EMAIL DETAILS

Jason,

Many thanks for preparing this report and informing the board of the
details of the arbitration proceedings. It gives me a better sense of what
is going on and I appreciate all of the hard work the BHR team has done in
limiting our liability to Sinopec and ensuring that that dispute was
handled in a professional and efficient manner. Well done.

I had a few thoughts and questions in connection with the information you
provided that I wanted to write down for the benefit of the BHR team and my
fellow board members.

First of all I think that Prime Mount Capital ("PMC") committed a grave
injustice by wantonly breaching our subscription agreement and failing to
work with BHR in any meaningful way to remedy the situation. Not only did
this have a clear quantifiable impact on BHR in terms of settlement that we
had to pay Sinopec (RMB 11.244 million) but it clearly impacted BHR in
terms of harm to reputation. Therefore, I am of the firm belief that
damages should be sought from PMC in order to try to make BHR somewhat
whole and in order to set the precedent that BHR will pursue all legal
means to ensure contracts entered into with it are enforced to the fullest
extent of the law.

With regard to PMC's claim of release of obligations under their
subscription agreement due to "corruption" at Sinopec I find this argument
to be dubious, capricious and arbitrary; unable to withstand even the
slightest bit of scrutiny and examination. Did PMC have proof of corruption
at Sinopec at the time their subscription was due or was the claim of
corruption just rampant speculation on PMC's part? Furthermore, was the
corruption PMC referring to corruption at Sinopec Group or was it
corruption at Sinopec Marketing? Sinopec Marketing is in and of itself its
own corporate entity, separate and apart from Sinopec Group, and if PMC can
rely on the "corporate veil" argument to protect themselves from damages we
can rely on the same argument to claim that any corruption at Sinopec Group
is not relevant to Sinopec Marketing.

Additionally, it was my understanding that PMC signed a subscription
agreement that held them "joint and severally liable" for breach of
contract. I notice that in the write-up it mentions that one of your
concerns is that, even if BHR wins an arbitration proceeding in China, then
there is a risk we won't be able to collect our award (that is how I
interpret your concerns regarding "enforceability" of the arbitral award).
Well, I think that is all the more reason to stretch out the PMI
arbitration in Hong Kong because one avenue of collection of an arbitral
award against PMC might be to go after assets of PMI. While you mention
that our lawyers in Hong Kong are not confident about our chances in that
arbitration proceeding based on the current situation, it might be the case
that our odds could improve if we have received an arbitral award from
CIETAC that PMC is failing to honor. So, recognizing we have delayed the
proceedings in Hong Kong for quite some time already and our scope to
continue doing so might be limited, it might be in our interest to prolong
that arbitration further if that is possible.

Finally, I would like BHR to let me know if they are aware of whether PMC,
or the principals thereof, have any assets in the United States. Now that
BHR has had to pay an award to Sinopec due to PMC's breach of contract, the
American shareholders may have a claim against PMC and it might be in our
interest to initiate litigation against them with the hope of impounding
their assets located in the US. This strategy is not unprecedented and
might serve to increase the pressure on PMC to negotiate a resolution with
BHR. I would be interested in hearing BHR's opinion on this.

So in summary, I think PMC's dishonorable breach of contract compels BHR to
strive to obtain the maximum damages from PMC. To that end I think it is
advisable to initiate proceedings against PMC in China at CIETAC and begin
to consider and possibly pursue other litigation approaches (i.e. lawsuits
in the US). If PMC wishes to enter into settlement negotiations with BHR
then we should enter them and negotiate in good faith. However, if PMC
continues their silence and obstruction we should be ready to take the
arbitration proceedings against PMC to their conclusion.

However, I realize that this is an issue on which there are many details
not all of which can be covered in a write-up so there might be some facts
not stated that cause me to come to a different conclusion. Moreover, I
humbly await the opinions of my fellow board members. If they believe
another course of action is advisable that would be very compelling to me.

So I look forward to hearing how these proceedings progress and, as always,
I am happy to discuss further with both the BHR team and my fellow board
members should they desire it.

Sincerely,
James Bulger

--
James J. Bulger
Chairman
Thornton Group LLC
14 Beacon Street, Suite 804A
Boston, MA 02108
Office tel: 617.248.9440 <(617)%20248-9440>

On Wed, Feb 22, 2017 at 5:32 AM, Jason Zhu <jason.zhu@bhrpe.com> wrote:

> 各位董事，
>
> Dear all,
>
>
>
> 中国国际经济贸易仲裁委员会关于中石化项目的仲裁已于2017年1月24日作出最终裁决，管理层就裁决情况及与违约投资人鼎峰的
> 后续处理事项向董事会进行报告（详见附件报告）。
>
>
>
> Regarding the Company’s ongoing arbitration proceedings with Sinopec,
> China International Economic and Trade Arbitration Commission (“CIETAC”)
> issued its final arbitral award on January 24, 2017. Details of the
> arbitral award and management’s proposals regarding the parallel
> arbitration proceedings in Hong Kong with PMI (the HK subsidiary of the
> defaulting limited partner) are set out in the attached report.
>
>
>
> Regards,
>
>
>
> 诸晨刚 Jason Zhu
>
> 董事总经理 Managing Director
>
>
>
> 渤海华美（上海）股权投资基金管理有限公司
>
> Bohai Harvest RST (Shanghai) Equity Investment Fund Management Co., Ltd.
>
> 北京市朝阳区建国路79号华贸中心写字楼2座31层3101室 邮编：100025
>
> 31/F, Unit 3101, Tower 2, China Central Place, 79 Jianguo Road,
>
> Chaoyang District, Beijing 100025, China
>
> Cellphone: 136 8169 7246
>
> Tel: 86 10 5969 5858
>
> Fax: 86 10 5969 6123
>
> Email: jason.zhu@bhrpe.com
>
>