EXHIBIT 10.3
Preliminary Option Agreement
EXHIBIT 10.3
Preliminary Option Agreement
This Agreement is entered into on November 9, 2004 by and between:
Xxxxx Xxxx Xxx, a citizen of China (Hong Kong) with an address at Xxxx 0000, Xxx
Xx Xxxxxxxx, 00-00 Xxxxxxxxx Xxxx, Xxxx Xxxx.
Fax (000) 0000 0000
Xxxxx Xxx Ming, a citizen of China (Hong Kong) with an address at Xxxx X0, 0/X.,
Xxxxx Xxxxx, Xxx Wo Ferry Pier Road, Lantau, Hong Kong.
Fax (000) 0000 0000
Xxxx Xxxxx, a citizen of China with an address at Xxxx 0000, Xxxxx 0, Xx. 00 Xx
Xxx Men Jiao Dai Dong Road, Beijing City, People's Republic of China.
Fax (00 00) 0000 0000
(collectively called "ABC")
Highland Mining Inc., a British Virgin Islands company with offices at TrustNet
Xxxxxxxx, Road Town, Tortola, British Virgin Islands.
Fax (000) 0000 0000
(herein called "BVI Co")
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 (00 000) 0000 000
(herein called "Tianyuan")
Continental Minerals Corporation, a British Columbia company with offices at
Suite 1020 - 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx,
X0X 0X0.
Fax: (000) 000-0000
(herein called "Continental")
Xxxxxx Xxxxxxxxx Inc., a British Columbia company with offices at Suite 1020 -
000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0, Xxxxxx.
Fax: (604) 684 - 8092
(herein called "HDI")
Xxxx Xxx, a citizen of 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
(herein called "WZ")
WHEREAS Tianyuan has the rights to explore the mineral property known as the
Xietongmen Copper Property (the "Property"), which is located near Xxxxx
Village, Xietongmen County, Rikaze area, Tibet Autonomous Region ("Tibet"), the
People's Republic of China ("PRC") and more particularly described in Schedule
A.
WHEREAS Tianyuan is the 100% subsidiary of BVI Co, and the Selling Parties
(defined below) have agreed to grant Continental with an option to acquire:
(i) 50% of the shares of BVI Co, through payment of USD2,000,000 to
ABC and the investment of USD5,000,000 in BVI Co to fund
exploration of the Property;
(ii) a further 10% of the shares of BVI, through the investment of
USD3,000,000 in BVI Co to fund exploration of the Property.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT for valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the Parties do hereby
mutually covenant and agree as follows:
1. Definitions
"BVI Co Shareholders Agreement" shall have the meaning provided in Section 2.3.
"BVI Co Share Option Agreement" shall have the meaning provided in Section 2.3.
"Completion Notice" means the written notice issued by Continental in accordance
with Section 2.2.
"CTVH" means China NetTV Holdings Inc., a Delaware corporation with an office at
Suite 000-000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx, X.X., Xxxxxx, X0X 0X0.
"Exploration Permit" means the exploration permit issued from time to time by
the relevant authorities evidencing the Exploration Rights. A copy of the
currently valid Exploration Permit is attached as Schedule B.
"Exploration Rights" means all of the exploration rights in relation to the
Property.
"MOLAR" means the Ministry of Land and Resources of the PRC.
"Selling Parties" means collectively BVI Co, ABC and Tianyuan, and "Selling
Party" means one of them as the context requires.
"Signature Date" means the date on which this Agreement has been signed by all
Parties to it.
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2. Nature of Cooperation
2.1 Selling Parties hereby grant to Continental the exclusive right to
participate in the cooperative exploration and development of the
Property on the terms and conditions of this Agreement.
2.2 Continental shall be permitted the opportunity to carry out a full due
diligence study on BVI Co, Tianyuan, the Property, the Exploration
Rights, the Exploration Permit and associated data. Selling Parties
shall carry out all other necessary actions and provide all necessary
documents and information as Continental and its legal advisors may
request in order to complete such study, including but not limited to
the documents described in Schedule C. As they receive the same,
Continental or its legal advisors shall issue a confirmation letter to
the Selling Parties to confirm the receipt of the documents listed in
Schedule C. Upon completing such study and becoming satisfied in its
sole discretion that, among other things, the Selling Parties are not
in breach of their representations and warranties under Section 4.1,
Continental will issue the Completion Notice to Selling Parties. If
not so satisfied, Continental may issue the notice contemplated in
Section 7.1. Continental will issue a Completion Notice or the notice
contemplated in Section 7.1 no later than forty-five (45) days
following the Signature Date, failing which any Party may, by notice
to the other Parties and without prejudice to any Party's rights to
claim against other Parties for breaches prior to the termination of
the Agreement, elect to terminate this Agreement.
2.3 ABC and BVI Co shall grant to Continental options to respectively
purchase and subscribe for shares in BVI Co on the terms described in
Schedule D. The terms of such options shall be set forth in a share
option agreement (the "BVI Co Share Option Agreement") in form and
substance satisfactory to Continental. Such BVI Co Share Option
Agreement shall include as a schedule a form of shareholders agreement
(the "BVI Co Shareholders Agreement") that shall govern the
relationship between the parties thereto as shareholders of BVI Co
upon Continental's exercise of at least one of such options, which
shall include the provisions described in Schedule E. ABC, BVI Co and
Continental shall commence good faith negotiations of the BVI Share
Option Agreement and the BVI Shareholders Agreement promptly following
the Signature Date and shall sign such agreements no later than
seventy-five (75) days following the Signature Date, failing which any
Party may, by notice to the other Parties and without prejudice to any
Party's rights to claim against other Parties for breaches prior to
the termination of the Agreement, elect to terminate this Agreement.
2.4 To secure its performance hereunder, ABC shall promptly following the
Signature Date pledge to Continental shares in BVI Co representing 50%
of the issued and outstanding share capital of BVI Co. ABC shall also
cause CTVH to pledge to Continental shares in BVI Co representing a
further 10% of the issued and outstanding share capital of BVI Co, and
from time to time to pledge such further shares of BVI Co as may be
necessary so Continental continues to hold under the pledge from CTVH
10% of the issued and outstanding share capital of BVI Co.
Continental's rights under such pledge shall terminate upon
termination of this Agreement in accordance with Section 2.2 or 2.3.
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3. Other Obligations of Selling Parties
3.1 Upon signing of this Agreement, provided that Continental performs its
obligations under this Agreement, Selling Parties shall do the
following:
(i) provide Continental with all data generated of both a technical
and non-technical manner applicable to the Property;
(ii) duly pay any fees and charges (including but not limited to
exploration right use fee and mineral resources compensation) in
connection with the Exploration Rights and the Exploration Permit
to keep them in good standing at least until the Completion
Notice is issued;
(iii) carry out all filings and do all other acts necessary to maintain
the validity of the Exploration Permit;
(iv) not transfer, sell, lease or mortgage the Exploration Rights, or
otherwise deal in them or encumber them;
(v) cause all existing exploration, mining, excavating, exploiting,
extracting, refining and processing activities and operations in
the areas in connection with the Property or the Exploration
Rights conducted by any Selling Party or by any third party to be
suspended;
(vi) assist Continental in Continental's purchasing and leasing of
equipment, machinery, tools, vehicles and other materials, and if
applicable, in carrying out all import and customs formalities in
respect thereto;
(vii) assist Continental's personnel in obtaining necessary visas and
invitation letters and certifications required for processing
other necessary travel documents in order to gain access to the
Property;
(viii)not transfer, sell, lease, mortgage or otherwise deal in any
assets of BVI Co and or Tianyuan, including but not limited to
the equity interest in Tianyuan owned by BVI Co nor create any
liability or obligation of those companies without Continental's
written consent; and
(ix) not carry out any actions that may impair or dilute Continental's
legal or beneficial interest in BVI Co or Tianyuan, including but
not limited to issuance or transfer of any shares or other
instruments, documents or securities of BVI Co or the increase of
registered capital of Tianyuan or the transfer of the same
(provided that the issuance of shares by BVI Co to Continental as
contemplated in Section 2.3 and Schedule D, as well as the
transaction between ABC and CTVH on the terms previously
disclosed to Continental in writing, shall not represent a breach
of this provision).
3.2 Provided that Continental performs its obligations under this
Agreement, WZ shall actively assist Continental and Tianyuan to apply
for and maintain the approvals, registrations, licenses, permits and
other government authorizations and support necessary or desirable in
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order for Tianyuan to undertake the exploration and development of the
Property and for Continental to participate in those activities on the
basis contemplated under this Agreement. WZ will be a signatory to the
BVI Co Shareholders Agreement and the BVI Co Share Option Agreement in
order that he have the above mentioned responsibilities under those
agreements.
4. Representations and Warranties
4.1 Selling Parties hereby jointly and severally represent and warrant to
Continental that:
(i) Each of BVI Co and Tianyuan is a company duly organized, validly
existing and in good standing under the laws of the jurisdiction
of its incorporation;
(ii) Each Selling Party 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;
(iii) 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 any Selling Party is a party;
(iv) The execution and delivery of this Agreement and the agreements
contemplated hereby by each Selling Party will not violate or
result in the breach of the laws of any jurisdiction applicable
or pertaining to such Selling Party or (where the Selling Party
is a body corporate) of its constating documents;
(v) This Agreement constitutes a legal, valid and binding obligation
of each of Selling Parties;
(vi) There are no options, warrants or any other rights to acquire any
authorised (issued or unissued) share capital in BVI Co other
than the options in favour of Continental contemplated in
Schedule D as well as CTVH's right to acquire shares in BVI Co
from ABC under the terms of the transaction between ABC and CTVH
previously disclosed to Continental in writing;
(vii) All returns, registrations, filings and other documents required
to be delivered by Selling Parties to the relevant government
authorities have been properly prepared and delivered;
(viii) None of the Selling Parties has breached any law of the
jurisdiction where it is incorporated or has citizenship, as the
case may be;
(ix) No order has been made, petition presented or resolution passed
for the winding-up or bankruptcy of any Selling Party or for the
appointment of a provisional liquidator to any Selling Party and
no administration order has been made in respect of any Selling
Party;
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(x) No receiver or receiver and manager has been appointed for the
whole or part of any Selling Party's business or assets;
(xi) There is not and has not been any governmental or other
investigation, enquiry or disciplinary proceeding concerning any
Selling Party and none is pending or threatened. No fact or
circumstance exists which might give rise to an investigation,
enquiry or proceeding of that type;
(xii) No civil, criminal, arbitration, administrative or other
proceeding is pending or threatened by or against any Selling
Party or a person for whose acts or defaults any Selling Party
may be vicariously liable;
(xiii) No fact or circumstance exists that might give rise to a civil,
criminal, arbitration, administrative or other proceeding
involving any Selling Party or a person for whose acts or
defaults any of Selling Party may be vicariously liable;
(xiv) There is no outstanding judgment, order, decree, arbitral award
or decision of a court, tribunal, arbitrator or governmental
agency against any Selling Party or a person for whose acts or
defaults any Selling Party may be vicariously liable;
(xv) Tianyuan has lawfully obtained the Exploration Rights, the
Exploration Permit and the mineral data and other geological
information related to the Property, and the Exploration Rights,
the Exploration Permit, and such mineral data and other
geological information are not subject to any dispute or any
third party claim or interest. The Exploration Permit constitutes
the only exploration permit issued over the Property and the only
exploration permit currently issued to Tianyuan;
(xvi) None of the Exploration Rights, the Exploration Permit or the
mineral data or other geological information related to the
Property are subject to any title dispute with, or lease or
mortgage to, any third party;
(xvii) All fees and charges (including but not limited to exploration
right use fee and mineral resources compensation) in connection
with the Exploration Rights and the Exploration Permit have been
duly paid;
(xviii)All filings necessary to maintain the validity of the Exploration
Permit have been duly made;
(xix) All obligations of the permit holder contemplated under the
Exploration Permit have been duly performed;
(xx) All existing exploration, mining, excavating, exploiting,
extracting, refining and processing activities and operations in
the areas in connection with the Property or the Exploration
Rights conducted by any Selling Party or by any third party have
been suspended;
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(xxi) All mineral data and other geological information any Selling
Party provides to Continental are complete, true, accurate,
legally owned or controlled by the Selling Parties, and are not
subject to any third party claim or any restriction;
(xxii) Tianyuan has paid in full all consideration due and owing by it
in connection with Tianyuan's purchase of the Exploration Rights,
and such consideration including all monetary amounts and other
consideration does not exceed US$2,000,000;
(xxiii)BVI Co has paid in full all consideration due and owing by it in
connection with BVI Co's purchase of 100% of the registered
capital of Tianyuan and is not subject to any debts or other
claims by the founding shareholders of Tianyuan or third parties
in connection with such purchase;
(xxiv) Tianyuan has not conducted any business or incurred any
obligations or liabilities since the issuance of its business
license; provided that acquisition by Tianyuan of the Exploration
Rights shall not represent a breach of this representation and
warranty;
(xxv) BVI Co has not conducted any business or incurred any obligations
or liabilities since the date of its incorporation other than
purchasing 100% of the registered capital of Tianyuan from the
founding shareholders of Tianyuan;
(xxvi) ABC collectively legally hold and beneficially own all issued and
outstanding share capital of BVI Co, clear of all liens, charges
or encumbrances, and with a par value of USD1 per share, and such
share capital has been duly authorized, validly issued and fully
paid;
(xxvii)BVI Co owns all the registered capital of Tianyuan, free and
clear of all liens, charges or encumbrances and have fully
contributed to Tianyuan such registered capital;
(xxviii)There are no options or any other rights to subscribed foror
acquire any equity interest of Tianyuan; and
(xxix) No order has been made, petition presented or resolution passed
for the winding-up or bankruptcy of any Selling Party or for the
appointment of a provisional liquidator to any Selling Party and
no administration order has been made in respect of any Selling
Party.
4.2 Continental and HDI each hereby represents and warrants to Selling
Parties that:
(i) it is a company duly organized, validly existing and in good
standing under the laws of the province of British Columbia;
(ii) 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;
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(iii) 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;
(iv) 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 constating documents; and
(v) This Agreement constitutes a legal, valid and binding obligation
of each of Continental and HDI.
4.3 The representations and warranties in this Section 4 are conditions on
which the Parties have relied in entering into this Agreement and shall
survive Continental's acquisition of shares of BVI Co. 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 4 if such breach has no adverse effect on the benefits,
rights or interests of the Party entitled to make a claim.
5. Confidential Information
5.1 In this Agreement, the term "Confidential Information" means: (a) any
information, data, samples or material concerning the Party supplying
or disclosing such information or material (the "Disclosing Party")
including but not limited to information concerning such Party's
business, financial condition, operations, technology, plans, research
and development, assets or liabilities; and (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 the other party (the "Recipient") from
time to time. Confidential Information shall not include information
that: (a) was known by the Recipient prior to disclosure by the
Disclosing Party; (b) is or becomes public knowledge other than through
the Recipient's breach of this Agreement; or (c) 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 information.
5.2 Each Party that receives Confidential Information shall, during the
term of this Agreement and for two (2) years thereafter, maintain the
confidentiality of the Confidential Information and not disclose it to
any person or entity, except to their respective employees who need to
know such Confidential Information for the sole purpose of such Party
undertaking the activities contemplated in this Agreement.
5.3 The Recipient shall, upon the request of the Disclosing Party, promptly
either destroy or deliver to the Disclosing Party all materials, and
all copies thereof, in the Recipient's possession or control that
contain any of the Disclosing Party's Confidential Information.
Delivery of such items to the Disclosing Party shall not relieve the
Recipient of its confidentiality obligations hereunder.
5.4 The obligations under this Section 5 shall not apply to any
Confidential Information that is required to be disclosed pursuant to
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any statute, law, rule or regulation of any governmental authority, any
order of any court of competent jurisdiction or any request by any
stock exchange; however, the Recipient shall notify the Disclosing
Party before disclosure and give the Disclosing Party reasonable
opportunity to obtain a protective order or other form of protection.
5.5 Each Party acknowledges 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 either Party, the other Party
shall be entitled, without waiving any other rights or remedies, to
seek injunctive relief or similar judicial or administrative remedies.
6. Assistance by Continental
6.1 No later than ten (10) days after the Signature Date, Continental shall
provide ABC with the following information:
(i) subject to the consent of such investors, a list of ten (10)
principal investors who have in the past provided financing to
Continental in connection with the Property or are linked to
Continental by way of Continental being managed by HDI in
connection with the Property; and
(ii) electronic copies (or hard copies if such electronic copies
are not available) of the principal marketing materials
Continental prepared in connection with obtaining financing
for the Property.
6.2 During the first two years after the Completion Notice, Continental
shall provide ABC with the following assistance in connection with
their efforts to obtain financing in respect of the Property:
(i) invite ABC to attend selected (at Continental's sole
discretion) marketing events conducted by Continental in
connection with the Property and use reasonable endeavours to
introduce BVI Co to the investors attending such events;
(ii) on request by ABC, assist with the preparation and review of
all public announcements prepared by ABC in connection with
the Property prior to public dissemination; and
(iii) provide electronic copies (or hard copies if such electronic
copies are not available) of the principal marketing materials
that Continental displays in public in connection with
obtaining financing for the Property.
6.3 Nothing in this Section 6 shall make Continental responsible to secure
funding for the ABC' interests in BVI Co, or otherwise be responsible
for the outcome of the fundraising activities of any Selling Party, or
to recommend an investment in those entities to any person.
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7. Miscellaneous Provisions
7.1 Upon undertaking all or part of the due diligence contemplated in
Section 2.2, Continental may determine that changes to the ownership
structure of Tianyuan or of the Property are needed in order to comply
with PRC law. If so, then Continental may no later than 60 (sixty) days
following the Signature Date, upon notice to Selling Parties, require
Selling Parties to negotiate in good faith and sign, no later than the
date that is fourteen (14) days after delivery of such notice,
amendments to this Agreement providing for such changes.
7.2 The Parties agree that if any Selling Party either becomes aware of any
interests in any mineral properties within 10 km 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 Selling Party's cost of
acquisition as paid or payable to a bona fide third party, with the
decision as to whether Tianyuan should purchase the interest being at
the sole discretion of the directors of Tianyuan. The directors of
Tianyuan shall make a decision whether to purchase such interests
within 20 days after Tianyuan is offered to purchase such interests. If
the directors of Tianyuan cannot make a decision within such time
period, Tianyuan shall be deemed to have waived the right to purchase
such interests.
7.3 Any notice, consent, demand or request (the "Communication") required
or permitted to be given under this Agreement shall be in writing and
may be delivered personally or sent by facsimile or may be sent by
courier to the relevant Party at its address first above written. Any
Communication delivered personally or sent by facsimile shall be deemed
to have been given and received on the second business day next
following the date of sending. Any Communication sent by courier as
aforesaid shall be deemed to have been given and received on the fifth
business day following the date it is sent by courier, addressed to the
Parties at their addresses first above written or to such other address
or addresses as either Party may from time to time specify by notice to
the other; provided, however, that if there shall be a slowdown or
other labour dispute which might affect delivery of the Communication
by courier, then the Communication shall be effective only if actually
delivered.
7.4 If a Party breaches its obligations under this Agreement and causes
damage to the other Parties, it shall be responsible for compensating
the other Parties. Selling Parties and WZ shall be jointly and
severally liable for breaches by any Selling Party of this Agreement
and shall indemnify Continental for its full losses arising from such
breach. HDI assumes joint and several liability for each of
Continental's obligations under this Agreement.
7.5 This Agreement shall be effective on the Signature Date and shall be
legally binding on the Parties until it is replaced by the BVI Co
Shareholders Agreement and the BVI Co Share Option Agreement
contemplated in Section 2.3. Upon signature of those Agreements by the
parties thereto, this Agreement shall terminate.
7.6 The formation, validity, interpretation and performance of this
Agreement, and any disputes arising under this Agreement, shall be
governed by the laws of British Columbia.
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7.7 Any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach, termination or invalidity thereof, shall be
settled by arbitration in accordance with the UNCITRAL Arbitration
Rules as at present in force (the "Rules"), as amended by the following
provisions:
(i) The appointing authority shall be Hong Kong International
Arbitration Centre (the "HKIAC").
(ii) The place of arbitration shall be in Hong Kong at the HKIAC.
(iii) There shall be only one arbitrator chosen by the Parties by
agreement in accordance with the 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 Rules.
(iv) 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 Arbitration Rules as are therein contained.
(v) The language to be used in the arbitral proceedings shall be
English.
(vi) The Selling Parties as a group 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
the Selling Parties and that requested 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.
(vii) The arbitration award shall be final and binding on the
Parties.
7.8 Each of the Parties shall from time to time and at all times do all
such further acts and execute and deliver all further deeds and
documents as shall be reasonably required in order fully to perform and
carry out the terms of this Agreement.
7.9 Assignments by the Parties of their rights and obligations under this
Agreement shall be governed by the following provisions:
(i) ABC may assign its rights and obligations under this Agreement
to CTVH without consent of the other Parties.
(ii) Each of Continental and CTVH may assign its rights and
obligations under this Agreement to any of its "Affiliates"
(defined below) without consent of the other Parties.
(iii) The assignee under any assignment permitted under this Section
7.9 shall be liable for all the obligations and liabilities of
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the assignor under this Agreement and as a condition of the
assignment must formally accede to this Agreement.
(iv) Except as provided in clauses (i) through (iii), no Party may
assign any of its rights or obligations under this Agreement
without the prior written consent of the other Parties.
(v) "Affiliate" means, in relation to a Party, any company which,
directly or indirectly, is controlled by, under common control
with, or in control of, that Party; the term "control" meaning
ownership of fifty percent or more of the voting stock or
registered capital, or the power to appoint or elect a
majority of the directors, of a company.
7.10 This Agreement will enure to the benefit of and be binding upon the
Parties hereto and their respective successors and permitted assigns.
7.11 Time is of the essence in this Agreement.
7.12 For the avoidance of doubt, this Agreement is an option only in favour
of Continental and, except as herein specifically provided, nothing
herein contained shall be construed as obligating Continental to do any
acts or make any payments hereunder. Unless otherwise provided in this
Agreement, any act or acts or payment or payments as shall be made
hereunder shall not be construed as obligating Continental to do any
further act or make any further payment.
7.13 Selling Parties acknowledge that Continental may be required to seek
acceptance from the TSX Venture Exchange (the "Exchange") to this
Agreement and if as a condition of acceptance, the Exchange requires
amendments to this Agreement, the Parties shall use their best efforts
to negotiate an agreement satisfactory to the Exchange. In the event
that acceptance of the Exchange is not obtained within ninety (90) days
following the date of this Agreement, this Agreement may be terminated
by Continental upon ten (10) days notice.
7.14 Each Party acknowledges that it will comply with all laws and regula-
tions 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:
(i) Training employees on the laws and regulations applicable in,
and the customs and traditions of, Tibet and the standards of
behaviour to be maintained while working in Tibet. ABC shall
assist Continental to prepare and deliver the training;
(ii) 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 behaviour;
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(iii) To the extent allowed by law, terminating the employment of
employees who commit a serious breach of such standards of
behaviour, 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 7.14, 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 endeavours to mitigate
the damages.
7.15 This Agreement may not be amended orally, and any amendment hereto must
be agreed to in a written instrument signed by all of the Parties.
7.16 This Agreement is signed in Chinese and English and each Party will
hold one (1) original of each language version. The two language
versions shall have equal validity.
7.17 Except as otherwise expressly provided for under this Agreement,
failure or delay on the part of any Party to exercise a right under
this Agreement shall not operate as a waiver thereof; nor shall any
single or partial exercise of a right preclude any other future
exercise thereof.
7.18 This Agreement constitutes the entire agreement among the Parties and
supersedes and replaces all previous oral or written agreements,
memoranda, correspondence or other communications between the Parties
relating to the subject matter hereof.
7.19 This Agreement may be executed in counterpart and by facsimile
transmission with the same effect as if the Parties had originally
signed the same document. All counterparts will be construed together
and constitute one and the same agreement.
IN WITNESS WHEREOF the Parties hereto have duly executed this Agreement as of
the dates detailed below.
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Xxxxx Xxxx Xxx
/s/ Xxxxx Xxxx Xxx
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Date:
Xxxxx Xxx Ming
/s/ Xxxxx Xxx Ming
--------------------
Date:
Xxxx Xxxxx
/s/ Xxxx Xxxxx
--------------------
Date:
Highland Mining Inc.
Per: /s/
----------------------------
Authorized Signatory
Name:
Date:
TIBET TianYuan Minerals
Exploration Ltd.
Per: /s/
----------------------------
Authorized Signatory
Name:
Date:
14
Continental Minerals
Corporation
Per: ____________________
Authorized Signatory
Name:
Date:
Xxxxxx Xxxxxxxxx Inc.
Per: ____________________
Authorized Signatory
Name:
Date:
Xxxx Xxx
/s/ Xxxx Xxx
--------------------
Date:
15
Schedule A
Description of the Property
Xietongmen Copper Deposit
Area: 12.91 km(2); 88(degree)23 45 88(degree)26 30 E & 29(degree)21 30
29(degree)24 00 N Location: Xxxxx Village, Xietongmen County, Rikaze Tibet.
350 km from Lhasa.
In the below diagram, the Property is represented by the entire shaded area and
the darker area within the shaded area represents known existing workings.
[DIAGRAM OMITTED]
16
Schedule B
Exploration Permit
17
Schedule C
Documentary Due Diligence
1. The documents Selling Parties shall provide to Continental in
accordance with Section 2.2 to enable Continental to undertake its due
diligence study shall include originals of the following documents:
(i) With respect to Tianyuan:
a. capital verification report and other documents evidenc-
ing that all of the registered capital has been fully
contributed by the founding shareholders of Tianyuan and
is currently held by BVI Co;
b. directors resolutions approving the entering into of
this Agreement and the performance of the obligations
hereunder;
(ii) With respect to BVI Co:
a. share certificate issued by BVI Co in the name of ABC;
b. certificate of incorporation of BVI Co;
c. company book of BVI Co (including but not limited to the
register of shareholders, the register of directors, the
register of charges, shareholders resolutions and the
board resolutions);
d. articles of association;
e. board resolutions and shareholders' resolutions approv-
ing the entering into this Agreement and the performance
of its obligations hereunder;
f. documents showing that ABC legally hold and beneficially
own all issued and outstanding share capital (all of
which has been duly authorized, validly issued and fully
paid) of BVI Co, free and clear of all liens, charges or
encumbrances, and with a par value of USD1 per share;
(iii) With respect to the Exploration Rights and the Exploration
Permit:
a. current Exploration Permit issued by the Ministry of
Land and Resources in the name of Tianyuan;
b. a legal opinion, in form and substance agreed by the
Parties, acceptable to Continental, issued by a
Qualified and reputable law firm in China, contemplating
that Tianyuan has legally obtained the Exploration
Rights, that the Exploration Permit is validly issued to
Tianyuan, that neither the Exploration Rights nor the
Exploration Permit is subject to any encumbrances or
third party rights, and that the Exploration Rights and
Exploration Permit give Tianyuan the right to conduct
exploration for copper and other associated minerals
including gold within the Property;
18
(iv) With respect to the acquisition of Tianyuan by BVI Co:
a. transfer agreement in relation to the acquisition of the
entire registered capital of Tianyuan by BVI Co;
b. documents submitted by the Department of Commerce of
Tibet to the Ministry of Commerce of the PRC ("MOFCOM")
requesting approval of such acquisition and the change
of Tianyuan from a PRC domestic limited liability
company to a wholly foreign-owned enterprise;
(v) With respect to the formal approval of the acquisition of
Tianyuan by BVI Co:
a. official reply issued by MOFCOM approving the acquisi-
tion of the equity interest in Tianyuan by BVI Co and
the change of Tianyuan from a PRC domestic limited
liability company to a wholly foreign-owned enterprise;
b. wholly foreign owned enterprise articles of association
of Tianyuan approved by the Department of Commerce of
the Tibet Autonomous Region;
c. Certificate of Approval for Establishment of Enterprises
with Foreign Investment in the PRC for Tianyuan issued
by the Department of Commerce of the Tibet Autonomous
Region;
(vi) Enterprise Legal Person Business License for Tianyuan issued
by the State Administration of Industry and Commerce of the
Tibet Autonomous Region evidencing that Tianyuan is a wholly
foreign-owned enterprise and that its scope of business
includes "mining, processing and sale of mineral products, and
investment in risk exploration for mineral resources other
than oil and gas in Rikaze area of Tibet"; and
(vii) official confirmation of the transfer of the Exploration
Rights to Tianyuan as a wholly foreign-owned enterprise issued
by MOLAR and documents evidencing that the "type of investor"
section of the record in relation to the Exploration Permit
has been changed to a wholly foreign-owned enterprise.
2. Continental shall provide ABC with a copy of each of the following
documents:
(i) Continental's certificate of incorporation and its memorandum
and articles, together with a document filed with the British
Columbia company registry showing the respective shareholdings
of its shareholders;
(ii) documents evidencing the shareholding relationship and the
shares entrustment relationship between HDI and Continental;
and
19
(iii) a legal opinion, in form and substance agreed by the Parties,
issued by a qualified and reputable law firm in Canada,
confirming that Continental has no remaining right or
obligation to acquire any interest in the Property under the
terms of the Property Option Agreement dated February 5, 2004
between HDI and CTVH, which was subsequently assigned by HDI
to Continental.
20
Schedule D
Options
The options granted by ABC and BVI Co to Continental in accordance with Section
2.3 shall include as follows:
1. First Option
An option, exercisable by notice to ABC within three (3) days after
signature of the BVI Co Share Option Agreement by the parties thereto,
for Continental to purchase from ABC such number of shares of BVI Co so
that Continental will hold 50% of the issued share capital of BVI Co
(the "First Option").
The following provisions shall apply to the First Option:
(i) ABC shall transfer such shares to Continental within ten (10)
days of Continental's issuance of its notice to exercise the
First Option.
(ii) Continental shall:
(a) pay ABC USD1,200,000 within five (5) business days after
the completion of transfer of such shares; and
(b) subject to the last paragraph of this Section 1, pay ABC
USD800,000 within one (1) year after the completion of
transfer of such shares.
If Continental does not pay the amount provided in subclause
(a) in accordance with the time requirement, this Agreement,
the BVI Co Share Option Agreement and the BVI Co Shareholders
Agreement shall terminate and Continental shall promptly
transfer back to ABC the shares purchased pursuant to the
First Option and shall release ABC from the share pledge
granted under Section 2.3 of this Agreement.
(iii) Continental may, at its absolute discretion and option, from
time to time within twenty four (24) months after the
Signature Date (the "First Expenditure Period") invest up to
USD5,000,000 into BVI Co in order to fund exploration activi-
ties in relation to the Property (the "First Expenditure").
Irrespective of Continental's investments into BVI Co under
this paragraph, Continental and the then other shareholders of
BVI Co (as a group) shall each hold 50% of the issued share
capital of BVI Co during the First Expenditure Period. To that
end, as Continental subscribes for any share capital of BVI Co
in relation to the First Expenditure, the other shareholders
of BVI Co as a group shall also be entitled to subscribe for
the same amount of share capital of BVI Co at nominal consider
-ation so that the shareholding of the then other shareholders
of BVI Co (as a group) is maintained at (but does not exceed)
50%.
21
(iv) Subject to clause (v), Continental's investment into BVI Co as
contemplated in clause (iii) above shall comply with the
following time schedule:
(a) the first USD3,000,000 within 365 days after the Signature
Date;
(b) the Full USD5,000,000 within 730 days after the Signature
Date.
(v) BVI Co will invest into Tianyuan all of the funds Continental
invests into BVI Co as contemplated in clause (iv) above and
Tianyuan will use such funds in connection with the
exploration and development of the Property. If the
exploration and development work is delayed for reasons not
attributable to Continental, Continental may request an
extension of the investment time schedule set out above as
well as an equal extension of the expiry date of the First
Expenditure Period and the other Parties may not unreasonably
refuse such request.
(vi) BVI Co shall allot and issue shares to the relevant
shareholder within ten (10) days after that shareholder's
subscription for new BVI Co shares in connection with its
investment into BVI Co.
(vii) Continental shall, upon receipt of the shares under this
Section 1, pledge such shares to ABC. Continental shall retain
full beneficial ownership of the shares notwithstanding the
pledge. If Continental exercises the First Option but fails
to fulfill any obligation under clauses (ii), (iii) or (iv)
above, Continental shall within three (3) days following the
earlier date of such failure or the date that Continental
provides notice to ABC that it no longer wishes to participate
in the Property, transfer to ABC all shares it holds in BVI Co
to ABC for USD1. Continental shall sign all documents in
relation to such pledge at the same time that the BVI Co Share
Option Agreement and the BVI Co Shareholders Agreement are
signed by the relevant Parties. Having transferred the shares
to ABC, Continental shall be responsible to invest into BVI Co
only such additional amounts as may be necessary to permit
Tianyuan to pay for costs Tianyuan has actually incurred in
the exploration and development of the Property prior to the
date of transfer of shares. Continental shall have no liabil-
ity to make additional investments into BVI Co and shall not
otherwise be liable to the other Parties under this Agreement
or in relation to the Property. A cost shall be considered
"actually incurred" for the purposes of this sub-clause (vii)
if Tianyuan has received the service or been delivered the
goods to which the cost relates prior to the date of transfer
of the shares.
(viii) Within three (3) days after Continental fulfils its
obligations under clauses (ii), (iii) and (iv) above, the
other BVI Co Shareholders shall release Continental from the
share pledge granted under clause (vi).
2. Second Option
A further option, exercisable by Continental after its exercise of the
First Option by (i) one month's prior notice to the then other
shareholders of BVI Co, where such notice is given no later than
twenty-two (22) months following the Signature Date, or (ii) two
months' prior notice to such shareholders, where such notice is given
22
between twenty-two (22) months and twenty-four (24) months following
the Signature Date, for Continental to subscribe at par value for such
number of shares of BVI Co (without any change in the total number of
shares issued to the then other shareholders of BVI Co) so that
Continental's shareholding in BVI Co after the issuance of such shares
will be 60% (the "Second Option").
The following provisions shall apply to the Second Option:
(i) BVI Co shall allot and issue such shares to Continental within
ten (10) days after Continental's issuance of its notice to
exercise the Second Option and payment by Continental of the
subscription price.
(ii) Continental may, at its absolute discretion and option, from
time to time within a timeframe as determined by Continental,
but no later than 365 days after expiry of the First Expenditure
Period (the "Second Expenditure Period") invest into BVI Co an
additional US$3,000,000 (less the subscription price Continental
has paid to obtain the shares subject to the Second Option) in
order to fund exploration activities in relation to the Property
(the "Second Expenditure"). Irrespective of Continental's invest
-ments into BVI Co under this paragraph, Continental shall hold
60% of the issued share capital of BVI Co and the then share-
holders of BVI Co (as a group) shall hold 40% of the issued
share capital of BVI Co during the Second Expenditure Period. To
that end, as Continental subscribes for any share capital of BVI
Co in relation to the Second Expenditure, the other shareholders
of BVI Co as a group shall also be entitled to subscribe for the
same amount of share capital of BVI Co so that the shareholding
of the then other shareholders of BVI Co (as a group) is main-
tained at (but does not exceed) 40%.
(iii) If the exploration and development work is delayed for reasons
not attributable to Continental, Continental may request an
extension of the expiry date of the Second Expenditure Period
and the other Parties may not unreasonably refuse such request.
(iv) Continental shall, upon receipt of the shares under this Section
2, pledge such shares to then other BVI Co shareholders. Xxxxx-
nental shall retain full beneficial ownership of the shares not-
withstanding the pledge. If Continental exercises the Second
Option but does not incur the Second Expenditure in accordance
with this Section, Continental shall within three (3) days
following the earlier date of the expiration of the Second
Expenditure Period or the date that Continental provides notice
to the other shareholders that it will not complete the expendi-
ture required in terms of the Second Option, transfer to the
then other BVI Co shareholders the shares subscribed for in
accordance with the Second Option for USD1. Continental shall
sign all documents in relation to such pledge at the same time
that it exercises the Second Option. Having transferred the
shares to ABC, Continental shall be responsible to invest into
BVI Co only such additional amounts as may be necessary to
permit Tianyuan to pay for costs Tianyuan has actually incurred
in the exploration and development of the Property prior to the
date of transfer of shares. Continental shall have no liability
to make additional investments into BVI Co and shall not other-
wise be liable to the other Parties.
23
(v) Within three (3) days after Continental fulfills its obligations
under this Section 2, ABC shall release Continental from the
share pledge granted under this Section B.2.
3. Further Assurances
ABC shall take all necessary and appropriate actions, including giving
all shareholder approvals and causing directors of BVI Co designated by
it to give their approvals, to enable the issuance of shares by BVI Co
pursuant to any exercise of the First Option and the Second Option.
24
Schedule E
Terms and Conditions of the BVI Co Shareholders Agreement
As contemplated in Section 2.3, the BVI Co Shareholders Agreement between
Continental and the ABC shall include the following principal provisions as well
as such further provisions as are ordinary or customary for such agreements in
order to protect the interests of the shareholders:
1. Funding of the Company
(a) Continental having completed its investment into BVI Co in
connection with the First Option (or if Continental exercises
the Second Option then upon expiry of the Second Expenditure
Period), the board of directors of BVI Co may from time to
time by simple majority resolution determine that BVI Co
requires additional funding and the then shareholders of BVI
Co shall have first right to supply such additional funding.
(b) The shareholders shall agree to make either equity
contributions or shareholders loans to BVI Co. In the event
that the shareholders cannot reach agreement on the form of
funding, the funding will be in the form of shareholders
equity.
(c) Each shareholder may subscribe to any such increase in
shareholders equity capital or shareholders loans (as the case
may be) in proportion to their prevailing respective
shareholdings by notifying the board of directors no later
than thirty (30) days after the board resolution is passed.
Contribution of any increase by either shareholder shall be
made no later than the time stipulated by the board of
directors, provided that the board of directors will not
require that the contributions are made less than sixty (60)
days following the date of the board resolution requiring the
increase.
(d) If any shareholder declines to subscribe for its proportionate
share of any such increase, the other shareholders may
subscribe for that share and the proportionate shareholding
interest of the shareholder not subscribing will be diluted
proportionately, in accordance with a formula to be set out in
the BVI Co Shareholders Agreement. If such increase is not
fully subscribed for, then the board of directors may reduce
the amount offered and re-send the notice until any notice
which is sent is fully subscribed by one or more of the
shareholders or the board of directors may invite other
investors, agreed to by the shareholders of BVI Co, to
subscribe for such equity, subject to the new investors
becoming party to the BVI Co Shareholders Agreement.
2. BVI NPI Payments
(a) The shareholders of BVI Co will be entitled to share in
dividends of BVI Co and in distribution of net proceeds upon a
liquidation of the assets of BVI Co according to their
respective shareholdings in BVI Co, provided that if the
shareholding in BVI Co in aggregate held by ABC falls below
25
15%, then ABC will have an option, exercisable by a single
written notice given by all of them to Continental, no later
than 30 days after their aggregated shareholding falls below
the aforementioned 15%, to:
(i) continue to hold their shares in BVI Co, to be
entitled to receive their respective shares of
dividends of BVI Co according to their respective
shareholdings and to be liable to make equity
contributions according to their respective
shareholdings in accordance with Section 1 above; or
(ii) return all their shareholdings in BVI Co to BVI Co
within ten (10) days from the date of the notice for
cancellation in exchange for a payment, payable
ninety (90) days after the financial year end of BVI
Co or the date that BVI Co distributes dividends to
its shareholders, whichever date is the later, to be
shared among themselves (a "BVI NPI Payment") in
respect of each financial year of BVI Co following
the date of transfer, calculated at a fixed rate of
12.5% of the "BVI Net Profits" (as defined below),
which BVI NPI Payments shall be subject to the
following provisions:
a. subject to subclauses b. and c. below, BVI
NPI Payments will not accrue or be payable
to such shareholders until after Continental
has recovered through its receipt of
dividends from BVI Co all of its "Continen-
tal BVI Excess Investment" (as defined
below);
b. in respect of any financial year before NPI
Payments have accrued and become payable in
accordance with subclause a. above, and
provided that in any event that BVI Co has
BVI Net Profits of no less than US$2
million, such shareholders shall be entitled
to a fixed interim payment of US$250,000 (to
be shared among themselves);
c. once BVI NPI Payments have accrued and
become payable in accordance with subclause
a. above, then the first US$250,000 of the
BVI NPI Payments for each year shall be paid
to such shareholders (to be shared among
themselves), and the remaining amounts
accrued, on an aggregated basis, shall be
reduced by the amount of any interim
payments such shareholders have received in
accordance with subclause b. above until all
such previously paid fixed interim amounts
have been accounted for as a credit to the
amounts otherwise due to the other
shareholders in BVI Co.
(b) The term "BVI Net Profits" for a particular financial year
means the profits of BVI Co available for distribution in
respect of that year to the shareholders of BVI Co, in
accordance with Canadian General Accepted Accounting Practices
("Canadian GAAP"), after deduction of operating expenses,
applicable taxes, loan repayments and other costs and
26
financial commitments as well as working capital and reserves
either required by law or determined to be reasonable by the
board of directors of BVI Co in order to provide for working
capital or for environmental reclamation in relation to the
Property.
(c) The term "Continental BVI Excess Investment" means all loan
and equity capital invested, provided and or contributed by
Continental to BVI Co as well as any additional investment
made by Continental in relation to the Property directly or
indirectly under the terms hereof and not otherwise accounted
for as part of BVI Co's loan or equity capital after the point
at which the shareholding of ABC 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.
(d) The Parties will enter into a BVI Net Profits Agreement
concurrently with such shareholders exercising their option to
receive the BVI Net Profits, in a form satisfactory to
Continental's legal advisors.
3. Exploration budgets
(a) Continental shall prepare annual exploration programs and
budgets ("Continental BVI Co Program") and submit them to the
Board for approval forty-five (45) days after the end of each
exploration program.
(b) In the event that Continental fails to submit a Continental
BVI Co Program in accordance with clause (a) upon expiry of
the First Expenditure Period (or if Continental exercises the
Second Option then upon expiry of the Second Expenditure
Period), ABC shall be entitled to submit an annual exploration
program and budget ("ABC BVI Co Program") for the following
year to the Board for approval and Continental undertakes that
it will approve the ABC BVI Co Program if it is in accordance
with sound mining and applicable industry standards and
practices in China.
(c) If Continental does not elect to fund the ABC BVI Co Program
or elects to fund less than USD1,000,000 or its pro rata share
of the ABC BVI Co Program if that is less than USD1,000,000,
then ABC shall be entitled to implement its proposed
exploration according to the ABC BVI Co Program and ABC may
elect to assume the operatorship, management and
administration of the ABC BVI Co Program.
(d) In the event that Continental submits a Continental BVI Co
Program in any period during which ABC has assumed the
operatorship, management and administration under an ABC BVI
Co Program, the operatorship, management and administration of
the annual exploration program and budget under the
Continental BVI Co Program shall revert to Continental so long
as Continental holds 50% or more of the shares of BVI Co.
(e) The provisions of (c) will apply mutatis mutandis to ABC and
the provisions of (d) will apply mutatis mutandis to
Continental if ABC's shareholding rises above 50%.
27
4. Board of Directors of BVI Co
(a) Continental having exercised the First Option and subject to
clause (b) below, the following provisions will apply:
(i) The board of directors of BVI Co shall consist of six
(6) directors. Upon signature of the BVI Co
Shareholders Agreement, BVI Co and the ABC shall
cause all but three (3) directors of BVI Co to resign
immediately and Continental shall be entitled to
appoint three (3) directors to the board of directors
of BVI Co;
(ii) Continental shall have the right to appoint the Chair
-man of the board of directors of BVI Co; and
(iii) BVI Co and the then shareholders of BVI Co other than
Continental agree not to undertake any action to
remove any of the Continental appointed directors
from the board of directors, without the prior
written consent of Continental, or to undertake any
shareholders action that may result in Continental
not being in control of the board of directors. The
other shareholders of BVI Co may request Continental
to remove a Continental appointed director who has
committed a serious breach of the standards of
behaviour provided for in Section 7.14, but
Continental shall be entitled to replace a director
so removed.
(b) In the event that Continental's shareholding in BVI Co falls
below 50%, each shareholder shall be entitled to appoint a
number of directors proportionate to their percentage interest
of the issued share capital of BVI Co, and the shareholder
holding more than 50% of the issued share capital will have
the right to appoint the Chairman and this clause will apply
to any subsequent shareholding changes where a shareholder
acquires an interest of more than 50% in BVI Co;
(c) Except for matters required by law to be dealt with by BVI Co
shareholders, the articles of association and by-laws of BVI
Co will provide that all decisions of BVI Co shall be resolved
by simple majority vote of the board of directors of BVI Co at
a duly convened meeting at which a quorum of a majority of the
board of directors is present.
(d) The Chairman of the board of directors shall have a casting
vote, except that if Tianyuan undertakes an ABC BVI Co Program
the following supplementary provisions shall apply:
(i) the directors of BVI Co appointed by ABC, and not the
Chairman of the Board, shall have a casting vote in
respect of all matters relating to the ABC BVI Co
Program, including the issuance of shares by BVI Co
to fund the ABC BVI Co Program in a good workmanlike,
safe and efficient manner in accordance with sound
mining and applicable industry standards and practice
in China; and
28
(ii) The Chairman of the Board shall have a casting vote
on all other matters, if any, excluding matters
relating to the ABC BVI Co Program.
5. Right of First Refusal
(a) Continental shall have the right to dispose of its shares in
BVI Co provided that the other shareholders of BVI Co have
first been offered the shares on the same terms as Continental
proposes to accept.
(b) Each shareholder of BVI Co other than Continental shall each
have the right to dispose of its shares in BVI Co provided
that such shareholder has first offered Continental the shares
on the same terms as the shareholder that is selling proposes
to accept.
(c) The shareholder proposing to sell shall first notify in
writing the other shareholder or shareholders having a right
of purchase with details about the proposed terms of sale and
other shareholder shall have thirty (30) days to decided
whether to purchase the shares being sold on the same terms as
are being offered with completion to occur on the earlier of a
date chosen by the buying party and the date which the selling
party would have otherwise sold the shares. Before any
transfer of shares of BVI Co is effected, any purchaser of the
shares must agree to become a party to the BVI Co Shareholders
Agreement and the BVI Co Share Option Agreement.
6. Management Organization and Personnel
(a) BVI Co shall have a management organization that is under the
leadership of the Chief Executive Officer, who shall be an
individual nominated by Continental and appointed by BVI Co's
board of directors.
BVI Co shall cause Tianyuan to set up a management
organization that is under the leadership of the General
Manager of Tianyuan, who shall be an individual nominated by
the Chief Executive Officer of BVI Co and appointed by the
board of directors of Tianyuan.
(b) Continental shall provide suitable engineering expertise,
charged at market related rates, as agreed in terms of the
annual exploration budget and program approved by the board of
directors, to BVI Co and Tianyuan, and BVI Co 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 in accordance
with Part B of this Schedule.
7. Accounts and Audits
(a) BVI Co shall prepare its accounts in accordance with Canadian
GAAP.
(b) BVI Co shall engage an international firm of auditors to audit
its accounts and annual financial statements and to prepare an
audit report.
29
CONTINENTAL MINERALS
CORPORATION
Per: /s/ X.X. Xxxxxxxx
-----------------------
Authorized Signatory
Name: X.X. Xxxxxxxx
Date: November 9, 2004
XXXXXX XXXXXXXXX INC.
Per: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------
Authorized Signatory
Name: Xxxxxx X. Xxxxxxxxx
Date: November 9, 2004
30
