EXHIBIT 10.1
PRELIMINARY JOINT VENTURE AGREEMENT
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THE PARTIES:
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(1) (YUNNAN PROVINCE NUCLEAR INDUSTRY BRIGADE 209) (the "Chinese Party"); and
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(2) GRAVITY SPIN HOLDINGS, INC. to be renamed as MAGNUS INTERNATIONAL RESOURCES
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INC.
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PRELIMINARY STATEMENTS
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A. The Chinese Party and the Foreign Party signed a Letter of Intent on
January 15, 2004 pursuant to which they agreed to establish a cooperative
joint venture company (the "JV Company") to conduct copper and gold
exploration and mining activities within Eighty-two point three nine(82.39)
square kilometer area (the "JV Area") of Huidong County, Sichuan Province,
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People's Republic of China (as shown on Appendix I).
B. The Chinese Party holds gold and copper exploration permits for the JV Area
(copies of which are attached hereto as Appendix II). Based on the
agreements arrived at through discussions between the Parties, the Chinese
Party shall transfer the exploration permits and all related data and
information (the "Exploration Permits") to the JV Company.
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C. Based on the [Mineral Exploration Rights Purchase Agreement] entered into
by the Chinese Party on April 2, 2004, the Chinese and Foreign Party agrees
that the JV Company will obtain exploration qualifications, in accordance
with the exploration permits in the JV Area (shown on Appendix II).
D. Based on friendly discussions, the Parties have agreed on the basic terms
of their cooperation, and to confirm such agreements by signing this
Agreement.
THEREFORE, the Parties hereby agree to the following terms.
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1. JV Company and JV Term
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The Parties shall establish the JV Company as a legal person Sino-foreign
cooperative joint venture company under the laws of the PRC. The term of
Company shall be provisionally set as 30 years. The JV Company's activities
will be divided into two phases. The first phase of 4 years will be the
exploration phase. The second phase of 26 years will be the development
phase. If the JV Company acquires mining rights to develop a commercial
mine, such initial term may be extended, based on actual operational needs,
so that the cooperation between the Parties may continue through the end of
the commercial life of the mine.
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2. Business Scope
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2.1 The JV Company's core objective shall be to engage in commercially
profitable exploration and mining within the JV Area. The JV Company's
business scope shall include the exploration, mining, processing,
refining and selling of copper, gold and other related metal and
mineral products.
2.2 In addition to the permits that the Chinese Party must transfer to the
JV Company in accordance with Article 7.2, the JV Company may also
acquire or apply for additional exploration and mining permits around
the perimeter area of the JV Area.
3. Management of the JV Company
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3.1 The JV Company shall be managed by a board of directors. The board
shall be composed of five directors. The Foreign Party shall appoint
three of the directors including the Chairman of the Board, and the
Chinese Party shall appoint two directors (including the Vice-Chairman
of the Board).
3.2 Except as required by laws and regulations, resolutions of the JV
Board may be passed with the approval of a majority of the directors.
JV Board meetings may be held in person or by telephone conference.
3.3 The Foreign Party shall have the right to appoint the General Manager
of the JV Company. The Chinese Party shall have the right to appoint
the Deputy General Manager(s) of the JV Company. The General Manager
shall manage the day-to-day operations of the JV Company in accordance
with policies and budgets established by the JV Board, and shall have
the power to select and hire other management personnel to assist him.
4. Appraisal of Permits Transferred by the Chinese Party and Information
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The Parties agree that the permits to be transferred by the Chinese Party
shall be appraised by a legally qualified appraisal firm in the appropriate
industry selected and appointed by the Foreign Party , however the ultimate
appraised value thereof shall not influence the distribution of rights and
interests within the JV Company.
5. Definitive JV Documents
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If the appraised value is satisfactory to both Parties, the Parties shall
agree on and sign a definitive joint venture contract and articles of
association (the "JV Documents") as soon as possible before June 30, 2004
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or such later date as the Parties may agree upon. The JV Documents shall
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reflect the terms and conditions of this Agreement and other customary
provisions.
6. Mineral Exploration Rights Purchase Agreement
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Pursuant to the Provisional Mineral Exploration Rights Purchase Agreement,
the Parties shall enter into a definitive agreement on the purchase of the
relevant mineral exploration rights by the JV Company at the same time as
the Parties sign the JV Documents. That mineral exploration rights
agreement shall reflect the terms of the Mineral Exploration Rights
Purchase Agreement and other customary provisions.
7. Total Investment and Registered Capital
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7.1 The total investment for the JV Company's Phase I activities shall be
Five Million United States Dollars (US$5,000,000) and the Registered
Capital shall be Three Million Ten Thousand United States Dollars
(US$3,010,000)
7.2 As its capital contribution, the Chinese Party shall, in accordance
with the JV terms, make its contribution to the registered capital by
transferring the Exploration Permits to the JV Company at the
appraised value of the exploration permits. The Chinese Party shall
hold ten percent (10%) of the rights and interests in the JV Company.
As its contribution to the registered capital the Foreign Party shall
remit Three Million Ten Thousand United States Dollars (US$3,010,000)
in cash and shall hold ninety percent (90%) of the rights and
interests in the JV Company.
7.3 Any increase in the registered capital or total investment of the JV
Company shall be contributed one hundred percent (100%) by the Foreign
Party, and the Chinese Party shall not be required to contribute
further capital to the JV Company, but shall retain its ten percent
(10%) share of the rights and interests in the JV Company.
7.4 Capital Contribution Schedule
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(1) The Chinese Party shall transfer its Exploration Permits in the JV
Area to the JV Company, in accordance with it JV terms, pursuant to
Article 7.2. The Chinese Party shall apply to the appropriate
competent governmental authority to transfer its Exploration Permits
in the JV Area to the JV Company immediately on the date of issuance
of the JV Company's Business License.
(2) i. Provided that Article 7.5 is observed, the Foreign Party shall
contribute not less than 15 percent (15%) of the capital
contribution to be made by the Foreign Party, i.e. Four Hundred
Sixty Thousand United States Dollars (US$460,000) to the JV
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Company's registered capital. Within three months after the
issuance of the JV Company's Business License.
Whereas the JV Company will contribute capital to acquire the
exploration rights for the Project for the Survey of Ma'anshan
Area of Weilian Village, Sujiayakou, Huidong County, Sichuan
Province, therefore, the Foreign Party shall make a further
capital contribution according to the capital contribution
schedule of the acquisition contract concluded between the
Chinese Party and Geological Brigade 404 of the Sichuan Province
Bureau of Mining and Geology(1) to complete the acquisition. Such
capital contribution shall also be the registered capital of the
JV Company.
ii. Provided that Article 7.5 is observed, the Foreign Party shall
further contribute the remaining 85 percent of the capital
contribution to be made by the Foreign Party, i.e. Two Million
Five Hundred Fifty Thousand United States Dollars (US$2,550,000)
within thirty (30) months after the issuance of the business
license. However, the amount already paid for the acquisition of
the exploration rights for the Project for the Survey of
Ma'anshan Area of Weilian Village, Sujiayakou, Huidong County,
Sichuan Province may be deducted from that capital contribution.
iii. Based on the results of the exploration by the JV Company, if
needed, within forty-eight (48) months after the issuance of the
Business License, the Foreign Party shall contribute an
additional Xxx Xxxxxxx Xxxx Xxxxxxx Xxxxxx Xxxxxxxx Xxxxxx Xxxxxx
Dollars to (US$1,990,000) to the JV Company.
7.5 The Foreign Party shall not be obligated to make any contribution to
the JV Company's registered capital pursuant to Article 7.4 if any of
the following conditions precedent have not been fulfilled to the
Foreign Party's satisfaction and the Foreign Party has not waived such
condition precedent:
(a) the Development and Reform Commission of Sichuan Province shall
have approved the Initial Feasibility Study Report without
requiring modifications, unless both Parties have agreed to make
modifications;
(b) the Ministry of Commerce shall have approved the JV Documents and
the establishment of the JV Company, and shall have issued an
official certification without requiring modifications to the JV
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Documents, unless both Parties have discussed and required in
writing that modifications be made;
(c) the Business License shall reflect the business scope set forth
in Article 2.1;
(d) the Exploration Permits shall have been timely transferred to the
JV Company, the Ministry of Land and Resources shall have issued
new exploration permits to the JV Company, and the Foreign Party
shall have received the original copies of such new exploration
permits.
(e) all other regulatory approvals, registrations, licenses, permits,
certificates and rights necessary for the JV Company to be able
to conduct the various activities within its scope of business
shall have been issued or transferred to the name of the JV
Company;
(f) the JV Company shall have obtained all necessary approvals from
the applicable authorities in charge of foreign exchange to open
a "foreign exchange bank account" in its own name and such
account shall have been opened in accordance with a formally
passed authorizing resolution of the Board of Directors;
(g) the JV Company shall have entered into the Definitive Mine Assets
Agreement with the Chinese Party;
(h) The Mine Assets (including the mining permits) have been
transferred into the name of the JV Company in accordance with
Definitive Mine Assets Agreement; and
(i) the Foreign Party shall have received a legal opinion from a
qualified law firm of Foreign Party's choice confirming that the
conditions listed above have all been satisfied and that the This
Contract is legal, valid and binding and enforceable against the
Parties in accordance with their terms.
7.6 If the Foreign Party decides that there is no value conducting further
exploration activities in the JV Area after the Foreign Party has
contributed at least [Three Hundred Thousand United States Dollars
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(US$300,000)] to the JV Company, then the Foreign Party may elect to:
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(i) transfer its interest in the JV Company to the Chinese Party; (ii)
reduce the registered capital of the JV Company to [Three Hundred
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Thousand United States Dollars (US$300,000)]; or (iii) dissolve the JV
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Company.
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8. Loans and Capital Increases
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8.1 The JV Company's total amount of investment and registered capital
shall be gradually and successively increased in accordance with the
JV Company's exploration results. The exploration program and mine
development program shall be determined by the JV Board.
8.2 In order to maximize the approvals of applicable laws, the JV Company
must fund its operations with loans borrowed from third parties and/or
by shareholder loans pursuant to loan agreements approved by the JV
Board. If required by the lender, the JV Company may mortgage its
assets in favor of the lender as security for the repayment of the
loan. In the case of a shareholder loan, the JV Company may pay
interest to the lending Party at the prevailing commercial rate of
interest for similar loans.
8.3 If the JV Board approves a work program or budget that will require
expenditures in excess of the funds then available to the Company by
loans, the registered capital of the Company shall be increased
accordingly, and the Parties shall take necessary steps to obtain
governmental approvals required in connection with such capital
increase.(3)
8.4 The Foreign Party shall contribute all the additional capital that may
be required by the JV Company ("Additional Capital").(3)
9. Profit Sharing
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9.1 If the Foreign Party has contributed less than or equal to
US$3,010,000 as capital to the JV Company, then after the JV Company
has paid all taxes due, set aside all necessary reserves and repaid
outstanding loans (in accordance with applicable laws, regulations,
loan agreements and the Board resolutions of the JV Company), the JV
Company must distribute the JV Company's remaining profits (the
"Distributable Profits") to the Parties in proportion to their
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respective actual capital contributions to the JV Company.(3)
9.2 If the Foreign Party has contributed more than US$3,010,000 as capital
to the JV Company, then the JV Company shall distribute the JV
Company's Distributable Profits to the Parties in proportion of 10% to
the Chinese Party and 90% to the Foreign Party.
9.3 Upon liquidation of the JV Company, the Chinese Party and Foreign
Party shall divide the remaining proceeds upon liquidation between
them on a pro rata basis according to their actual contributions to
the capital of the JV Company.
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10. Exclusivity
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From the now until the JV Documents come into effect, neither Party may
enter into any negotiations or agreements with any other person relating to
any mineral exploration or mining project within the JV Area, or any of the
other subject matters contemplated herein.
11. Termination of Agreement
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Any Party may terminate this Agreement by written notice to the other Party
if the Parties fail to enter into the JV Documents by June 30, 2004.(2)
12. Confidentiality
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Neither Party may disclose the existence or terms of this Agreement or the
Letter of Intent to any third party, except to employees, directors,
technical advisors, service providers, consultants and potential investors
who have signed confidentiality agreements, or pursuant to disclosure
requirements imposed by applicable laws, regulations or stock exchange
rules to which it may be subject.
13. Governing Law
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The validity, interpretation and implementation of the Agreement shall be
governed by the laws of China.
14. Dispute Resolution
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Any dispute arising out of or in connection with this Agreement shall be
settled through friendly consultations between the Parties. In case no
settlement of the dispute can be reached through consultations within sixty
days, either Party may submit the dispute to binding arbitration under the
auspices and in accordance with the rules of, the Arbitration Institute of
the Stockholm Chamber of Commerce in Stockholm, Sweden.
15. Assignment
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Either Party may notify the other Party that it may transfer its rights and
obligations to an entirely autonomous subsidiary and nominate the
subsidiary to represent it and sign the JV Documents on its behalf.
16. Language
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This Agreement has been signed in both Chinese and English, and both
language versions shall have equal validity.
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17. This agreement is made in four copies, and shall enter into effect after it
is signed by the legal representatives or authorized signatories of the
Parties.
This Agreement has been signed by a duly authorized signatory of each Party in
Kunming Municipality, Yunnan Province on this sixth day of April, 2004.
(YUNNAN PROVINCE NUCLEAR INDUSTRY BRIGADE 209)
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By: /s/ Xxxxxxx Xxxxx
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Title: Legal Representative
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GRAVITY SPIN HOLDINGS, INC. to be renamed as MAGNUS
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INTERNATIONAL RESOURCES INC.
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By: /s/ Xxxxxx Xxxxxx
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Title: President
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* Translator's Notes
(1) This may not be the official English name, if any.
(2) An error in the Chinese text renders this sentence impossible to translate.
I have translated the sentence, as I believe the writer had intended.
(3) The wording of the Chinese text is awkward and unclear. I have translated
it according to what I believe to have been the author's intent.
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