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