PROPERTY OPTION AGREEMENT
THIS AGREEMENT made and entered into as of the fifth day of February, 2004.
BETWEEN:
CHINA NETTV HOLDINGS INC., a company with offices at 916 -
000 Xxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
(herein called the "Optionor")
OF THE FIRST PART
AND:
XXXXXX XXXXXXXXX INC., a company with offices at Suite 1020 -
000 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
(herein called the "Optionee")
OF THE SECOND PART
WHEREAS:
A. The Optionor has represented that through Honglu Investment Holdings Inc.,
its wholly owned subsidiary, it is the sole legal and beneficial owner of 100%
of the Property Rights as defined herein in respect of the mineral property
located in Tibet, China known as the Xietongmen Gold-Copper Property as more
particularly described in Schedule "A" attached hereto (the "Property"); and
B The Optionor wishes to grant to the Optionee an exclusive Option to acquire an
aggregate 50% of the Property Rights in respect of the Property and a Further
Option to acquire up to a further 10% of the Property Rights, for an aggregate
60% of such Property Rights on the terms and conditions hereinafter set forth;
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT for valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the Parties hereto do
hereby mutually covenant and agree as follows:
1. Definitions
1.1 The following words, phrases and expressions shall have the
following meanings:
(a) "Acceptance Date" means the date that notice that this Agreement
has been accepted for filing by the TSX Venture Exchange is received by
the Optionee;
(b) "After Acquired Properties" means any and all mineral properties in
respect of which mineral rights and interests staked, located, granted,
optioned or otherwise acquired, directly or indirectly by or on behalf
of either of the Parties hereto or affiliate, associate or any
corporation having common management with either of the Parties hereto
including any assignee pursuant to ss.8 hereof, within ten (10)
kilometers of the perimeter of the Property.
(c) "Completion Date" refers to the date which is the last day of the
twenty four (24) months period following the Effective Date;
(d) "Effective Date" refers to the date on which the Optionee makes the
payment contemplated by ss.2.1(a)(i) hereof;
(e) "Exchange" means the TSX Venture Exchange;
(f) "Expenditures" and "Further Expenditures" refers to all direct or
indirect expenses (net of government incentives and net of payments to
the Optionor pursuant to ss.2 hereof) of or incidental to Exploration
Programs to be incurred by the Optionee together with any
non-refundable deposits, bonds or other payments to third parties as
are posted in connection with any Work Program and/or Further Work
Program, excluding any refunds. All such expenses will be computed into
the Expenditures and/or Further Expenditures as the case may be, if
certified by the Controller or other financial officer of the Optionee
as project operator;
(g) "Exploration Programs" means:
(i) every kind of work done on or with respect to the
exploration of the Property by or under the direction of the
Optionee during the Option Period or pursuant to a Work
Program; and
(ii) without limiting the generality of the foregoing, the
work of assessment, geophysical, geochemical and geological
surveys, studies and mapping, environmental, permitting,
investigating, drilling, designing, examining equipping,
improving, surveying, shaft sinking, raising, cross-cutting
and drifting, searching for, digging, trucking, sampling,
working and procuring minerals, ores and metals for
exploration purposes, in surveying with a view to bringing any
mineral claims to lease or patent, in doing all other work
usually considered to be prospecting, exploration,
development, a feasibility study, save and except mining work
and the commercial production of Mineral Products;
(h) "Force Majeure" means an event beyond the reasonable control of the
Parties which prevents or delays a Party or both Parties from
conducting the activities contemplated by this Agreement other than the
making of payments by the Optionee referred to as Acquisition Costs in
ss.2 herein. Such events shall include but not be limited to acts of
God, war, insurrection, labour strife, action or inaction of
governmental agencies, inability to secure adequate (by way of
condition or numbers) equipment or work force for the conduct of a Work
Program, inability to obtain any environmental, operating or other
permits or approvals, authorizations or consents and inclement weather
conditions outside of the normal weather for the region. Any such
failure on the part of such party to so perform shall not be deemed to
be a breach of this Agreement and the time within which such party is
obliged to comply with any such term, covenant or condition of this
Agreement shall be extended by the total period of all such delays. In
order that the provisions of this definition may become operative, such
party shall give notice in writing to the other party, forthwith and
for each new cause of delay or prevention and shall set out in such
notice particulars of the cause thereof and the day upon which the same
arose, and shall give like notice forthwith following the date that
such cause ceased to subsist;
(i) "Further Option" means the option to be granted by the Optionor to
the Optionee to acquire up to a further 10% of the Property Rights in
respect of the Property and corresponding interest in the Joint
Venture, for an aggregate 60% interest as more particularly set forth
in ss.3;
(j) "Joint Venture" means the joint venture to be formed between the
Optionor and the Optionee in respect of the Property upon exercise of
the Option;
(k) "Joint Venture Agreement" means the joint venture agreement to be
entered into between the Optionor and the Optionee as provided for in
ss.2.2 andss.3.2 hereof;
(l) "Mineral Products" means the commercial end products derived from
operating the Property as a mine;
(m) "Option" means the option granted by the Optionor to the Optionee
to acquire an undivided 50% of the Property Rights in respect of the
Property as more particularly set forth in ss.2.1;
(n) "Option Period" means the period from the date hereof to the date
at which the Optionee has performed its obligations to acquire its 50%
interest in the Property as set out in ss.2 hereof and has given notice
of the exercise of the Option and, in circumstances where the Optionee
elects to exercise the Further Option, shall include such period to the
date on which the Optionee has either exercised the Further Option,
waivers such Further Option or gives notice to the Optionor in writing
that it does not intend to proceed with such exercise;
(o) "Property" refers to the mineral property known as Xietongmen
Gold-Copper Property located in Tibet, China as more specifically
described in Schedule A attached hereto;
(p) "Property Rights" refers to any and all rights, interests and
privileges currently held and owned and/or hereafter acquired by the
Optionor directly or indirectly, by law or by contract, including,
without limitation to, such rights, interests and privileges under or
derived from the prospecting licenses and/or permits in respect of the
Property;
(q) "Work Program" means the business plan for the Exploration Programs
to be carried out on the Property and completed by the Optionee on or
before the Completion Date, said Work Program to be prepared by the
Optionee in consultation with the Optionor and to contain in a written
document setting out in reasonable detail:
(i) an outline of the Exploration Programs proposed to be
undertaken and conducted on the Property, specifically stating
the period of time during which the work contemplated by the
proposed program is to be done and performed;
(ii) the estimated cost of such Exploration Programs including
a proposed budget no less than $5,000,000 providing for
estimated monthly cash requirements in advance and giving
reasonable details; and
(iii) the identity and credentials of the person or persons
undertaking the Exploration Programs so proposed if not the
Optionee.
1.2 All references to monies ("$") hereunder shall be to U.S.
funds.
2. Option
2.1 The Optionor hereby grants to the Optionee an exclusive option (the
"Option") to acquire 50% of the undivided Property Rights in respect of
the Property, exercisable as follows:
(a) the Optionee making the following cash payments totaling
$2,000,000 (the Acquisition Costs") to the Optionor:
(i) $500,000 on the Acceptance Date, or, in the circum-
stances contemplated by ss.8.2 hereof, that date which is 90
days following the date of this Agreement; and
(ii) a further $250,000 every four (4) months thereafter
until the full balance of the Acquisition Costs are paid in
full;
and
(b) the Optionee incurring the Expenditures totaling $5,000,000 within
twenty-four (24) months following the Effective Date; provided that a
minimum of $3,000,000 is to be incurred within twelve (12) months
following the Effective Date;
For greater certainty, the total Expenditures shall be incurred in
accordance with the Work Program. It is the understanding of the
Parties that the Work Program shall include an estimated thirty (30)
drill holes during the first twelve (12) months following the Effective
Date.
(c) the Optionee giving the Optionor notice in writing of the
exercise of the Option;
provided that the Optionee shall not be entitled to exercise the Option at a
time when it is in default hereunder.
2.2 Following the exercise of the Option by the Optionee, the Optionor and the
Optionee will form a Joint Venture for the purpose of carrying out further
exploration and development work on the Property and will use their commercially
reasonable best efforts to negotiate and execute a Joint Venture Agreement, said
Agreement to incorporate this Agreement and have standard Rocky Mountain Mineral
Law Foundation terms and shall include, but not be limited to, the following
provisions:
(a) subject to ss.7.2 hereof, the interests of the Parties in the Joint
Venture will be 50% as to the Optionee and 50% as to the Optionor and
the prior expenditures incurred by the Parties shall be deemed to be
$5,000,000 in respect of each of the Optionee and the Optionor;
(b) the Optionee shall be the initial operator of the Joint Venture,
reporting to the Management Committee to be established upon execution
of the Joint Venture Agreement, supervised by the Management Committee
and bound by such decisions as may be made by the Management Committee
from time to time;
(c) the Joint Venture will be overseen by the Management Committee,
with the Parties to have voting rights on such Management Committee
equal to their respective interest from time to time in the Joint
Venture;
(d) the interests of the parties in the Joint Venture will be subject
to dilution for non-contribution on a straight line basis, provided
that if the interests of the Optionor in the Joint Venture falls below
12.5% it shall revert to a 12.5% interest in the Net Profits (as
defined in Schedule "B" hereto);
(e) each Party will grant to the other a right of first refusal with
respect to the sale of such Party's interest in the Joint Venture;
(f) each Party will have the right to take in kind any Mineral
Products; and
(g) the parties will have fifteen (15) days following adoption of a
Work Program to elect to participate therein and invoices rendered to
participating parties in respect of any Work Program shall be payable
within thirty (30) days.
3. Further Option
3.1 In circumstances where the Optionee has exercised the Option as provided for
herein and so elects in writing to the Optionor, and provided that the Optionee
has completed the Work Program and incurred the Expenditures hereunder and is
not otherwise in default under this Agreement, the Optionee shall have the
Further Option to acquire a further 10% interest in the Joint Venture and in the
Property Rights by incurring Further Expenditures of $3,000,000, in addition to
the Expenditures, within thirty-six (36) months of the Effective Date and,
following the incurring of such Further Expenditures, by giving notice in
writing to the Optionor of the exercise of the Further Option in circumstances
where the Optionee is not in default hereunder. The Optionee intending to
exercise the Further Option shall give written notice to the Optionor no later
than sixty (60) days after the Completion Date. Failing such notice, the
Optionee shall be considered to have waived the Further Option.
3.2 Notwithstanding the provisions of ss.2.2 hereof, in circumstances where the
Optionee elects to exercise the Further Option as contemplated by ss.3.1 hereof,
the operation of the Joint Venture Agreement will be held in abeyance until such
time as the Optionee effectively exercises the Further Option as contemplated by
ss.3.1 above or gives notice to the Optionor in writing that it does not intend
to proceed with such exercise and, in circumstances where the Further Option is
exercised, the parties shall proceed to amend the Joint Venture Agreement as
follows:
(a) the interest of the parties to the Joint Venture will be 60%
as to the Optionee and 40% as to the Optionor; and
(b) the prior expenditures incurred by the parties shall be deemed
to be $8,000,000 in respect of the Optionee and $5,333,333 in respect
of the Optionor.
4. Power of Attorney Over use of Properties and Reclamation
4.1 Upon execution of this Agreement, the Optionor will deliver or cause to be
delivered to the Optionee a duly executed power of attorney authorizing the
Optionee to apply for land use/work/exploration and other operation permits
necessary to carry out Work Programs on a timely basis on the Property. The
Parties understand that application for and grant of such permits will be
subject to the approval by Chinese authorities and in the event the application
by the Optionee is unsuccessful, the Optionor agrees to seek and apply for the
necessary approvals. Such actual expenses of the Optionor shall be governed by
ss.6 hereof.
5. Conduct of Expenditures
5.1 All Expenditures and/or Further Expenditures to be incurred shall be carried
out by, or under the direction of, the Optionee and, where appropriate, the
Optionee shall look to secure its goods, services and workers locally. The
Optionee acknowledges that the Optionor possesses unique knowledge of the
Property and of the logistics of carrying on mineral exploration in Tibet and
the Optionee may, from time to time, seek to avail itself of the Optionor's
assistance, which assistance the Optionor agrees will not be unreasonably
withheld.
6. Contribution by Optionor
Where prior to the formation of the Joint Venture the Optionor is requested by
the Optionee to make contribution or incur expenses in respect of the Property,
other than the obligations of the Optionor herein expressly provided, such
expenses and contribution shall be reimbursed by the Optionee upon invoice by
the Optionor which disbursement will be charged to the Expenditures and/or
Further Expenditures.
7. Transfer of Title
7.1 Upon the Optionee effecting the payment contemplated by ss.2.1(a)(i) hereof,
the Optionor will deliver or cause to be delivered to the Optionee's solicitors
a duly executed transfer of 50% of the Property Rights in respect of the
Property in favour of the Optionee (the "Optionee Transfer") to be held in trust
by said solicitors subject to the terms and conditions of this Agreement. The
Optionee shall be entitled to record the Optionee Transfer with the appropriate
government offices to effect transfer of legal title of the Property Rights into
its own name upon the exercise of the Option by the Optionee.
7.2 Notwithstanding the above, it is acknowledged that the parties may elect to
evidence their interests in the Property Rights in respect of the Property and
in the Joint Venture through the shareholdings in a company (the "Joint Venture
Company") which would hold the Property Rights in respect of the Property in
which case the parties would take such steps as shall be necessary to transfer
the Property Rights in respect of the Property to such Joint Venture Company,
and in such instance it is contemplated that 50% of the shares of the Joint
Venture Company would be transferred or issued into the name of the Optionee on
the Effective Date, which shares would then be pledged as security for the
obligations of the Optionee under ss.2.1, and in such instance the parties would
use their commercially reasonable best efforts to negotiate and execute a
shareholders agreement which would include, but not necessarily be limited to,
the terms contemplated by ss.2.2.
8. Assignment
8.1 No Party shall sell, transfer, assign, mortgage, pledge or otherwise
encumber its interest in this Agreement or its right or interest in the Property
without the consent of the other Party, such consent to be not unreasonably
withheld, provided that any Party shall be permitted to assign this Agreement to
an "affiliate" or "associate" as those terms are defined in The Company Act
(British Columbia). It will be a condition of any assignment under this
Agreement that such assignee shall agree in writing to be bound by the terms of
this Agreement applicable to the assignor.
8.2 Notwithstanding the provisions of ss.8.1, it is acknowledged and agreed by
the Parties that the Optionee may assign all of its right, title and interest in
and to this Agreement to a public company listed and in good standing on the
Exchange managed by the Xxxxxx Xxxxxxxxx group within 10 days of the date of the
execution of this Agreement by the last of the parties to do so (the "Execution
Date") provided that, in circumstances where this Agreement is not accepted for
filing by the Exchange by that date which is ninety (90) days following the
Execution Date the Optionee may elect to reconvey such interests back to itself.
The Optionee shall promptly deliver notice of such assignment with full
particulars.
9. Termination
9.1 This Agreement shall forthwith terminate and the responsibility for the
Property shall revert back to the Optionor in circumstances where:
(a) the Optionee advises the Optionor in writing on or before that date
which is thirty (30) days from the Execution Date that its due
diligence review of the Property was, in the Optionee's sole opinion,
not satisfactory;
(b) the Optionee fails to make the payments for or carry out the
Expenditures required in this Agreement on or before the dates set out
herein other than in circumstances where the Optionee is prevented from
carrying out any of the Expenditures contemplated herein prior to or on
the dates set out therein due to Force Majeure; or
(c) this Agreement is terminated in accordance with the provisions of
ss.16 herein.
10. Representations, Warranties and Covenants of the Optionor
10.1 The Optionor represents, warrants and covenants to and with the
Optionee as follows:
(a) the Optionor is a company duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorpora-
tion;
(b) the Optionor has full power and authority to carry on its
business and to enter into this Agreement and any agreement or instru-
ment referred to or contemplated by this Agreement;
(c) neither the execution and delivery of this Agreement, nor any of
the agreements referred to herein or contemplated hereby, nor the
consummation of the transactions hereby contemplated conflict with,
result in the breach of or accelerate the performance required by, any
agreement to which it is a party;
(d) the execution and delivery of this Agreement and the agreements
contemplated hereby by the Optionor will not violate or result in the
breach of the laws of any jurisdiction applicable or pertaining thereto
or of its constating documents;
(e) this Agreement constitutes a legal, valid and binding obligation of
the Optionor;
(f) the Property is accurately described in Schedule "A", is in good
standing under the laws of the jurisdiction in which it is located and
is free and clear of all liens, charges and encumbrances;
(g) the Optionor through its wholly owned subsidiary is the sole legal
and beneficial owner of the Property Rights and has the right to enter
into this Agreement and all necessary authority to transfer its
interest in the Property in accordance with the terms of this
Agreement;
(h) no person, firm or corporation has any proprietary or possessory
interest in the Property other than the Optionor and/or its wholly
owned subsidiary, and no person, firm government or corporation is
entitled to any royalty, rent or other payment on the Property Rights
of the Optionor or its transfer to the Optionee hereunder;
(i) upon request by the Optionee, the Optionor shall deliver or cause
to be delivered to the Optionee copies of all available maps and other
documents and data in its possession respecting the Property and a
title opinion respecting the Property, in form satisfactory to the
Optionee acting reasonably;
(j) the Optionor shall assume sole responsibility and liability for any
obligations outstanding as of the date hereof with respect to reclama-
tion of the lands comprising the Property;
(k) the Optionor has completed its stock for stock exchange agreement
so as to acquire all of the issued and outstanding shares of Honglu
Investment Holdings, Inc.;
(l) the Optionor shall provide an initial draft of the Joint Venture
Agreement for consideration by the parties hereto within forty-five
(45) days of the date hereof; and
(m) the Optionor has provided the Optionee with all scientific and
technical data respecting the Property in its possession and such data
is, to the best of the Optionor's knowledge, accurate and correct.
11. Representations, Warranties and Covenants of the Optionee
11.1 The Optionee represents, warrants and covenants to and with the
Optionor that:
(a) the Optionee is a company duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation;
(b) the Optionee 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;
(c) neither the execution and delivery of this Agreement, nor any of
the agreements referred to herein or contemplated hereby, nor the
consummation of the transactions hereby contemplated conflict with,
result in the breach of or accelerate the performance required by, any
agreement to which it is a party;
(d) the execution and delivery of this Agreement and the agreements
contemplated hereby by the Optionee will not violate or result in the
breach of the laws of any jurisdiction applicable or pertaining thereto
or of its constating documents;
(e) this Agreement constitutes a legal, valid and binding obligation of
the Optionee;
(f) during the Option Period, the Optionee will keep the Property free
and clear of all liens, charges and encumbrances, will obtain all
necessary licenses and permits as shall be necessary, will carry out
all Exploration Programs on the Property and will report to the
Optionor on a quarterly basis as to the results of such Exploration
Programs;
(g) the Optionee will assume sole responsibility and liability for any
obligations arising during the Option Period or as a result of the
exploration activities of the Optionee during the Option Period with
respect to reclamation of the property comprising the Property;
(h) the Optionee will cause the filing with the Exchange of the
necessary application for acceptance of this Agreement by the Exchange
forthwith upon receipt of a title opinion in respect of the Property in
form satisfactory to the Optionee, acting reasonably, and will use its
commercially reasonable best efforts to secure such acceptance within
forty-five (45) days following the date of this Agreement;
(i) the Optionee shall keep the Property clear of liens and all other
charges arising from its operations thereon;
(j) the Optionee shall carry on all operations on the Property in a
good and miner-like manner and in compliance with all applicable gov-
ernmental regulations and restrictions;
(k) the Optionee shall pay or cause to be paid any rates, taxes,
duties, royalties, assessments or fees levied with respect to the
Property or the Optionee's operations thereon;
(l) the Optionee shall, upon termination of this Agreement, leave the
Property in a safe and environmentally acceptable condition in
accordance with good miner-like practice and all applicable
requirements of law, provided that the Optionee's obligations in this
regard only apply to operations on the Property carried out by it;
(m) the Optionee shall allow the Optionor and any duly authorized agent
or representative of the Optionor to inspect the Property at all times
and intervals; provided however that it is agreed and understood that
the Optionor or any such agent or representative shall be at his own
risk and the Optionee shall not be liable for any loss, damage or
injury incurred by such persons arising from their inspection of the
Property, except those caused by the gross negligence or willful
misconduct of the Optionee, its agents, employees and directors;
(n) the Optionee shall allow the Optionor access at all times to all
maps, reports, assay results and other technical data prepared or
obtained by the Optionee in connection with its operations on the
Property;
(o) the Optionee shall, during times when technical data are being
produced, provide the Optionor with a quarterly summary progress report
describing the work carried out by the Optionee on or with respect to
the Property, and which shall include copies of all technical data
generated, together with location maps, sampling plans and other
information sufficient to enable the reader to interpret the said data;
such quarterly reports shall be delivered to the Optionor within ten
(10) days of the end of each calendar quarter;
(p) the Optionee shall provide the Optionor on or before February 28 of
each year with a comprehensive progress report, in writing, with
respect to its operations on the Property during the preceding calendar
year and shall provide the Optionor with copies of any and all
documents filed by the Optionee with any governmental agency with
respect to its operations on the Property; and
(q) the Optionee will obtain and maintain or cause any contractor
engaged by it hereunder to obtain and maintain, during any period in
which active work is carried out hereunder, adequate insurance, and
will forward to the Optionor the Optionee's or the Optionee's
contractor's certificate of insurance showing the Optionor as named
insured, and will give the Optionor advance written notice of any
reduction or termination of coverage.
12. Indemnity and Survival of Representations
12.1 The representations and warranties hereinbefore set out are conditions on
which the parties have relied in entering into this Agreement and shall survive
the acquisition of any interest in the Property by the Optionee and each of the
Parties will indemnify and save the other harmless from all loss, damage, costs,
actions and suits arising out of or in connection with any breach of any
representation, warranty, covenant, agreement or condition made by them and
contained in this Agreement.
13. Confidentiality
13.1 The Parties hereto agree to hold in confidence all information obtained in
confidence in respect of the Property or otherwise in connection with this
Agreement other than in circumstances where a party has an obligation to
disclose such information in accordance with applicable securities legislation,
in which case such disclosure shall only be made after consultation with the
other Party.
14. Notice
14.1 All notices, consents, demands and requests (the "Communication") required
or permitted to be given under this Agreement shall be in writing and may be
delivered personally or sent by telegram, by telex or telecopier or other
electronic means or may be forwarded by first class prepaid registered mail to
the parties at their addresses first above written. Any Communication delivered
personally or sent by telegram, telex or telecopier or other electronic means
shall be deemed to have been given and received on the second business day next
following the date of sending. Any Communication mailed as aforesaid shall be
deemed to have been given and received on the fifth business day following the
date it is posted, 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
mail strike, slowdown or other labour dispute which might affect delivery of the
Communication by mail, then the Communication shall be effective only if
actually delivered.
15. Further Assurances
15.1 Each of the Parties to this Agreement 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.
16. Regulatory Approval
16.1 The Optionor acknowledges that the Optionee may be required to seek
acceptance from 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 Execution Date, this Agreement shall, other than
in the circumstances contemplated by ss.8.2 hereof, be automatically terminated.
The Optionee shall have no access to the Property prior to the Acceptance Date
other than to conduct its due diligence review and to confirm prior results from
the Property.
17. Entire Agreement
17.1 The Parties hereto acknowledge that they have expressed herein the entire
understanding and obligation of this Agreement and it is expressly understood
and agreed that no implied covenant, condition, term or reservation, shall be
read into this Agreement relating to or concerning any matter or operation
provided for herein.
18. Proper Law and Arbitration
18.1 This Agreement will be governed by and construed in accordance with the
laws of the Province of British Columbia and the laws of Canada applicable
therein, subject to mandatory laws and regulations in force in China applicable
to the Property and the Property Rights therein. All disputes arising out of or
in connection with this Agreement, or in respect of any defined legal
relationship associated therewith or derived therefrom, shall be settled through
friendly consultations between the Parties following a ten (10) day cooling off
period, failing which either Party may refer such disputes to arbitration and to
have them finally resolved by a sole arbitrator under the rules of The
Commercial Arbitration Act of British Columbia.
19. Enurement
19.1 This Agreement will enure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns.
20. After Acquired Properties
20.1 The Parties covenant and agree, each with the other, that a Party with
opportunity and intent to acquire any After Acquired Property or any interest
therein, including, but not limited to, Property Rights, shall first offer the
same opportunity with the condition of acquisition and interest in same (the
"Offering Party") to the other (the "Non-Offering Party") for acquisition on the
same term and inclusion as part of the "Property" and, if accepted by such
Non-Offering Party, shall be subject to the terms and conditions of this
Agreement. If the Non-Offering Party does not accept any particular After
Acquired Property for acquisition, then thereafter the Offering Party shall be
free to deal with such After Acquired Property without further obligation to the
Non-Offering Party. Any costs incurred by a Party in staking, locating,
recording, optioning or otherwise acquiring any "After Acquired Properties" will
be deemed to be the acquisition costs for both Parties according to their
respective interest ratio in the Joint Venture.
21. Default
21.1 Notwithstanding anything in this Agreement to the contrary if any Party (a
"Defaulting Party") is in default of any requirement or its obligations herein
set forth the Party affected by such default shall give written notice to the
Defaulting Party specifying the default and the Defaulting Party shall not lose
any rights under this Agreement, unless thirty (30) days after the giving of
notice of default by the affected Party the Defaulting Party has failed to cure
the default by the appropriate performance and if the Defaulting Party fails
within such period to cure any such default, the affected Party shall be
entitled to seek any remedy it may have on account of such default including,
without limitation to damages including direct, indirect, consequential and
incidental damages and termination of this Agreement.
22. Option Only
22.1 This is an option only and except as herein specifically provided, nothing
herein contained shall be construed as obligating either Party to do any acts or
make any payments hereunder. Unless otherwise provided in this Agreement or the
Joint Venture Agreement, any act or acts or payment or payments as shall be made
hereunder shall not be construed as obligating the Optionor or Optionee to do
any further act or make any further payment or payments.
23. Supersedes Previous Agreements
23.1 This Agreement constitutes the entire agreement between the Parties and
supersedes and replaces all previous oral or written agreements, memoranda,
correspondence or other communications between the parties hereto relating to
the subject matter hereof, save and except the Confidentiality Agreement in
respect of the Property. To the extent of inconsistency, this Agreement shall be
considered to have the effect of amending the Confidentiality Agreement
concluded by the Parties on November 24, 2003.
24. Headings
24.1 Any heading, caption or index hereto shall not be used in any
way in construing or interpreting any provision hereof.
25. Singular, Plural
25.1 Whenever the singular or masculine or neuter is used in this Agreement, the
same shall be construed as meaning plural or feminine or body politic or
corporate or vice versa, as the context so requires.
26. Time of the Essence
26.1 Time is of the essence in this Agreement.
27. Counterparts
27.1 This Agreement may be executed in counterpart and by facsimile transmission
with the same effect as if both 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.
CHINA NETTV HOLDINGS INC.
Per:
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Authorized Signatory
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Date of Execution
XXXXXX XXXXXXXXX INC.
Per:
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Authorized Signatory
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Date of Execution
SCHEDULE "A"
Property Description
Xietongmen copper, gold polymetallic mine
Area: 12.9 km(2); 88(degree)23 45 88(degree)26 30 E & 29(degree)21
30 29(degree)24 00 X
Xxxxxxxx: Xxxxxx Xxxxxxx, Xxxxxxxxxx Xxxxxx, Xxxxx. 350 km from Lhasa.
SCHEDULE B
to a Property Option Agreement between Xxxxxx Xxxxxxxxx Inc. and China NetTV
Holdings Inc. dated as of the fifth day of February, 2004.
NET PROFITS ROYALTY
1. Interpretation
1.1 Where used herein:
(a) "Agreement" means the above-referenced agreement, including
any amendments thereto or renewals or extensions thereof;
(b) "Commercial Production" means the operation of the Property or any
part thereof as a mine but does not include milling for the purpose of
testing or milling by a pilot plant. Commercial Production shall be
deemed to have commenced on the first day of the month following the
first 15 consecutive days during which Mineral Products have been
produced from the Property at an average rate not less than 70% of the
initial rated capacity of the Facilities;
(c) "Facilities" means all mines and plants including, without
limitation, all pits, shafts, haulageways and other underground
workings, and all buildings, plants and other structures, fixtures and
improvements, and all other property, whether fixed or moveable, as the
same may exist at any time in or on the Property and relating to the
operation of the Property as a mine or outside the Property if for the
exclusive benefit of the Property only;
(d) "Holder" means the person or persons that are from time to time
entitled to be paid a Royalty hereunder;
(e) "Operating Costs" means, for any period after commencement of
Commercial Production, all Costs, incurred or chargeable, directly or
indirectly, by the Operator in connection with Operating Plans
including, without duplication and without limiting the generality of
the foregoing, the following:
(i) all Costs of or related to operating employee facilities,
including housing;
(ii) all duties, charges, levies, royalties, taxes (excluding
taxes levied on the income of the parties) and other payments
imposed by any government or municipality or department or
agency thereof upon or in connection with operating the
Property as a mine;
(iii) all Costs of maintaining the Property in good standing,
including any required vendor's or royalty payments;
(iv) all reasonable Costs of the Operator for providing
technical, management and/or supervisory services;
(v) all reasonable Costs of consulting, legal, accounting,
insurance and other services;
(vi) all exploration expenditures incurred after commencement
of Commercial Production;
(vii) all capital costs of operating the Property as a mine
including all Costs of construction, equipment and mine
development and including maintenance, repairs and
replacements, and any capital expenditures relating to an
improvement, expansion, modernization or replacement of the
Facilities;
(viii) a reasonable amount of funds set aside to cover
reclamation Costs;
(ix) all Costs incurred or to be incurred relating to a
temporary or permanent shut-down of the Facilities, including
Costs to be incurred after any shut-down; and
(x) a management fee payable to the Operator in respect of its
unallocable overhead and head office expenses equal to 3% of
all Operating Costs other than those referred to in ss.(iv),
(viii) and (x) hereof;
and, except where specific provision is made otherwise, all Operating
Costs shall be determined in accordance with generally accepted
accounting principles applied consistently from year to year, provided
however that such costs shall not include any amount in respect of
amortization of Expenditures or Production Program Costs, depletion or
depreciation;
(f) "Operating Plan" means a plan for an Operating Year including,
inter alia, the following information:
(i) a written plan of the proposed mining operations for
the Operating Year, including any plans for exploration or for
expansion of the Facilities;
(ii) a detailed estimate of all Operating Costs plus a
reasonable allowance for contingencies, on a monthly basis,
including any proposed cash calls;
(iii) an estimate of the quantity and quality of the ore to
be mined and of the quality of Mineral Products to be produced
on a monthly basis; and
(iv) such other facts as may be reasonably necessary to
present the results proposed to be achieved during the Operat-
ing Year;
(g) "Operating Year" means a calendar year or such other fiscal year as
the management committee formed under the Joint Venture may approve. In
the case of the first Operating Year, unless otherwise decided by such
management committee, that Operating Year shall be the remainder of the
current calendar or fiscal year, if the date Commercial Production
commences occurs 2 months or more before the expiration of the year, or
the period from the date Commercial Production commences to the end of
the next succeeding calendar or fiscal year, if the date Commercial
Production commences occurs on or after the date which is 2 months
before the expiration of the year;
(h) "Participant" means any party having an Interest and its successors
and permitted assigns and Participants means collectively all parties
having an Interest and their respective successors and permitted
assigns;
(i) "Prime Rate" means the per annum rate declared from time to time by
the main branch in Vancouver, B.C., of Bank of Montreal as the rate of
interest charged by it to its largest and most creditworthy commercial
borrowers for demand Canadian dollar loans over $200,000;
(j) "Production Program Costs" means all Costs spent or incurred
directly or indirectly in connection with a Production Program in order
to equip the Property or a part thereof for Commercial Production,
including, without limitation:
(i) all monies expended to develop, construct or acquire
the Facilities and other Assets, as contemplated in the
Production Program;
(ii) working capital required for the initial four months
of operation of the Property or part thereof as a mine or for
such longer period as may be reasonably justified in the
circumstances;
(iii) a contingency amount of not less than 10% and not
more than 20% of total Production Program Costs;
(iv) a management fee payable to the Operator in respect
of its unallocable overhead and head office expenses equal to
3% of all Production Program Costs other than those referred
to in this ss.(iv); and
(v) monies set aside or lodged as security for environ-
mental remediation and reclamation;
(k) "Royalty" shall mean the percentage share of Net Profits pay-
able pursuant to a Net Profits Royalty under the Agreement; and
(l) all other defined terms used in this Schedule which are not defined
herein have the meanings ascribed thereto in the Agreement provided
that, any reference to "Property" shall be deemed to include a
reference to "After Acquired Properties", both as defined in the
Agreement.
1.2 All calculations and computations relating to the Royalty shall be carried
out in accordance with generally accepted accounting principles to the extent
that such principles are not inconsistent with the provisions of the Agreement
and this Schedule.
2. Net Profits
2.1 For the purposes of the Agreement, "Net Profits" shall mean that amount by
which Revenues exceed Costs. If Costs exceed Revenues in any Operating Year, the
excess Costs shall be carried forward into the next succeeding Operating Year.
2.2 For the purpose of computing Net Profits hereunder:
(a) "Revenues" shall mean the total proceeds, calculated at the point
of sale, derived from the sale of Mineral Products plus any
miscellaneous proceeds (including, without limitation, all net amounts
received from the sale of plant, machinery, equipment or other assets
prior to the cessation of operations, any insurance proceeds not used
for the replacement or repair of lost or damaged assets, compensation
for expropriated properties, government grants and interest on Revenue
earned from the date of receipt to the date of payment, but excluding
interest earned on working capital) from the Property; and
(b) "Costs" shall mean all expenditures, whether current or capital,
incurred on or in connection with the Property and related to the
exploration, development, and placing of the Property into Commercial
Production, and all operating, mining, milling, smelting, refining,
marketing and transportation costs, including, without limitation:
(i) taxes (other than income taxes), royalties (other than the
Royalty) and other like charges necessary to maintain the
Property in good standing or otherwise imposed, charged or
levied upon the Property or any production therefrom;
(ii) interest on money borrowed for one or more of the above
enumerated purposes by the Participants in existence at the
time of a payment of the Royalty being made, at such rate as
is actually charged to or incurred by such Participants in
borrowing such money, where the Property is charged to the
lender as security for the money borrowed or, where the money
is borrowed or provided by such Participants without specific
recourse to the Property as security, at a rate per annum
equal to the Prime Rate plus 2%; and
(iii) all other charges and expenses usually made or incurred
for a like operation and accounted for in accordance with
generally accepted accounting principles and including,
without limitation and without duplication, all Expenditures,
Production Program Costs and Operating Costs incurred under
the Agreement or by the joint venture.
For greater certainty, in determining Costs hereunder, outlays
of a capital nature shall not be amortized.
3. Calculation and Payment of Royalty
3.1 The Royalty shall be:
(a) calculated and paid on a quarterly basis within 45 days after the
end of each quarter of the Operating Year, based on the Net Profits for
such quarter, and after deducting any credit from the payment of
advance royalties, if any, as may be set forth in the Agreement.
However, when calculating the required quarterly payments, a reasonable
provision may be made for anticipated Costs for the remainder of the
Operating Year; and
(b) calculated by the Operator Participant, by each Participant as to
its respective share of Royalty and each Participant and the Operator
shall keep an account relating to its operations related to the
Property.
3.2 The Royalty shall be payable as follows:
(a) each payment of Royalty will be accompanied by an unaudited
statement indicating the calculation of the Royalty hereunder in
reasonable detail and the Holder will receive, within 3 months of the
end of each Operating Year, an annual summary unaudited statement (an
"Annual Statement") showing in reasonable detail the calculation of the
Royalty for the last completed Operating Year and showing all credits
and deductions added to or deducted from the amount due to the Holder;
(b) the Holder will have 45 days from the time of receipt of the Annual
Statement to question the accuracy thereof in writing and, failing such
objection, the Annual Statement will be deemed to be correct and
unimpeachable thereafter;
(c) if the Annual Statement is questioned by the Holder, and if such
questions cannot be resolved between the Holder and the Operator that
prepared the Annual Statement, the Holder will have 12 months from the
time of receipt of the Annual Statement to have such audited, which
will initially be at the expense of the Holder;
(d) the audited Annual Statement will be final and determinative of the
calculation of the Royalty for the audited period and will be binding
on the Holder and the party that prepared the Annual Statement and any
overpayment of Royalty will be deducted from future payments of Royalty
and any underpayment of Royalty will be paid to the Holder forthwith;
(e) the costs of the audit will be borne by the Holder if the Annual
Statement overstated the Royalty payable or understated the Royalty
payable by not more than 1% and will be borne by the party that
prepared the Annual Statement if such statement understated the Royalty
payable by greater than 1%. If the party that prepared the Annual
Statement is obligated to pay for the audit it will forthwith reimburse
the Holder for any of the audit costs which it had paid; and
(f) the Holder will be entitled to examine, on reasonable notice and
during normal business hours, such books and records as are reasonably
necessary to verify the payment of the Royalty to it from time to time,
provided however that such examination shall not unreasonably interfere
with or hinder the Operator's operations or procedures.
END
