EXHIBIT 10.1.1 JOINT ACTIVITY
AGREEMENT
Tomsk August 30, 2004
CIGMA METALS CORPORATION, a corporation, listed on the stock exchange in
the USA (hereunder CIGMA), represented by its Managing Director Xx. Xxxx Xxxxx,
from one side, and
SIENCE-INDUSTRIAL CORPORATION GEOSPHERA, registered in Russia (hereunder
GEOS), represented by its Director Xx. Xxxxxxx Anastasia Evgenievna, acting
pursuant to the Charter, on the other side,
hereinafter referred to as the Parties,
for the purpose of continuing their joint activity with regard to the
exploration of the Haldeevskaya license area and in the light of new goals and
objectives of the Joint Activity, agreed to enter into a new Agreement as
follows:
1. SUBJECT
1.1. Subject to the terms and conditions of this Agreement, the Parties shall
combine their capital investment and shall pursue joint activity without
establishing a legal entity.
1.2. The joint activity shall be carried as a simple partnership in accordance
with Chapter 55 of the Part 2 of the Civil Code of the Russian Civil Code
and other Russian regulations applicable to the Joint Activity in the
Russian Federation.
1.3. The purpose of the Joint Activity shall be the completion by the Parties of
the prospecting and exploration work on the Haldeevskaya license area to
find and develop one or more gold deposits.
1.4. For the accomplishment of such common purpose the Parties shall pursue the
following objectives:
1.4.1. Financing the exploration work on the Haldeevskaya license area
from the funds to be provided by CIGMA.
1.4.2. Establishing a new company in the Russian Federation.
1.4.3. Transfer of the license for the Khaldeevskaya area from GEOS to
the new company.
1.5. The documents on the area are provided as Attachment 1.
2. CONTRIBUTIONS BY THE PARTIES
2.1. As at the time of establishing the Joint Activity as a simple partnership,
the distribution of interests in the Joint Activity shall be as follows:
GEOS - 51%, CIGMA - 49%.
2.2. Contributions by the Parties:
2.2.1. CIGMA's contribution shall be the cash funds in the amount of
US$50,000 (fifty thousand).
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2.2.2. GEOS' contribution shall be the license for the Haldeevskaya area
and all geological information on this subsoil area, which
is owned by GEOS. For the purposes of this Agreement such
contribution by GEOS shall be valued by the Parties at US$52,000
(fifty two thousand).
2.3. The Parties have mutually approved the further contribution by CIGMA in the
amount of US$350 000 (THREE HUNDRED FIFTY THOUSAND).
2.4. CIGMA shall make its contribution by remitting US$350,000 to the hard
currency account of GEOS following the execution of this Agreement in
accordance with the 2004 Budget (Attachment 2).
2.5. After the above contribution have been completed, the distribution of
interests in the Joint Activity shall be as follows: GEOS - 20%, CIGMA -
80%.
3. OBLIGATIONS OF THE PARTIES AND MUTUAL WARRANTIES
3.1. GEOS on the terms, which are most favorable for the Joint Activity, and
subject to the requirements of the license agreement and investment
program, shall :
3.1.1. Carry out field, office and laboratory work in respect of the
Haldeevskaya area consistent with the funding approved in
the 2004 Budget (Attachment 2).
3.1.2. Comply with the environmental and engineering requirements, as
well as applicable laws and regulations of the Russian
Federation and Tomsk Region.
3.1.3. Ensure timely payments to the appropriate authorities in respect
of all charges and taxes, payable under the GEOS license.
3.1.4. Liaise with the local and regional authorities, companies,
organizations, land owners with the purpose of obtaining all
requisite information, approvals, permits and land access rights
for the Joint Activity operations.
3.1.5. Provide to CIGMA the geological and other information with
respect to the completed work.
3.2. CIGMA shall:
3.2.1. Finance the work during 2004 according to the approved Budget
until total of US$350,000 in funding has been provided
(Attachment 2).
3.2.2. Subject to approved changes in the Budget, provide additional
funding in case, stipulated herein, which the Parties could not
foresee on the date of the Agreement.
3.3. Each Party provides to the other Party the following warranties:
3.3.1. The Parties are legal entities, duly incorporated and existing in
accordance with the laws of the country of their incorporation.
3.3.2. The person, executing this Agreement, has full powers to do that,
and, if executed, the Agreement constitutes valid and binding
obligation of each of the Parties.
3.3.3. The Parties are not involved in any administrative, court or
other proceedings that may adversely affect the ability of the
each of the Parties to perform its obligations hereunder or to
impede the Joint Activity operations as contemplated hereunder.
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3.4. Each of the Parties shall:
3.4.1. Create a new structure for the joint use of the Haldeevskaya area
license on the terms of this Agreement, if, for whatever reason,
the Haldeevskaya area license is not transferred to the new
company;
3.4.2 Comply with and properly perform its obligations hereunder.
3.4.3. Not do or cause to do any acts that may result in full or partial
revision, revocation, non-issuance or refusal to issue the
license.
3.4.4. Conduct its business with the other Party in fair and honest way.
4. CONDUCT OF COMMON BUSINESS OF THE PARTIES
4.1. The Parties hereby appoint GEOS as Manager responsible for the general
conduct of the Joint Activity. The Manager will conduct common business of
the Parties as part of their Joint Activity by virtue of the Power of the
Attorney issued by CIGMA (Attachment 3).
4.2. Rights and obligations of the Manager:
4.2.1. Manager directs and controls the prospecting and exploration work
in accordance with the approved Budget (Attachment 2).
4.2.2. Manager is obliged to maintain accounting and provide separate
records of operations on this Agreement.
4.2.3. Manager may hire and discharge personnel, consultants and
contractors for the purpose of accomplishing the objectives of
the Joint Activity.
4.2.4. Manager shall have to provide the Parties with the information,
regarding the Joint Activity, as required by them.
4.2.5. Manager has a right to carryout any other activity to the extent
reasonably required for the performance of this Agreement.
4.3. In conducting the common business the Manager shall be entitled to the
reimbursement of the expenses incurred by it for such purposes.
4.4. For payments with respect to the operations under the Agreement the Parties
shall use GEOS US Dollar bank account opened by the Manager.
5. ESTABLISHMENT OF NEW COMPANY
5.1. The joint activity is not the final structure for conducting and financing
of exploration work on the Haldeevskaya license area, and in the future the
Parties intend to restructure the Joint Activity by setting up a new legal
entity.
5.2. Within a reasonable time following the execution of this Agreement, GEOS
shall incorporate in accordance with the Russian law a subsidiary (limited
liability company) with a minimum required capital and register the same
with the Tomsk Region tax authorities.
5.3. Following the formation and incorporation of the new company GEOS shall
submit the application for the transfer of the Haldeevskaya area license to
such company.
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5.4. GEOS shall control such company, which shall assume the obligations under
such license.
5.5. The Parties shall transfer to new company all of its rights for and
interests in the existing license (Attachment 1), all of the geological
information relating to the exploration work and associated with such
subsoil area.
6. NEW COMPANY FINANCING AND CAPITAL DISTRIBUTION PLAN
6.1. Once the license for the Haldeevskaya has been transferred to the new
company and CIGMA has performed all of its obligations under section
3.2.1., GEOS shall promptly admit CIGMA as a member in the new company by
transferring its 80% ownership interest in such new company. The
distribution of the ownership interests shall then be as follows:
GEOS - 20% (twenty percent) of the charter capital of the new company;
CIGMA - 80% (eighty percent) of the charter capital of the new company.
6.2. Subject to the performance by the Parties under section 6.1., CIGMA commits
to invest to the new venture during 2005 US$1,500,000 in equal portion over
the year in accordance with the approved Budget. If such financing is not
provided in full, CIGMA shall return to GEOS 30% of its ownership interests
in the new company. The distribution of the ownership interests shall then
be as follows:
GEOS - 50% (fifty percent) of the charter capital of the new company;
CIGMA - 50% (fifty percent) of the charter capital of the new company.
6.3. The transfer of ownership interests under sections 6.1 and 6.2 shall be
effected at nominal value.
6.4 Subject to the performance by the Parties under section 6.1., CIGMA commits
to invest further US$1,300,000 during 2006 into the development of the
Haldeevskaya area. GEOS ownership interest in the company may not be
reduced below 20%.
6.5. Upon completion of the three-year working program and expending
US$3,200,000, the Parties shall mutually agree on the further financing
scheme for the project.
6.6. In the event no financing is provided by CIGMA under section 6.2 or 6.4 or
the financing provided is irregular or insufficient, resulting in delay in
completion of the work, required to be completed under the license
agreement and the work program, the Parties shall mutually agree on the
further financing scheme for the project, including by way of attracting a
third party for such purposes.
6.7. If the third party financing is approved under section 6.6, such third
party equity participation could be considered through reduction of CIGMA's
ownership interest.
7. FORCE MAJEURE
7.1. Neither of the Parties shall be liable before the other Party for not
fulfilling or for a delay in fulfilling any obligation as provided in the
present Agreement if the said non-fulfillment or delay is caused by a
force-majeure situation. The Parties to the Agreement recognize the
following as force-majeure events without limitations: flood, fire,
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earthquake, hurricane, explosion, epidemic or other similar occurrence, as
well as revolts, political disturbances, uprisings or military action
between or within countries in which the present Agreement is to be
fulfilled.
7.2. Neither of the Parties shall be liable before the other Party for not
fulfilling or for a delay in fulfilling any obligation as provided in the
present Agreement if the said non-fulfillment or delay is caused by the
action (or inaction) of government authorities, by the acceptance of legal
acts by government authorities that make the fulfillment of the present
Agreement impossible, or by any other reason that is beyond the reasonable
control of the Party in the said situation. However, the non-fulfillment or
a delay in fulfilling its obligations by the Parties if the said
non-fulfillment or delay is partially or completely caused or created by
the Parties themselves.
7.3. The Party affected by a force-majeure event shall inform the other Party by
any means possible of the beginning and end of the said events and of the
conditions interfering with the timely performance of its obligations as
provided in the present Agreement. The Party that is not able to fulfill
its obligations as a result of such events must make all efforts to resume
the performance of its obligations in the shortest time possible.
8. TERMINATION OF ACTIVITY
8.1. The present Agreement and the joint activity governed thereby shall be
terminated by the agreement of the Parties or after the formation of the
joint venture company in accordance with all the conditions stipulated
herein.
8.2. If the present Agreement is terminated due to the agreement of the Parties,
the Parties must follow the guidelines below:
8.2.1. The License not transferred to the new company remain the
property of that Party, to which the same was issued.
8.2.2. Any funds contributed to the capital by CIGMA shall not be
reimbursable.
8.2.3 Any geological information obtained through the use of CIGMA
provided funding shall be the joint property of CIGMA and GEOS,
and the intellectual property containing the said geological
information belongs equally to CIGMA and GEOS.
8.3. If the present Agreement is terminated as the result of the formation of a
new company with CIGMA becoming one of its members, the Parties shall not
retain any rights to monetary funds, contributed by them to the Joint
Activity.
9. CONFIDENTIALITY AND INTELLECTUAL PROPERTY
9.1. The Parties recognized the commercial value and confidential nature of all
information, obtained as a result of accomplishing the objectives of the
Joint Activity. For the duration of this Agreement the Parties shall keep
confidential all such information and shall neither transfer nor disclose
it without prior approval of the other Party to any third party other than
its employees and associated corporate entities to the extent necessary for
the purposes of this Agreement.
9.2 The confidential information shall be disclosed to the governmental
authorities subject to the requirements of the applicable law.
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9.3. The geological information obtained or developed as a result of the Joint
Activity may be used only for carrying out such Joint Activity hereunder,
and later by the new company to be formed by the Parties. Neither Party
shall transfer, sell or assign such geological information or results of
such geological information evaluation to any parties other than as
contemplated hereunder subject to consent of the other Party.
10. BOARD OF THE PARTIES
10.1. All the decisions of fundamental importance, related to conduct of the
Joint Activity, shall be taken jointly by Parties.
10.2. The Board meetings shall be held in December to approve the Annual Budget
and in April to approve the scope of planned field work, as well as on
as-needed basis. The Parties may meet or conduct the meeting of the Board
of Parties via telephone, E-mail or any other connection available. The
Board shall be deemed to have a quorum only if both representatives of the
Parties are present.
10.3. The following matters shall, without limitation, constitute the exclusive
authority of Board of the Parties:
a) principal directions, goals and objectives of the Joint Activity;
b) approval of the Joint Activity Budgets;
c) provision and valuation of the contributions to and distribution of
interests in the Joint Activity;
d) approval of the Joint Activity structure;
e) other matters relating to the conduct of the Joint Activity.
10.4. Decisions will be taken by voting of the Parties on the Board of Parties.
Each Party will have one vote per each percent of the ownership interest.
Decision on approval or disapproval of issues, referable by Board of
Parties, will be taken by simple majority from the general number of votes
belonging to all the Parties present at the corresponding Board.
10.5. Decision on the matters, enumerated in items a) through d) of this section
10.3. shall be approved by the Parties unanimously.
11. MISCELLANEOUS
11.1. If any provision of this Agreement is held invalid or illegal in any
respect, this shall in no way affect the validity and legality of the
remaining provisions.
11.2. The applicable law shall be the law of the Russian Federation.
11.3. Parties may not sell, transfer, mortgage or encumber their rights under
the present agreement or their interest in the jointly owned property
without prior written consent of the other Party. The remaining Party shall
have right of first refusal with respect to the transfer of ownership
interest that shall be on the terms not less favorable than those of the
third party offer.
11.4. This agreement is executed in 4 counterparts, each having force:
- 2 counterparts in Russian;
- 2 counterparts in English.
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11.5. The exchange of the signed counterparts of the agreement can be by
facsimile or e-mail. The Agreement delivered to the other party via fax or
e-mail has the legal force of the original if it is signed by duly
authorized representatives of the Parties.
11.6. All correspondence and negotiations relating to this Agreement or Joint
Activity shall be in Russian and English by way of telephone, e-mail or
other available means of communication.
11.7. Any changes and additions to this Agreement shall be valid only if made in
writing and signed by duly authorized representatives of the Parties.
11.8. This Agreement contains the entire agreement of the Parties with respect
to the subject matters thereof. Upon execution of this Agreement, the joint
activity agreement between the Parties dated April 7, 2004 shall terminate.
11.9. Addresses and Signatures of the Parties:
SCIENCE-INDUSTRIAL CORPORATION GEOSPHERA
Legal address: Russia, 649000 Republic of Altay, Gorno-Altajsk, 00
Xxxxxx-Xxxxxxx xxx.
Xxxxxx address: 634050 Tomsk, 00 Xxxxxx xxxxxx, TPU, building 1
INN 0411092103/041101001
Bank Details: XX XXXXXX XXXXX BANK, NEW YORK
New York, USA SWIFT CODE: XXXXXX00
account No 400 921 413 f/o GAZPROMBANK, SWIFT CODE: XXXXXXXX
in favor of TOMSK BRANCH, SWIFT CODE: XXXXXXXX000
account 40702840900007002427 in favor of Science-industrial Corporation
Geosphera, Tomsk, Russia
Telephone/Fax (7 - 3822) 564-444, 585-299, xxxxxxxx-xxxxx@xxxxxx.xx
CIGMA METALS CORPORATION
Address: Xxxx 0/0000 Xxxxx Xxx Xxx, Xxxxxx Xxxxx, Xxxxxxxxxx, Xxxxxxxxx 0000.
Bank Details: Xxxxxx Bank International Corp. New York, N.Y., USA
SWIFT: HATRUS33 for the account of: BMO - Bank of Montreal Vancouver Xxxx Xxxxxx
000 Xxxxxxx Xxxxxx Xxxxxxxxx, X.X. Xxxxxx X0X 0X0 for client's account:
CIGMA METALS CORPORATION account number: 0000-0000-000
XXXX XXXXX XXXXXXXXX XXXXXXX
DIRECTOR DIRECTOR
CIGMA METALS CORPORATION SCIENCE-INDUSTRIAL CORPORATION GEOSPHERA
/S/ XXXX XXXXX /S/ XXXXXXXXX XXXXXXX
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