EXHIBIT 10.5 .A
MEMORANDUM OF UNDERSTANDING
1.0 The Parties agree to enter in a Joint Venture for:
a) Processing (sorting, cutting and polishing) of gems and marketing of
cut and rough stones.
2.0 The Parties to the Joint Venture consist of:
a) American Benefits Group, Inc. (ABFG),
b) Menavi Group:
(i) Menavi International Ltd.
(ii) Advance Cutting Center (Israel) Ltd.
(iii) Advance Cutting Center Ltd. (Bangkok).
3.0 The Parties will register an off-shore corporation in which the shares
will be equally held by both Parties to the Joint Venture. The company
will be named ABFG Total Gem Management Ltd. (TGM).
4.0 The general goal of this agreement if for TGM to manage and handle ABFG
sapphires from the point after mining and sorting. TGM will sort rough,
cut and polish it in its own lapidaries or supervise other lapidaries,
sort and grade cut stones, and distribute them.
5.0 Terms and Conditions:
a) ABFG will provide Line of Credit to TGM by means of Letter of Credit
open on behalf of TGM to Menavi International Ltd. At a value of
approximately U.S. One Million (US$1,000,000.00) Dollars per month.
b) Processing:
(i) ABFG will continue to mine, in full force sapphires from any
source it wishes to mine,
(ii) ABFG will sort all rough into two (2) main categories:
1. cuttable, and
2. non-cuttable.
(iii) All cuttable rough will be sorted under TGM guidance according
to size and quality ready to be shipped to TGM,
(iv) TGM will sort rough ready to be shipped to the various
lapidaries,
(v) Gems over 4 mm cut size will be cut at ACC Israel and Bangkok,
(vi) Smaller gems will be cut in China and Sri-Lanka after
performing in the TGM lapidary,
(vii) TGM will supervise the cutting and quality of cut in all the
above places,
(viii) All cut stones will be sorted and graded at the sorting
offices in Bangkok and TLV, and (ix) Final pricing and
estimation will be done in the TLV offices.
a) Marketing and Distribution:
(i) The Parties will use TGM's offices in Ramat-Gan and Bangkok
and New York in order to distribute ABFG gemstones in the Far
East, in Israel and the US.,
(ii) TGM will be the sole distributor of ABFG sapphires,
(iii) TGM agree to put up all the existing offices, and provide the
required existing personnel to carry out cutting, sorting and
distribution of ABFG gems, and
(iv) The pricing activity will be done jointly by representatives
of all Parties.
6.0 Dividing the Profits:
a) On goods that are from ABFG mines the TOTAL NET SALES of the Joint
Venture will be divided between the Parties in accordance to the
following:
b)
(i) Cut and semi-cut stones:
1. Party ABFG seventy five (75%) percent, and
2. Party TGM twenty five (25%) percent.
(ii) On unprocessed rough:
1. Party ABFG eighty five (85%) percent, and
2. Party TGM fifteen (15%) percent.
c) On goods that are purchased by ABFG funds:
(i) Profit will be equally divided between ABFG to TGM. (Profit =
Total Sales - Total Purchase Costs)
d) The TOTAL NET SALES will be calculated after the deduction of the
following items from the TOTAL SALES:
(i) All approved expenses related to cutting, processing and
exporting of gemstones,
(ii) Any commissions related to the purchasing, sales and marketing
of rough or cut stones,
(iii) Any taxes or fees required by the Government in accordance to
the law,
(iv) Interest rates will be libor plus one-half (1/2%) percent, and
(v) All applicable commissions.
b) TOTAL PURCHASE COSTS:
(i) All approved expenses related to purchase of rough or cut
gemstones,
(ii) Any commissions related to the purchasing, sales and marketing
of rough or cut stones, and
(iii) Any taxes or fees required by the Government in accordance to
the law.
7.0 Other Agreements
a) The Joint Venture will have the first right of refusal to purchase
the products of ABFG mining activity, beside the portion of the mine
run that will be set as policy to sell to external buyers.
b) The initial capital investment into the project, which consists of
capital investment to set-up new offices and enlarge lapidaries will
be provided by ABFG as a Shareholder Loan to TGM.
c) All accounting will be done on a monthly basis.
d) The processing and marketing will be managed by TGM. The mining
venture will be managed by ABFG.
e) The Joint Venture Agreement will be subject to the laws of the state
of Israel and the United States of America and the language used
will be English.
This Memorandum of Understanding is to set the principals to the Joint Venture
Agreement. Both Parties shall negotiate a final contract within sixty (60) days
of this Memorandum of Understanding.
This Memorandum of Understanding and further contracts will be subject to the
laws of the United States and Israel.
Dated and signed this 26th day of August, 1998 at Calgary, Alberta, Canada.
American Benefits Group, Inc. Menavi International Ltd.
Per: /s/Xxxxxx X Xxxxx, Per: /s/ Menahem Sevdermish
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Per: /s/ Xxxx Xxxxxxx Per: /s/ Avi Meirom
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Advance Cutting Center (Israel) Ltd. Advance Cutting Center Ltd.
Per: /s/ Menahem Sevdermish Per: /s/ Menahem Sevdermish
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Per: /s/ Avi Meirom Per: /s/ Avi Meirom
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