EXHIBIT 10.2
AGREEMENT FOR SHARE EXCHANGE
EXHIBIT 10.2
AGREEMENT FOR SHARE EXCHANGE
AGREEMENT FOR SHARE EXCHANGE ("AGREEMENT") dated as of November 5, 2004, by
and among ChinaNet Holdings Inc., a Nevada, USA Corporation ("ChinaNet") and
Xxxxxx Xxxxx, Xxxxxxx Xxxxx, Xxxxx Xxxx, (together "Highland Shareholders"),
holders of 50% of issued and outstanding shares in the capital stock of Highland
Mining Inc., a British Virgin Islands corporation ("Highland").
RECITALS:
WHEREAS, ChinaNet and Highland Shareholders have agreed to enter into a
binding transaction whereby ChinaNet shall issue certain number of its common
shares from treasury in exchange for 50% of the issued and outstanding shares of
Highland held by Highland Shareholders, pursuant to the terms and conditions
hereinafter set forth (the "Exchange"); and
WHEREAS, the parties desire to make certain representation, warranties and
agreements in connection with the Exchange and also to prescribe various
conditions to the Exchange.
NOW, THEREFORE, in consideration of the foregoing recitals, which shall be
considered an integral part of this Agreement, and the covenants, conditions,
representations and warranties hereinafter set forth, the parties hereby agree
as follows:
ARTICLE I
THE EXCHANGE
1.1 The Exchange. At the Closing (as hereinafter defined), ChinaNet shall
acquire, from Highland Shareholders, 500,000 shares of Common Stock of Highland,
representing 50% of the issued and outstanding stock of Highland ("Highland
Shares"). Consideration to be issued by ChinaNet to Highland Shareholders or
their nominees in exchange for the Highland Shares shall be the issuance of
85,000,000 of common stock and a debenture convertible into 65,000,000 of
ChinaNet shares (the "Exchange Shares"). The Exchange shall take place upon the
terms and conditions provided for in this Agreement and applicable laws of the
jurisdiction of the parties.
Notwithstanding this paragraph 1.1, if Highland Shareholders are unable to
enter into a binding agreement on a share purchase and sale transaction (the
"Definitive Agreement") with Xxxxxx Xxxxxxxxx Inc. ("HDI") to sell and transfer
the other 50% of the issued and outstanding shares of Highland (the "Remaining
Shares") to HDI on or before March 30, 2005 (the "Outside Date"), or if either
or both HDI and Highland Shareholders decide to terminate the Definitive
Agreement pursuant to the terms and conditions therein on or before the Outside
Date, then unless Highland Shareholders and ChinaNet otherwise agree, Highland
Shareholders shall sell and transfer the Remaining Shares to ChinaNet at a
nominal price, pursuant to the same terms and conditions contained hereunder as
applicable to the parties then.
1.2 Other Mineral Properties. Highland Shareholders have direct or indirect
rights or options to, or interests in, (the rights, options and interests
together are called "Additional Rights") certain mineral properties in Tibet,
China (the "Additional Properties") as listed in Schedule "A" attached hereto,
subject to terms and conditions and regulatory requirements attached to the
Additional Rights. Highland Shareholders hereby transfer and assign, or shall
cause to be transferred and assigned, to ChinaNet the Additional Rights for
$1.00, subject to terms and conditions and regulatory requirements attached
thereto, and terms and conditions herein.
1.3 Closing and Effective Time. Subject to the provisions of this
Agreement, the parties shall hold a closing (the "Closing") on (i) the first
business day on which the last of the conditions set forth in Article V to be
fulfilled prior to the Closing is fulfilled or waived or (ii) such other date as
the parties hereto may agree (the "Closing Date"), at such time and place as the
parties hereto may agree. Such date shall be the date of Exchange (the
"Effective Time").
1.4 Management of Highland. Upon completion of the Exchange, the following
individuals shall be elected or appointed as directors of Highland:
Xxx Xxxx
Xxx Xxxx
Xiaojun Ma
Xxxx Xxxx
Xxxxxxx Xxxxxx
1.5 Management of ChinaNet. Upon completion of the Exchange, the following
individuals shall be elected or appointed as directors of ChinaNet.
Xxx Xxxx
Xxx Xxxx
Xiaojun Ma
Xxxx Xxxx
Xxxxxxx Xxxxxx
1.6 Finder's Fee. There will be a finder's fee in the form of a debenture
convertible into 9,639,000 ChinaNet shares payable to Xxxxxx Xxxxx Xxx upon
completion of the Exchange.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of ChinaNet. ChinaNet represents and
warrants to Highland as follows:
(a) Organization, Standing and Power. ChinaNet is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Nevada, has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted,
and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary.
(b) Capital Structure. The authorized capital stock of ChinaNet consists of
200,000,000 common shares. As at the date of this Agreement the total
number of issued and outstanding shares of ChinaNet shall be 57,036,200 All
outstanding common shares of ChinaNet are, and the Exchange Shares to be
issued pursuant to this Agreement will be when issued pursuant to the terms
of the resolution of the Board of Directors of ChinaNet approving such
issuance, validly issued, fully paid and nonassessable and not subject to
preemptive rights. All of the issued and outstanding common shares of
ChinaNet were issued in compliance with all Federal and state securities
laws. Except those contained in Schedule "B" attached hereto, there are no
options, warrants, calls, agreements or other rights to purchase or
otherwise acquire from ChinaNet at any time, or upon the happening of any
stated event, any shares of the capital stock of ChinaNet, whether or not
presently issued or outstanding.
(c) Certificate of Incorporation, By-Laws, and Minute Books. The copies of
the Articles of Incorporation and of the By-Laws of ChinaNet which have
been delivered to Highland are true, correct and complete copies thereof.
The minute books of ChinaNet which have been made available for inspection
contain accurate minutes of all meetings and accurate consents in lieu of
meetings of the Board of Directors (and any committee thereof) and of the
shareholders of ChinaNet since the respective dates of incorporation and
accurately reflect all transactions referred to in such minutes and
consents in lieu of meetings.
(d) Authority. ChinaNet has all requisite power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Director of ChinaNet. No other corporate or shareholder proceedings on the
part of ChinaNet are necessary to authorize the Exchange, or the other
transactions contemplated hereby.
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(e) Conflict with Other Agreements; Approvals. The execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated hereby will not result in any violation of, or default (with
or without notice or lapse of time, or both) under, or give rise to a right
of termination, cancellation or acceleration of any obligation or the loss
of a material benefit under, or the creation of a lien, pledge, security
interest or other encumbrance on assets (any such conflict, violation,
default, right of termination, cancellation or acceleration, loss or
creation, a "violation") pursuant to any provision of the Articles of
Incorporation or By-laws or any organizational document of ChinaNet or,
result in any violation of any loan or credit agreement, note, mortgage,
indenture, lease, benefit plan or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to ChinaNet which violation
would have a material adverse effect on ChinaNet taken as a whole. No
consent, approval, order or authorization of, or registration, declaration
or filing with, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (a
"Governmental Entity") is required by or with respect to ChinaNet in
connection with the execution and delivery of this Agreement by ChinaNet or
the consummation by ChinaNet of the transactions contemplated hereby.
(f) Books and Records. ChinaNet has made and will make available for
inspection by Highland Shareholders upon reasonable request all the books
of ChinaNet relating to the business of ChinaNet. Such books of ChinaNet
have been maintained in the ordinary course of business. All documents
furnished or caused to be furnished to Highland Shareholders by ChinaNet
are true and correct copies, and there are no amendments or modifications
thereto except as set forth in such documents.
(g) Compliance with Laws. ChinaNet is and has been in compliance in all
material respects with all laws, regulations, rules, orders, judgments,
decrees and other requirements and policies imposed by any Governmental
Entity applicable to it, its properties or the operation of its businesses.
(h) Financial Statements. ChinaNet has delivered to Highland Shareholders
financial statements for the periods ending September 30, 2004 which has
been reviewed and accepted by an independent US auditor. Such financial
statements are true and correct, and provide a fair and accurate
presentation of the financial condition and assets and liabilities of
ChinaNet as of the date thereof.
(i) Litigation. There is no suit, action or proceeding pending, or, to the
knowledge of ChinaNet, threatened against or affecting ChinaNet which is
reasonably likely to have a material adverse effect on ChinaNet, nor is
there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against ChinaNet having, or which, insofar
as reasonably can be foreseen, in the future could have, any such effect.
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(j) Tax Returns. ChinaNet has duly filed all tax reports and returns
required to be filed by it and has fully paid all taxes and other charges
claimed to be due from it by any federal, state or local taxing authorities
(including without limitation those due in respect of its properties,
income, franchises, licenses, sales and payrolls); there are not now any
pending questions relating to, or claims asserted for, taxes or assessments
asserted upon ChinaNet.
2.2 Representations and Warranties of Highland Shareholders Highland
Shareholders represent and warrant to ChinaNet as follows:
(a) Organization, Standing and Power. To the best knowledge of Highland
Shareholders, Highland is a corporation duly organized, validly existing
and in good standing under the laws of British Virgin Islands, has all
requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted, and is duly qualified and
in good standing to do business in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification necessary.
(b) Capital Structure. The authorized capital stock of Highland consists of
1,000,000 shares of Common Stock with a par value of US$1.00. As at the
date of this agreement, 1,000,000 shares of Common Stock were issued and
outstanding. To the best knowledge of Highland Shareholders, all
outstanding Highland shares including in particular the Highland Shares are
validly issued, fully paid and nonassessable and not subject to preemptive
rights or other restrictions on transfer; all of the issued and outstanding
shares of Highland in particular the Highland Shares were issued in
compliance with all applicable securities laws; there are no options,
warrants, calls, agreements or other rights to purchase or otherwise
acquire from Highland at any time, or upon the happening of any stated
event, any shares of the capital stock of Highland.
(c) Certificate of Incorporation, By-Laws and Minute Books. To the best
knowledge of Highland Shareholders, the copies of the Certificate of
Incorporation and of the By-Laws of Highland which have been delivered to
ChinaNet are true, correct and complete copies thereof; the minute books of
Highland which have been made available for inspection contain accurate
minutes of all meetings and accurate consents in lieu of meetings of the
Board of Directors and of the shareholders of Highland since the date of
incorporation and accurately reflect all transactions referred to in such
minutes and consents in lieu of meetings.
(d) Authority. Highland Shareholders have all requisite power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
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consummation of the transactions contemplated hereby have been duly
approved by the Board of Directors of Highland and by its shareholders
including Highland Shareholders. This Agreement has been duly executed and
delivered by Highland Shareholders and constitutes a valid and binding
obligation of Highland Shareholders enforceable in accordance with its
terms.
(e) Conflict with Agreements; Approvals. To the best knowledge of Highland
Shareholders, the execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of any provision of the Certificate of
Incorporation or By-laws of Highland or of any loan or credit agreement,
note, mortgage, indenture, lease, benefit plan or other agreement,
obligation, instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Highland or its properties or assets. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Highland Shareholders
in connection with the execution and delivery of this Agreement by Highland
Shareholders, or the consummation by Highland Shareholders of the
transactions contemplated hereby.
(f) Financial Statements. Highland Shareholders have furnished ChinaNet
with unaudited financial statements as of September 30, 2004. To the best
knowledge of Highland Shareholders, the Highland financials statements are
substantially complete and correct in all material respects and fairly
present in all material respects the financial condition and results of the
operations of Highland and the changes in its financial position at such
dates and for such periods and show all material liabilities, absolute or
contingent of Highland.
(g) Books and Records. Highland Shareholders, where appropriate, have made
and will make available for inspection by ChinaNet upon reasonable request
all the books of account, relating to the business of Highland. To the best
knowledge of Highland Shareholders, such books of account of Highland have
been maintained in the ordinary course of business. All documents furnished
or caused to be furnished to ChinaNet by Highland Shareholders are true and
correct copies, and there are no amendments or modifications thereto except
as set forth in such documents.
(h) Compliance with Laws. To the best knowledge of Highland Shareholders,
Highland is and has been in compliance in all material respects with all
laws, regulations, rules, orders, judgments, decrees and other requirements
and policies imposed by any Governmental Entity applicable to it, its
properties or the operation of its businesses.
(i) Subsidiaries, Mineral Properties: To the best knowledge of Highland
Shareholders, Highland fully and legally owns Tianyuan Mineral Exploration
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Ltd. ("Tianyuan"), a wholly owned and validly existing foreign enterprise
registered in Tibet, China, incorporated pursuant to relevant Chinese laws
and regulations, which holds a valid exploration license covering
Xietongmen Mine in Tibet, China (a copy of the Exploration License and a
copy of Business License issued to Tianyuan are attached hereto as Schedule
"C") issued by the Ministry of Land and Resources of China.
(j) Liabilities and Obligations. To the best knowledge of Highland
Shareholders, Highland has conducted no business activities except the
acquisition of Tianyuan, has no material liabilities or obligations
(absolute, accrued, contingent or otherwise) except those expressly
disclosed in the financial statements delivered to ChinaNet.
(k) Litigation. To the best knowledge of Highland Shareholders, there is no
suit, action or proceeding pending, or, threatened against or affecting
Highland which is reasonably likely to have a material adverse effect on
Highland or Highland Shares, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against
Highland having, or which, insofar as reasonably can be foreseen, in the
future could have, any such effect.
(l) Taxes. To the best knowledge of Highland Shareholders, Highland has
filed or will file within the time prescribed by law (including extension
of time approved by the appropriate taxing authority) all tax returns and
reports required to be filed (including, all filings with all other
jurisdictions including Tianyuan filings, where such filing is required by
law); and Highland has paid, or made adequate provision for the payment of
all taxes, interest, penalties, assessments or deficiencies due and payable
on, and with respect to such periods.
(m) Licenses, Permits: To the best knowledge of Highland Shareholders,
Highland owns or possesses in the operation of its business all material
authorizations which are necessary for it to conduct its business as now
conducted. Neither the execution or delivery of this Agreement nor the
consummation of the transactions contemplated hereby will require any
notice or consent under or have any material adverse effect upon any such
authorizations.
(n) No Encumbrances: Highland Shareholders are the legal and beneficial
owners of Highland Shares. The Highland Shares are duly and validly issued
to Highland Shareholders, free from any lien, claim, mortgage,
hypothecation, or any other encumbrances or security interest, save and
except the terms of the Option Agreement and the obligations of Highland
Shareholders therein.
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ARTICLE III
COVENANTS RELATING TO CONDUCT OF BUSINESS
3.1 Covenants of Highland and ChinaNet. During the period from the date of
this Agreement and continuing until the Effective Time, Highland Shareholders
and ChinaNet each agree as to themselves and their related entities that (except
as expressly contemplated or permitted by this Agreement, or to the extent that
the other party shall otherwise consent in writing):
(a) Ordinary Course. Each party shall carry on its respective businesses in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted.
(b) Dividends; Changes in Stock. No party shall (i) declare or cause to
declare or pay any dividends on or make other distributions in respect of
any of its capital stock, (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or (iii) repurchase or otherwise acquire, or permit any
subsidiary to purchase or otherwise acquire, any shares of its capital
stock.
(c) Issuance of Securities. No party shall, or shall cause to, issue,
deliver or sell, or authorize or propose the issuance, delivery or sale of,
any shares of its capital stock of any class, any voting debt or any
securities convertible into, or any rights, warrants or options to acquire,
any such shares, voting debt or convertible securities.
(d) Governing Documents. No party shall amend or propose to amend relevant
Certificate of Incorporation or By-laws.
(e) No Dispositions. Except for the transfer of assets in the ordinary
course of business consistent with prior practice, no party shall sell,
lease, encumber or otherwise dispose of, or agree to sell, lease, encumber
or otherwise dispose of, any of the corporate assets, which are material,
individually or in the aggregate, to such party.
(f) Indebtedness. No party shall, or shall cause to, incur any indebtedness
for borrowed money or guarantee any such indebtedness or issue or sell any
debt securities or warrants or rights to acquire any debt securities of
such party or guarantee any debt securities of others other than in each
case in the ordinary course of business consistent with prior practice.
(g) Regulatory Compliance: Each party shall, or shall cause to, make such
filing or registration in the jurisdiction where it operates, or cause its
subsidiaries to make such filings or registration, to ensure all licenses,
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permits and approvals required for the their operations in their respective
jurisdiction are current and valid.
3.2 Other Actions. No party shall take any action that would or is
reasonably likely to result in any of its representations and warranties set
forth in this Agreement being untrue as of the date made (to the extent so
limited), or in any of the conditions to the Exchange set forth in Article V not
being satisfied.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Shareholders Approval at Highland. Highland Shareholders have
previously received or will receive necessary approval, consent or agreement in
relation to the Exchange.
4.2 Restricted ChinaNet Shares; Registration Rights. (a) The Exchange
Shares will not be registered under the Securities Act, but will be issued
pursuant to an exemption from such registration requirements based upon
representations and warranties made by the Shareholders. Accordingly, the
Exchange Shares will constitute "restricted securities" for purposes of the
Securities Act and applicable state securities laws and Shareholders will not be
able to transfer such Exchange Shares except upon compliance with the
registration requirements of the Securities Act and applicable state securities
laws or an exemption therefrom. The certificates evidencing the Exchange Shares
shall contain a legend to the foregoing effect and the Shareholders shall
deliver at Closing an Investment Letter in substantially the form of Schedule
"D" hereto acknowledging the fact that the Exchange Shares are restricted
securities and agreeing to the foregoing transfer restrictions.
4.3 Access to Information. Upon reasonable notice, ChinaNet and Highland
Shareholders shall each afford to the officers, employees, accountants, counsel
and other representatives of the other party, access to all their respective
properties, books, contracts, commitments and records and, during such period,
each of ChinaNet and Highland Shareholders shall furnish promptly to the other
corporate and business information as such other party may reasonably request.
Unless otherwise required by law, the parties will hold any such information
which is nonpublic in confidence until such time as such information otherwise
becomes publicly available through no wrongful act of either party, and in the
event of termination of this Agreement for any reason each party shall promptly
return all nonpublic documents obtained from any other party, and any copies
made of such documents, to such other party.
4.4 Legal Conditions to Exchange. Each of ChinaNet and Highland
Shareholders shall take reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on itself with respect to the Exchange
and will promptly cooperate with and furnish information to each other in
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connection with any such requirements imposed upon any of them or any of their
related entities or subsidiaries in connection with the Exchange. Each party
will take all reasonable actions necessary to obtain (and will cooperate with
each other in obtaining) any consent, authorization, order or approval of, or
any exemption by, any Governmental Entity or other public or private third
party, required to be obtained or made by ChinaNet or Highland Shareholders or
Highland or any of their related entities or subsidiaries in connection with the
Exchange or the taking of any action contemplated thereby or by this Agreement.
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions to Each Party's Obligation To Effect the Exchange. The
respective obligation of each party to effect the Exchange shall be subject to
the satisfaction prior to the Closing Date of the following conditions:
(a) Necessary Approvals. All authorizations, consents, orders or approvals
of, or declarations or filings with, or expirations of waiting periods
imposed by, any Governmental Entity the failure to obtain which would have
a material adverse effect on ChinaNet or Highland shall have been filed,
occurred or been obtained.
5.2 Conditions of Obligations of ChinaNet. The obligations of ChinaNet to
effect the Exchange are subject to the satisfaction of the following conditions
on or before the Closing Date unless waived by ChinaNet:
(a) Representations and Warranties. The representations and warranties of
Highland Shareholders set forth in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and (except to
the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date, except
as otherwise contemplated by this Agreement.
(b) Performance of Obligations of Highland Shareholders. Highland
Shareholders shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior the Closing
Date.
(c) Closing Documents. ChinaNet shall have received such certificates and
other closing documents as counsel for ChinaNet shall reasonably request.
(d) Opinion of Counsel for Highland Shareholders, Highland and/or Tianyuan.
ChinaNet shall have received an opinion dated the Closing Date of counsel
for Highland Shareholders, Highland and/or Tianyuan, in form and substance
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reasonably satisfactory to ChinaNet and its counsel relating to such
matters as are customarily delivered in connection with an Exchange
transaction.
(e) Consents. ChinaNet shall have obtained the consent or approval of each
person whose consent or approval shall be required in connection with the
transactions contemplated hereby under any loan or credit agreement, note,
mortgage, indenture, lease or other agreement or instrument, except those
for which failure to obtain such consents and approvals would not, in the
reasonable opinion of ChinaNet, individually or in the aggregate, have a
material adverse effect on Highland Shares, Highland and its subsidiaries
and related entities taken as a whole upon the consummation of the
transactions contemplated hereby.
(f) Highland Review. ChinaNet shall have completed to its reasonable
satisfaction a review of the business, operations, finances, assets and
liabilities of Highland and shall not have determined that any of the
representations or warranties of Highland Shareholders contained herein
are, as of the date hereof or the Closing Date, inaccurate in any material
respect or that Highland is otherwise in violation of any of the provisions
of this Agreement.
(g) Pending Litigation. There shall not be any litigation or other
proceeding pending or threatened to restrain or invalidate the transactions
contemplated by this Agreement, which, in the sole reasonable judgment of
ChinaNet, made in good faith, would make the consummation of the Exchange
imprudent. In addition, there shall not be any other litigation or other
proceeding pending or threatened against Highland Shares, Highland
Shareholders and Highland, the consequences of which, in the judgment of
ChinaNet, could be materially adverse to Highland Shares or Highland.
5.3 Conditions of Obligations of Highland. The obligation of Highland
Shareholders to effect the Exchange is subject to the satisfaction of the
following conditions unless waived by Highland Shareholders:
(a) Representations and Warranties. The representations and warranties of
ChinaNet set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the
extent such representations speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, except as otherwise
contemplated by this Agreement, and Highland Shareholders shall have
received a certificate signed on behalf of ChinaNet by the Chief Executive
Officer to such effect.
(b) Performance of Obligations of ChinaNet. ChinaNet shall have performed
in all material respects all obligations required to be performed by it
under this Agreement at or prior to the Closing Date, and Highland
Shareholders shall have received a certificate signed on behalf of ChinaNet
by the President to such effect.
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(c) Opinion of Counsel for ChinaNet. Highland Shareholders shall have
received an opinion dated the Closing Date of counsel for ChinaNet, in form
and substance reasonably satisfactory to Highland Shareholders and their
counsel relating to such matters as are customarily delivered in connection
with an Exchange transaction.
(d) Closing Documents. Highland Shareholders shall have received such
certificates and other closing documents as counsel for Highland
Shareholders shall reasonably request.
(e) Consents. Highland Shareholders shall have obtained the consent or
approval of each person whose consent or approval shall be required in
connection with the transactions contemplated hereby.
(f) Highland Shareholders Review. Highland Shareholders shall have
completed to their reasonable satisfaction a review of the business,
operations, finances, assets and liabilities of ChinaNet and shall not have
determined that any of the representations or warranties of ChinaNet
contained herein are, as of the date hereof or the Closing Date, inaccurate
in any material respect or that ChinaNet is otherwise in violation of any
of the provisions of this Agreement.
(g) Pending Litigation. There shall not be any litigation or other
proceeding pending or threatened to restrain or invalidate the transactions
contemplated by this Agreement, which, in the sole reasonable judgment of
Highland Shareholders, made in good faith, would make the consummation of
the Exchange imprudent. In addition, there shall not be any other
litigation or other proceeding pending or threatened against ChinaNet the
consequences of which, in the judgment of Highland Shareholders, could be
materially adverse to ChinaNet.
ARTICLE VI
TERMINATION AND AMENDMENT
6.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time:
(a) by mutual consent of ChinaNet and Highland Shareholders;
(b) by either ChinaNet or Highland Shareholders if there has been a
material breach of any representation, warranty, covenant or agreement on
the part of the other set forth in this Agreement which breach has not been
cured within 5 business days following receipt by the breaching party of
notice of such breach, or if any permanent injunction or other order of a
court or other competent authority preventing the consummation of the
Exchange shall have become final and non-appealable; or
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(c) by either ChinaNet or Highland Shareholders if the Exchange shall not
have been consummated before December 20, 2004.
6.2 Effect of Termination. In the event of termination of this Agreement by
either Highland Shareholders or ChinaNet as provided in Section 6.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of any party hereto. In such event, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
6.3 Amendment. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
6.4 Extension; Waiver. At any time prior to the Effective Time, the parties
hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE VII
GENERAL PROVISIONS
7.1 Survival of Representations, Warranties and Agreements. All of the
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective Time
for a period of two years from the date of this Agreement.
7.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed) or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) If to ChinaNet to
ChinaNet Holdings Inc.
Attention: Xxxxxxx Xxxxxx, President
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(b) if to Highland Shareholders, to
Highland Mining Inc.
Attention: Xxx Xxxx,
7.3 Interpretation. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available.
7.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
7.5 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership.
This Agreement (including the documents and the instruments referred to herein)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
7.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Nevada without regard to principles of
conflicts of law. Each party hereby irrevocably submits to the jurisdiction of
any Nevada state court or any federal court in the State of Nevada in respect of
any suit, action or proceeding arising out of or relating to this Agreement, and
irrevocably accept for themselves and in respect of their property, generally
and unconditionally, the jurisdiction of the aforesaid courts.
7.7 No Remedy in Certain Circumstances. Each party agrees that, should any
court or other competent authority hold any provision of this Agreement or part
hereof or thereof to be null, void or unenforceable, or order any party to take
any action inconsistent herewith or not to take any action required herein, the
other party shall not be entitled to specific performance of such provision or
part hereof or thereof or to any other remedy, including but not limited to
money damages, for breach hereof or thereof or of any other provision of this
Agreement or part hereof or thereof as a result of such holding or order.
7.8 Publicity. Except as otherwise required by law or the rules of the SEC,
so long as this Agreement is in effect, no party shall issue or cause the
14
publication of any press release or other public announcement with respect to
the transactions contemplated by this Agreement without the written consent of
the other party, which consent shall not be unreasonably withheld.
7.9 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties, except that ChinaNet may assign, in its sole discretion, any or all of
its rights, interests and obligations hereunder to any direct or indirect wholly
owned subsidiary of such company, and Highland Shareholders or each of them may
assign, in their sole discretion, any or all if their rights, interests and
obligations hereunder to a person or persons who are related to any of Highland
Shareholders. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
IN WITNESS WHEREOF, this Agreement has been signed by the parties set forth
below as of the date set forth above.
ChinaNet Holdings Inc.
By: /s/ Xxxxxxx Xxxxxx
----------------------------------------
Director
Highland Shareholders
By:
----------------------------------------
By: ----------------------------------------
By: ----------------------------------------
15
Schedule "A"
16
Additional Properties
Minimum Need to be
spending reimbursed to
Certificate Name of deposit area Area Period of required budget for State
number (km2) validity annually exploration Investment Title
Binda Lead and Antimony 5.15 2002.12.30-
5400000220548 Copper and Multi-metal 2004.09.09 7,500.00 42,350.00 Danlu
Mining Area, Jiangda County 2002.12.30-
5400000220554 (with prospecting license) 4.37 2005.12.28 5,462.50 482,406.75 834.862.50 DanLu
5400000220552 Duoxiasongduo Copper Mining 2002.12.28-
Area, Gongiue County (with 2.94 2005.12.28 3,675.00 480,000.00 DanLu
prospecting license)
Ganzhongxiong Lead & Zine mine 2002.12.28-
5400000220549 (with prospecting license) 6.45 2005.12.28 8,062.50 1,952.50 DanLu
Gegongnong Gold(copper) deposit 2002.12.30
5400000220555 in Gongiue county, Tibet 37.39 2005.12.28 46,737.50 2,390,687.50 DanLu
GeXiong Niobium & Tantalum, 2002.09.10-
5400000230429 Jida Village, Basu county, 3.70 2004.09.10 4,625.00 Honglu
Tibet (w prospecting license)
Jiaduoling Iron Mining Area, 2002.12.30-
5400000220545 Jiangda County (exploitation 17.16 2005.12.28 21,450.00 39,025.00 DanLu
certificate is being applied)
Jiama Copper, Lead, Mining
Area line 16 to 40, Mozhugongka 2003.7- 585.13 2,500.00 DanLu
5400000320024 County (with exploitation 0.468 2005.7
Jiama Copper, Lead, Mining
Area line 40 to 80, Mozhugongka 2003.7- 11,5613.75 2,250,000.00 DanLu
5400000320025 County (with exploitation 0.929 2005.7
Jiduipu Marble Mining Area,
Renbu County, Tibet 2003.06.12-
5400000330262 (with prospecting license) 10.30 2005.06.27 1,287.50 DanLu
Kada Green Stone mine 2003.09.05-
5400000340577 (prospecting license) 3.72 2005.09.17 4,650.00 DanLu
La-Zi Xxxx Xx & Fe Mine 2003.06.04-
5400000310244 in La-zi County of Tibet 35.92 2005.04.30 8,980.00 DanLu
2003.06.04-
5400000310242 Long-ren-la Fe Mine 46.66 2005.04.30 11,665.00 DanLu
Malasongduo Copper Mining
Area Xxxxx County (with 2002.12.30-
5400000220553 prospecting license) 3.31 2005.12.28 4,137.50 762,500.00 DanLu
Mangzong Porphyritic Copper
(Mo) Mining Area, Changdu 2002.08.01-
5400000220551 County(w prospecting license) 4.41 2005.08.01 5,512.50 1,814,400.00 DanLu
Meiduo Antimony Mining Area,
Anduo County (w/ exploitation 2002.12-
5400000260068 certificate) 1.3197 2004.12 1,649.63 1,451,350.00 DanLu
Nanyuela Lead & Zinc Mine 2002.12.30-
5400000220546 (with prospecting license) 13.22 2005.12.28 1,652.50 24,675.00 DanLu
Niangguchu Gold Mining Area
Naidong County (with 2002.12.30-
5400000220550 prospecting license) 1.12 2004.12.16 1,400.00 250,000.00 630,300.00 DanLu
Nianggui Corundum Mining
Area, Qushui County (with 2002.12.30-
5400000220540 prospecting license) 4.12 2005.12.30 5,150.00 170,975.00 DanLu
Panong Tantalum mine, 2003.03.17-
5400000320003 (with prospecting license) 2.24 2004.03.17 2,800.00 Honglu
Qinong Tantalum mine, 2002.09.10-
5400000230428 (prospecting license) 118.10 2004.09.10 147,625.00 Honglu
Xietongmen xiongcun gold
deposit, Tibet (with 2003.06.15-
5400000032070 prospecting license) 12.91 2005.06.15 16,137.50 Honglu
Youzha Salt Mining Area,
Gongjue County (with 2002.12.28-
5400000220547 prospecting license) 12.92 2005.12.28 16,150.00 696,250.00 DanLu
Yugu Iridium & Osmium Mine
Leiwugi County (with 2002.12.30-
5400000220541 prospecting license) 5.51 2004.9.9 6,887.50 12,525.00 DanLu
Zhanaga Copper & Molybdenum
Mining Area, Changdu County 2002.12.30-
5400000220543 (with prospecting license) 3.30 2005.12.28 4,125.00 688,700.00 DanLu
Zonglongge(zhongda) Uranium,
Xxxxxx, Xxxxx Yttrium, 2002.12.30-
5400000220544 Mining Area, Leiwugi County 6.40 2005.12.28 8,000.00 12,500.00 DanLu
17
Note:
1. Honglu holds 100% of interest in properties #6 #19 #20 #21 and 65% of
interest in all other properties of Danlu listed above. Honglu's 65%
interest is evidenced in its corresponding title to and right in the
exploration licenses covering those properties.
2. Honglu's interest in the properties listed above is subject to and valid
with minimum annual payment and minimum annual geologic or exploratory work
in respect of each properties, to be completed pursuant to the relevant
regulations of the Ministry of Land and Resources of China.
3. Honglu's interest in any of the properties listed above cannot be
transferred, assigned or old except with the consent of the party holding
the balance of the rights in the properties, and further with the approval
of the Department of Land and Resources of Tibet Autonomous Region, or the
approval of the Ministry of Land and Resources of China if such interest is
transferred to a foreign company or company with foreign investment.
4. Where, in respect of any properties listed above, there has been any prior
state investment or prior state financed geological work, the state
investment or state input may need to be compensated on the basis of a
valuation of the state investment or
input, before any development, transfer, assignment or sale of the
property may be approved by the Ministry of Land and Resources or the
Department of Land and Resources of Tibet Autonomous Region, as the case
may be.
18
Schedule "B"
Options
1. ChinaNet granted on May 31, 2000 options to former directors of
ChinaNet and consultants for the purchase of 5,000,000 shares of
ChinaNet common stock exercisable on or before May 31, 2005 at an
exercise price $0.40 per share.
2. ChinaNet granted an option on September 11, 2003 to a director for the
purchase of 1,000,000 shares of ChinaNet common stock exercisable on or
before August 1, 2006 at an exercise price of $0.10 per share.
19
Schedule "C"
Tianyuan Licenses
GRAPHICS OMITTED
20
