EXHIBIT 10.2
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 an indicated two hundred (200)
square kilometer area (the "JV Area") of Qilian County, Qinghai 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 [Preliminary Mine Purchase Agreement] entered into between the
Chinese Party and(1) the Qilian County, Qinghai Province Zhamashi Copper
Mill(2), the Chinese Party agrees to acquire the assets (see Appendix III)
and Mining Permits (See Appendix IV) owned by the mine (collectively, the
"Mining Assets"). Thereafter, the Chinese Party agrees to sell the Mining
Assets to the JV Company in accordance with the [Mine Purchase Agreement]
which will soon be entered into by the JV Company and the Chinese Party.
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 five years will be the
exploration phase. The second phase of 25 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.
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 prior to the conclusion of definitive JV documents,
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 ("Appraised Value of the Exploration
Permits"), 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 of the Exploration Permits and the appraised value
of the Mining Assts are 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
reflect the terms and conditions of this Agreement and other customary
provisions.
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6. Mine Purchase Agreement
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The Parties shall enter into a [Definitive Mine Assets Agreement] at the
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same time as the Parties sign the JV Documents. The Definitive Mine Assets
Agreement shall reflect the terms of the Preliminary Mine 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 Ten Thousand United States Dollars (US$5,010,000) and the
Registered Capital shall be Five Million Ten Thousand United States
Dollars (US$5,010,000)
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 Five Million Ten Thousand United States Dollars (US$5,010,000)
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. Seven Hundred
Fifty Thousand United States Dollars (US$750,000) to the JV
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
Qilian County, Qinghai Province Zhamashi Copper Mill(2) and the
Mine Assets thereof, therefore, the Foreign Party shall be a
further capital contribution according to the capital
contribution schedule of the acquisition contract concluded
between the Chinese Party and the Qilian County, Qinghai Province
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Zhamashi Copper Mill(2) 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. Four Million
Two Hundred and Sixty Thousand United States Dollars
(US$4,260,000) within thirty-six (36) months after the issuance
of the JV Company's Business License. However, the amount already
paid for the acquisition the Qilian County, Qinghai Province
Zhamashi ▇▇▇▇▇▇ Mill(2) may be deducted from that capital
contribution.
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 Qinghai 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
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;
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(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.
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$5,010,000 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
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"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$5,010,000 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.
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 do not enter into the JV Documents by June 30, 2004.
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.
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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.
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/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Title: Legal Representative
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GRAVITY SPIN HOLDINGS, INC. to be renamed as MAGNUS INTERNATIONAL
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RESOURCES INC.
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By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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Title: President
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* Translator's Notes
(1) An error in the Chinese text renders this sentence impossible to translate.
I have translated the sentence, as I believe the writer had intended.
(2) This may not be the official English name, if any.
(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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