EXHIBIT 10.2.1 JOINT ACTIVITY
AGREEMENT
Tomsk June 17, 2005
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
OOO 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, 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 exploration work on the Tugoyakovka license area (164 square
kilometers) 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 Tugoyakovka 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 Tugoyakovka 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. The contributions to the Joint Activity shall have a monetary valuation
based on a joint determination of the Parties. The value of any
contribution shall be agreed and confirmed by each of the Parties.
2.2. Contributions by the Parties:
2.2.1 CIGMA's contribution shall be in cash funds in the amount
of US$400,000 (four hundred thousand) to be provided in equal
portions over the year 2005 in accordance with the approved
Budget;
2.2.2. GEOS' contribution shall be the license for the
Tugoyakovka area and all geological information on this subsoil
area, which is owned by GEOS, as well as
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professional knowledge, skills and business contracts. For
the purposes of this Agreement such contribution by GEOS shall be
valued by the Parties at US$100,000 (one hundred thousand).
2.3. CIGMA shall make its contribution by remitting US$400,000 (four hundred
thousand) to the hard currency account of GEOS following the execution of
this Agreement in accordance with the 2005 Budget (Attachment 2).
2.4. The Parties agree that 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 drilling, field, office and laboratory work in
respect of the Tugoyakovka area consistent with the funding
approved in the 2005 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 2005 according to the approved
Budget until total of US$400,000 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.
3.4. Each of the Parties shall:
3.4.1. Create a new structure for the joint use of the
Tugoyakovka area license on the terms of this Agreement, if, for
whatever reason, the Tugoyakovka area license is not transferred
to the new company;
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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.
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.
4.2.2. Manager is obliged to maintain accounting and provide
separate records of operations on this Agreement.
4.2.3. Manager shall 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' hard currency and current bank accounts.
5. ESTABLISHMENT OF NEW COMPANY
5.1. The joint activity is not the final structure for conducting and financing
of exploration work on the Tugoyakovka license area, and in the future the
Parties intend to restructure the Joint Activity by setting up a new legal
entity.
5.2. Following the remittance by CIGMA of the full amount of its contribution,
GEOS shall within reasonable time 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 Tugoyakovka area license to
such company.
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, all of the geological information
relating to the exploration work and associated with such subsoil area.
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6. NEW COMPANY FINANCING AND CAPITAL DISTRIBUTION PLAN
6.1. Once the license for the Tugoyakovka has been transferred to the new
company and CIGMA has performed all of its obligations to make its
contribution under section 3.2.1., GEOS shall admit CIGMA as a member in
the new company by transferring a portion of its 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 Parties' performance under section 6.1., CIGMA commits to
finance the new venture during 2006 by providing US$ 1,500,000 in equal
portions in accordance with the Budget approved by the Parties.
6.3 If such financing is not provided in full during 2006 and US$800,000 to
US$1,499,000 has been provided in financing, CIGMA shall transfer to GEOS
10% of its ownership interests in the new company so that the distribution
of the ownership interests be as follows:
GEOS - thirty percent (30%) of the charter capital of the new venture;
CIGMA - seventy percent (70%) of the charter capital of the new venture.
6.4 If the financing provided during 2006 is between US$350,000 to US$799,000
CIGMA shall transfer to GEOS 20% of its ownership interests in the new
company so that the distribution of the ownership interests be as follows:
GEOS - forty percent (40%) of the charter capital of the new venture;
CIGMA - sixty percent (60%) of the charter capital of the new venture.
6.5 If the financing provided during 2006 is less than US$350,000 CIGMA shall
transfer to GEOS 31% of its ownership interests in the new company so that
the distribution of the ownership interests be as follows:
GEOS - fifty one percent (51%) of the charter capital of the new venture;
CIGMA - forty nine percent (49%) of the charter capital of the new venture.
6.6 If CIGMA has fully performed its obligation to finance the new venture
during 2006 and has provided US$1,500,000 the distribution of the ownership
interests of the Parties in the such venture shall remain unchanged.
6.7. Upon completion of the working program and expending US$1,900,000 the
Parties shall mutually agree on the further financing scheme for the
project. The ownership interest of GEOS in the new venture may not fall
below 20% of the charter capital.
6.8. The ownership interests in the new venture shall be transferred (assigned)
at their nominal value.
6.9 In the event financing provided by CIGMA is irregular or insufficient,
resulting in delay in completion of the work, required to be completed
under the license agreement, the
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work program and/or approved annual Budget, the Parties shall mutually
agree on the further financing scheme for the project, including by way of
attracting a third party for such purposes.
6.10. If the third party financing is approved under section 6.9, such third
party equity participation could be considered through reduction of CIGMA's
ownership interest.
6.11 If no financing is provided by CIGMA during 2006 resulting in breach of the
terms and conditions of the license agreement and potential termination of
the subsoil use rights in respect of the Tugoyakovka area, CIGMA shall
assign to GEOS 100% equity interest in the new venture and withdraw from it
as a member.
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,
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
new venture 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.
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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. BOARD OF THE PARTIES
9.1. All the decisions of fundamental importance, related to conduct of the
Joint Activity, shall be taken jointly by Parties.
9.2. 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.
9.3. 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.
9.4. 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.
9.5. Decision on the matters, enumerated in items a) through d) of this section
9.3. shall be approved by the Parties unanimously.
10. MISCELLANEOUS
10.1. 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.
10.2. The applicable law shall be the law of the Russian Federation.
10.3. 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.
10.4. This agreement is executed in 4 counterparts, each having force:
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- 2 counterparts in Russian;
- 2 counterparts in English.
10.5. 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.
10.6. 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.
10.7. Any changes and additions to this Agreement shall be valid only if made in
writing and signed by duly authorized representatives of the Parties.
10.8. This Agreement contains the entire agreement of the Parties with respect
to the subject matters thereof.
10.9. Addresses and Signatures of the Parties:
LIMITED SOCIETY SCIENCE-INDUSTRIAL CORPORATION GEOSPHERA
Legal address: Russia, 649000 Republic of Altay, Xxxxx-Xxxxxxx, 00
Xxxxxx-Xxxxxxx xxx.
Bank Details: XX XXXXXX XXXXX BANK, NEW YORK
New York, USA SWIFT CODE: XXXXXX00
account 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.
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
MANAGING DIRECTOR DIRECTOR
CIGMA METALS CORPORATION SCIENCE-INDUSTRIAL CORPORATION GEOSPHERA
/S/ XXXX XXXXX /S/ XXXXXXXXX XXXXXX
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