8.5	 	The Parties acknowledge that the U.S. Gas Technology Institute (“GTI”) owns
certain patents, know-how, information and trade secrets (the “Intellectual
Property”) relating to GTI’s gasification technology, which is confidential and
that GTI has granted Synthesis Energy Systems, Inc an exclusive right to such GTI
technology, including any improvements and know how, in China, and the Company
has the legal right to use such technology and there will be no additional fees
for the use of such technology beyond the Capacity and Energy Fees under this
Contract. All such Intellectual Property shall remain the sole property of
Synthesis Energy Systems, Inc and (if applicable) GTI and no license or grant of
rights in any of the Intellectual Property will be conveyed by Synthesis Energy
Systems, Inc to Hai Hua or any of its affiliated or related companies. Hai Hua
and its affiliated and related companies shall not compete with Synthesis Energy
Systems, Inc with respect to such Intellectual Property.

	 	15.9	 	Representations and Warranties
	 
	 	 	 	Hai Hua represents and warrants to the Company as follows:

	 	15.9.1	 	it is a legal entity validly established and existing under the laws of the PRC;
	 
	 	15.9.2	 	it has power and authority to enter into and perform its obligations under this
Contract;
	 
	 	15.9.3	 	the entering into of and performance of its obligations under this Contract
will not breach any law or any contract to which it is a party;
	 
	 	15.9.4	 	all necessary Consents for the entering into of and performance of its
obligations under this Contract have been obtained; and
	 
	 	15.9.5	 	its obligations under this Contract are valid, binding and enforceable.
	 
	 	 	 	The Company represents and warrants to Hai Hua as follows:

EXECUTION VERSION

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	 	15.9.6	 	it is a legal entity validly established and existing under the laws of the PRC;
	 
	 	15.9.7	 	it has power and authority to enter into and perform its obligations under this
Contract;
	 
	 	15.9.8	 	the entering into of and performance of its obligations under this Contract
will not breach any law or any contract to which it is a party;
	 
	 	15.9.9	 	all necessary Consents for the entering into of and performance of its
obligations under this Contract have been obtained; and
	 
	 	15.9.10	 	its obligations under this Contract are valid, binding and enforceable.

	15.10 Assistance
	 
	 	 	 	Hai Hua agrees to co-operate with and provide assistance to the Company, in such
manner as may be required by the Company to enable the Company to obtain and utilise
credit, financing or other financial accommodation or facilities for the Project.
	 
	 	 	 	In particular, upon the Company’s request Hai Hua agrees to enter into, with such of
the Company’s Lenders referred to in Section 15.6, a Direct Agreement on such form as
may be agreed between the Company’s Lenders, the Company and Hai Hua. The Direct
Agreement shall as a minimum (and amongst other matters) allow the Company’s Lenders
or some of them the right to “step in” in relation to this Contract in the event Hai
Hua purports to terminate this Contract.

The Parties executed this Contract on 22 October 2006 in Zao Zhuang, Shandong Province.

	 	 	 	 	 	 	 	 	 	 	 
	Synthesis Energy Systems (Zaozhuang) New 

Gas Company Ltd	 	 	 	Shandong Hai Hua Coal & Chemical
Company Ltd	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Donald P. Bunnell
	 	 	 	By:
	 	/s/ Ding Zhong Min	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	Name: Donald P. Bunnell
	 	 	 	 	 	Name: Ding Zhong Min 	 	 
	 

	 	Title: Authorized Representative
	 	 	 	 	 	Title: Chairman	 	 

EXECUTION VERSION

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Appendix I

Definitions

“Affiliate” means with respect to either Party, any person or entity that owns or controls, is
owned or controlled by or is under common ownership or control with that Party including direct or
indirect ownership of more than 10% of the voting right or interest in such entity.

“Allowed Variation” has the meaning given to it in Appendix III, Table III-1.

“Annual Synthesis Gas Generation Plan” has the meaning given to it in Section 3.3.2.

“Board” means the Board of Directors of the Company.

“Business Day” means a day (other than a Saturday) on which banks are open for business in Zao
Zhuang.

“Change in Existing Regulations” means a change in any Existing Regulations or in the
interpretation or application thereof occurring after the date of this Contract. For the avoidance
of doubt “Change in Existing Regulations” includes (1) a change in any Existing Regulations
relating to tax, and (2) any non-renewal of any Consent for reasons not attributable to the Company
or the imposition of more onerous conditions attaching to any Consent or the renewal thereof.

“CIETAC” means the China International Economic and Trade Arbitration Commission.

“CIETAC Arbitration Rules” means the arbitration rules for the time being of CIETAC.

“Commencement Date” means the date on which this Contract becomes effective in accordance with
Section 2.

“Commercial Operation” means when that the Plant has completed its testing and commissioning period
and is ready, as determined by the Company, to enter into full commercial operation and produce
synthesis gas for Hai Hua.

“Commercial Operation Date” means the date on which the Plant has entered into Commercial
Operation.

“Company” has the meaning given in the Preface.

“confidential information” has the meaning given in Section 15.8.

“Consent” means all licenses, consents, permits, authorizations and other approvals which may
required to be obtained by the Company as owner of the Plant.

“Construction Coordinating Committee” shall have the meaning given to it in Section 5.4

“Contract” means this contract.

“Delivery Point” means: the delivery point, to be agreed by the Parties within 30 days of
execution of this Contract, for synthesis gas and the Input Commodities.

“Design
Basis Coal” has the meaning given in Appendix III, table III-1 of this Contract.

“Dispute” has the meaning given in Section 12.2.

“Energy Fee” means the fee to be paid by Hai Hua to the Company pursuant to Section 6.1 of this
Contract.

EXECUTION VERSION

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“Existing Regulations” means the laws, regulations, provisions, rules of the PRC or any applicable
state, provincial or municipal laws, regulations, provisions, rules or any conditions attached to
any necessary Consents in force at the date of this Contract.

“fen” means RMB fen.

“Force Majeure” has the meaning given in Section 4.4.

“Future Regulations” means any laws, regulations, provisions, rules of the PRC or any applicable
state, provincial or municipal laws, regulations, provisions, rules or any conditions attached to
any necessary Consent, arising as a result of a Change in Existing Regulation.

“Hai Hua” has the meaning given in the Preface.

“Hai Hua Plant” means the coke and methanol plant and other facilities owned by Hai Hua at Xue
Cheng District.

“Input Commodities” means coke oven gas to be used as start-up fuel for the Plant’s gasifiers and
for the Plant’s coal drying equipment, and coke which is to be used as a second stage start up fuel
for the Plant’s gasifiers and steam.

“Maintenance Plan” has the meaning given in Section 3.3.3.

“Major Equipment” means the Plant’s oxygen supply equipment and sulfur removal equipment.

“Month” means a calendar month.

“Ncum” means normal cubic meters.

“Net Syngas” means synthesis gas as defined in Appendix II (Net Syngas contents).

“Parties” refers to both Hai Hua and the Company and a “Party” refers to either of them.

“Planned Outage” has the meaning given in Section 3.3.5.

“Plant” has the meaning given in Recital G of this Contract.

“PRC” or “China” means the People’s Republic of China.

“Presiding Arbitrator” has the meaning given in Section 12.2.2.

“Project” has the meaning given in Recital A of this Contract.

“Project Documents” means this Contract, the Joint Venture Contract and Articles of Association
between Hai Hua and SES.

“Relevant State Agencies” means the PRC Government, the Shandong Provincial People’s
Government, the Zaozhuang People’s Government, the Xuecheng People’s Government, any ministry,
department, political sub-division, instrumentality, agency, company, corporation, government
undertaking or commission under the direct or indirect control of the PRC Government, the Shandong
Provincial People’s Government, the Zaozhuang People’s Government, the Xuecheng People’s Government
or any political sub-division of them.

“RMB” means the lawful currency of the PRC.

“SES” means Synthesis Energey Systems Investments, Inc.

“Site” means the plot of land on which the Plant is located or is to be located.

EXECUTION VERSION

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“Taxes” means taxes and withholdings of any nature imposed on present or future profit of the
Company.

“Term of Operation” means the term of this Contract being a period coterminous with the term of the
Joint Venture Contract.

“Capacity Fee” means the monthly Capacity Fee to be paid by Hai Hua to the Company pursuant to
Section 6.1 of this Contract.

“Year” means (i) with respect to the first year of the Term of Operation, the period from the
Scheduled Commercial Operation Date of Unit 1 until the 24th hour of December 31 of such year; (ii)
with respect to any year thereafter (except in the case of the circumstances described in
Subsection (iii) below), the period from 00:00 of January 1 until 24:00 on December 31 of each
year; and (iii) with respect to the last year of the Term of Operation, the period from 00:00 of
January 1 till the 24th hour of the final day of the Term of Operation.

EXECUTION VERSION

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Appendix II

Net Syngas Contents

     The Company shall provide Net Syngas to Hai Hua, as outlined in this Appendix II within the
specifications outlined below:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Pressure	 	Temperature	 	Volume
	Gas Components	 	H2	 	CO	 	CO2	 	CH4	 	N2	 	Ar	 	O2	 	H2S	 	COS	 	H2O	 	MPa(G)	 	°C	 	Ncum/h
	Net Syngas
(delivery)
	 	 	47.72	 	 	 	43.18	 	 	 	2.78	 	 	 	1.67	 	 	 	0.51	 	 	 	0.09	 	 	 	0.0	 	 	20mg/m3	 	200 mg/m3	 	 	4.04	 	 	 	0.01	 	 	 	40	 	 	 	22,000	 

 

			
	1.	 	The Company has the obligation to ensure the quality of the synthesis gas in accordance with
the parameters outlined in this Appendix II and Hai Hua shall have the right to reject any
synthesis gas that it is able to demonstrate to the Company does not meet such quality
specifications.
	 
	2.	 	The Net Syngas shall contain no less than 89% CO, H2 and CH4.
	 
	3.	 	CO shall not exceed 43.5%. of the total synthesis gas volume.
	 
	4.	 	CO2 in the Net Syngas shall be no higher than 4%
	 
	5.	 	H2S in the Net Syngas shall not exceed 20mg/m3.
	 
	6.	 	The Company shall make all reasonable efforts to ensure that presence of organic sulfur,
nitrogen, argon and other trace elements (including but not limited to COS, HCN, NH3, Hg, HCL,
F) are kept to a minimum in order not to affect the quality of Methanol Company’s methanol
production.
	 
	7.	 	Notwithstanding any other provisions herein, if the Company fails to supply synthesis gas in
accordance with the specifications outlined in Appendix II, in circumstances where Hai Hua has
delivered the Input Commodities in accordance with the specifications, quality or sizing
outlined in Section 4.1.6, the Company shall not in any event be liable for the loss of use of
any plant or facility operated by Hai Hua, for any loss of profit, loss of any indirect or
consequential loss or damage which may be suffered by Hai Hua, save for direct losses caused
by damage to Hai Hua’s machinery and equipment.

EXECUTION VERSION

-21-

 

APPENDIX III

Energy Fee Calculation and Adjustments

The Energy Fee (exclusive of value-added tax), per Ncum of Net Syngas, on the date of signing this
Contract is RMB * (“P0”), where the prices (exclusive of value-added tax) of key raw materials
used in arriving at
P0 are:

Table
III-1

	 	 	 
	Design Basis Coal

	 	RMB */ton (“D0”)
	Coke

	 	RMB */ton (“B0”)
	Coke Oven Gas

	 	RMB * Ncum (“C0”)
	Power

	 	RMB */MWh (“E0”)
	Steam

	 	RMB */ton (“S0”)
	Tap Water

	 	RMB */ton (“T0”)

The monthly Energy Fee in a particular month “n” (“Pn”) will be calculated based on the actual
volume of syngas in Ncum delivered to Hai Hua, as metered in accordance with Section 10, on that
month multiplied by the Energy Fee per Ncum for that month.

The Energy Fee Pn for a month shall be recalculated monthly in accordance with the formula in the
following paragraph and shall be revised if it differs by more than 2% from Pn-1, where Pn-1
represents the monthly Energy Fee charged to Hai Hua in the month immediately preceding that month.

Pn for a particular month is calculated as:

Where:

Dn = benchmark Price of Design Basis Coal available in the market for that month (the Price of
Design Basis Coal is defined below);

Bn = benchmark Price of coke for that month is the weighted average price actually charged by Hai
Hua for that month;

Cn = Price of Coke Oven Gas for that month is the weighted average price actually charged by Hai
Hua for that month;

En = Price of Power for that month is the prevailing average power price as stated in the invoice
from the relevant power bureau for that month;

Sn = Price of steam for that month is the weighted average price actually charged by Hai Hua for
that month;

Tn = Price of Tap Water for that month is the prevailing average water price as stated in the
invoice from the relevant water company for that month.

EXECUTION VERSION

	[*]	 	This information has been omitted in reliance upon Rule 24b-2 under
the Securities Exchange Act of 1934, as amended, and has been filed separately with the Securities
and Exchange Commission.

-22-

 

Example —  As an example, if in month n, Pn as calculated differs from Pn-1 by 1%, then Pn
(Energy Fee charged to Hai Hua in respect of month n) shall be fixed at Pn-1(Energy Fee charged to
Hai Hua in respect of month n-1), and not the Pn as calculated.

If subsequently Pn+1 differs from Pn-1 by 2.5% (i.e. differing from Pn as calculated by 1.5%), then
Pn+1 shall be revised.

The Price used to calculate the Design Basis Coal (Dn) shall be:

Where,

Dn-1 = Dn of the month immediately preceding the current month

OTQ = Total quantity of coal in tons on hand at the beginning of the current month

HHQ = Total quantity of coal in tons purchased from Hai Hua during the current month

HHP = Weighted average price for HHQ

OQP = Total quantity of coal in tons purchased from parties other than Hai Hua

“ADBC” is based on the average coal price for coal available in the market within the Allowed
Variation for the Design Basis Coal (as outlined in Table III-1 in this Appendix) sold by other
mines in Tengnan Mine Area and includes the average transportation charge (“ATC”) for truck
transportation, as determined by the Coal Expert, within 35 km of the Site. If the Parties can not
agree on such ADBC price, they shall jointly appoint and share the costs of independent third party
(the “Coal Expert”) to survey the cost for coals with a quality within the Allowed Variation for
the Design Basis Coal sold by at least three (3) mines in the Tengnan coal field. The Coal Expert
shall decide as an expert and not as an arbitrator. The Parties shall each have the right to make
representations to the Coal Expert. The decision of the Coal Expert shall be final and binding on
the Parties.

If the Coal Expert Can Not be Agreed

If the Parties can not agree on the appointment of the Coal Expert, either Party may agree on the
relevant body who is to appoint the Coal Expert, and if they are unable to agree on the appointing
body, require CIETAC to nominate the appointing body or else appoint the Coal Expert. Until such
appointment is settled, ADBC shall be the actual cost of coal purchased by the Company plus the
Company’s actual transportation costs for such coal. If, after such dispute is resolved and the
Coal Expert is appointed, if the Coal Expert determines that the Company overcharged Hai Hua for
its coal purchases and or its coal transportation expenses, the Company shall refund to Hai Hua the
difference between the ADBC or ATC, as the case may be, and the actual coal cost paid by the
Company and, in addition to such sum, interest on such sum from the date payable until the date of
actual payment at a rate of 0.1% a day. If the Coal Expert determines that the Company
undercharged Hai Hua for its coal purchases and or its coal transportation expenses, Hai Hua shall
pay to the Company the difference between the ADBC or ATC, as the case may be, and the actual coal
cost paid by the Company and, in

EXECUTION VERSION

-23-

 

addition to such sum, interest on such sum from the date payable until the date of actual payment
at a rate of 0.1% a day.

The Parties agree, at the end of the first year after the Commercial Operation Date, to review the
formula for Energy Fee as set out in this Appendix. If the formula does not operate as intended by
the Parties in practice, the Parties agree to discuss in good faith and to amend the formula so as
to reflect the Parties intentions when entering into this Contract.

Design Basis Coal:

The design
basis for the Plant (the “Design Basis Coal”) is outlined
in Table III-1 below and is
based on coal from the Tengnan coal field and an assumed Net Syngas output of 22,000 Ncum/hour.
Hai Hua shall make available to the Company coal middlings from Hai Hua’s coal washing facility
that were derived from the Tengnan coal field and the Company shall have the right of first refusal
to purchase such middlings from Hai Hua.

Table
III-1 — Design Basis Coal

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	“Allowed Variation”
	 	 	 	 	 	 	 	 	 	 	from Design Basis
	 	 	Variable Name	 	Test Result	 	Units	 	Coal
	1

	 	LHV
	 	 	3,660	 	 	kCal/kg

(analyzed net)
	 	3,611 kCal/kg

minimum

No maximum
	 
	 	 	 	 	 	 	 	 	 	 
	2

	 	Ash, wt% (dry basis)
	 	 	41.34	 	 	weight %
	 	42.5% maximum
No minimum
	 
	 	 	 	 	 	 	 	 	 	 
	3

	 	Total Moisture % (surface
and inherent)
	 	 	10	 	 	weight %
	 	< 10%
	 
	 	 	 	 	 	 	 	 	 	 
	4

	 	Sulfur content (dry basis)
	 	 	1.57	 	 	weight %
	 	1.8 maximum
	 
	 	 	 	 	 	 	 	 	 	 
	5

	 	Carbon content (dry basis)
	 	 	28.26	 	 	weight %
	 	28% minimum

EXECUTION VERSION

-24-

 

APPENDIX IV

Capacity Fee Calculation

A. Capacity Fee

The
monthly Capacity Fee for the Term of this Contract is outlined in
Table IV-1 below.

The monthly Capacity Fee is payable in respect of “Plant Availability” (defined below) in respect
of each calendar month (i.e. it is not dependant on the actual number of calendar days in the month
in question).

Table
IV – 1 – Monthly Capacity Fee (in Renminbi)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Year 1	 	Year 2	 	Year 3	 	Year 4	 	Year 5	 	Year 6	 	Year 7	 	Year 8	 	Year 9	 	Year 10
	*
	 	*
	 	*
	 	*
	 	*
	 	*
	 	*
	 	*
	 	*
	 	*
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Year 11
	 	Year 12
	 	Year 13
	 	Year 14
	 	Year 15
	 	Year 16
	 	Year 17
	 	Year 18
	 	Year 19
	 	Year 20
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	*
	 	*
	 	*
	 	*
	 	*
	 	*
	 	*
	 	*
	 	*
	 	*

“Year 1” begins on the first day of Commercial Operation, and “Year 2” shall begin on the
first anniversary of the Commercial Operation Date, “Year 3” on the second anniversary, and so on.
Value added tax shall be added by the Company when invoicing Hai Hua.

Following the Plant’s Commercial Operation Date, the Company will use commercially reasonable
efforts to maintain 22,000 Ncum/hour of Net Syngas which is the “Guaranteed Capacity”.

The Monthly Capacity fee can also be expressed in RMB per Ncum of Net Syngas for purposes of
calculating the Initial Synthesis Gas Price as set out in Section 6.2, as follows: The monthly
Capacity Fee expressed in Table IV-1 divided by 22,000 Ncum of Net Syngas divided by 660 hours
(7,920 hours in a Year after deducting 35 days for Planned Outages). In Year 1, the Capacity Fee
portion of the Initial Syngas Price = RMB */Ncum of Net Syngas.

“Plant Availability” is calculated as follows:

Where :

	 	 	 
	H1 =

	 	the number of hours in the calendar month where the Plant is actually producing (or
else is deemed to be available to produce) synthesis gas at the level of the
Guaranteed Capacity (i.e. 22,000 Ncum/hour of Net Syngas). Deemed availability means
when the Plant is able to produce syngas but does not produce syngas because Hai Hua
does not require syngas or because Hai Hua has not provided the Input Commodities.

Guaranteed Cap = Guaranteed Capacity (22,000 Ncum/hour of Net Syngas)

EXECUTION VERSION

	[*]	 	This information has been omitted in reliance upon Rule 24b-2 under
the Securities Exchange Act of 1934, as amended, and has been filed separately with the Securities
and Exchange Commission.

-25-

 

	 	 	 
	H2 =

	 	the number of hours in the calendar month where the Plant can, or is deemed to be able
to produce synthesis gas but is not producing (or deemed to be available to produce)
synthesis gas at the level of the Guaranteed Capacity (22,000 Ncum/hour of Net
Syngas). Deemed availability means when the Plant is able to produce syngas but does
not produce syngas because Hai Hua does not require syngas or because Hai Hua has not
provided the Input Commodities.

	 	 	 
	Reduced Cap =

	 	
the Reduced Capacity of the Plant (i.e. below 22,000 Ncum/hour of Net Syngas) to produce, or to be deemed
to be available to produce, syngas.

	 	 	 
	H3 =

	 	the total number of hours in the calendar month

For the avoidance of doubt, in applying the above formula, Plant Availability is not dependant only
on the actual number of hours that the Plant operates and exports syngas to Hai Hua, but is instead
dependant on the number of hours that the plant is deemed to be available to produce synthesis gas
plus the number of hours it actually delivers synthesis gas.

	 	 	 	 	 	 	 	 	 
	*
	 	*
	 	*
	 	*
	 	*

Monthly
Capacity Fee = the figure stated in Table IV-1 above multiply by Plant Availability

If the Plant is available (or deemed to be available) every hour of the month at or above the
Guaranteed Capacity, Hai Hua shall pay to the Company 100% of the Capacity Fee for that month.

	 	 	 	 	 	 	 	 	 
	*
	 	*
	 	*
	 	*
	 	*

In
summary, the Monthly Capacity Fee as stated in Table IV-1 above and payable by Hai Hua to
the Company shall be reduced only in the event of a “Plant Unplanned Outage” or “Reduced Capacity”
in the following circumstances:

“Plant Unplanned Outage” – this is defined as:

the period during when Hai Hua requires synthesis gas (provided its requirements are in
compliance with all conditions stated in the Contract) and the Company actually fails to
deliver synthesis gas and it is not a Planned Outage;

“Reduced Capacity”  — this is defined as the period of time (excluding any periods of
Plant Unplanned Outage) where the Plant is available to deliver synthesis gas or does deliver
synthesis gas, but less than (nor deemed to be producing up to) the Guaranteed Capacity.

	 	 	 	 	 	 	 	 	 
	*
	 	*
	 	*
	 	*
	 	*

An outage or reduction in capacity caused by the following circumstances shall NOT be
considered a Plant Unplanned Outage, nor a circumstance of any of a Reduced Capacity:

EXECUTION VERSION

-26-

 

	(I)	 	if Hai Hua does not deliver adequate or any Input Commodities, or delivers Input Commodities
which are NOT in compliance with the Contract specifications (i.e. outside the specifications,
quality or sizing outlined in Clause 4.1.6, to the Plant (including outages or downtime
suffered due to damage to the Plant, caused by such non-compliant Input Commodities),
	 
	(II)	 	In the circumstances set out in Sections 4.1.2, 4.1.3,
	 
	(III)	 	A Planned Outage, as defined in Section 3.3.5
	 
	(IV)	 	if Hai Hua demands less than the Guaranteed Capacity of Net Syngas from the Company,
	 
	(V)	 	the time period required by the Company to start-up the Plant or to step up production after
a period when Hai Hua demands no synthesis gas (or less than 18,000 Ncum/hour of Net Syngas)
or a period where Hai Hua has demanded less than the Guaranteed Capacity of Net Syngas from
the Company and then requires the Plant to produce at the Guaranteed Capacity.

In respect of any period during which Planned Outages occur, the Plant shall be deemed to be
available to produce synthesis gas at the Guaranteed Capacity, and the Capacity Fee shall not be
affected in any way by this unavailability.

	 	 	 	 	 	 	 	 	 
	*
	 	*
	 	*
	 	*
	 	*

Example 1

As an example, in Year 2 if the Guaranteed Capacity (22,000 Ncum/hour) is available all of the
hours in a month with 30 days, then Plant Availability is 100% , calculated as follows
:

	 	 	 	 	 
	Plant Availability

	 	=
	 	30 days x 24 hours x 22,000 Ncum/hour
	 

	 	 	 	30 days x 24 hours x 22,000 Ncum/hour
	 
	 	 	 	 
	 

	 	=
	 	100% Plant Availability (a total of
	 

	 	 	 	15,840,000 out of 15,840,000 Ncum)

Capacity
Fee for that month = 100% of the monthly Capacity Fee in
Year 2 (indicated in Table IV-1
above)

Example 2

Alternatively, if in a month in Year 2 the Guaranteed Capacity (22,000 Ncum/hour) was
available all of the hours over 20 days, and a reduced capacity of 18,000 Ncum/hours was available
over 10 days, then the Plant Availability is 93.94%, calculated as follows :

Plant Availability =

 (20 days x 24 hrs x 22,000 Ncum/hr) + (10 days x 24 hrs x 18,000 Ncum/hr)

(30 days x 24 hrs x 22,000 Ncum/hr)

EXECUTION VERSION

-27-

 

= 93.94% Availability (a total of 14,880,000 out of 15,840,000 Ncum)

Capacity
Fee for that month = 93.94% of the monthly Capacity Fee in
Year 2 (indicated in Table IV-1
above).

Example 3

Alternatively, if in a month in Year 2 the Guaranteed Capacity (22,000 Ncum/hour) is available
only 10 days in such month and the Plant is totally unavailable for the other 20 days in such
month, and if the Company has exceeded its 35 days allotment of Planned Outages, then the Plant
Availability is 33%, calculated as follows :-

	 	 	 	 	 
	Plant Availability

	 	=
	 	10 days x 24 hours x 22,000 Ncum/hour
	 

	 	 	 	30 days x 24 hours x 22,000 Ncum/hour
	 
	 	 	 	 
	 

	 	=
	 	33% Availability (a total of 5,280,000 out of
15,840,000 Ncum)

Capacity Fee for that month = 33% of the monthly Capacity Fee in Year 2

(indicated Table IV-1 above).

Example 4

Alternatively, if in a month in Year 2 the Guaranteed Capacity (22,000 Ncum/hour) was
available all of the hours over 20 days, and a reduced capacity of 18,000 Ncum/hours was available
over 5 days, and there was another 5 days of Plant Unplanned Outage, then the Plant Availability is
80.30% , calculated as follows :

(20 days x 24 hrs x 22,000 Ncum/hr) + (5 days x 24 hrs x 18,000 Ncum/hr)

(30 days x 24 hrs x 22,000 Ncum/hr)

= 80.30% Availability (a total of 12,720,000 out of 15,840,000 Ncum)

Capacity Fee for that month = 80.30% of the monthly Capacity Fee in Year 2

(indicated in Table IV-1 above).

EXECUTION VERSION

-28-

 

Appendix V

Excess Quantities

If the Plant can produce Net Syngas in excess of 22,000 Ncum an hour from its phase I
equipment, then Hai Hua may request that the Company deliver additional synthesis gas quantities
and the Company shall sell such additional synthesis gas to Hai Hua.

Hai Hua shall, in addition to the Capacity Fee and Energy Fee applicable to the 22,000 Ncum an hour
of Net Syngas, pay for synthesis gas purchases above 22,000 Ncum an hour of Net Syngas as follows:

	 	§	 	For volumes between 22,000 to 24,000 Ncum/hour, Hai Hua shall pay 100% of the
corresponding Energy Fee and pay a pro-rated proportion of the Capacity Fee but reduced by
20% for the additional 2,000 Ncum/hour of volume;
	 
	 	§	 	For volumes between 24,000 to 29,000 Ncum/hour, Hai Hua shall pay 100% of the
corresponding Energy Fee and a pro-rated proportion of the Capacity Fee but reduced by 25%
for the additional 5,000 Ncum/hour of volume; and
	 
	 	§	 	For volumes over 29,000 Ncum/hour, Hai Hua shall pay 100% of the Energy Fee and a
pro-rated proportion of the Capacity Fee but reduced by 40% for the additional volume,

	 	 	In addition to the discounted Capacity Fee that applies only to volumes above 22,000 Ncum of Net
Syngas, Hai Hua shall also reimburse the Company for its additional coal, power, water costs, etc.
associated with such increased synthesis gas production through the Energy Fee associated with such
additional synthesis gas production.
	 
	 	 	For the avoidance of doubt, the discounts listed in this Appendix V shall only apply to the
Capacity Fee for quantities above 22,000 Ncum of Net Syngas.
	 
	 	 	As an example, if during a month (with 30 days) during the first year of operation the Company has
available and Hai Hua agrees to accept 29,000 Ncum/hour of synthesis gas for the whole of that
month, the Capacity Fee for that month would be

=           RMB *

+ (2,000 Ncum/hour / 22,000 Ncum/hour x RMB *) x 0.80

+ (5,000 Ncum/hour / 22,000 Ncum/hour x RMB *) x 0.75

=          RMB *

EXECUTION VERSION

	[*]	 	This information has been omitted in reliance upon Rule 24b-2 under
the Securities Exchange Act of 1934, as amended, and has been filed separately with the Securities
and Exchange Commission.

-29-

 

Appendix VI

Map of Land for Coal Storage Facility

As outlined in Section 4.1.5 of this Contract, Hai Hua shall contribute the land outlined in
red in the map below for the Company to utilize for its Coal Storage Facility:

EXECUTION VERSION

-30-

 

Appendix VII

Further Cooperation

Within two years of execution of this Contract, the Parties shall cooperate in a friendly manner to
achieve the following goals:

	 	§	 	Hai Hua should develop the coke gas market, and gradually reduce its own coke gas
consumption so that Hai Hua’s methanol subsidiary, the Shandong Xuejiao Chemical Co. Ltd
(the “Methanol Company”) will eventually use only syngas for methanol production;
	 
	 	§	 	The Company should develop its gas production process so as to produce syngas of
sufficient pressure and purity for direct methanol production, and expand its syngas
production capacity so as to meet the Methanol Company’s total gas demand; and
	 
	 	§	 	The Parties should cooperate to develop the most economical syngas production system to
achieve a win-win outcome for the Parties;

To achieve the above goals the Parties agree:

	i.	 	At any time within two (2) years of execution of this Contract, Hai Hua may request the
Company to expand its syngas production which will be of sufficient pressure and purity for
the direct production of methanol, to be supplied directly to the Methanol Company, and the
Parties shall agree on the necessary technical reform plans and negotiate the requisite
project documents within three (3) months of Hai Hua’s request for additional syngas
quantities;
	 
	ii.	 	The Methanol Company shall contribute certain equipment necessary for
such expanded syngas production to the Company. Such equipment
includes, but is not limited to the Methanol Company’s air separation
unit, fine sulphur removal system, compression equipment and other
relevant equipment. In consideration of the contribution of such
equipment, the Methanol Company shall be given an ownership interest
in the Company. The value of such equipment should be evaluated by
independent asset evaluation companies.
	 
	iii.	 	The Methanol Company shall actively develop a second phase 100,000
methanol project and the Company will supply syngas for such
expansion. The Company intends to supply the total syngas required
for such methanol expansion whereby the gas quality and pressure of
the syngas supplied meets the requirements for the direct production
of methanol; and
	 
	iv.	 	Upon Hai Hua’s request for additional syngas as outlined above, the
Parties will negotiate in good faith the requisite project documents
and renegotiate a new syngas price for the new syngas system. Such
syngas price should not be higher than the syngas price in this
Contract of RMB */Ncum of syngas (after deducting the cost of
additional operating costs and equipment cost necessary for producing
syngas that is suitable for direct methanol production). The Company
shall make best efforts to produce syngas of a sufficient pressure
and quality that is satisfactory to Hai Hua.
	 
	v.	 	If the Parties can not come to agreement upon the above plans, within three (3) months of Hai
Hua making its request for additional syngas supply, then the Parties shall invite a mediator,
such mediator to be agreed by the Parties, to assist the Parties to try to reach definitive
agreements based on the above principles. Before such arbitration begins, each Party shall
deposit RMB 3,000,000 in an escrow account. If during the mediation the Mediator makes a
determination that any Party is not acting in good faith to try and reach an agreement, the
mediator may, in its sole discretion, award damages to the other party of up to RMB 3,000,000.

EXECUTION VERSION

	[*]	 	This information has been omitted in reliance upon Rule 24b-2 under
the Securities Exchange Act of 1934, as amended, and has been filed separately with the Securities
and Exchange Commission.

-31-

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