EXHIBIT 10.2
SHAREHOLDERS AGREEMENT
EXHIBIT 10.2
SHAREHOLDERS AGREEMENT
BY AND AMONG
HIGHLAND MINING INC.
TIBET TIANYUAN MINERALS EXPLORATION LIMITED
AND
SHAREHOLDERS OF HIGHLAND MINING INC.
CONTINENTAL MINERALS CORPORATION
CHINA NETTV HOLDINGS INC.
AND
XXXX XXX
DATED 23 December 2004
TABLE OF CONTENTS
SECTION PAGE
SECTION 1 DEFINITIONS.....................................................1
SECTION 2 BOARD MATTERS, CORPORATE GOVERNANCE.............................5
SECTION 3 SHAREHOLDERS MEETINGS..........................................11
SECTION 4 RESTRICTIONS ON TRANSFER OF ORDINARY SHARES....................13
SECTION 5 NPI PAYMENT RIGHTS.............................................17
SECTION 6 EXPLORATION BUDGETS............................................18
SECTION 7 COMPANY ANNUAL BUDGETS.........................................21
SECTION 8 TIANYUAN ANNUAL BUDGETS........................................22
SECTION 9 FUNDING OF THE COMPANY.........................................23
SECTION 10 MANAGEMENT STRUCTURES..........................................27
SECTION 11 CERTAIN COVENANTS..............................................27
SECTION 12 TERMINATION OF AGREEMENT.......................................30
SECTION 13 REPRESENTATIONS AND WARRANTIES.................................31
SECTION 14 OBLIGATIONS AND LIABILITY OF WZ................................32
SECTION 15 MISCELLANEOUS..................................................32
SCHEDULE A ADHERENCE AGREEMENT............................................40
SCHEDULE B SAMPLE CALCULATIONS............................................41
SCHEDULE C SAMPLE CALCULATIONS............................................42
This SHAREHOLDERS AGREEMENT (this "Agreement") is made and entered into as of
[*], 2004 by and among:
(1) Highland Mining Inc., a British Virgin Islands company with offices at
TrustNet Xxxxxxxx, Road Town, Tortola, British Virgin Islands; Fax: (852)
0000-0000 (the "Company");
(2) Tibet Tianyuan Minerals Exploration Ltd., a wholly foreign-owned enterprise
incorporated and existing under the laws of the People's Republic of China
with a registered address at 00X, Xxxxxxx Economic and Trade Tower, 75 Xxx
Xxx West Road, Lhasa, Tibet, People's Republic of China, Fax: (86 891)
0000-000 ("Tianyuan");
(3) China NetTV Holdings Inc., a Delaware corporation with offices at Suite
000-000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx, X.X., Xxxxxx, X0X 0X0, Fax: (1-604)
000-0000 ("CTVH");
(4) Continental Minerals Corporation, a British Columbia company with offices
at Suite 1020 - 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx,
Xxxxxx, X0X 0X0, Fax: (0 000) 000-0000 ("Continental"); and
(5) Xxxx Xxx, a citizen the United States of America with an address at Apt.
116, 0000 XxxxxxXxxxxx Xxxxxxx, Xxx Xxxxx, XX 00000, Xxxxxx Xxxxxx of
America, Fax: (00 00) 0000 0000 ("WZ").
WHEREAS, Xxxxx Xxxx Xxx, Xxxxx Xxx Ming, Xxxx Xxxxx, the Company, Tianyuan, Xxxx
Xxx, CTVH, Xxxxxx Xxxxxxxxx Inc. and Continental have entered into a Option
Agreement dated as of 23 December 2004 (the "Option Agreement"), pursuant to
which the Company will issue, and Continental will purchase from Xxxxx Xxxx Mei,
Xxxxx Xxx Ming and Xxxx Xxxxx shares of the Company representing 50% of the
issued and outstanding Ordinary Shares of the Company, as set forth in the
Option Agreement;
WHEREAS, upon the exercise of the first option under the Option Agreement,
Continental will be a shareholder of the Company;
WHEREAS, the execution and delivery of this Agreement is a condition to the
closing under the Option Agreement.
NOW, THEREFORE, on the basis of the foregoing premises and the mutual agreements
and covenants set forth in this Agreement, the parties hereto agree as follows:
SECTION 1 DEFINITIONS
1.1 Defined Terms. Unless otherwise defined herein, the following terms
are defined as follows:
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"Affiliate" shall mean in relation to an entity, any individual,
partnership, corporation, trust or other entity that directly or
indirectly controls, or is controlled by, or is under common control
with, such entity, where control means the direct or indirect
ownership of more than 50% of the outstanding shares or other
ownership interests having ordinary voting power to elect directors or
the equivalent. The term Affiliate shall, in relation to Continental,
include Xxxxxx Xxxxxxxxx Inc, and any company directly or indirectly
controlled by Xxxxxx Xxxxxxxxx Inc., and in relation to CTVH, include
any company directly or indirectly controlled by Xxxx Xxx.
"Applicable Law" means with respect to any Person, any and all
provisions of any constitution, treaty, statute, law, regulation,
ordinance, code, rule, judgment, rule of common law, order, decree,
award, injunction, judgment, Governmental Approval, concession, grant,
franchise, license, agreement, directive, guideline, policy,
requirement, or other governmental restriction or any similar form of
decision of, or determination by, or any interpretation or
administration of any of the foregoing by, any Governmental Authority,
whether in effect as of the date hereof or thereafter and in each case
as amended, applicable to such Person or its subsidiaries or their
respective assets.
"Board" means the board of directors of the Company from time to time.
"Business Day" shall mean any day (excluding Saturdays, Sundays and
public holidays in Vancouver, Canada or PRC) on which banks generally
are open for business in Vancouver, Canada, and PRC.
"CEO" means the chief executive officer of the Company, appointed in
accordance with Section 10.1.
"Company Annual Budget" means, for any financial year, a budget for
the Company's operations during such financial year prepared by the
CEO in accordance with Section 7.
"Confidential Information" means:
(a) any information, data, samples or material concerning the Party
supplying or disclosing such information or material including
but not limited to information concerning such Party's business,
financial condition, operations, technology, plans, research and
development, assets or liabilities;
(b) any information or materials concerning any other entity or
person in respect of which the disclosing Party is bound by
obligations of confidentiality, as the disclosing Party
identifies to any other Party (the "Recipient") from time to
time; and
(c) the terms and conditions of this Agreement, the Option Agreement
and all exhibits and schedules attached hereto and thereto.
Confidential Information shall not include information that:
(i) was known by the Recipient prior to disclosure by the
disclosing Party;
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(ii) is or becomes public knowledge other than through the
Recipient's breach of Section 15.4 of this Agreement; or
(iii) was obtained by the Recipient from a third party where the
Recipient was not aware that the third party was under an
obligation of confidentiality with respect to such informa
-tion.
"Consent" means any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, exemption or order
of, registration, certificate, declaration or filing with, or report
or notice to, any Person, including any Governmental Authority.
"Continental" means Continental Minerals Corporation, a British
Columbia company with offices at Suite 1020 - 000 Xxxx Xxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx, X0X 0X0.
"Continental Exploration Program" means an annual exploration program
and budget in relation to the Property submitted by Continental in
accordance with Section 6.4.
"CTVH Exploration Program" means an annual exploration program and
budget in relation to the Property submitted by CTVH in accordance
with Section 6.5.
"Director" means a member of the Board.
"Encumbrance" means any lien, pledge, mortgage, deed of trust,
security interest, claim, lease, charge, option, right of first
refusal, transfer restriction, hypothecation, encumbrance or other
security interest of any kind or nature whatsoever, or any agreement
to give or make any of the foregoing.
"First Expenditure Period" means the period from the date of the
Option Agreement to November 10, 2006.
"GAAP" means Canadian generally accepted accounting principles,
consistently applied.
"General Manager" means the general manager of Tianyuan, appointed in
accordance with Section 10.2.
"Governmental Approvals" shall mean any action, order, authorization,
consent, approval, license, lease, waiver, franchise, concession,
agreement, license, ruling, permit, tariff, rate, certification,
exemption of, filing or registration by or with, or report or notice
to, any Governmental Authority.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial regulatory or administrative functions of or
pertaining to any government with competent jurisdiction.
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"Group Company" means a Person (other than a natural person or an
individual) that is controlled by the Company.
"Net Profits" for a particular financial year means the profits of the
Company available for distribution in respect of that year to the
shareholders of the Company, in accordance with GAAP, after deduction
of operating expenses, applicable taxes, loan repayments and other
costs and financial commitments, as well as, working capital and
reserves either required by law or determined to be reasonable by the
Board in order to provide for working capital or for environmental
reclamation in relation to the Company, Group Companies and the
Property.
"Offered Ordinary Shares" shall mean the Ordinary Shares proposed to
be Transferred by a Selling Shareholder.
"Ordinary Shares" means the Ordinary Shares of the Company, par value
US$1.00, which shall be the only class of shares of the Company.
"Party" means a reference to either CTVH, the Company, Continental,
Tianyuan, a Group Company or WZ and "Parties" shall mean a reference
to two or more of the foregoing.
"Permitted Transfer" means a transfer of shares by a Shareholder (i)
that is not prohibited by the terms of this Agreement or any other
agreement, instrument, or constitutional document, (ii) where the
transferee has executed and delivered to the Company an Adherence
Agreement substantially in the form attached hereto as Schedule A,
assuming the obligations of the transferring Shareholder with respect
to the transferred shares, and (iii) where the Company is given
written notice at the time of such transfer stating the name and
address of the transferee and identifying the shares of the Company
that are being transferred.
"Person" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint-stock
company, trust, unincorporated organization, governmental body or
other entity.
"PRC" means the People's Republic of China.
"Property" means the Xietongmen Copper Property, which is located near
Xxxxx Village, Xietongmen County, Rikaze area, Tibet Autonomous
Region, the PRC.
"Restated Articles" means the Articles of Association of the Company,
filed with the Registrar of Companies in British Virgin Islands as the
same may be further amended from time to time after the date hereof in
accordance with the terms hereof and the terms therein.
"Restated Memorandum" means the Memorandum of Association of the
Company dated June 18, 2004, filed with the Registrar of Companies in
British Virgin Island as the same may be further amended from time to
time after the date hereof in accordance with the terms hereof and the
terms therein.
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"Second Expenditure Period" means the period from November 10, 2006 to
November 10, 2007.
"Shareholder" means CTVH, Continental and such other Person as may
from time to time hold Ordinary Shares of the Company and have become
a party to this Agreement in accordance with Section 15.5(b).
"Selling Shareholder" means the Shareholder that plans to sell,
transfer, pledge or otherwise dispose of or permit the sale, transfer,
pledge, or other disposition of any interest in any of its Ordinary
Shares.
"Taxes" shall mean any domestic or foreign taxes, charges, fees,
levies or other assessments, including any interest, penalties or
additions relating thereto, imposed by any Governmental Authority or
other taxing authority.
"Tianyuan" shall mean Tibet Tianyuan Minerals Exploration Ltd., a
company incorporated under the law of the PRC, all of the shares of
which are held by Company.
"Tianyuan Annual Budget" means, for any financial year, a budget for
the Company's operations during such financial year prepared by the
General Manager in accordance with Section 8.
"Tianyuan Board" shall mean the Board of Directors of Tianyuan.
"Transfer," "Transferring" (or any correlative term) shall mean a
sale, assignment, pledge, gift, placement in trust (voting or
otherwise) or transfer by operation of law of, or disposal (directly
or indirectly and whether or not voluntary), and shall include any
transfer by will or intestate succession.
"UNCITRAL Rules" means the Arbitration Rules of the United Nations
Commission on International Trade Law.
"US$" means the legal currency of the United States.
"Warrantors" means the Company, Tianyuan, CTVH and WZ.
1.2 Rules of Construction. Words such as "herein", "hereinafter",
"hereto", "hereby" and "hereunder", when used with reference to this
Agreement, refer to this Agreement as a whole, unless the context
otherwise requires. The words "include", "includes", "included" and
"including" shall be construed as if followed by the phrase "without
being limited to." A reference to a particular gender means a
reference to any gender.
SECTION 2 BOARD MATTERS, CORPORATE GOVERNANCE
2.1 Election of Directors to the Board.
(a) The Board shall initially consist of six (6) Directors.
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(b) For so long as (1) Continental and CTVH are shareholders of the
Company and the Company has no other shareholders and (2)
Continental holds at least 50% of the outstanding Ordinary
Shares:
(i) CTVH shall be entitled to designate three Directors and
(ii) Continental shall be entitled to designate three
Directors.
(c) If a party other than Continental and CTVH holds Ordinary Shares
or Continental holds less than 50% of the outstanding Ordinary
Shares, then the Board shall be reconstituted with a maximum of
nine (9) Directors and each Shareholder shall be entitled to
designate one Director for each full eleven percent (11%) of
outstanding Ordinary Shares held by such Shareholder.
(d) The Shareholders shall take all action (including, without
limitation, voting the Ordinary Shares owned by each, calling
extraordinary meetings of shareholders and executing and
delivering written consents, and obtaining the resignation or
removal of incumbent directors) necessary to elect the Directors
designated by the Shareholders in accordance with the provisions
of (b) and (c) of this Section 2.1, including amendments, if any,
to the Restated Articles.
(e) The Directors elected pursuant to this Section 2.1 shall be
entitled to appoint alternates to serve at any meeting of the
Board or of any committee thereto, and such alternates shall be
permitted to attend all meetings of the Board or of any committee
and vote on the Director's behalf. An alternate director, whilst
acting in the place of a Director who appointed him or her, shall
exercise and discharge all the duties and functions of the
Director he or she represents. The appointment of an alternate
director shall cease on the happening of any event which, if he
or she were a Director, would cause him or her to cease to be a
Director, or if a Director gives notice to the secretary of the
Company that the alternate director representing him or her shall
have ceased to represent such Director.
(f) No Director shall be removed except by the affirmative vote of
the Shareholder designating such Director, however the other
Shareholders may remove a Director due to bad faith, willful
misconduct, fraud, or a breach of the standards of behavior while
in Tibet that may be reasonably expected to adversely affect
Tibet's political stability or national harmony or to offend
Tibet's customs and traditions, provided, however, that the
Shareholder that designated such Director shall be entitled to
designate the replacement of a Director so removed.
(g) Subject to Section 2.1(h), in the event of a deadlock amongst the
Board, the Chairman of the Board shall have the casting vote.
Continental shall have the right to appoint the Chairman of the
Board, provided, however, that if Continental holds less than 50%
of the outstanding Ordinary Shares, the Shareholder holding the
largest percentage of outstanding Ordinary Shares in the Company
shall have the right to appoint the Chairman of the Board.
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(h) In the event that Tianyuan undertakes a CTVH Exploration Program,
the following supplementary provisions shall apply:
(i) one of the Directors designated by CTVH, and not the Chair
-man of the Board, shall have a casting vote in respect of
all matters relating to the CTVH Exploration Program for
so long as the activities under the CTVH Exploration Pro-
gram are conducted in a good workmanlike, safe and
efficient manner in accordance with sound mining and
applicable industry standards and practice in China,
including the issuance of shares by the Company to fund
the CTVH Exploration Program; and
(ii) the Chairman of the Board shall have a casting vote on all
other deadlocked matters, if any, excluding matters relat-
ing to the CTVH Exploration Program.
(i) Subject to the limitations in this Agreement, the Shareholders
shall not take any action that may result in Continental not
having control of the Board.
2.2 Election of Directors to Tianyuan.
(a) The Parties shall take such actions as shall be necessary to
ensure that the Tianyuan Board shall be the same size and include
the same individuals as the Board from time to time.
(b) The Parties shall procure that, to the extent permitted by
relevant law, all corporate actions of Tianyuan and any other
direct or indirect subsidiary of the Company, shall follow the
instruction of the Board, subject always to the approval
requirement of Section 3.
2.3 Board Meetings.
(a) The Board shall appoint a secretary, who need not be a Director.
The secretary shall, on the instructions of the Chairman of the
Board, give the required notice to the Directors, shall duly
record the minutes of all meetings of the Board and shall
distribute such minutes to the Directors. The secretary shall
certify in such minutes that proper notice of a meeting of the
Board was given in accordance with this Section 2.3.
(b) Notice of each Board meeting shall be given at least twenty-one
(21) days prior (exclusive of the day of receipt). The secretary
shall send such notice together with a draft agenda for the
meeting to all the Directors. The secretary shall at least
fourteen (14) days prior to the meeting send to all the Directors
the final agenda for the meeting, with such additions to the
agenda a Director may have requested. The secretary shall also
circulate minutes of each Board meeting to all the Directors
within fourteen (14) days after the date of each such meeting.
The Directors shall confirm in writing its receipt of the notice
and agenda within seven (7) days upon its receipt of such notice.
(c) Topics or proposals not listed in the final agenda set forth in
Section 2.3(b) shall not be put to vote in the meeting of the
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directors, unless unanimously approved by all Directors of the
Company, present or not.
(d) Board meetings shall be held at such times and at such places and
in any such manner as the Directors may from time to time decide
but shall be held at least semi-annually until such time as mine
development work commences. Any Director shall have the right to
convene a Board meeting at any time upon due notice.
(e) The Board shall meet quarterly to discuss:
(i) the performance of the Company's business;
(ii) detailed management accounts prepared by the Company to
show its results for the prior quarter for each Group
Company and on a consolidated basis;
(iii) the Company's performance vis-a-vis the Company Annual
Budget;
(iv) personnel matters, including performance and retention
issues; and
(v) any other significant matters.
(f) Meetings of the Board and of any committee of the Board may be
held by telephone or other electronic means whereby all persons
participating in the meeting can hear each other. Directors may
elect to attend any Board or committee meeting by such electronic
means.
(g) For so long as (1) Continental and CTVH are shareholders of the
Company and the Company has no other shareholders and (2)
Continental holds 50% or more of the outstanding Ordinary Shares,
a quorum of the Board or the Tianyuan Board shall consist of four
directors present in person or by alternate or proxy, at least
two of whom shall be the directors designated by Continental.
Quorum otherwise shall consist of a majority of directors present
in person or by alternate or proxy, provided that (so long as
such party has the right to designate a director) one of the
directors constituting quorum shall be a director designated by
CTVH and one of the directors constituting quorum shall be a
director designated by Continental.
2.4 Resolutions and Voting.
(a) Except for matters required by law to be dealt with by the
Company's shareholders and the restrictions contained in Section
3, the Restated Articles of the Company shall provide that all
decisions of the Company shall be resolved by simple majority
vote of the Board at a properly constituted meeting. In the event
that a quorum for a meeting of the Board or Tianyuan Board is not
present within thirty (30) minutes after the time at which such
meeting was to have commenced according to the terms of the
notice convening such meeting, the meeting shall stand adjourned
to a place, date, and time determined by the directors present,
which date shall not be sooner than five (5) Business Days later.
The directors not present shall forthwith be informed in writing
of the adjournment of the meeting and the place, date and time
for the resumption of the adjourned meeting. If by thirty (30)
minutes after the time at which such resumed meeting was to have
commenced a quorum is not present, the members of the Board or
Tianyuan Board then present shall constitute a quorum.
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(b) The Board may adopt any resolution without a meeting if such
resolution is signed by at least the number of directors required
for a quorum at a Board meeting. Information supporting such
resolution must be sent in written form to all of the directors
then holding office and the resolution for signature must be sent
to the directors no sooner than seven (7) days after the
supporting information having been sent to the directors.
(c) Directors nominated by Continental shall have no right to vote on
the approval of the costing of the provision by Continental or an
Affiliate of Continental of technical or other services to the
Company or Group Companies as set out in the Company Annual
Budget, except matters associated with the implementation of a
Continental Exploration Budget.ii
(d) Directors nominated by CTVH shall have no right to vote on
matters involving CTVH or an Affiliate of CTVH, excluding matters
related to the subscription by CTVH or an Affiliate of CTVH for
the issuance of Ordinary Shares of the Company and matters
associated with the implementation of a CTVH Exploration Budget.
2.5 Expenses.
The Company shall reimburse the Directors elected pursuant to Sections
2.1 and 2.2 for all reasonable expenses relating to all Board and
Tianyuan Board activities, including, without limitation, expenses or
fees incurred in relation to attending the Board and Tianyuan Board
meetings or meetings of any committee. Directors expenses incurred
shall form part of the expenditure in terms of the Continental
Exploration Program or CTVH Exploration Program (as the case may be).
2.6 Committees.
2.6.1 At such time as the Company engages in mining activities in
relation to the Property, the Board shall establish committees
in accordance with this Section 2.6 consisting of Directors of
the Company to deal with matters delegated to such committees
by the Board.
2.6.2 Audit Committee.
---------------
(a) The audit committee, if any, shall consist of four
(4) members, of which at least one member shall be a
Director designated by CTVH as long as CTVH holds not
less than twenty-five percent (25%) of the Ordinary
Shares of the Company. A Director designated by the
largest shareholder of the Company shall be the
chairman of the audit committee. The chairman shall
have a casting vote.
(b) The duties of the audit committee shall include:
(i) recommending the selection of the external
auditor to the Board;
(ii) reviewing the external audit plan;
(iii) evaluating the annual audited financial
statements;
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(iv) overseeing the external audit process and
audit results;
(v) monitoring the external auditor's indepen-
dence;
(vi) monitoring internal control over financial
reporting;
(vii) overseeing the internal audit function; and
(viii) evaluating interim financial statements and
the external auditor's review of those state
-ments.
2.6.3 Management Committee.
(a) The management committee, if any, shall consist of
four (4) members, of which at least one member shall
be a Director designated by CTVH as long as CTVH
holds not less than twenty-five percent (25%) of the
Ordinary Shares in the Company. A Director designated
by the largest shareholder of the Company shall be
the chairman of the management committee. The
chairman shall have a casting vote.
(b) The duties of the management committee shall include:
(i) reviewing the operations of the Company and
Group Companies;
(ii) reviewing the detailed management accounts
of the Company and Group Companies; and
(iii) reviewing the financial accounts of the
Company and Group Companies
2.6.4 Compensation Committee.
(a) The compensation committee, if any, shall consist of
four (4) members, of which at least one member shall
be a Director designated by CTVH as long as CTVH
holds not less than twenty-five percent (25%) of the
Ordinary Shares of the Company. A Director designated
by the largest shareholder of the Company shall be
the chairman of the compensation committee. The
chairman shall have a casting vote.
(b) The duties of the compensation committee shall
include:
(i) determining remuneration policies; and
(ii) recommending the remuneration of senior
officers, consultants and technical person-
nel of the Company and Group Companies to
the Board.
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2.6.5 Procedures for Committee Meetings.
Meetings of each committee shall be held in accordance with
the following procedures:
(a) Meetings of each committee shall be held no less
often than every six months and at such places and in
any such manner as the members of such committee may
from time to time decide.
(b) The quorum of the meeting of a committee shall be two
members, and decisions shall be passed by simple
majority.
(c) A resolution in writing circulated to all the members
of a committee or their representatives and signed by
all of the members or their representatives shall be
as valid and effectual as if it had been passed at a
duly held meeting of the committee. For such
purposes, a signature sent by facsimile, or by email
using a PDF file or some other similar electronic
imaging software, shall be deemed a written
signature.
2.7 Director Information.
The Company shall furnish to each Director of the Board:
(a) promptly after the delivery thereof, all management letters of
accountants relating to the Company or any Group Company;
(b) promptly upon any executive officer obtaining actual knowledge
thereof and in any event promptly upon delivery or receipt by the
Company or any Group Company of any notice relating thereto,
written notification of:
(i) the occurrence of any default or breach under any
material agreement to which the Company or any Group
Company is a party; and
(ii) the commencement of any material legal or regulatory
proceeding, action or investigation to which the
Company or any Group Company is a party.
2.8 Officers.
Unless stated otherwise in this Agreement, the Board shall have the
absolute right, in its sole discretion, to appoint or remove senior
officers of the Company or any Group Company (other than the CEO), with
or without cause, subject to all Applicable Laws.
SECTION 3 SHAREHOLDERS' MEETINGS
3.1 Quorum.
The quorum for meetings of the Shareholders of the Company shall be the
presence of the duly authorized representative (whose authority shall
be in writing) of each Shareholder at the commencement of the meeting.
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3.2 Adjournment.
If a quorum is not present within thirty (30) minutes of the time at
which a Shareholders' meeting should have commenced at which such
meeting was to have commenced according to the terms of the notice
convening such meeting, the meeting shall stand adjourned to a place,
and a time and on a date not sooner than the fifth (5th) day following
the date on which the meeting was adjourned, of which adjournment the
Shareholder not present shall forthwith be informed in writing of the
meeting and the place, date and time for the resumption of the
adjourned meeting. If within thirty (30) minutes after the time to
which the meeting was adjourned as aforesaid, the quorum is still not
present, the Shareholders then present shall constitute a quorum.
3.3 Actions Requiring Special Consent.
Notwithstanding anything herein that may be to the contrary, each of
the Shareholders undertakes to each other that it shall exercise all
its powers in relation to the Company so as to procure (insofar as it
is able) that, in addition to any other approvals required by
Applicable Law, the Restated Memorandum and the Restated Articles or
any equivalent organizational documents of any Group Company, the
following matters shall not be effected in relation to the Company or
any Group Company, without the unanimous consent of the Shareholders:
(a) the amendment, alteration, or repeal of any provision of the
Restated Memorandum or Restated Articles, or the constitutional
documents of any Group Company;
(b) any alteration or reorganization of the share capital or
registered capital of the Company or any Group Company,
including, without limitation, reduction, consolidation,
subdivision or conversion thereof, or the rights in respect of
any share capital, but excluding any increase in the share
capital;
(c) except as provided herein, the payment or declaration of a
distribution or dividend, including, without limitation, the
redemption or repurchase of any such capital shares;
(d) any issuance of capital share of the Company in class other than
Ordinary Shares;
(e) the merger, amalgamation or consolidation of the Company or any
Group Company with any Person, or the sale, lease, exchange,
transfer, contribution, Encumbrance or other disposition of all
or substantially all of the consolidated assets of the Company or
any Group Company (whether in an individual transaction or a
series of related transactions), or the purchase or other
acquisition of all or substantially all of the assets of another
Person, or the reorganization of the Company or any Group
Company;
(f) any voluntary dissolution, winding-up or liquidation of the
Company or any Group Company;
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(g) except as provided herein, any increase or decrease in the size
of the Board or the board of directors or similar governing body
of any Group Company;
(h) any major corporate or financial commitment, expenditure or cash
disbursement on the part of the Company or any Group Company that
could result in a variance from the Company Annual Budget of
greater than twenty percent (20%);
(i) the giving of any guarantee or indemnity by the Company or any
Group Company regarding or in connection with any borrowing,
other than borrowings by the Company or a Group Company in the
normal course of business;
(j) any change in accounting principles of the Company or any Group
Company, except as required by the Applicable Law;
(k) the creation of any Encumbrance (other than those created by
operation of law) with respect to assets of the Company or any
Group Company, other than in the normal course of business; and
(l) the consideration of and, as may be appropriate, the approval of
any material diversification or investment, or a change of
business, subject to the appropriate governmental approvals (if
required).
SECTION 4 RESTRICTIONS ON TRANSFER OF ORDINARY SHARES
4.1 Legends.
Each certificate representing Ordinary Shares of the Company shall be
stamped or otherwise imprinted with a legend in substantially the
following form in the English language pursuant to this Agreement:
"THE SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR TRANSFER OF
THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
THE TERMS AND CONDITIONS OF A CERTAIN SHAREHOLDERS AGREEMENT
BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS OF THE
COMPANY. COPIES OF THE SHAREHOLDERS AGREEMENT MAY BE OBTAINED
UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY."
4.2 Right of First Refusal.
(a) Parties' Respective Rights of First Refusal.
(i) Continental shall have the right to Transfer its
Ordinary Shares provided that the other Shareholders
then holding Ordinary Shares have first been offered
the Ordinary Shares on the same terms as Continental
proposes to accept in accordance with this Section
4.2. Any Transfer of Ordinary Shares to an Affiliate
13
of Continental shall not require Continental to first
offer the Ordinary Shares to be Transferred to the
Other Shareholders.
(ii) Each Shareholder other than Continental shall have
the right to Transfer its Ordinary Shares in the
Company provided that such Shareholder has first
offered Continental the Ordinary Shares on the same
terms as the Shareholder that is selling proposes to
accept in accordance with this Section 4.2. Any
Transfer of Ordinary Shares to an Affiliate of CTVH
shall not require CTVH to first offer the Ordinary
Shares to be Transferred to Continental.
(iii) The transferee in relation to a Transfer permitted
under this Section 4.2 shall execute and deliver to
the Company an Adherence Agreement substantially in
the form attached hereto as Schedule A, assuming the
obligations of the transferring Shareholder with
respect to the transferred shares.
(b) Transfer Notice.
Each Shareholder agrees that if at any time it plans to
Transfer any of its Offered Ordinary Shares, then such Selling
Shareholder shall give the Shareholder having a right of first
refusal in relation to the Offered Ordinary Shares in
accordance with Section 4.2(a) (the "RFR Shareholders") a
written notice of its intention to make such Transfer ("First
Transfer Notice"), which such First Transfer Notice shall
include:
(i) the number of Offered Ordinary Shares;
(ii) the identity of the prospective transferee(s); and
(iii) the consideration and the material terms and
conditions upon which the proposed Transfer is to be
made.
The First Transfer Notice shall certify that such Selling
Shareholder has received a firm offer from a third party
transferee(s) and in good faith believes a binding agreement
for the Transfer is obtainable on the terms set forth in the
First Transfer Notice. The First Transfer Notice shall also
include a copy of any written proposal, term sheet or letter
of intent or other agreement relating to the proposed
Transfer.
(c) Purchase Notice.
Within thirty (30) days following the receipt of the First
Transfer Notice (subject to extension as provided in Sections
4.2(d)(iii) and 4.2(d)(iv)), RFR Shareholders may exercise
their right of first refusal by giving notice, pursuant to
Sections 4.2(d), to the Selling Shareholder ("Purchase
Notice"), with a copy to the Company. If an RFR Shareholder
fails to deliver the Purchase Notice within thirty (30) days
following the receipt of a First Transfer Notice, it may not
exercise its right of first refusal in such Transfer.
14
(d) RFR Shareholders' Right of First Refusal.
----------------------------------------
(i) If an RFR Shareholder elects to exercise its right of
first refusal, its Purchase Notice shall set forth
the number of Offered Ordinary Shares such Remaining
Shareholder wishes to purchase, subject to a maximum
of its right of first refusal pro rata amount,
calculated immediately prior to the time of the
purchase hereunder from the Selling Shareholder.
(ii) Immediately following the expiration of the thirty
(30) day period referred to in Section 4.2(c) above,
the Selling Shareholder shall send out a second
notice ("Second Transfer Notice") to each RFR Share-
holder that exercised its right of first refusal
regarding the First Transfer Notice ("Purchasing
Shareholder"), with a copy to the Company, setting
forth the number of shares that remain unpurchased
from the First Transfer Notice ("Remaining Shares").
Each Purchasing Shareholder shall have fifteen (15)
Business Days from the date of receipt of the Second
Transfer Notice to purchase up to that portion of the
Remaining Shares equal to the proportion that the
number of Ordinary Shares held by such Purchasing
Shareholder bears to the total number of Ordinary
Shares held by all Purchasing Shareholders who wish
to purchase the Remaining Shares by giving Notice to
the Selling Shareholder ("Second Purchase Notice").
(iii) Should any Shareholder be wound-up, liquidated,
placed under judicial management, whether provision-
ally or finally and whether voluntarily or
compulsorily (other than for the purposes of a recon-
struction or amalgamation) then the Shareholder shall
be deemed, on the day immediately preceding the
occurrence of such event, to have offered all its
Ordinary Shares in the Company to the other Share-
holders, and the price per Ordinary Share shall be
the greater of the original subscription price paid
by the Selling Shareholder for such Offered Ordinary
Shares (appropriately adjusted for share splits,
share dividends, combinations and the like) or the
fair market value of such Offered Ordinary Shares,
which shall be a price determined in good faith by
the Board reflecting the current value of the Offered
Ordinary Shares in view of the present earnings and
future prospects of the Company, determined within
thirty (30) days after receipt by the RFR Sharehold-
ers of the First Transfer Notice. In the event that
the Selling Shareholder or his or her executor dis-
agrees with such valuation as determined by the
Board, the Selling Shareholder or his or her executor
shall be entitled to have the valuation determined by
an independent appraiser to be mutually agreed upon
by the RFR Shareholders and the Selling Shareholder
or his or her executor, the fees of which appraiser
shall be borne by the Selling Shareholder or his or
her estate. The thirty (30) day period specified in
Section 4.2(c) shall be extended to the fifth (5th)
Business Day after a valuation pursuant to this
Section 4.2(d)(iii) has been determined to be final
and binding.
15
(iv) In the event the consideration for the Offered Shares
specified in a First Transfer Notice is payable in
property other than cash and the Selling Shareholder
and the RFR Shareholders who wish to purchase
the Offered Shares (acting together) cannot agree on
the cash value of such property within thirty (30)
days after such RFR Shareholders' receipt of the
First Transfer Notice, the value of such property
shall be determined by an independent appraiser to be
mutually agreed upon by the Selling Shareholder and
such RFR Shareholders (acting together) within one
month from its appointment, and such determination
shall be final and binding on the Selling Shareholder
and such RFR Shareholders. The cost of such appraisal
shall be paid by the Shareholders whose value is the
furthest away from the value determined by the inde-
pendent appraiser. The thirty (30) day period speci-
fied in Section 8.1(c) shall be extended to the fifth
(5th) Business Day after a valuation pursuant to this
Section 8.1(d)(iv) has been determined to be final
and binding.
(v) The exercise (whether in full or in part) or
non-exercise of any right of first refusal by any
Remaining Shareholder to purchase or participate in
one or more proposals to Transfer any Offered
Ordinary Shares shall not adversely affect its rights
to purchase or participate in subsequent Transfers of
Offered Ordinary Shares.
(vi) Notwithstanding any rights or rights of first refusal
in this Section 4.2, in the event the RFR
Shareholders do not purchase all of the offered
Ordinary Shares that remain available in the Second
Transfer Notice, the Selling Shareholder may cancel
all sales to RFR Shareholders and Transfer all of the
Offered Ordinary Shares to the third party
transferee(s) on the terms set forth in the First
Transfer Notice.
4.3 Non-Exercise of Rights.
Completion of the Transfer of the Offered Ordinary Shares to the third
party transferee(s) set forth in the First Transfer Notice (and if
applicable, the Purchasing Shareholders) shall occur no later than the
later of (i) thirty (30) days after the receipt of the Second Transfer
Notice or (ii) the determination of the value of the shares by an
independent appraiser pursuant to Sections 4.2(d)(iii) and 4.2(d)(iv).
If no RFR Shareholder elects to exercise the right of first refusal,
all but not less than all Offered Ordinary Shares may be transferred in
accordance with the First Transfer Notice. The Selling Shareholder
shall procure, as a condition of the effectiveness of the Transfer of
the Offered Ordinary Shares, that the third party transferee(s) assume
the obligations of the Selling Shareholder under this Agreement by
executing and delivering to the Company an Adherence Agreement
substantially in the form attached hereto as Schedule A. Unless written
consent of each RFR Shareholder is obtained, if such Transfer is not
completed within the time period prescribed in this Section 4.3, or if
any proposed terms or conditions with respect to the Transfer of the
Offered Shares become more favorable to the proposed purchaser than
those set forth in the First Transfer Notice, then such proposed
Transfer shall again be subject to the right of first refusal, and the
procedures in connection therewith, set forth in Section 4.2.
16
4.4 Disclosure to Proposed Transferees.
Each holder of Ordinary Shares shall be entitled to disclose to any
third party transferee(s) of Ordinary Shares any information,
documents, or materials concerning the Company and Group Companies
known to or in the possession of such holder, and the Company shall
provide any assistance or cooperation reasonably requested by such
holder or any third party transferee in connection with such third
party transferee's due diligence investigation of the Company subject
to appropriate nondisclosure arrangements.
SECTION 5 NPI PAYMENT RIGHTS
5.1 The Shareholders of the Company will be entitled to share in dividends
of the Company and in the distribution of net proceeds upon a
liquidation of the assets of Company according to their respective
shareholdings in the Company, provided that if the shareholding in the
Company in aggregate held by either CTVH or Continental, and only CTVH
or Continental (as the case may be), (such party a "Selecting
Shareholder") falls below 15%, then the Selecting Shareholder will have
an once-off option, exercisable by notice to the other Shareholder, no
later than 30 days after its aggregated shareholding falls below the
aforementioned 15%, to:
(a) continue to hold its Ordinary Shares to be entitled to receive
its share of dividends of the Company according to its
shareholding and to be liable to make equity contributions
according to its shareholding in accordance with Section 9; or
(b) to the extent permitted by law, redeem its Ordinary Shares in
exchange for an annual payment, payable ninety (90) days after
the financial year end of the Company or the date that the
Company distributes dividends to its shareholders, whichever
date is the later, (a "BVI NPI Payment") in respect of each
financial year of the Company following the date of redemption,
calculated at a fixed rate of 12.5% of the Net Profits, which
BVI NPI Payments shall be subject to the following provisions:
(i) subject to subclauses (ii), (iii) below, BVI NPI Payments
will not accrue or be payable to the Selecting
Shareholder until after the other Shareholder or
Shareholders (as the case may be) have recovered through
their receipt of dividends from the Company all of their
"BVI Excess Investment" (as defined below);
(ii) in respect of any financial year before BVI NPI Payments
have accrued and become payable in accordance with
subclause (i) above, and provided that in any event that
the Company has BVI Net Profits of no less than US$2
million, the Selecting Shareholder shall be entitled to a
fixed interim payment of US$250,000;
(iii) once BVI NPI Payments have accrued and become payable in
accordance with subclauses (i) and (ii) above, then the
first US$250,000 of the BVI NPI Payments for each year
17
shall be paid to the Selecting Shareholder, and the
remaining amounts accrued, on an aggregated basis, shall
be reduced by the amount of any interim payments the
Selecting Shareholder has received in accordance with
subclause (ii) above until all such previously paid fixed
interim amounts have been accounted for as a credit to
the amounts otherwise due to the Selecting Shareholder;
and
(iv) the Company shall provide the Selecting Shareholder with
an audit certificate evidencing the calculation of the
BVI NPI Payment for that year.
5.2 The term "BVI Excess Investment" means all loan and equity capital
invested, provided and or contributed to the Company by the other
Shareholders, as well as any additional investment not accounted for in
such loan or equity capital and made by the other Shareholders in
relation to the Company, Group Companies and the Property directly or
indirectly under the terms hereof and not otherwise accounted for as
part of the Company's loan or equity capital after the point at which
the shareholding of the Selecting Shareholder falls below 15% of the
total shareholders equity capital, plus interest on such funds at the
interest rate published calculated in accordance with the prime
overdraft rate charged by the Bank of Montreal, Canada to its corporate
customers.
5.3 The Parties will enter into a Net Profits Agreement concurrently with
such Shareholders exercising their option to receive the Net Profits,
in a form satisfactory to the other Shareholders. An example of the
calculations above is attached as Schedule B.
SECTION 6 EXPLORATION BUDGETS
6.1 Business.
The business of the Group Companies shall be the exploration for
minerals on and under the Property, the compilation of a bankable
feasibility study on exploiting the minerals on and under the Property,
and the mining and beneficiation of the minerals on and under the
Property.
6.2 Exploration Programs and Budgets.
The Company and Group Companies' exploration operations shall be
conducted, expenses shall be incurred, and assets shall be acquired
only pursuant to an approved exploration program and budget. The
Parties undertake to set the term of each exploration program and
budget so that the program runs over the same period as the Company's
financial year after completion of the First Expenditure Period or the
Second Expenditure Period (as the case may be).
6.3 Preparation of Exploration Programs and Budgets.
(a) Continental shall prepare "the Continental Exploration
Program" and submit its Continental Exploration Program to
18
each Director no later than forty-five (45) days after the end
of the existing Continental Exploration Program, for the
Directors' review and adoption in accordance with Section 6.4.
(b) The annual expenditure under a Continental Exploration Program
shall be at least US$1,000,000, except that if the expenditure
under the previous Continental Exploration Program exceeded the
budgeted expenditure amount, then the excess amount ("Excess
Amount") shall be credited toward such minimum US$1,000,000
budgeted annual expenditure for the subsequent Continental
Exploration Program. In the event that the budgeted expenditure
for a Continental Exploration Program is less than US$1,000,000,
then the shortfall shall nonetheless be budgeted for and
Continental shall in any case invest no less than US$1,000,000 in
Ordinary Shares of the Company except in the event where there is
an Excess Amount in which event the amount invested by Continual
shall be no less than the difference between US$1,000,000 and the
Excess Amount. Any amounts so invested shall be first used to
fund expenditure under a subsequent Continental Exploration
Program.
(c) Continental may elect to provide suitable engineering expertise
to the Company and Tianyuan, charged at the market rates
contemplated under the terms of the Continental Exploration
Program approved by the Board, and the Company and Tianyuan shall
engage personnel recommended by Continental to operate all the
engineering programs. Continental may elect to have the costs of
such provision of expertise be either (i) reimbursed to it by
Tianyuan or (ii) credited as Continental's expenditure incurred
in relation to the Property. The costing of such services shall
be approved as a separate budget item in accordance with Section
2.3. This Section shall apply mutatis mutandis to CTVH if it
proposes a CTVH Exploration Program.
6.4 Review and Adoption of Proposed Programs.
(a) Within fourteen (14) days of receipt of a proposed Continental
Exploration Program, each Director shall provide their
comments or proposed modifications to the proposed Continental
Exploration Program, if any, to Continental. Failure to
provide comments or modifications shall not preclude a
Director from voting for or against the adoption of a
Continental Exploration Program.
(b) No earlier than fourteen (14) days, but no later than
twenty-eight (28) days after submitting the proposed
Continental Exploration Program to the Directors, Continental
shall submit the Continental Exploration Program, as amended
in his sole discretion to take account of Directors' comments
and proposed modifications, to the Board.
(c) Within fourteen (14) days after receipt of the Continental
Exploration Program, the Board and the Tianyuan Board shall
convene in accordance with Sections 2.3 and 2.4 for the purpose
of reviewing and voting upon the Continental Exploration Program.
The Board shall give its written notice to all Shareholders as to
whether it has approved or rejected the Continental Exploration
Program. In the event that the Board approves the Continental
19
Exploration Program with the exception of the budget items
relating to services to be rendered by a Shareholder or its
Affiliates to the Company or a Group Company, the CEO will be
entitled to continue the operations of the Company in accordance
with such Continental Exploration Program excluding the
unapproved budget items and the Shareholders will meet to resolve
the outstanding budgetary items. Until such time that the
Shareholders resolve the outstanding budgetary items, the CEO
shall be entitled to incur expenditures for those items up to the
limit approved for those items under the previous Continental
Exploration Program having been approved by the Board.
(d) If the Board rejects the Continental Exploration Program, the
Shareholders shall meet within fourteen (14) days in order to
determine a new exploration program and budget and in the
event that the Shareholders are unable to agree on a new
exploration program and budget within twenty -eight (28) days
of the Board rejecting the Continental Exploration Program,
the matter shall be referred for arbitration in terms of
Section 15.10.
(e) Notwithstanding the foregoing, any Continental Exploration
Program may be approved and adopted by the unanimous written
consent of the Board.
6.5 In the event that Continental fails to submit or fund a Continental
Exploration Program in accordance with Section 6.3 upon expiry of the
First Expenditure Period (or if Continental exercises the Second Option
(as defined in the Option Agreement), then upon expiry of the Second
Expenditure Period), CTVH shall be entitled to submit the CTVH
Exploration Program no later than sixty (60) days after the end of the
existing exploration program and budget to the Board for approval and
Continental undertakes that it will approve and Continental will cause
the directors it designated to approve the CTVH Exploration Program if
it is in accordance with sound mining and applicable industry standards
and practices in China.
6.6 In the event that Continental:
(a) does not elect to fund the CTVH Exploration Program;
(b) elects to fund less than US$1,000,000 of the funding required
under the terms of the CTVH Exploration Program; or
(c) elects to fund less than its pro rata share of the CTVH
Exploration Program if that is less than US$1,000,000.
then CTVH shall be entitled to implement its proposed exploration
program according to the CTVH Exploration Program and CTVH may elect to
assume the operatorship, management and administration of the CTVH
Exploration Program. In the event that Tianyuan undertakes a CTVH
Exploration Program, the Board voting procedures as set out in Section
2.1(h) will apply.
6.7 In the event that Continental submits a Continental Exploration Program
in any period during which CTVH has assumed the operatorship,
management and administration under a CTVH Exploration Program, the
operatorship, management and administration of the exploration program
and budget under the Continental Exploration Program following the
expiration of the CTVH Exploration Program shall revert to Continental
20
and Continental shall have a casting vote for all matters before the
Board so long as Continental holds 50% or more of the shares of the
Company.
6.8 The provisions of Section 6.3 will apply mutatis mutandis to CTVH and
the provisions of 6.5 will apply mutatis mutandis to Continental if
CTVH's shareholding rises above 50%.
6.9 Program Review.
The progress of each Continental Exploration Program and each CTVH
Exploration Program adopted by the Board shall be reviewed at least
quarterly at meetings of the Board.
SECTION 7 COMPANY ANNUAL BUDGETS
7.1 Company Annual Budgets.
The Company's operations shall be conducted, expenses shall be
incurred, and assets shall be acquired only pursuant to an approved
annual budget which shall include on a consolidated basis the Tianyuan
Annual Budget approved in terms of Section 8 or the Continental
Exploration Budget or CTVH Exploration Budget (as the case may be)
approved in terms of Section 6. The annual budget shall include a
two-year rolling forecast.
7.2 Preparation of the Company Annual Budget.
The CEO shall on an annual basis prepare and submit a proposed Company
Annual Budget to each Director no later than forty-five (45) days
before the end of the current financial year, for the Directors' review
in accordance with Section 7.3. The provision of services by a
Shareholder or its Affiliates to the Company or a Group Company and the
costing of such services shall be approved as separate budget items in
accordance with Section 2.3.
7.3 Review and Adoption of Company Annual Budget.
(a) Within fourteen (14) days of receipt of a proposed Company
Annual Budget, each Director shall provide their comments or
proposed modifications to the proposed Company Annual Budget,
if any, to the CEO. Failure to provide comments or
modifications shall not preclude a Director from voting for or
against the adoption of a Company Annual Budget.
(b) No earlier than fourteen (14) days, but no later than twenty
-eight (28) days after submitting the proposed Company Annual
Budget to the Directors, the CEO shall submit the Company
Annual Budget, as amended in his sole discretion to take
account of Directors' comments and proposed modifications, to
the Board.
21
(c) Within fourteen (14) days after receipt of the Company Annual
Budget, the Board shall convene for the purpose of reviewing and
voting upon the Company Annual Budget. The Board shall give
written notice to all Shareholders as to whether it has approved
or rejected the Company Annual Budget. In the event that the
Board approves the Company Annual Budget with the exception of
the budget items relating to services to be rendered by a
Shareholder or its Affiliates to the Company or a Group Company,
the CEO will be entitled to continue the operations of the
Company in terms of the Company Annual Budget, excluding the
unapproved budgetary items, and the Shareholders will meet to
resolve the outstanding budgetary item. The CEO may incur
expenditure for unapproved budget items if such budget items were
approved in the previous year's Company Annual Budget having been
approved by the Board.
(d) If the Board rejects the Company Annual Budget, the Shareholders
shall meet within fourteen (14) days in order to determine a new
Company Annual Budget and in the event that the Shareholders are
unable to agree on a new Company Annual Budget within twenty
-eight (28) days of the Board rejecting the Company Annual
Budget, the CEO shall be entitled to operate the Group Companies
under the terms of the then existing approved Company Annual
Budget until such time as the Board approves a new Company Annual
Budget.
SECTION 8 TIANYUAN ANNUAL BUDGETS
8.1 Tianyuan Annual Budgets.
Tianyuan's operations shall be conducted, expenses shall be incurred,
and assets shall be acquired only pursuant to an approved annual
budget. During the period that the Company operates under either a
Continental Exploration Program or a CTVH Exploration Program (as the
case may be), the Continental Exploration Program or a CTVH Exploration
Program (as the case may be) shall be the deemed to be the Tianyuan
Annual Budget. The annual budget shall include a two year rolling
forecast.
8.2 Preparation of the Tianyuan Annual Budget.
The General Manager shall on an annual basis prepare and submit a
Tianyuan Annual Budget to each Tianyuan Director no later than sixty
(60) days before the end of the current financial year, for the
Tianyuan Directors' review in accordance with Section 8.3. Continental
may elect to provide suitable engineering expertise, charged at market
related rates, as agreed in terms of the annual exploration budget and
program approved by the Board, to the Company and Tianyuan, and the
Company and Tianyuan shall engage personnel recommended by Continental
to operate such engineering programs. Continental may elect to have the
costs of such provision of expertise be either (i) reimbursed to it by
Tianyuan or (ii) credited as Continental's expenditure incurred in
22
relation to the Property. The costing for such services shall be
approved as separate budget items in accordance with Section 2.3. This
Section 8.2 shall apply mutatis mutandis to CTVH if it proposes a CTVH
Exploration Program.
8.3 Review and Adoption of Tianyuan Annual Budget.
(a) Within fourteen (14) days of receipt of a proposed Tianyuan
Annual Budget, each Tianyuan Director shall provide their
comments or proposed modifications to the proposed Tianyuan
Annual Budget, if any, to the General Manager. Failure to
provide comments or modifications shall not preclude a
Tianyuan Director from voting for or against the adoption of a
Tianyuan Annual Budget.
(b) No earlier than fourteen (14) days, but no later than twenty
-eight (28) days after submitting the proposed Tianyuan Annual
Budget to the Tianyuan Directors, the General Manager shall
submit the Tianyuan Annual Budget, as amended in his sole
discretion to take account of the Tianyuan Directors' comments
and proposed modifications, to the Tianyuan Board.
(c) Within fourteen (14) days after receipt of the Tianyuan Annual
Budget, the Tianyuan Board shall convene for the purpose of
reviewing and voting upon the Tianyuan Annual Budget. In the
event that the Board approves the Tianyuan Annual Budget with the
exception of the budget items relating to services to be rendered
by a Shareholder or its Affiliates to the Company or a Group
Company, the General Manager will be entitled to continue the
operations of the Company in terms of the Tianyuan Annual Budget
and the Shareholders will meet to resolve the outstanding
budgetary item. The General Manager may incur expenditure for
unapproved budget items up to the limit approved for such items
in the previous year's Tianyuan Annual Budget having been
approved by the Tianyuan Board.
(d) If the Tianyuan Board rejects the Tianyuan Annual Budget, the
Shareholders shall meet within fourteen (14) days in order to
determine a new Tianyuan Annual Budget and in the event that
the Shareholders are unable to agree on a new Tianyuan Annual
Budget within twenty -eight (28) days of the Tianyuan Board
rejecting the Tianyuan Annual Budget, the General Manager
shall be entitled to operate Tianyuan under the terms of the
then existing approved Tianyuan Annual Budget until such time
as the Tianyuan Board approves a new Tianyuan Annual Budget
SECTION 9 FUNDING OF THE COMPANY
9.1 Continental having completed its investment into the Company in
connection with the First Option or Second Option (as the case may be)
as provided in the Option Agreement, the Board may from time to time by
simple majority resolution determine that the Company requires
additional funding in accordance with a Company Annual Budget having
been approved by the Board. The then Shareholders of Company shall have
first right to supply such additional funding.
9.2 In the event that the Board determines by simple majority resolution
that the Company requires additional funding in accordance with the
terms of an approved Company Annual Budget, the Shareholders shall
agree to make either equity contributions or shareholders loans to
23
Company. If the Shareholders cannot reach agreement on the form of
funding, the funding will be in the form of shareholders equity and the
Company shall undertake an issuance of Ordinary Shares to permit such
funding.
9.3 Pre-emptive Right.
The Company hereby grants to each Shareholder a right of first refusal
to subscribe for its pro rata share of any such increase in
shareholders equity capital that the Company may, from time to time,
propose. A Shareholder's "pro rata share", for purposes of this
pre-emptive right, shall be determined according to the number of
Ordinary Shares owned by such Shareholder immediately prior to the
issuance of the Ordinary Shares in relation to the total number of
Ordinary Shares outstanding immediately prior to the issuance of the
Ordinary Shares. Each Shareholder shall have a right of over-allotment
such that, if any Shareholder fails to exercise its right hereunder to
subscribe for its pro rata share of the increase in shareholders equity
capital, the other Shareholders may subscribe for the non-subscribing
Shareholder's portion on a pro rata basis in accordance with Section
9.4 below.
9.4 Issuing Of Ordinary Shares: Procedures.
(a) First Participation Notice.
In the event that the Company proposes to undertake an
issuance of Ordinary Shares, it shall give to each Shareholder
Notice indicating its intention to issue Ordinary Shares,
describing the amount of shareholders' equity that the Company
proposes to raise and the general terms upon which the Company
proposes to issue such Ordinary Shares ("First Participation
Notice"). Each Shareholder shall have thirty (30) Business
Days from the date of receipt of any such First Participation
Notice to agree in writing to subscribe for such Shareholder's
pro rata share of such shareholders equity upon the terms and
conditions specified in the First Participation Notice by
giving written notice to the Company and stating in such
notice the quantity of shareholders equity to be subscribed
for (not to exceed such Shareholder's pro rata share). If any
Shareholder fails to so agree in writing within such thirty
(30) Business Day period to subscribe for such Shareholder's
full pro rata share of the shareholders' equity, then such
Shareholder shall forfeit the right hereunder to subscribe for
that part of its pro rata share of such shareholders equity
that it did not so agree to subscribe.
(b) Second Participation Notice; Oversubscription.
If any Shareholder fails to exercise its rights under the
First Participation Notice in full in accordance with
subsection (a) above, the Company shall promptly give each
Shareholder that has exercised its rights under the First
Participation Notice in full ("Participating Shareholder") a
Second Participation Notice indicating the amount of
shareholders equity remaining available for subscription. Each
such Participating Shareholder shall have five (5) Business
24
Days from the date of receipt of the Second Participation
Notice to elect by written notice to the Company to subscribe
for that portion of the remaining shareholders' equity equal
to the proportion that the number of Ordinary Shares held by
such Participating Shareholder bears to the total number of
Ordinary Shares held by all Participating Shareholders who
wish to subscribe for the remaining shareholders' equity. If
the shareholders equity made available for subscription is not
fully subscribed for by the Shareholders following issuance of
the Second Participation Notice, the Board may invite
investors who are not Shareholders to subscribe for the
shareholders equity still available for subscription, subject
to the investors being acceptable to the Shareholders and
becoming party to this Agreement in accordance with Section
15.5(b).
9.5 Failure to Exercise.
In the event that the Shareholders together fail to subscribe for all
the Ordinary Shares offered in terms of Section 9.4, the Company may
reduce the amount of Ordinary Shares to be subscribed for to an amount
equal to the amount subscribed, or it may offer any unsubscribed
Ordinary Shares to third parties approved by the holder of a majority
of Ordinary Shares upon terms not more favorable to the third parties
than specified in the First Participation Notice. In the event that the
Company has not issued and sold such Ordinary Shares within ninety (90)
days after the Shareholders receipt of the First Participation Notice,
then the Company shall not thereafter issue or sell any Ordinary Shares
without again first offering such Ordinary Shares to the Shareholders
pursuant to Section 9.4.
9.6 Timing of Subscription.
The payment for Ordinary Shares by Shareholders pursuant to this
Section 9.6 shall occur no later than the time stipulated by the Board,
provided, however, that the Board shall not require payment earlier
than thirty (30) days following the Shareholders' receipt of the First
Participation Notice (or the Second Participation Notice, if such is
given).
9.7 Termination.
The right of each Shareholder under this Section 9 shall terminate upon
such Shareholder ceasing to hold any Ordinary Shares.
9.8 Board Voting for New Issuance of Shares.
Where CTVH and Continental subscribe the shares to be issued in
accordance with the above, the new issuance of shares shall be approved
by the Board with a simple majority.
9.9 Formula for Issuance of New Shares by Company.
(a) If Continental has exercised the First Option but not the Second
Option under the Option Agreement:
(i) Determination of Shareholders Interest.
CTVH's shareholders interest = A divided by (A plus
25
B), expressed as a percentage.
Continental's shareholders interest = B divided by (A
plus B), expressed as a percentage.
Where:
A = The aggregate amount of contributions,
including share capital and surplus, to the
Company, expressed as a US$ amount after
Continental has completed its required
expenditure in relation to the First Option,
if any, plus US$5,000,000 as a deemed amount
for the purpose of calculating CTVH's
shareholders interests, less subscription
monies paid to acquire CTVH's pro rata
number of shares in relation to the First
Option.
B = the aggregate amount of contributions,
including share capital and surplus, to the
Company, expressed as a US$ amount, after
Continental has completed its required
expenditure in relation to the First Option
if any, plus US$5,000,000.
(ii) Determination of number of shares to be issued.
The Company will issue at par the number of shares
required to equate the shareholding of the
Shareholders with their respective shareholders
interests as calculated above and the balance of the
subscription price will be allocated to the surplus
account of the Company.
An example calculation is appended as Schedule C.
In the event that the Company has Shareholders other than
Continental and CTVH, the formula will be amended to include
such other Shareholders.
(b) If Continental has exercised the Second Option under the
Option Agreement and has completed its expenditure under the
Second Option, then:
(i) Determination of Shareholders Interest.
CTVH's shareholders interest = A divided by (A plus
B), expressed as a percentage
Continental's shareholders interest = B divided by (A
plus B), expressed as a percentage.
Where:
A = The aggregate amount of contributions,
including share capital and surplus, to the
Company, expressed as a US$ amount after
Continental has completed its required
expenditure in relation to the Second
Option, if any, plus US$5,333,330 as a
deemed amount for the purpose of calculating
26
CTVH's shareholders interests, less
subscription monies paid to acquire ABC's
pro rata number of shares in relation to the
First and Second Option.
B = the aggregate amount of contributions,
including share capital and surplus, to the
Company, expressed as a US$ amount, after
Continental has completed its required
expenditure in relation to the Second
Option, if any, plus US$8,000,000.
(ii) Determination of number of shares to be issued.
----------------------------------------------
The Company will issue at the nominal value the
number of Ordinary Shares required to equate the
shareholding of the parties with their respective
shareholders interests as calculated above and the
balance of the subscription price will be allocated
to the surplus account of the Company.
An example calculation is appended as Schedule C.
In the event that the Company has Shareholders other than Continental
and CTVH, the formula will be amended to include such other
Shareholders.
9.10 Bank Accounts.
The Group Companies shall from time to time open an account or accounts
with such bank or banks as the Board may determine, such accounts to be
maintained in the name of the relevant Group Company. All monies from
time to time received by, or on account of, the Group Companies shall
be deposited forthwith preferably by electronic transfer in such Group
Company accounts and all disbursements on account of the Group
Companies shall be drawn upon such Group Company account or accounts.
Such persons as may from time to time be designated by resolution of
the Board, may draw cheques in the name of the Group Companies and may
sign, endorse and accept in the name of the Group Companies, any bills,
notes, cheques, drafts or other instruments for the purpose of the
Business of the Group Companies, subject to such restrictions as may
from time to time be prescribed by the Board.
SECTION 10 MANAGEMENT STRUCTURES
10.1 The Company shall have a management organization that is under the
leadership of the CEO, who shall be an individual nominated by the
Shareholder holding the largest number of Ordinary Shares of the
Company and appointed by the Board. In the event that Tianyuan is
operating a CTVH Exploration Program, CTVH shall have the right to
remove and nominate the CEO.
10.2 The Company shall cause Tianyuan to set up a management organization
that is under the leadership of the General Manager, who shall be an
individual nominated by the CEO of the Company and appointed by the
Tianyuan Board by simple majority vote.
10.3 In the event that Tianyuan is operating a CTVH Exploration Program,
CTVH shall have the right to remove any of the personnel of Tianyuan
27
and appoint replacement personnel for the duration of the CTVH
Exploration Program.
SECTION 11 CERTAIN COVENANTS
11.1 Covenants of the Company.
(a) Accounting; Financial Statements and Other Information;
Inspection Rights.
The Company covenants to the each of the Shareholders as follows:
(i) Accounting. The Company shall maintain and cause each
Group Company to keep complete accounts and records,
maintain a system of accounting established and admini-
stered in accordance with GAAP, and shall set aside on
its books and cause each Group Company to set aside on
its books, all such proper reserves as shall be
required by GAAP and the Board. The Company shall
engage an international firm of auditors to audit its
accounts and annual financial statements and to prepare
an audit report and KPMG shall be the initial auditors
of the Company appointed by the Board.
(ii) Financial Statements and Other Information.
The Company shall deliver to the Shareholders and the
Selecting Shareholder (as the case may be), promptly
after the period covered thereby, and in any event
within ninety (90) days thereafter, annual audited
financial statements of the Company and each Group
Company, prepared in accordance with GAAP and
certified by an independent reputable international
certified public accounting firm or an Affiliate
thereof approved by the Board.
The Company shall deliver to the Shareholders then
holding more than ten percent (10%) of the
outstanding Ordinary Shares:
(A) promptly after the period covered thereby,
and in any event within thirty (30) days
thereafter, quarterly unaudited financial
statements of the Company and each Group
Company, prepared in accordance with GAAP,
(B) monthly operational and management reports
or reviews detailing key operational
performance indicators of the Company and
each Group Company within thirty (30) days
after the end of each month,
(C) copies of any resolutions, minutes or
written consents of the Board or committees
of the Company (or similar bodies for any
Group Company), or the Shareholders of the
28
Company or any Group Company, in each case
within fourteen (14) days following the date
of the applicable meeting or within five (5)
days following the complete execution of the
unanimous written consent,
(D) no later than thirty (30) days before the
commencement of each financial year, the
Company Annual Budget for the upcoming
financial year of the Company and each Group
Company,
(E) general communications from the Company or
any Group Company to its shareholders,
directors or the public at large,
(F) reports or other materials filed by the
Company or any Group Company with any
Governmental Authority;
(G) notice of any material adverse event, condi-
tion or litigation affecting the Company or
any Group Company,
(H) such other information and copies of
documents concerning the business and
operations of the Company or any Group
Company as the Shareholder may request
including without limitation, information
and returns on Taxes, Governmental Approvals
and Consents; and
(I) any information that such Shareholder
reasonably requests in connection with any
domestic or foreign tax or other
governmental filing to be made by such
Shareholder or its Affiliates, provided that
such Shareholder reimburses the Company for
the incidental out-of-pocket costs incurred
by the Company in preparing and delivering
any such information (including reasonable
costs in respect of the Company's own
personnel and facilities).
(iii) Inspection Rights.
The Company shall permit any representative
designated by any Shareholder holding no less than
ten percent (10%) of the outstanding Ordinary Shares
of the Company, at such Shareholder's expense, to
visit and inspect any of the properties or assets of
the Company or any Group Company, including its and
their books of account (and to make copies thereof
and to take extracts therefrom), and to discuss its
and their affairs, Taxes, finances and accounts with
its and their officers or employees, all at such
reasonable times and as often as may be reasonably
requested; provided, however, that such rights shall
be exercised in a manner so as not to materially and
adversely disrupt the ordinary course of business of
the Company or any Group Company.
The Company shall permit any international accounting
firm designated by the Selecting Shareholder, at the
Selecting Shareholder's expense, to inspect the books
of account of the Company or any Group Company (and
to make copies thereof and to take extracts
29
therefrom), all at such reasonable times and as often
as may be reasonably requested; provided, however,
that such rights shall be exercised in a manner so as
not to materially and adversely disrupt the ordinary
course of business of the Company or any Group
Company.
(b) Insurance.
The Company shall, and shall cause each Group Company to
maintain or cause to be maintained, with financially sound and
reputable insurers, insurance with respect to their properties
and business against loss or damage of the kinds customarily
insured against by corporations of established reputation
engaged in the same or similar business in the country or
countries in which each of the Company and the Group Company
conducts its business, in such amounts as are customarily
carried under similar circumstances by such other corporations
in such countries. In addition, the Company shall maintain with
sound and reputable insurers, insurance with respect to actions
of the Board and the officers of the Company in amounts and
with insurance carriers satisfactory to Shareholders.
30
(c) Disclosure and Cooperation with Respect to Transfers.
Upon the request of any Shareholder, the Company shall:
(i) promptly supply to such Shareholder or its third party
transferees permitted hereunder, all information
regarding the Company required to be delivered in
connection with such transfer, if applicable, provided
that such transferee enters into a reasonable and
customary confidentiality agreement with respect to such
information; and
(ii) otherwise cooperate and take all other actions as
reasonably requested by such Shareholder in connection
with any transfer.
(d) Compliance with Applicable Laws; Maintenance of Governmental
Approvals.
(i) The Company shall (and shall cause each Group Company
to) comply at all times in all material respects with
all Applicable Laws applicable to the Company or any
Group Company.
(ii) The Company shall, and shall cause each Group Company,
as applicable, to:
(1) keep in full force and effect all such Govern-
mental Approvals and Consents, that may be
required for:
(a) the carrying on of its business and
the business of each Group Company,
in each case as it is presently
carried on and is contemplated to be
carried on, and
(b) the exercise by any Shareholders of
its rights and remedies under any of
such agreements to which it is a
party.
(2) obtain any other Governmental Approvals and
Consents required to be obtained, as soon as
such Governmental Approvals and Consents
become necessary.
SECTION 12 TERMINATION OF AGREEMENT
12.1 This Agreement shall terminate with respect to each Shareholder at the
time at which such Shareholder ceases to own any Ordinary Shares of the
Company, except that such termination shall not affect:
(a) rights perfected or obligations incurred by such Shareholder
under this Agreement prior to such termination, and
(b) obligations expressly stated to survive such cessation of
ownership of any Ordinary Shares of the Company.
31
SECTION 13 REPRESENTATIONS AND WARRANTIES
13.1 Representations and Warranties of the Warrantors.
The Warrantors hereby jointly and severally represent and warrant to
Continental that on the date of this Agreement:
(a) Each of the Group Companies, the Company, Tianyuan and CTVH is
a company duly organized, validly existing and in good
standing under the laws of the jurisdiction of its
incorporation;
(b) Each of the Warrantors and the Group Companies has full power
and authority, and has obtained all necessary consents and
approvals to enter into this Agreement and to exercise its
rights and perform its obligations under this Agreement. All
corporate and other actions required to authorize the
execution and delivery of this Agreement and the performance
of the obligations in this Agreement has been duly taken by
the Warrantors and the Group Companies.
(c) Each of the Warrantors has full capacity to enter into this
Agreement.
(d) Neither the execution and delivery of this Agreement, nor any
of the agreements referred to herein or contemplated hereby,
nor the consummation of the transactions hereby contemplated
conflict with, result in the breach of, or accelerate the
performance required by, any agreement to which each of the
Warrantors is a party;
(e) The execution and delivery of this Agreement and the
agreements contemplated hereby by the Warrantors will not
violate or result in the breach of the laws of any
jurisdiction applicable or pertaining to the Warrantors (as
the case may be) or their respective constitutional documents
(as the case may be);
(f) This Agreement constitutes a legal, valid and binding obliga-
tion of each of the Warrantors.
13.2 Representations and Warranties of Continental.
Continental hereby represents and warrants to CTVH, the Company,
Tianyuan, and WZ that on the date of this Agreement:
(a) It is a company duly organized, validly existing and in good
standing under the laws of the province of British Columbia;
(b) It has full power and authority to carry on its business and
to enter into this Agreement and any agreement or instrument
referred to or contemplated by this Agreement;
32
(c) Neither the execution and delivery of this Agreement, nor any
of the agreements referred to herein or contemplated hereby,
nor the consummation of the transactions hereby contemplated
conflict with, result in the breach of, or accelerate the
performance required by, any agreement to which it is a party;
(d) The execution and delivery of this Agreement and the
agreements contemplated hereby by it will not violate or
result in the breach of the laws of any jurisdiction
applicable or pertaining to it or of its constitutional
documents; and
(e) This Agreement constitutes a legal, valid and binding obliga-
tion of Continental.
13.3 Survival.
The representations and warranties in this Section 13 are conditions on
which the Parties have relied in entering into this Agreement and shall
survive until the termination of this Agreement. The Parties confirm
for the avoidance of doubt that no Party may make a claim against
another Party for a breach of any representation or warranty in this
Section 13 if such breach has no adverse effect on the benefits, rights
or interests of the Party entitled to make a claim.
SECTION 14 OBLIGATIONS AND LIABILITY OF WZ
14.1 Obligations.
WZ shall actively assist Continental, the Company, Group Companies and
Tianyuan to apply for and maintain the Governmental Approvals and other
approvals, registrations, licenses, permits, authorizations and support
necessary or desirable in order for the Company and Tianyuan to
undertake the exploration and development of the Property and for
Continental to participate in those activities. The parties confirm for
the avoidance of doubt that by agreeing to provide his active
assistance, WZ does not guarantee to the other parties that such
Government Approvals or such other approvals, registrations, licenses,
permits, authorizations and support will be available.
14.2 Liability.
WZ's hereby agrees that he shall be liable to Continental for any
breach of any representation or warranty under Section 13.1 and such
aggregated liability under Section 13.1 shall not exceed USD$2,000,000.
Unless terminated earlier by the relevant provision(s) of this
Agreement, WZ's liability to Continental under Section 13.1 shall be
terminated two years from the date of this Agreement.
33
SECTION 15 MISCELLANEOUS
15.1 Area of Interest.
Continental, CTVH and WZ agree that if any of them either becomes aware
of any interests in any mineral properties within 10 kilometres of the
perimeter of the Property that may be available for purchase, or if it
actually makes a purchase of such interests, that any such interests
will first be offered to Tianyuan for purchase at that party's cost of
acquisition as paid or payable to a third party, with the decision as
to whether Tianyuan should purchase the interest being at the sole
discretion of the Tianyuan Board. The Tianyuan Board shall make a
decision whether to purchase such interests within twenty (20) days
after Tianyuan is offered to purchase such interests. The directors
appointed by the party (or the party itself if it is a director) shall
abstain from voting on the acquisition of the mineral property in
question. If the Tianyuan Board cannot make a decision within such time
period, Tianyuan shall be deemed to have waived the right to purchase
such interests.
15.2 Laws, Customs and Traditions in Tibet.
Each Party acknowledges that it will comply with all laws and
regulations applicable in Tibet.
The Parties shall make reasonable efforts to cause their employees to
comply with the laws and regulations applicable in Tibet, and not to
engage in any activities, or spread any information, while in Tibet
that may reasonably be expected to adversely affect Tibet's political
stability or national harmony or to offend Tibet's customs and
traditions. Such efforts will include:
(a) Training employees on the laws and regulations applicable in,
and the customs and traditions of, Tibet and the standards of
behavior to be maintained while working in Tibet. CTVH shall
assist Continental to prepare and deliver the training;
(b) To the extent allowed by law, providing in all employment
agreements that the employer has the right to terminate the
employment of any employee who commits a serious breach of
such standards of behavior;
(c) To the extent allowed by law, terminating the employment of
employees who commit a serious breach of such standards of
behavior, provided that the Company has received notice of
such breach from the public security bureau or other
government department with authority over the employee.
If any Party breaches the requirements of this Section 15.2, it must
commence to remedy the breach on receipt of notice of such breach and
complete remedy of the breach within one year of receiving the notice
of such breach, as well as use its reasonable endeavors to mitigate
the damages.
15.3 Notices.
All notices, requests, demands, approvals, consents, waivers or other
communications required or permitted to be given hereunder (each, a
"Notice") shall be in writing and shall be (a) personally delivered,
(b) transmitted by telecopy facsimile, provided that the original copy
thereof also is sent by pre-paid, first class, certified or registered
34
mail or by next-day or overnight mail or courier or by an
internationally recognized express delivery service, (c) sent by first
class, registered or certified mail or by next-day or overnight mail or
courier return receipt requested, postage and charges prepaid, or (d)
delivered by an internationally recognized express delivery service
with all postage and charges prepaid:
(a) if to any Shareholder, at the address set forth on the Registry
of Members of the Company, or at such other address as the
Shareholder may specify in a Notice to the Company; and
(b) if to the Company, at Suite 1020 - 000 Xxxx Xxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx, X0X 0X0, Fax: (1 604)
684-8092 or at such other address as may have been furnished by
the Company in a Notice to the other Parties.
Any Notice shall be deemed effective or given upon receipt (or refusal
of receipt).
15.4 Confidentiality.
(a) Disclosure of Terms.
Confidential Information, including the existence of such
Confidential Information, shall not be disclosed by any Party
to any third party during the term of this Agreement and for
two (2) years thereafter, except in accordance with the
provisions set forth below.
(b) Permitted Disclosures.
Notwithstanding the foregoing any Party may disclose any of
the Confidential Information to its (i) respective employees,
contractors and advisors where such disclosure of Confidential
Information is required for such Party to undertake the
activities contemplated by this Agreement, or (ii) current or
bona fide prospective investors, employees, investment
bankers, lenders, accountants and attorneys, in each case only
where such persons or entities are under appropriate
nondisclosure obligations;
(c) Legally Compelled Disclosure.
In the event that any Party is requested or becomes legally
compelled (including without limitation, pursuant to
securities laws and regulations) to disclose the existence of
this Agreement or any of the Confidential Information in
contravention of the provisions of this Section 15.4, such
Party shall provide the other parties with prompt written
notice of that fact so that the appropriate Party may seek
(with the cooperation and reasonable efforts of the other
Parties) a protective order, confidential treatment or other
appropriate remedy. In such event, the Party disclosing
Confidential Information shall furnish only that portion of
the information that is legally required and shall exercise
reasonable efforts to obtain reliable assurance that
confidential treatment will be accorded such information to
the extent reasonably requested by any such other
non-disclosing Party.
35
(d) Relief.
The Group Companies and Shareholders acknowledge that monetary
damages may not be a sufficient remedy for an unauthorized
disclosure of Confidential Information and that in the event
of such disclosure by any Party to this Agreement, the other
Party shall be entitled, without waiving any other rights or
remedies, to seek injunctive relief or similar judicial or
administrative remedies.
15.5 Binding Effect; Assignment.
(a) Assignment. Except as otherwise provided in this Agreement,
the rights of each Shareholder shall be transferred to any
person who acquires shares of the Company in a Permitted
Transfer, and who becomes a "Shareholder" hereunder pursuant
to their execution of an Adherence Agreement. Any such
transferee shall receive such assigned rights subject to all
the terms and conditions of this Agreement, including without
limitation the provisions of this Section 15.5.
(b) Adherence Agreement. Any Shareholder Transferring Ordinary Shares
of the Company shall procure that the transferee shall execute
and deliver to the Company an Adherence Agreement substantially
in the form and substance attached hereto as Schedule A, thereby
assuming the rights and obligations of such Shareholder under
this Agreement. Upon the execution and delivery of an Adherence
Agreement by any transferee, such transferee shall be deemed to
be a Shareholder hereunder. By their execution hereof, each of
the Parties appoints the Company as its attorney-in-fact for the
limited purpose of executing any Adherence Agreement which may be
required to be delivered pursuant to this Section 15.5(b).
15.6 Severability.
Should any Section or any part of a Section within this Agreement be
rendered void, invalid or unenforceable by any court of law for any
reason, such invalidity or unenforceability shall not void or render
invalid or unenforceable any other Section or part of a Section in this
Agreement.
15.7 Amendments.
Except as otherwise provided in this Agreement, any provision of this
Agreement may be amended only with the written consent of the Company,
Tianyuan and the Shareholders. The observance of any provision of this
Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively) as to any Party only with
the written consent of that Party and any Party may waive any of its
rights hereunder without obtaining the consent of any other Party. Any
amendment or waiver effected in writing in accordance with this Section
15.7 shall be binding upon the Company, Tianyuan, each Shareholder, and
their respective successors in interest.
36
15.8 Entire Agreement.
This Agreement, together with all schedules and exhibits hereto, which
are hereby expressly incorporated herein by this reference, constitute
the entire understanding and agreement between the Parties with regard
to the subjects hereof.
15.9 Delays or Omissions.
No delay or omission to exercise any right, power or remedy accruing to
any Party hereto upon any breach or default of any other Party hereto
under this Agreement, shall impair any such right, power or remedy of
the aggrieved Party nor shall it be construed to be a waiver of any
such breach or default, or an acquiescence therein, or of any similar
breach of default thereafter occurring; nor shall any waiver of any
other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the
part of any Party hereto of any breach of default under this Agreement
or any waiver on the part of any Party hereto of any provisions or
conditions of this Agreement, must be in writing and shall be effective
only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, or by law or otherwise afforded
to the parties shall be cumulative and not alternative
15.10 Dispute Resolution.
The Parties agree to negotiate in good faith to resolve any dispute
between them regarding this Agreement. If the negotiations do not
resolve the dispute to the reasonable satisfaction of all Parties
within thirty (30) days after one Party has given notice to the others
requesting such negotiations, then such dispute shall be settled by
arbitration in accordance with the UNCITRAL Rules as at present in
force, as amended by the following provisions:
(a) The appointing authority shall be the Hong Kong International
Arbitration Centre (the "HKIAC").
(b) The place of arbitration shall be in Hong Kong at the HKIAC.
(c) There shall be only one arbitrator chosen by the Parties by
agreement in accordance with the UNCITRAL Rules, provided that
if they do not reach agreement on the choice of a sole
arbitrator, then three arbitrators shall be appointed in
accordance with the UNCITRAL Rules. The sole or presiding
arbitrator shall not be a citizen of any of Canada, United
States of America and People's Republic of China.
(d) Any such arbitration shall be administered by the HKIAC in
accordance with the HKIAC Procedures for Arbitration in force
at the date of this Agreement including such additions to the
UNCITRAL Rules as are therein contained.
(e) The language to be used in the arbitral proceedings shall be
English.
(f) CTVH and Continental shall each submit to the arbitrators in
writing a description of the facts relating to, and a
requested remedy for, the dispute. The arbitrators shall
select between the remedy requested by CTVH and that requested
37
by Continental and it shall award the entire remedy selected
and only that remedy. In no event may the arbitrators issue an
award that provides a remedy less than, more than, or in any
other way different from the Party-requested remedy that the
arbitrators have selected.
(g) The arbitration award shall be final and binding on the Parties.
38
15.11 Force Majeure.
A Party shall not be deemed in default of this Agreement to the extent
that performance of its obligations or attempts to cure any breach are
delayed, restricted or prevented by reason of any acts of God, war,
civil strife, fire, natural disaster, acts of terrorism, acts of
government, strikes or labor disputes, inability to obtain on
reasonably acceptable terms any public or private license, permit or
other authorization, delay or failure by suppliers or transporters of
materials, parts, supplies, services or equipment, or any other act or
condition beyond the reasonable control of the Parties provided that
the affected Party gives the other Party written notice thereof and
uses its best efforts to cure the delay. In the event that any act of
force majeure prevents any Party from carrying out its obligations
under this Agreement for a period of more than six months (or such
other period as may be agreed by the Parties), the other Parties may
terminate this Agreement without liability upon thirty (30) days'
notice.
15.12 Supremacy of this Agreement.
(a) The provisions of this Agreement shall take precedence over
the Restated Articles and in the event of any conflict between
the Restated Articles and this Agreement, the provisions of
this Agreement will prevail.
(b) The Shareholders agree that operation of any provision of the
Restated Articles which may from time to time conflict with
this Agreement shall be deemed to be suspended during the
subsistence of this Agreement.
(c) In the event of any conflict between the Articles and this
Agreement, upon written request by any Shareholder, the
Parties undertake to procure an amendment of the Restated
Articles to eliminate such inconsistency, and the Shareholders
undertake irrevocably to vote, or execute written consents, to
effect any such amendment.
15.13 Legal Fees.
In the event of any action at law, suit in equity or arbitration
proceeding in relation to this Agreement or the rights conferred
hereunder, the Parties shall be responsible for each Party's respective
attorney's fees and out-of-pocket expenses incurred in relation to the
above mentioned action at law, suit in equity or arbitration
proceeding.
15.14 Language of Performance.
All notices, communications, and proceedings relating to this Agreement
and the exercise or performance of the Parties' respective rights and
duties hereunder shall be in the English language.
15.15 Further Assurances.
Each Party shall from time to time and at all times hereafter make, do,
execute, or cause or procure to be made, done and executed such further
acts, deeds, conveyances, consents and assurances without further
39
consideration, which may reasonably be required to effect the
transactions contemplated by this Agreement.
15.16 Captions and Section Headings.
Section titles or captions contained in this Agreement are inserted as
a matter of convenience and for reference purposes only, and in no way
define, limit, extend or describe the scope of this Agreement or the
intent of any provision hereof.
15.17 Schedules.
The schedules attached hereto are hereby incorporated into this
Agreement and are an integral part of this Agreement.
15.18 Counterparts.
This Agreement may be executed (including by facsimile transmission)
with counterpart signature pages or in one or more counterparts, each
of which shall be deemed an original and all of which together shall be
considered one and the same agreement.
15.19 Shares Subject to this Agreement.
This Agreement shall apply to (a) the Ordinary Shares held by the
parties hereto, as well as any Ordinary Shares hereafter acquired by
any such party, and (b) any and all shares in the capital of the
Company which may be issued in respect of, exchanged for, or
substituted for Ordinary Shares, by reason of any stock dividend,
split, reverse split, combination, reclassification, merger,
recapitalization, share exchange or other transaction.
15.20 Governing Law.
This Agreement shall be governed by the laws of British Columbia,
Canada without giving effect to any choice of law rule that would cause
the application of the laws of any jurisdiction other than the laws of
British Columbia, Canada to the rights and duties of the Parties.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
HIGHLAND MINING INC.
By:
-----------------------------------
Name:
Title:
40
TIBET TIANYUAN MINERALS EXPLORATION LIMITED
By:
-----------------------------------
Name:
Title:
CONTINENTAL MINERALS CORPORATION
By:
-----------------------------------
Name:
Title:
CHINA NETTV HOLDINGS INC.
By:
-----------------------------------
Name:
Title:
Xxxx Xxx
41
SCHEDULE A
ADHERENCE AGREEMENT
This Adherence Agreement ("Adherence Agreement") is executed by the
undersigned (the "Transferee") pursuant to the terms of that certain
Shareholders Agreement dated as of _____________, 2004 (the "Agreement") by and
among Highland Mining Inc. (the "Company"), Tibet Tianyuan Minerals Exploration
Limited and certain of its shareholders, and is in consideration of the shares
purchased by the Transferee and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged. Capitalized terms used
but not defined in this Agreement shall have the respective meanings ascribed to
such terms in the Agreement. By the execution of this Adherence Agreement, the
Transferee agrees as follows:
1. Acknowledgment. Transferee acknowledges that Transferee is acquiring
[number] of ordinary shares of the Company (the "Shares") from [name of
transferor] (the "Transferor"), subject to the terms and conditions of the
Agreement.
2. Agreement. Immediately upon transfer of the Shares, Transferee (i)
agrees that the Shares acquired by Transferee shall be bound by and subject to
the terms of the Agreement applicable to the Transferor, and (ii) hereby adopts
the Agreement with the same force and effect as if Transferee were originally a
"Shareholder" thereunder.
3. Notice. Any notice required or permitted by the Agreement shall be given
to Transferee at the address listed beside Transferee's signature below.
EXECUTED AND DATED this ______ day of _________________, ____.
TRANSFEREE:
By: _______________________
Name: _________________________
Accepted and Agreed: Title: _______________________
--------------------
HIGHLAND MINING INC.
By: ___________________________ Address: _______________________
Name: ___________________________ Fax: _______________________
Title: ___________________________
42
SCHEDULE B
SAMPLE CALCULATIONS
BVI NET PROFITS CALCULATION EXAMPLE
CS$
Net income before interest and taxes 10,000,000
Interest (1,000,000)
Net income before taxes 9,000,000
Taxes (3,000,000)
Distributable Income 6,000,000
Less: Loan repayments (1,000,000)
Less: Financial Commitments (1,000,000)
Less: Working Capital requirements (1,000,000)
Less: Reserves (1,000,000)
Company Net Profits 2,000,000
BVI EXCESS INVESTMENT CALCULATION EXAMPLE
Month 1 Month 2 Month 3
Days 31 30 31
Interest rate 2.00% 2.00% 2.00%
Opening balance 0 1,001,699 2,004,989
Share equity (par value) 10,000 0 0
Surplus 990,000 0 0
Shareholders loan 0 1,000,000 1,000,000
Total 1,000,000 2,001,699 3,004,989
Interest 1,699 3,290 5,104
Closing balance 1,001,699 2,004,989 3,010,093
BVI PAYMENTS CALCULATION EXAMPLE
Company Net Company Fixed Repayment Balance Net Payment
Interim
Profits Payments Payment Accrued
Year 1
- -
Year 2 - -
Year 3 - -
Year 4 1,500,000 - - - - -
Year 5 2,000,000 - 250,000 - 250,000 -
Year 6 3,000,000 - 250,000 - 500,000 -
Year 7* 4,000,000 500,000 250,000 (250,000) 250,000 -
Year 8 5,000,000 625,000 250,000 (250,000) - 125,000
Year 9 10,000,000 1,250,000 - - - 1,250,000
Year 10 10,000,000 1,250,000 1,250,000
- - -
* BVI Excess Investment repaid in year 7
43
SCHEDULE C
SAMPLE CALCULATIONS
SAMPLE CALCULATION WHERE CONTINENTAL HAS EXERCISED THE FIRST OPTION BUT NOT THE
SECOND OPTION IN TERMS OF THE
OPTION AGREEMENT
CTVH's shareholders interest before subscription = 50%
Continental's shareholders interest before subscription = 50%
Funding required by the Company = USD2,000,000
CTVH subscribes for US$400,000
Continental subscribes for US$1,600,000
Calculation of Shareholders Interest
A = 400,000 + 5,000,000 B = 1,600,000 + 5,000,000
A = 5,400,000 B = 6,600,000
CTVH shareholders interest = A / (A+B)
= 5,400,000 / (5,400,000 + 6,600,000)
= 5,400,000 / (12,000,000)
= 45%
Continental's shareholders interest = B / (A+B)
= 6,600,000 / (5,400,000 + 6,600,000)
= 6,600,000 / (12,000,000)
= 55%
SAMPLE CALCULATION WHERE CONTINENTAL HAS EXERCISED THE
SECOND OPTION IN TERMS OF THE OPTION AGREEMENT
CTVH's shareholders interest before subscription = 40%
Continental's shareholders interest before subscription = 60%
Funding required by the Company = USD2,000,000
CTVH subscribes for US$340,000
44
Continental subscribes for US$1,660,000
Calculation of Shareholders Interest
A = 340,000 + 5,333,330 B = 1,660,000 + 8,000,000
A = 5,673,330 B = 9,660,000
CTVH shareholders interest = A / (A+B)
= 5,673,330/ (5,673,330+ 9,660,000)
= 5,673,330/ (15,333,330)
= 37%
Continental's shareholders interest = B / (A+B)
= 9,660,000/ (5,673,330+ 9,660,000)
= 9,660,000/ (15,333,330)
= 63%
45
