Document:

EXHIBIT 10.15
-------------

                       COOPERATIVE JOINT VENTURE CONTRACT

                                     Between

                           GEOLOGY BRIGADE 209 OF THE
                                NUCLEAR INDUSTRY
                            OF YUNNAN PROVINCE, CHINA

                                       And

                      MAGNUS INTERNATIONAL RESOURCES INC.,
                          Registered in Nevada, U.S.A.

                            For the Establishment of

                              LONG TENG MINING LTD.

<PAGE>

                                TABLE OF CONTENTS
                                -----------------

Article                                                                    Page

        Preliminary Statements..............................................1

1.      Parties to the Contract.............................................2

2.      Definitions.........................................................2

3.      Establishment and Legal Form of the Cooperative Company.............6

4.      Purpose, Scope of Business and Phases of Activity...................7

5.      Total Amount of Investment and Registered Capital;
        Assignment of Cooperative Company Interests.........................7

6.      Responsibilities of the Parties....................................13

7.      Mutual Representations.............................................15

8.      Warranties and Undertakings........................................16

9.      Sale of Cooperative Company Products...............................17

10.     Board of Directors.................................................17

11.     Management Organization............................................20

12.     Conduct of Operations..............................................21

13.     Purchase and Supply of Materials and Equipment
        and Provision of Services......... ................................22

14.     Labour Management..................................................22

15.     Financial Affairs and Accounting, Distribution of Profits..........23

16.     Taxation and Insurance.............................................26

17.     Confidentiality....................................................26

18.     Contract Term......................................................28

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19.     Termination and Liquidation........................................29

20.     Breach of Contract.................................................31

21.     Non-Competition....................................................31

22.     Force Majeure......................................................32

23.     Settlement of Disputes.............................................32

24.     Applicable Law.....................................................34

25.     Miscellaneous Provisions...........................................34

Appendix I       Map of Cooperation Area

Appendix II      Party A Exploration Licenses

Appendix III     Description of Party A Exploration Licenses and Party A Mineral
                 Data

Appendix IV      Copies of Appraisal Documents

                                       ii
<PAGE>

                       COOPERATIVE JOINT VENTURE CONTRACT
                       ----------------------------------

THIS  CONTRACT  is entered  into  between  Geology  Brigade  209 of the  Nuclear
Industry or Yunnan Province,  China  (hereinafter  referred to as "Party A") and
                                                                   -------
Magnus International  Resources Inc., registered in Nevada, U.S.A.  (hereinafter
referred to as "Party B").
                -------

                             Preliminary Statements
                             ----------------------

Taking into consideration that:

A.   All mineral  resources  within the  territory of the  People's  Republic of
     China  (hereafter  referred  to as  "China")  are owned by the State of the
                                          -----
     People's Republic of China.

B.   (1)  Party B is willing to provide funds in order to carry out  Exploration
          for  resources  with Party A, and the  Parties  are willing to jointly
          make  investments,  to jointly bear risks and to share the Exploration
          results of a certain area;

     (2)  The Government of Yunnan Province of China (hereinafter referred to as
          "Yunnan") is encouraging the establishment of cooperative  enterprises
           ------
          in Yunnan.

C.   Party A and Party B signed a Preliminary  Joint Venture  Agreement on April
     6, 2004  pursuant to which they agreed to  establish  a  cooperative  joint
     venture company (the  "Cooperative  Company") to conduct  copper,  gold and
                            --------------------
     iron  exploration  and  mining  activities  within an area of 44.02  square
     kilometer   of   Luquan   County,   Yunnan   Province(Exploration   license
     No.5300000410155)  and an area of 82.39  square  kilometer  of the  Huidong
     county,  Sichuan Province (Exploration license  No.5100000430204) (as shown
     on Appendix I) an Eighty-two point three nine (82.39) square kilometer area
     (the  "Cooperation  Area") of Huidong County,  Sichuan  Province,  People's
            -----------------
     Republic of China (as shown on Appendix I).

D.   In China Exploration Licenses and Mining Licenses are conferred through the
     issuance of  permits,  and the holder of an  Exploration  License or Mining
     License shall carry on business and fulfill its  obligations  in accordance
     with the Mineral  Resources Law of the People's Republic of China and other
              --------------------------------------------------------
     applicable laws and regulations.

E.   Party A owns;  in  addition,  it has agreed to transfer to the  Cooperative
     Company  gold and copper  Exploration  Licenses  (the "Party A  Exploration
                                                            --------------------
     Licenses") for the Cooperation  Area (a copy of which is attached hereto as
     --------
     Appendix II) and related data and information (the "Party A Mineral Data").
                                                         --------------------

                                        1
<PAGE>

Party A and B, after  friendly  consultation  conducted in  accordance  with the
principle  of equality  and mutual  benefit,  have agreed,  in  accordance  with
China's laws,  regulations and relevant rules, to enter into this Contract which
both Parties shall abide by.

                       Article 1: Parties to this Contract
                       -----------------------------------

1.1  The parties to this Contract are:

     (1)  Party  A:  Geology  Brigade  209 of the  Nuclear  Industry  or  Yunnan
          Province,  China,  a  registered  institutional  legal person with its
          legal  address at No. 182, West Dongfeng  Road,  Kunming City,  Yunnan
          Province, People's Republic of China.

          Legal Representative Person of Party A:

          Name:              Cheng Huiming
          Position:          Brigade Leader
          Nationality:       Chinese
          Resident of:       China

     (2)  Party  B:  Magnus   International   Resources  Inc.,  a  company  duly
          registered  under the laws of the  State of  Nevada,  U.S.A.  with its
          legal address at 101 Convention  Center Drive,  7th Floor,  Las Vegas,
          Nevada 89109, U.S.A.

          Legal Representative Person of Party B:

          Name:              Graham R. Taylor
          Position:          Chairman
          Nationality:       Canadian
          Resident of:       Canada

1.2  Change of Legal Representative Person
     -------------------------------------

          Each Party  shall  have the right to change  its legal  representative
          person and if a change  occurs such Party is  obligated  to notify the
          other Party by written notification of the name, position, nationality
          and  limits of rights of its new legal or  authorized  representative.
          One Party shall  reimburse the other Party for direct losses the other
          Party incurs as a result of one Party not notifying the other Party in
          a timely manner of a change of its legal representative person.

                             Article 2: Definitions
                             ----------------------

                                        2
<PAGE>

Unless  otherwise  provided  herein,  the following words and terms used in this
Contract shall have the meanings set forth below:

2.1  "Affiliate"  means,  in relation  to Party A, any  superior  enterprise  or
      ---------
     department of Party A and any  enterprise or other entity which is directly
     or  indirectly   subordinate   to,  or  controlled   by,  Party  A  or  the
     department-in-charge  of Party A; the term "control"  meaning  ownership of
     fifty percent or more of the  registered  capital or voting  stock,  or the
     power to appoint  the general  manager,  factory  chief or other  principal
     person in charge of an enterprise or other entity.

2.2  "Affiliate"  means, in relation to Party B, any company which,  directly or
      ---------
     indirectly,  is controlled by, under common control with, or in control of,
     Party B; the term "control"  meaning  ownership of fifty percent or more of
     the voting stock or registered  capital, or the power to appoint or elect a
     majority  of the  directors,  or the power to direct the  management,  of a
     company.

2.3  "Articles  of  Association"  means  the  Articles  of  Association  of  the
      -------------------------
     Cooperative  Company approved by the Examination and Approval Authority and
     signed by Party A and Party B simultaneously with this Contract.

2.4  "Board  of  Directors"  means  the board of  directors  of the  Cooperative
      --------------------
     Company.

2.5  "Budget" means a detailed estimate and schedule of all costs to be incurred
      ------
     pursuant to a Program to be implemented by the Cooperative Company approved
     by the Board of Directors in accordance with Article 12.3.

2.6  "Budget Period" means one year unless otherwise  determined by the Board of
      -------------
     Directors.

2.7  "Business Day" means a day other than Saturday, Sunday or statutory holiday
      ------------
     in China or the U.S.A.

2.8  "Business  License" means the business  license of the Cooperative  Company
      -----------------
     issued by the China State  Administration  for Industry and Commerce or its
     authorized local administration for industry and commerce.

2.9  "Contract Term" means the term of this Contract as set forth in Article 18.
      -------------

2.10 "Cooperation  Area" means that distinct area of 44.02 square kilometers and
      -----------------
     82.39  square  kilometers  which is  marked  for ease of  reference  on the
     coordinate  map  included  as  Appendix  I, or  other  area as the  Parties
     mutually agree upon.

2.11 "Cooperative  Company"  means the  Sino-Foreign  enterprise  registered and
      --------------------
     formed by Party A and Party B pursuant to this  Contract and in  accordance
     with the Law of the People's Republic of China on Sino-Foreign  Cooperative
              ------------------------------------------------------------------
     Enterprises and other relevant laws of China.
     -----------

                                        3
<PAGE>

2.12 "Costs"  means  all  costs,  expenses,  charges  and  outlays,  direct  and
      -----
     indirect,  made or incurred by or on behalf of the  Cooperative  Company or
     General  Manager in respect of operations of the  Cooperative  Company from
     the date of execution of this  Contract  including,  but not limited to the
     generality of the foregoing,  all field office costs, costs of Exploration,
     licensing,  Development and Mining, which costs shall include the salaries,
     benefits  and travel  expenses of persons  engaged in the  operation of the
     Cooperative Company.

2.13 "Development"  means all preparation for overburden  stripping and recovery
      -----------
     of Products,  including the preparation of feasibility studies,  designing,
     licensing, construction, installation or purchase of heap leaching, milling
     or processing plants and other plant and  infrastructure to be used for the
     mining, transporting,  handling, milling, processing or production of other
     beneficiation products.

2.14 "Effective Date" means the effective date of this Contract,  which shall be
      --------------
     the date on which this Contract and the Articles of  Association  have been
     approved by the Examination and Approval Authority.

2.15 "Examination  and Approval  Authority"  means the government  department or
      ------------------------------------
     agency  authorized  under the  China  State  Council  rules  regarding  the
     examination  and  approval  of foreign  investment  projects to examine and
     approve this Contract and the Articles of Association.

2.16 "Exploration"   means  all  activities  directed  toward  ascertaining  the
      -----------
     existence,  location, quantity, quality or commercial value of Minerals and
     Mineral  deposits,   including  prospecting,   reconnaissance,   trenching,
     drilling,    sampling,    surveying,    metallurgical   testing,   economic
     pre-feasibility  studies,  environmental  impact  studies,  researching and
     perfecting titles to use land and Exploration Licenses.

2.17 "Exploration  License" means all rights to conduct  Mineral  reconnaissance
      --------------------
     and  related  activities  in the  Cooperation  Area  granted by the License
     Issuing Authority.

2.18 "Feasibility  Study Report" means the feasibility  study report compiled by
      -------------------------
     Party A and Party B in accordance with the relevant laws and regulations in
     China relating to the formation of a Cooperative Company, which report must
     be approved by the appropriate department or authority in charge.

2.19 "Formal  Approvals"  means  the  fulfillment  of the  conditions  listed in
      -----------------
     Article 5.6(1) to (4).

2.20 "License  Issuing  Authority"  means the Ministry of Land and  Resources of
      ---------------------------
     China  or the  Departments  of Land and  Resources  of the  governments  of
     various provinces,  municipalities,  autonomous regions, and municipalities
     directly under the Central Government.

                                        4
<PAGE>

2.21 "Management  Personnel"  means the Cooperative  Company's  General Manager,
      ---------------------
     Deputy General Manager and other  management  personnel who report directly
     to the General Manager.

2.22 "Minerals" means all metallic minerals, including gold ore.
      --------

2.23 "Mineral Data" means all geological,  geochemical and geophysical  data and
      ------------
     prospecting  data,  survey results,  drill logs, assays and other data, and
     includes drill core samples.

2.24 "Mining"  means all  activities  to  recover  Products,  including  mining,
      ------
     extracting,   producing,   handling,   treating,  heap  leaching,  milling,
     beneficiation or other Mineral product processing  including the production
     of refinable concentrates,  regardless of the method, and all operating and
     reclamation activities.

2.25 "Mining License" means all rights to conduct Mining in the Cooperation Area
      --------------
     granted by the License Issuing Authority.

2.26 "Other   Entity"   means  any  natural   person,   legal  person  or  other
      --------------
     organization, enterprise or entity other than Party A or Party B.

2.27 "Party A Mineral Data" means all data and information relating to the Party
      --------------------
     A  Exploration  Licenses  owned or  controlled  by Party A, as described in
     Appendix III.

2.28 "Party A Exploration  Licenses" mean the Exploration Licenses held by Party
      -----------------------------
     A as of the date of  execution  of this  Contract,  copies of which are set
     forth in Appendix II (1) and Appendix II (2) and every Exploration  License
     issued in  substitution or replacement  thereof,  including the Exploration
     Licenses  issued  to  the  Cooperative  Company  as a  result  of  Party  A
     transferring  the above mentioned  Exploration  Licenses to the Cooperative
     Company.

2.29 "Phase I" and "Phase II" mean the first and second phases, respectively, of
      -------       --------
     the activities of the Cooperative Company as more particularly described in
     Article 4.3.

2.30 "Products" means all Minerals produced from Mining Licenses or other rights
      --------
     owned by the Cooperative  Company,  including all refined gold ingots,  and
     other products produced therefrom.

2.31 "Program"  means a  reasonably  detailed  description  of  operating  to be
      -------
     conducted and objectives to be accomplished by the Cooperative  Company for
     a Budget  Period,  approved by the Board of  Directors in  accordance  with
     Article 12.3.

2.32 "Three  Funds" means the social  insurance,  medical  insurance and housing
      ------------
     fund of the Cooperative Company as required to be established in accordance
     with relevant regulations in China.

2.33 "Cooperative Conditions" means the Party A Exploration Licenses and Party A
      ----------------------
     Mineral  Data  obtained  by  Party A and the  registered  capital  of Three
     Million Ten Thousand  United States Dollars  (US$3,010,000)  to be injected
     into the Cooperative Company by Party B.

                                        5
<PAGE>

       Article 3: Establishment and Legal Form of the Cooperative Company
       ------------------------------------------------------------------

3.1  The Parties hereby agree to establish the Cooperative Company in accordance
     with the relevant laws and  regulations of China and the provisions of this
     Contract.  Promptly following the signature of this Contract,  both Parties
     shall sign the Cooperative Company's Articles of Association.  Party A will
     handle  application  procedures  for the approval of this  Contract and the
     Articles of Association. Party B will assist Party A in providing documents
     and  information  required  from  Party  B  in  carrying  out  the  various
     procedures.

3.2  Party A shall provide to Party B photocopies of all  application  documents
     and materials  submitted to government  departments in connection  with the
     procedures  described  in Article 3.1,  and  promptly  upon  receipt  shall
     provide to Party B photocopies  of all  correspondence,  official  replies,
     approval  certificates,  the  Business  License  and  any  other  documents
     received from government departments. In addition, Party A shall provide to
     Party B,  within  sixty (60) days from  issuance of the  Business  License,
     notarized  copies of the Business  License and of the official  replies and
     approval  certificates  for the  Phase I  Feasibility  Study  Report,  this
     Contract and the Articles of Association.

3.3  The Cooperative  Company shall commence operations upon the issuance of its
     Business License.

3.4  The name of the  Cooperative  Company  shall  be  (Chinese  characters)  in
     Chinese and Yunnan Long Teng Mining Ltd. in English.

3.5  The legal address of the Cooperative Company shall be Dushimingyuan  Bldg.,
     No.  A-2708,  Central  Renmin  Road,  Kunming,  Yunnan  Province,  People's
     Republic of China.

3.6  The  Cooperative  Company may establish  branch offices with the consent of
     the  Board  of  Directors  and  approval  from  the  relevant  governmental
     authorities in China.

3.7  The Cooperative  Company shall be an enterprise legal person registered and
     formed by Party A and Party B pursuant to this  Contract and in  accordance
     with the laws of China.  The  activities of the  Cooperative  Company shall
     comply with the provisions of the laws,  decrees and  regulations of China,
     and its  lawful  rights and  interests  shall be  protected  by the laws of
     China.

3.8  The Cooperative Company shall be a limited liability company. The liability
     of  each  Party  to  the  Cooperative  Company  shall  be  limited  to  its
     contribution to the Cooperative  company's registered capital in accordance
     with  Article  5.  Party  A  shall,  in  accordance  with  the  Cooperative
     Condition,  transfer the Party A  Exploration  Licenses and Party A Mineral
     Data  to  the  Cooperative  Company  and  Party  B's  contribution  to  the
     registered  capital of the  Cooperative  Company shall be Three Million and
     Ten Thousand US Dollars  (US$3,010,000)  during  Phase I.  Creditors of the
     Cooperative  Company  shall  have  recourse  only  to  the  assets  of  the

                                        6
<PAGE>

     Cooperative  Company and shall not be entitled to compensation,  damages or
     other remedies from any of the Parties.

          Article 4: Purpose, Scope of Business and Phases of Activity
          ------------------------------------------------------------

4.1  The purpose of the  Cooperative  Company is to use advanced  technology and
     scientific  management  techniques  to conduct  Exploration  activities  in
     China, and to obtain satisfactory economic benefits for the Parties.

4.2  The Cooperative  Company's scope of business shall be Exploration,  Mining,
     dressing,  Development,  processing  and selling of copper,  gold and other
     related polymetallic Minerals.

4.3  The Cooperative  Company's  activities will be divided into two phases. The
     first phase, of four (4) years,  will be the  Exploration  phase (Phase I).
     The second phase, of Twenty-six (26) years,  will be the Development  phase
     (Phase II). However,  Exploration,  Development or Mining activities may be
     conducted  in either  Phase I or Phase II,  as  determined  by the Board of
     Directors.

4.4  The Parties confirm that their objective is the Cooperative Company's scope
     of business,  including the Exploration and Mining for deposits of precious
     metals and  non-ferrous  metals as contemplated in Article 4.2. The Parties
     shall cooperate with one another and with the Cooperative Company to obtain
     any  additional  Exploration  Licenses,  Mining  Licenses,   approvals  and
     registrations  in accordance with current  relevant laws and regulations of
     China.

          Article 5: Total Amount of Investment and Registered Capital;
          -------------------------------------------------------------
                   Assignment of Cooperative Company Interests
                   -------------------------------------------

5.1  The Cooperative Company's total investment in Phase I shall be Five Million
     US Dollars  (US$5,000,000) and the Cooperative Company's registered capital
     shall be Three Million and Ten Thousand US Dollars (US$3,010,000).

5.2

     (1)  As its Cooperative  Conditions,  Party A shall, in accordance with the
          relevant  terms of this  Contract,  transfer the "Party A  Exploration
          Licenses" and the "Party A Mineral Data" to the  Cooperative  Company.
          The value of the said  "Party A  Exploration  Licenses"  and  "Party A
          Mineral  Data"  has  been  appraised  by  a  mining  right   appraisal
          institution  qualified  under Chinese law (Appendix IV). In accordance
          with Article 15.11, the  contribution of such  Cooperative  Conditions
          shall  entitle  Party  A  to a  ten  percent  (10%)  interest  in  the
          Cooperative Company.

                                        7
<PAGE>

     (2)  The  Parties  hold that the  "Party A  Exploration  Licenses"  and the
          "Party A Mineral  Data" shall have a total  appraised  value and that:
          (i) the total appraised  value became valid following  confirmation by
          the  appraisal  report issued on the 5th day of July,  2004;  (ii) the
          report  shall  be  filed  with  the   appropriate   competent   higher
          governmental authority; and (iii) such report shall be attached hereto
          as an Appendix.

5.3  (1)  Subject to Article 5.6, Party B shall contribute Three Million and Ten
          Thousand  US  Dollars  (US$3,010,000)  as  the  Cooperative  Company's
          registered capital. Party B shall contribute the registered capital in
          United States  Dollars cash. In  accordance  with Article  15.11,  the
          contribution  of such capital  contributions  shall entitle Party B to
          a 90% interest in the Company.

     (2)  Any  increase in the  registered  capital or total  investment  of the
          Company shall be contributed  one hundred  percent (100%) by the Party
          B, and the Party A shall not be required to contribute further capital
          to the  Cooperative  Company,  but shall retain its ten percent  (10%)
          share of the rights and interests in the Cooperative Company.

     (3)  Within 30 days upon receipt of the business license of the Cooperative
          Company,  Party B will give to Party A Five  Hundred  Thousand  United
          States Dollars  (US$500,000)  of equivalent  shares of common stock of
          Magnus  International  Resources,  Inc.  listed on the U.S.A.'s NASDAQ
          market  (listed on United States NASD OTC Bulletin  Board),  and shall
          take care of the  documentation  for such  equity  transfer as soon as
          possible.

                                        8
<PAGE>

5.4  (1)  The Parties shall make their  contributions of Cooperative  Conditions
          or registered  capital in  accordance  with the timetable set forth in
          Article 5.4(2).  If the overdue  contribution has not been made within
          thirty (30) days of "notification"  of default,  the other Party shall
          have the right to terminate  this  Contract and claim damages from the
          breaching Party.

     (2)  The timetable for such contributions is as follows:

          (i)  Party  A  shall  apply  to the  suitable  competent  governmental
               authority  to transfer  its "Party A  Exploration  Licenses"  and
               Party Mineral Data free and clear of mortgages (free and clear of
               property  liens) to the  Cooperative  Company  immediately on the
               date of issuance of the Cooperative  Company's  Business License,
               and cause the "Party A Exploration  Licenses" to be registered in
               the name of the Cooperative Company within ninety (90) days after
                                                          -----------
               the date of issuance of the Business License.

          (ii) Following transfer of the "Party A Exploration  Licenses" and the
               "Party A Mineral Data" to the Cooperative Company:

               (A)  Party B shall  contribute  not less than Four Hundred  Sixty
                    Thousand   United  States   Dollars   (US$460,000)   to  the
                    Cooperative  Company's registered capital,  within three (3)
                    months after the issuance of the Business License.

               (B)  Party B shall  contribute an additional  funds not less than
                    One Million  United  States  Dollars  (US$1,000,000)  to the
                    Cooperative Company's registered capital, within twenty-four
                    (24) months after the issuance of the Business License.

               (C)  Party B shall  contribute  an  additional  funds of not less
                    than One Million Five Hundred Fifty  Thousand  United States
                    Dollars   (US$1,550,000)   to  the   Cooperative   Company's
                    registered  capital within  thirty-six (36) months after the
                    issuance of the Business License.

         (iii) If Party B is  satisfied  with  the  results  of the  Cooperative
               Company's  Exploration program and additional funds are required,
               then, the Parties will jointly apply to the appropriate competent

                                        9
<PAGE>

               governmental  authority  to increase  the  Cooperative  Company's
               registered  capital to  US$5,000,000.  Subject to the approval of
               the   application,   Party  B  shall   contribute  an  additional
               US$1,990,000 of registered capital within forty-eight (48) months
               after the date of issuance of the Business License.

     Notwithstanding  Article  5.4(2)(ii),  Party B may, at its sole discretion,
     elect to make  contributions  to the capital of the Cooperative  Company in
     advance of the dates specified in Article 5.4(2)(ii),  provided that during
     Phase I Party B shall contribute sufficient funds on an annual basis to the
     Cooperative  Company's  registered  capital to enable it to  undertake  the
     minimum Exploration expenditures in accordance with the Party A Licenses as
     required by law.

5.5  Each  time  Party B  makes  a  contribution  to the  Cooperative  Company's
     registered capital, a Chinese registered accountant engaged by the Board of
     Directors  shall  promptly  verify  the  contribution  and  issue a capital
     verification  report to the Cooperative Company within sixty (60) days from
     the date of the  contribution.  Within thirty (30) days from receipt of the
     capital  verification  report,  the  Cooperative  Company  shall  issue  an
     investment  certificate  to  such  Party  in  the  form  prescribed  by the
     applicable   regulations   in  China,   signed  by  the  Chairman  and  the
     Vice-Chairman of the Board and chopped with the Cooperative Company's chop,
     and a copy shall be submitted to the Examination and Approval Authority for
     the  record.  The  General  Manager  shall  maintain a file of all  capital
     verification  reports and copies of all investment  certificates  that have
     been issued to the Parties.

5.6  Party B shall not be obligated to make any  contribution to the Cooperative
     Company's  registered  capital if any of the following  conditions  has not
     been satisfied or waived in writing by Party B:

     (1)  following signature by both Parties, this Contract and the Articles of
          Association  have  been  approved  by  the  Examination  and  Approval
          Authority  without  altering  their terms and  conditions  and without
          imposing any additional obligations on either Party or the Cooperative
          Company,  unless Party B has been notified in advance of and consented
          in writing to such alterations or additional obligations;

     (2)  the Business  License has been issued without altering the Cooperative
          Company's  business scope as set forth in Article 4.2,  unless Party B
          has been  notified  in  advance  of and  consented  in writing to such
          alteration;

     (3)  issuance  and transfer to the  Cooperative  Company in its name of the
          "Party A  Exploration  Licenses",  free and  clear  of all  liens  and
          liabilities;

     (4)  issuance  or  transfer  to  the  Cooperative   Company  of  all  other
          regulatory approvals,  registrations,  permits, licenses, certificates

                                       10
<PAGE>

          and rights that Party B reasonably  considers to be necessary  for the
          Cooperative  Company  to be able to  conduct  the  various  activities
          within its scope of business; and

     (5)  receipt  by  Party B of a legal  opinion  from a lawyer  of Party  B's
          choice  that  confirms  that the  conditions  listed  above in Article
          5.6(1) to (4) have been  satisfied  and that this  Contract is a valid
          and  binding  contract  the terms of which are  fully  binding  on the
          Parties.

     The Parties agree that if any of the conditions specified in Article 5.6(1)
     to (5) have not been  satisfied  or waived  by Party B within  the first to
     occur of (A) three (3) months from issuance of the Business  License or (B)
     five (5)  months  from the date on which  this  Contract  is  signed by the
     Parties,  or within any extended period of time as the Parties may agree in
     writing,  then Party B shall have the right to terminate  this  Contract by
     written notice to Party A.

5.7  If Party B decides that there is no value  conducting  further  Exploration
     activities  after Party B has  contributed  at least Four Hundred and Sixty
     Thousand United States Dollars  (US$460,000)  to the  Cooperative  Company,
     then Party B may elect to: (i)  transfer  its  interest in the  Cooperative
     Company to Party A without consideration;  or (ii) dissolve the Cooperative
     Company.

5.8  Loans and Capital Increases

     (1)  The  total  amount  of  the  Cooperative   Company's   investment  and
          registered  capital shall be gradually and  successively  increased in
          accordance  with  the  Cooperative   Company's   Exploration  results.
          Exploration,  Development  and Mining  schemes,  Programs  and Budgets
          shall be determined by the Board of Directors.

     (2)  To the greatest extent  permitted by applicable  laws, the Cooperative
          Company may fund its operations with loans borrowed from third parties
          and/or by shareholder  loans pursuant to loan  agreements  approved by
          the Board of  Directors.  If required by the lender,  the  Cooperative
          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
          Cooperative  Company  may pay  interest  to the  lending  Party at the
          prevailing commercial rate of interest for similar loans.

     (3)  If the Board of  Directors  approves a scheme,  Program or Budget that
          will require  expenditures  in excess of the funds  obtainable  by the
          Company,  the Company may resolve the  situation  by taking out loans,
          but  the  registered   capital  of  the  Company  shall  be  increased
          accordingly,  and the Parties shall take necessary  steps to make best
          efforts to obtain  governmental  approvals required in connection with
          such capital increase.

                                       11
<PAGE>

     (4)  Party B  shall  contribute  all the  additional  capital  that  may be
          required by the Cooperative Company ("Additional Capital").
                                                ------------------

     (5)  If an  increase  is  required in  accordance  with the  provisions  of
          Article 5.8(3),  no increase in registered  capital shall be effective
          until  the  requirements  of the  applicable  laws of China  have been
          complied with:

          (i)  each Party now agrees that it will promptly  implement  documents
               of that type, and take acts with reference to the requirements of
               the laws of China so as to cause the  increase  to be  effective;
               and

          (ii) without  limiting the  generality of the  foregoing,  if the said
               resolution  is  required  to be  passed  in  accordance  with the
               applicable  laws of China,  each Party  shall be  responsible  to
               cause  the  directors  appointed  by it to  vote  in  favor  of a
               unanimous Board resolution approving such increase,.

5.9  The  stipulations set forth in this Article 5.9 shall apply to transfers of
     the Parties' interests in the Cooperative Company:

     (1)  Each Party shall have a pre-emptive  right of purchase with respect to
          the transfer of all or any part of the other  Party's  interest in the
          Cooperative  Company.  A  Party  (the  "Transferor")  that  wishes  to
                                                  ----------
          transfer its interest in the Cooperative  Company shall give the other
          Party  written  notice  (the  "Transfer  Notice")  setting  forth  the
                                         ----------------
          identity of the intended  transferee (the  "Transferee") and the price
                                                      ----------
          and other terms and  conditions of the transfer.  The Transfer  Notice
          shall constitute an irrevocable  offer to transfer the interest to the
          other  Party  or,  in the case of  Party  B, to Party B or such  Other
          Entity  as may be  designated  by Party B, at the  price  and upon the
          other  terms and  conditions  set forth  therein.  The other Party may
          accept the  Transferor's  offer to  transfer  the  interest by written
          notice (the "Acceptance  Notice") to the Transferor sent no later than
                       ------------------
          sixty (60) days after  receipt of the  Transfer  Notice.  During  that
          sixty-day  period,  the Transferor shall promptly provide to the other
          Party such information  concerning the intended  Transferee's business
          and financial  condition as the other Party may reasonably  request so
          as to  enable  the other  Party to  decide  whether  to  exercise  its
          preemptive  right of  purchase.  If the other  Party does not send the
          Acceptance  Notice within the sixty-day  period,  the  Transferor  may
          transfer the interest to the intended  Transferee  for a price no less
          than the price set forth in the  Transfer  Notice and upon other terms
          and  conditions no more favorable than those set forth in the Transfer
          Notice.  The Transferor shall notify the other Party in writing of the
          final  terms and  conditions  of the  transfer  within two (2) days of
          concluding a transfer  contract with the intended  Transferee.  If the
          transfer  to  the  intended   Transferee   is  not  submitted  to  the
          Examination  and  Approval  Authority  for  approval  within three (3)

                                       12
<PAGE>

          months from the expiration of the foregoing sixty (60) day period, the
          Transferor  must again  comply  with the  provisions  of this  Article
          5.9(1) before transferring its interest in the Cooperative Company.

     (2)  Each  Party may at any time  during the  Contract  Term  transfer  its
          interest in the Cooperative  Company to an Affiliate of the Party, and
          at this time each Party waives its pre-emptive  right of purchase with
          respect to transfers by the other Party.

     (3)  A Party transferring its interest in the Cooperative Company will:

          (i)  ensure  that its  transferee  signs a  legally  binding  document
               making  it a party to this  Contract  and  bound by the terms and
               conditions  of  this  Contract  to the  same  extent  as was  the
               transferring Party; and

          (ii) until the date of transfer  of its  interest,  remain  liable for
               liabilities or obligations existing or incurred.

     (4)  Each Party hereby consents to any transfer that meets the requirements
          of this  Article  5.9 and further  agrees that the Board of  Directors
          shall be deemed to have consented unanimously to such a transfer. Each
          Party agrees  promptly to take all actions and to sign all  documents,
          and to cause its appointees on the Board of Directors promptly to take
          all legally required actions and sign all legally required  documents,
          in order to effect the  transfer.  The transfer  shall be submitted to
          the  Examination  and Approval  Authority for approval and,  following
          receipt of such  approval,  the  Cooperative  Company  shall carry out
          procedures  for the  amendment  of  registration  with  the  competent
          administration for industry and commerce.

5.10 Transfer of any change in the "Party A  Exploration  Licenses"  to an Other
     Entity requires approval by Party A and Party B.

5.11 The  Cooperative  Company  may obtain  loans in China or abroad to fund the
     difference  between  the total  amount  of  investment  and the  registered
     capital.  Party A will assist the Cooperative Company in applying for loans
     from lenders in China on competitive terms and conditions, and Party B will
     assist the  Cooperative  Company in applying for loans from lenders outside
     China on competitive  terms and  conditions.  If any lender requires a loan
     guarantee, the Parties shall consult to determine whether and on what terms
     they are willing to provide such guarantees.

5.12 No Party shall mortgage,  pledge or otherwise  encumber its interest in the
     Cooperative Company without the prior written consent of the other Party.

5.13 Except as otherwise  expressly  provided in this Contract,  the Cooperative
     Company shall not assume any liabilities or other obligations of Party A or
     Party B.

                                       13
<PAGE>

                   Article 6: Responsibilities of the Parties
                   ------------------------------------------

6.1  In addition to its other  obligations  under this  Contract,  Party A shall
     have the following responsibilities:

     (I)  procure on the Cooperative  Company's behalf and at the expense of the
          Cooperative Company all approvals, permits, licenses, certificates and
          rights needed for the lawful  establishment of the Cooperative Company
          and for undertaking activities within the scope of business set out in
          Article 4.2 during the term of the Cooperative Company;1

     (2)  assist the Cooperative Company in negotiations with county, municipal,
          provincial  and  central  government  departments  and other  relevant
          authorities  to  ensure  that the  Cooperative  Company  can  commence
          activities  within the scope of  business  set out in  Article  4.2 in
          accordance with applicable  laws, and to maintain all the legal rights
          and interests of Party B under this Contract;

     (3)  at  the  request  of  the  Cooperative   Company,   provide  at  rates
          competitive  in the  vicinity,  all  office  space  required  for  the
          operations  of  the  Cooperative  Company  and  any  labor  and  staff
          requested by the Cooperative Company;

     (4)  assist  the  Cooperative  Company in  applying  for all  licenses  and
          permits  required  for  the  operation  of the  Cooperative  Company's
          business,  including  renewals  of or  replacements  for the  "Party A
          Exploration Licenses".

     (5)  assist the  Cooperative  Company in  purchasing,  leasing or otherwise
          procuring  equipment  and  machinery,  tools,  raw  materials,  office
          furniture and equipment, vehicles and other materials required for the
          Cooperative Company's production and operations from sources in China;

     (6)  assist the Cooperative Company in applying for licenses for the import
          of equipment and machinery, tools, raw materials, office furniture and
          equipment,  vehicles and other materials  required for the Cooperative
          Company's  production and  operations,  and in carrying out all import
          and customs declaration formalities in respect thereto;

     (7)  assist the Cooperative Company in obtaining all necessary entry visas,
          work permits,  residence permits and other necessary documents for its
          expatriate personnel;

     (8)  assist the  Cooperative  Company in  recruiting  skilled  managers and
          technical personnel;

                                       14
<PAGE>

     (9)  assist the Cooperative  Company in obtaining or providing  housing for
          its expatriate personnel, with the cost of such housing to be borne by
          the Cooperative Company;

     (10) assist the  Cooperative  Company to obtain  government  approvals  and
          registrations  necessary to effect any increase in registered  capital
          that, as  contemplated  in accordance  with the  provisions of Article
          5.8, are required under a Budget approved by the Board of Directors;

     (11) assist the Cooperative  Company in applying for and obtaining the most
          preferential tax treatment and other investment  incentives  available
          under the laws and regulations of China and of Yunnan;

     (12) assist the  Cooperative  Company in  obtaining  and  keeping a Foreign
          Exchange  Registration  Certificate and other  necessary  approvals to
          utilize the various foreign exchange balancing methods permitted under
          the applicable laws and regulations of China;

     (13) assist  the  Cooperative  Company  in  opening  Renminbi  and  foreign
          currency bank accounts and in obtaining from local banks all necessary
          working capital Renminbi loans; and

     (14) handle other matters entrusted to it by the Board of Directors.

6.2  In addition to its other  obligations  under this  Contract,  Party B shall
     have the following responsibilities:

     (1)  assist the  Cooperative  Company in  purchasing,  leasing or otherwise
          procuring  equipment  and  machinery,  tools,  raw  materials,  office
          furniture and equipment, vehicles and other materials required for the
          Cooperative Company's production and operation from sources outside of
          China;

     (2)  assist the  Cooperative  Company in  recruiting  skilled  managers and
          technical personnel; and

     (3)  handle other matters entrusted to it by the Board of Directors.

                        Article 7: Mutual Representations
                        ---------------------------------

7.1  Each Party hereby  represents  and warrants to the other Party that,  as of
     the date hereof and as of the Effective Date:

     (1)  such Party is duly  organized,  validly  existing and in good standing
          under the laws of the place of its establishment or incorporation;

                                       15
<PAGE>

     (2)  such Party has carried out all  procedures  and obtained all approvals
          required under the laws and  regulations  to which it is subject,  and
          has the requisite power under such laws and regulations, to enter into
          this Contract and to perform all of its obligations hereunder;

     (3)  such Party has taken all internal actions necessary to authorize it to
          enter into and perform  this  Contract  and its  representative  whose
          signature is affixed hereto is fully  authorized to sign this Contract
          and to bind such Party thereby;

     (4)  upon the effective  date,  this Contract  shall be legally  binding on
          such Party;

     (5)  neither the  signature  of this  Contract nor the  performance  of its
          obligations hereunder will conflict with, or result in a breach of, or
          constitute  a  default  under,   any  provision  of  the  articles  of
          association or by-laws of such Party,  or any law,  regulation,  rule,
          authorization or approval of any government  agency or body, or of any
          contract or agreement to which such Party is a party and subject;

     (6)  no lawsuit, arbitration,  other legal or administrative proceeding, or
          governmental  investigation  is pending  against such Party that would
          affect in any way its ability to enter into or perform this  Contract;
          and

     (7)  such Party has  disclosed  to the other Party all  information  in its
          possession  relating to the  Cooperative  Company's  establishment  or
          future  operations,  including that which may have a material  adverse
          effect  on such  Party's  ability  to fully  perform  its  obligations
          hereunder,  or  which  has a  material  effect  on the  other  Party's
          willingness to enter into this Contract,  and none of the  information
          provided  by such  Party to the  other  Party  contains  any  material
          statements which are false or misleading.

                     Article 8: Warranties and Undertakings
                     --------------------------------------

8.1  Party A represents, warrants and undertakes to Party B that:

     (1)  it has lawfully acquired the "Party A Exploration Licenses" and "Party
          A Mineral Data", and complete and correct descriptions of the "Party A
          Exploration  Licenses" and the "Party A Mineral  Data",  respectively,
          contained in Appendix III as of the effective date;

     (2)  it has not committed, and will not commit, any breach under the "Party
          A Exploration Licenses" and enjoys valid and subsisting reconnaissance
          rights  within  the  scope  described  in  the  "Party  A  Exploration
          Licenses";

                                       16
<PAGE>

     (3)  it may  lawfully  transfer  to the  Cooperative  Company  the "Party A
          Exploration Licenses" and "Party A Mineral Data";

     (4)  the "Party A Exploration  Licenses" and "Party A Mineral Data" are not
          subject to any mortgage, encumbrances, liens or other fees and Party A
          has good  saleable  contractual  rights  to the  "Party A  Exploration
          Licenses" and "Party A Mineral Data";

     (5)  it knows  of no  actual  legal  claim  by any  government  department,
          military unit, organization,  company,  collective or any other entity
          or  individual,   that  will  directly  or  indirectly   subjects  the
          Cooperative  Company's  use  rights  to any  conditions  except  those
          specified in the "Party A Exploration Licenses"; and

     (6)  all necessary  filings have been made and the  requirements to protect
          the "Party A Exploration Licenses" have been fulfilled.

8.2  Each Party shall indemnify the other Party against all losses, expenses and
     liabilities arising from a breach of any of the foregoing  representations,
     warranties and undertakings.

     (1)  Party B is duly organized,  validly existing and has a good reputation
          under the laws of the place of its establishment or incorporation;

     (2)  Party B has taken all actions  necessary to authorize it to enter into
          this Contract and the representative whose signature is affixed hereto
          is fully  authorized  to sign this  Contract  and to bind  such  Party
          thereby;

     (3)  Party B has disclosed to Party A all  documents,  representations  and
          information in its possession  which may have an adverse effect on the
          ability of the matters of this Contract to perform this  Contract,  or
          information  which if  disclosed  may cause the other  Party to have a
          material  effect on the  willingness to enter into this Contract,  and
          none  of  the  documents  provided  by  Party  B  contains  any  false
          statements in respect of material facts or does not omit any necessary
          material facts so as to become misleading;

     (4)  subject to the relevant  terms of this Contract and the practical laws
          and  statutes  of China,  Party B will  steadily  inject  funds in the
          Cooperative  Company to ensure the normal operation of the Cooperative
          Company;

     (5)  all mineral  data of the  Cooperative  Company  shall be shared by the
          Parties and no such data may be concealed from Party A; and

                                       17
<PAGE>

     (6)  the personnel to be recruited and engineering  works to be carried out
          by the  Cooperative  Company  shall be  recommended  by Party A and be
          subject to the consent of the Board of Directors.

8.3  Each Party shall indemnify the other Party against all losses, expenses and
     liabilities arising from a breach of any of the foregoing  representations,
     warranties and undertakings.

                 Article 9: Sale of Cooperative Company Products
                 -----------------------------------------------

9.1  The Cooperative  Company may sell Minerals and related  Products  extracted
     from  the  Cooperation  Area in  accordance  with  the  relevant  laws  and
     regulations of China.

9.2  The  pricing of  Minerals  and  related  Products  sold by the  Cooperative
     Company shall be determined by the General  Manager in accordance  with the
     relevant  laws and  regulations  of China and pricing  policies  set by the
     Board of Directors.

                         Article 10: Board of Directors
                         ------------------------------

10.1 The Board of Directors  shall be the highest  authority of the  Cooperative
     Company and shall decide all matters of major importance to the Cooperative
     Company.  The date of issuance of the Business License shall be the date of
     establishment of the Board of Directors.

10.2 The Board of Directors  shall comprise five (5) directors,  two (2) of whom
     shall be  appointed  by Party A and three (3) of whom shall be appointed by
     Party B.

10.3 Each  director  shall be  appointed  for a term of three (3) years.  If the
     Party which has  appointed a director  at any time  removes a director,  it
     shall appoint a replacement in the same manner as the original appointee. A
     director  may serve  consecutive  terms if  reappointed  by the Party  that
     originally appointed him. If a seat on the Board of Directors is vacated by
     the retirement,  resignation,  removal,  disability or death of a director,
     the Party that originally appointed such director shall appoint a successor
     to serve out such director's term.

10.4 Party B shall  designate a director  to serve as the  Chairman of the Board
     and Party A shall designate  another director to serve as the Vice-Chairman
     of the Board. The Chairman of the Board is the legal representative  person
     of the Cooperative  Company,  but shall not contractually or otherwise bind
     the  Cooperative  Company  without the prior written  authorization  of the
     Board of Directors. Whenever the Chairman of the Board is unable to perform
     his  responsibilities  for any reason,  the Chairman shall appoint the Vice
     Chairman  of  the  Board  to  perform  such   responsibilities  or  if  the
     Vice-Chairman  is unable to perform such  responsibilities  for any reason,
     the   Chairman   shall   appoint   another   director   to   perform   such
     responsibilities.

                                       18
<PAGE>

10.5 To appoint or remove a director,  or to designate or change the Chairman or
     Vice-Chairman,   a  Party   shall   notify  the  other  Party  in  writing.
     Appointments and removals of directors, and designations and changes of the
     Chairman or  Vice-Chairman,  shall  become  effective  upon receipt of such
     notice by the other  Party.  As  required by law,  appointments,  removals,
     designations and changes in designation shall be filed with the Examination
     and Approval Authority and registered with the competent administration for
     industry and commerce.

10.6 The Cooperative  Company shall  indemnify each director  against all claims
     and  liabilities  incurred  by  reason  of  his  being  a  director  of the
     Cooperative  Company,  provided that the claim or liability does not result
     from intentional  misconduct or gross negligence or a violation of criminal
     laws by the director.

10.7 The first  meeting of the Board of  Directors  shall be held within one (1)
     month from the date of issuance of the Business License, unless the Parties
     agree otherwise. Thereafter, the Board of Directors shall hold at least one
     (1) regular  meeting in each calendar year. Upon the written request of two
     (2) or more of the  directors of the  Cooperative  Company  specifying  the
     matters to be discussed, the Chairman of the Board shall within thirty (30)
     days of  receipt  thereof  convene  an  interim  meeting  of the  Board  of
     Directors.

10.8 The Chairman of the Board shall give written notice, including the time and
     place of the  meeting  and the agenda,  to each of the  directors  at least
     fifteen (15) days prior to any meeting of the Board.  A Board  meeting held
     without  proper notice  having been given to any director  shall be invalid
     unless  such  director,  either  before or after the  meeting,  delivers  a
     written notice of waiver to the Chairman and Vice-Chairman.  Meetings shall
     be held at the registered address of the Cooperative  Company or such other
     address  in China or abroad as may be agreed by the  Chairman  of the Board
     and  Vice-Chairman  of the Board.  The  Chairman of the Board shall set the
     agenda for Board meetings after  consultation with the Vice-Chairman of the
     Board  and shall be  responsible  for  convening  and  presiding  over such
     meetings.

10.9 Five (5) directors,  present in person or by proxy, two (2) of whom must be
     the Chairman of the Board and Vice-Chairman of the Board,  shall constitute
     a quorum for all  meetings of the Board of  Directors.  If at any  properly
     convened  meeting,  no quorum  is  constituted  because  less than four (4)
     directors are present in person or by proxy, then the Chairman of the Board
     may call another  meeting with five (5) days notice to each director.  If a
     director  or his proxy fails to attend that other  meeting,  that  director
     shall be deemed to have attended such meeting for the purposes of quorum.

10.10If a director is unable to attend Board of  Directors  meetings or to carry
     out his other  functions  as  director,  he may issue a proxy and entrust a
     representative  to attend  meetings or carry out his other functions on his

                                       19
<PAGE>

     behalf.  The  representative  so  entrusted  shall have the same rights and
     powers as the director who  entrusted  him. One person may  represent  more
     than one director by proxy.

10.11The Board of Directors  will cause  complete  and accurate  minutes in both
     Chinese  and  English  to be  preserved  of all  Board  meetings.  Whenever
     possible,  the text of Board  resolutions  shall be prepared in Chinese and
     English for signature at the meeting by those directors  voting in favor of
     the resolution. Draft minutes of Board meetings shall be distributed to all
     the  directors  within  thirty (30) days from the date of the meeting.  Any
     director who wishes to propose an  amendment  or addition  shall submit the
     same in writing to the Chairman and the  Vice-Chairman  within  thirty (30)
     days after receipt of the draft minutes.  No amendments or additions  shall
     be proposed to written  resolutions  signed at a meeting.  The Chairman and
     Vice-Chairman  shall complete the final minutes and distribute them to each
     director  and each Party not later than ninety (90) days after the meeting.
     If the Chairman and  Vice-Chairman  cannot agree on any part of the text of
     the  minutes,  the text at issue  shall be placed on the agenda of the next
     Board meeting and they shall complete,  sign and distribute the rest of the
     final minutes as stipulated above. The Cooperative Company shall maintain a
     file of all Board meeting minutes and make the same freely available to the
     Parties and their authorized representatives.

10.12Resolutions  concerning adoption of the following matters shall require the
     unanimous assent of all the directors who are present in person or by proxy
     at a duly convened meeting of the Board of Directors:

     (1)  amendments to the Articles of Association;

     (2)  increase or reduction  in the  registered  capital of the  Cooperative
          Company;

     (3)  dissolution of the Cooperative Company;

     (4)  mortgage or pledge of assets of the Cooperative Company; and

     (5)  merger,  spin-off  or  change  in  the  form  of  organization  of the
          Cooperative Company.

10.13Resolutions  on the adoption of all other  matters shall require the assent
     of a majority of the  directors  who are present in person or by proxy at a
     duly convened meeting of the Board of Directors.

10.14The Board of Directors  may adopt any  resolution  without a meeting if all
     of the directors  then holding  office sign the resolution in written form.
     Such written  resolutions shall be filed with the minutes of Board meetings
     and shall have the same force and effect as a unanimous  resolution adopted
     at a meeting of the Board.

                                       20
<PAGE>

10.15Directors  shall  serve  without  any  remuneration.   Costs  and  expenses
     incurred by a director in the  performance  of his duties as director shall
     be paid  for by the  Party  appointing  such  director,  but the  costs  of
     directors  attending regular meetings of the Board of Directors  (including
     but not limited to travel  expenses) shall be reimbursed by the Cooperative
     Company.

                       Article 11: Management Organization
                       -----------------------------------

11.1 The  Cooperative  Company's  management  organization  shall be  under  the
     leadership of a General Manager,  who shall report directly to the Board of
     Directors.  In addition to the General  Manager,  the  Cooperative  Company
     shall have a Deputy General Manager, and other department managers, each of
     whom shall report directly to the General Manager.

11.2 The  General  Manager  shall be  nominated  by Party B, the Deputy  General
     Manager shall be nominated by Party A, and each of them shall be subject to
     appointment by the Board of Directors.  The other Management Personnel,  if
     any,  shall also be appointed by the Board of Directors.  All  replacements
     for any of the Management  Personnel,  whether by reason of the retirement,
     resignation,  disability  or  death of a  manager  or of the  removal  of a
     manager by the Board of  Directors  or by the Party  which  nominated  him,
     shall be  nominated  and subject to  appointment  in the same manner as the
     original appointee, unless otherwise specified in this Contract.

11.3 The General  Manager  shall be in charge of the  day-to-day  operation  and
     management  of the  Cooperative  Company  and shall  carry out all  matters
     entrusted  by the Board of  Directors.  The Deputy  General  Manager  shall
     assist  the  General  Manager in his work and shall  report to the  General
     Manager.

11.4 It is not necessary that the General  Manager,  Deputy General  Manager and
     all other  Management  Personnel  shall perform their duties on a full-time
     basis, unless the Board of Directors requires otherwise.

11.5 The  Cooperative  Company's  basic  departmental  structure,  including the
     creation of Management  Personnel  positions  other than those specified in
     this  Contract,  shall  be  approved  by the  Board of  Directors  based on
     proposals formulated by the General Manager. The details of the Cooperative
     Company's organizational structure and the creation of employment positions
     other  than  Management  Personnel  positions  shall be  determined  by the
     General Manager.

                        Article 12: Conduct of Operations
                        ---------------------------------

12.1 Except  as  provided  in  Article  12.7 and  12.8,  all  operations  of the
     Cooperative Company, including all services provided by the General Manager
     and  Deputy  General  Manager  shall be  conducted  and  expenses  shall be
     incurred only in accordance with Programs and Budgets approved by the Board
     of Directors in  accordance  with the  provisions of Article 10.13 and this
     Article 12.

                                       21
<PAGE>

12.2 Within twenty (20) days of the Effective  Date and  thereafter on or before
     December 1 each year  thereafter,  the General  Manager  shall  prepare and
     submit  to the  Board of  Directors  a  proposed  Program  and  Budget  for
     operations for the ensuing Budget Period.

12.3 Within  twenty (20) days after  submission  to the Board of  Directors of a
     proposed Program and Budget, the Board of Directors shall hold a meeting at
     which the directors shall, by resolution  passed in accordance with Article
     10.13:

     (1)  approve the  proposed  Program and Budget,  or a modified  form of the
          proposed Program and Budget; or

     (2)  reject the proposed Program and Budget.

12.4 If the Board of Directors fails,  for any reason,  to approve a Program and
     Budget  by March 1 of a year,  the  General  Manager  shall be deemed to be
     authorized to continue operations at levels of expenditure  comparable with
     the  preceding  year's  approved  Program  and  Budget  unless the Board of
     Directors otherwise directs,  and the preceding year's approved Program and
     Budget shall be deemed extended at the same expenditure levels.

12.5 The General  Manager  shall by the  twentieth  (20th) day of each  calendar
     quarter (or such shorter  period of time as may be  designated by the Board
     of  Directors)  submit  to each  Party a  funding  notice  setting  out the
     contributions   of  registered   capital  required  to  be  paid  into  the
     Cooperative  Company by the Parties during the calendar quarter in order to
     fund the approved Programs and Budgets then in effect.

12.6 The General  Manager  shall  promptly  notify the Board of Directors of any
     actual or  anticipated  material  departure  from an  approved  Program and
     Budget.  The General  Manager  shall not exceed an approved  Budget by more
     than 10% unless expressly authorized by the Board of Directors.

12.7 Notwithstanding  any other provision of this Contract or of the Articles of
     Association,  in case of emergency, the General Manager may take reasonable
     action he deems  necessary  to protect  life or  property,  to protect  the
     assets  of the  Cooperative  Company  or to comply  with law or  government
     regulation.  The  General  Manager  shall  promptly  notify  the  Board  of
     Directors of any emergency expenditure.

12.8 At any time the General  Manager may propose the  amendment  of an approved
     Program and Budget, in which event the procedure  specified in Article 12.3
     shall apply.

                                       22
<PAGE>

           Article 13: Purchase and Supply of Materials and Equipment
           ----------------------------------------------------------
                            and Provision of Services
                            -------------------------

13.1 The Cooperative  Company may purchase  equipment and machinery,  tools, raw
     materials,  vehicles,  spare parts and supplies,  and may obtain technology
     and  services,  required  for the  Cooperative  Company's  operations  from
     sources within and outside China.

13.2 Any party that performs  services shall be compensated for its services and
     reimbursed for its costs incurred in connection therewith. Compensation for
     services  provided  by  contractors  shall  be  approved  by the  Board  of
     Directors of the Cooperative Company.

                          Article 14: Labour Management
                          -----------------------------

14.1 Matters relating to the recruitment,  employment,  dismissal,  resignation,
     wages and welfare, etc. of the staff and workers of the Cooperative Company
     shall be handled in accordance with the Labour Law of the People's Republic
                                             -----------------------------------
     of China and the  Regulations  of the People's  Republic of China on Labour
     --------          ---------------------------------------------------------
     Management in Foreign Invested Enterprises and related or relevant laws and
     ------------------------------------------
     regulations in China (hereinafter  collectively  referred to as the "Labour
                                                                          ------
     Laws").  The  Cooperative  Company's  labour  rules and  policies  shall be
     ----
     approved by the Board of Directors, and the implementation thereof shall be
     handled by the General Manager or under the General Manager's supervision.

14.2 The Cooperative  Company's employees,  other than the Management Personnel,
     shall be employed by the  Cooperative  Company in accordance with the terms
     of an individual labour contract. Management Personnel shall be employed by
     the  Cooperative  Company  in  accordance  with  the  terms  of  individual
     employment contracts approved by the Board of Directors.

14.3 The general level of salary and benefits paid by the Cooperative Company to
     expatriate   personnel  shall  be  commensurate  with  that  of  expatriate
     personnel  in  comparable  positions  in foreign  invested  enterprises  in
     equivalent parts of China.  Subject to applicable  provisions of the Labour
     Laws, the general level of salary and benefits of Chinese  personnel  shall
     be commensurate with that of Chinese  personnel in comparable  positions in
     foreign invested enterprises in equivalent parts of China.

14.4 Employees will be selected according to their professional  qualifications,
     individual  characteristics and working experience. The specific number and
     qualifications of the employees shall be recommended by the General Manager
     in  accordance  with the  operating  needs of the  Cooperative  Company for
     determination  by the  Board of  Directors.  All  employees  must  complete
     satisfactorily  a  six-month   probationary  period  of  employment  before
     becoming regular employees of the Cooperative Company.

                                       23
<PAGE>

14.5 The  Cooperative  Company  shall  conform to rules and  regulations  of the
     government  of China  concerning  labour  protection  and  ensure  safe and
     civilized  production.  Labour  insurance for employees of the  Cooperative
     Company shall be handled in accordance with the Labour Laws.

      Article 15: Financial Affairs and Accounting; Distribution of Profits
      ---------------------------------------------------------------------

15.1 The General Manager of the Cooperative Company shall be responsible for the
     financial management of the Cooperative Company.

15.2 The General  Manager shall  prepare the  Cooperative  Company's  accounting
     system and procedures in accordance with the Enterprise  Accounting  System
                                                              ------------------
     of the  People's  Republic of China for Foreign  Invested  Enterprises  and
     ----------------------------------------------------------------------
     other relevant laws and  regulations  in China,  and submit the same to the
     Board of Directors for adoption. The accounting system and procedures shall
     be filed with the department in charge of the Cooperative  Company and with
     the relevant local  department of finance and the tax  authorities  for the
     record.

15.3 The  Cooperative  Company  shall  adopt  Renminbi as its  bookkeeping  base
     currency,  but shall also adopt United States Dollars,  or with the consent
     of  Party A and  Party  B  other  foreign  currencies,  as a  supplementary
     bookkeeping currency.

15.4 All accounting records,  vouchers,  books and statements of the Cooperative
     Company must be made and preserved in Chinese. All financial statements and
     reports of the  Cooperative  Company shall be made and preserved in Chinese
     and English.

15.5 Translations  between foreign currency and Renminbi shall be made using the
     median  rate for buying and  selling  for such  currency  announced  by the
     People's  Bank of China on the date of actual  receipt  or  payment  by the
     Cooperative Company.

15.6 The  Cooperative  Company shall adopt the calendar year as its fiscal year.
     The Cooperative Company's first fiscal year shall commence on the date that
     the Cooperative  Company  receives a business  license and shall end on the
     immediately succeeding December 31.

15.7 The Parties shall have full and equal access to the  Cooperative  Company's
     accounts,  which  shall be kept at the  legal  address  of the  Cooperative
     Company.  The  Cooperative  Company shall furnish to the Parties  unaudited
     financial  reports  on a  monthly  and  quarterly  basis  so that  they may
     continuously  be  informed  about  the  Cooperative   Company's   financial
     performance.  In addition,  each Party, at its own expense and upon advance
     notice to the Cooperative Company, may appoint an accountant  registered in
     China or abroad to audit the accounts of the Cooperative  Company on behalf
     of such Party.  The  Cooperative  Company  shall permit such  accountant to

                                       24
<PAGE>

     examine  all of  its  accounting  and  financial  records  and  other  such
     documents, provided that the auditor agrees to maintain the confidentiality
     of such documents.

15.8 The Cooperative Company shall engage an accountant independent of any Party
     and registered in China to audit its accounts and its financial  statements
     and report.  Drafts of the audited financial statements and report shall be
     provided to each Party and to the Board of Directors  for review within two
     (2)  months  after  the end of each  fiscal  year,  and the  final  audited
     financial  statements and report shall be completed not later than four (4)
     months  after the end of each fiscal year or at such other time  periods as
     declared by the Board of Directors.

15.9 The Cooperative Company shall separately open United States Dollars foreign
     exchange accounts and Renminbi accounts at banks within China authorized to
     conduct foreign exchange operations. The Cooperative Company, in accordance
     with the  applicable  laws of China,  may also open foreign  exchange  bank
     accounts outside China.

15.10The  Cooperative  Company shall be responsible for maintaining a balance in
     its foreign exchange  receipts and expenditures on its own through the sale
     of its  products and through  other  methods  permitted  under the laws and
     regulations  of China  (including  the  conversion of currency at banks and
     foreign  exchange  adjustment  centers in accordance with exchange  control
     regulations).

15.11After the Cooperative  Company has paid income taxes and made up any losses
     incurred in previous  years,  the Board of Directors  shall  determine  the
     annual  allocations  to the Three Funds from the  after-tax net profits and
     the Cooperative Company shall distribute profits to the Parties as follows:

     (1)  Within four (4) months from the end of each fiscal year,  the Board of
          Directors  shall  decide  the  amount  of  after-tax   profit  of  the
          Cooperative  Company,  after  allocation  to the  Three  Funds,  to be
          retained  for   production   and  operations  and  the  amount  to  be
          distributed to the Parties ("Distributable Profits"). Unless otherwise
                                       ---------------------
          decided  by the Board of  Directors,  the  Cooperative  Company  shall
          distribute to the Parties no less than  seventy-five  percent (75%) of
          its Distributable Profits.

     (2)  In  accordance  with  Article  5.2(2),  Party A shall  contribute  the
          appraised  value of its  Cooperative  Conditions,  being the  "Party A
          Exploration  Licenses" and "Party A Mineral  Data",  as capital to the
          Cooperative  Company,  and Party B's capital contribution shall be the
          total amount of its actual  contribution to the registered  capital of
          the  Cooperative  Company.  If  Party  B  has  contributed  less  than
          US$3,010,000  as capital to the Cooperative  Company,  the Cooperative
          Company shall distribute the  Distributable  Profits to the Parties in
          proportion to the actual capital  contributions made by the Parties in

                                       25
<PAGE>

          accordance  with Articles 5.2 and 5.3, all as of the date of the Board
          of Directors resolution approving the distribution.

     (3)  If Party B has  contributed  US$3,010,000  or more as  capital  to the
          Cooperative Company, then the Cooperative Company shall distribute the
          Cooperative   Company's   Distributable  Profits  to  the  Parties  in
          proportion to the Parties'  interests as stipulated in Articles 5.1(1)
          and 5.3 (i.e. a 10% interest  held by Party A and a 90% interest  held
          by Party B).

     (4)  Losses from previous years must be made up before any profits from the
          current year are distributed to the Parties.  Profits  retained by the
          Cooperative Company in previous years may be distributed together with
          the profits of the current year.

     (5)  In accordance with the foreign  exchange laws of China,  Party B shall
          have a  priority  right  to  receive  its  share of  profits  from the
          Cooperative Company's foreign exchange,  with conversion from Renminbi
          to United  States  Dollars  made at the  median  rate for  buying  and
          selling  announced by the People's  Bank of China on the date on which
          the Board of Directors makes to distribute profits. If the Cooperative
          Company does not have sufficient foreign exchange available to pay all
          of Party B's share of profits,  the Cooperative Company upon Party B's
          instructions  shall promptly  convert the remaining amount of Renminbi
          profits into foreign currency at a bank or foreign exchange adjustment
          centre and pay such  foreign  currency to Party B. If the  Cooperative
          Company is unable to effect  conversion,  then upon  instructions from
          Party  B,  it must  deposit  the  remaining  Renminbi  profits  into a
          separate  interest-bearing  bank  account  opened  in the  name of the
          Cooperative  Company,  and must hold this  Renminbi  and the  interest
          earned thereon in such account pending further instructions from Party
          B. The  Cooperative  Company  shall  promptly  comply  with  Party B's
          instructions  concerning  the  disposition  of the  funds in this bank
          account, provided that such instructions are not inconsistent with the
          laws and regulations of China.

15.12All remittances of profits and other payments out of China to Party B shall
     be made in United  States  Dollars to a foreign bank account  designated by
     Party  B,  subject  to  compliance  with  the  foreign   exchange   control
     regulations of China.

                                       26
<PAGE>

                       Article 16: Taxation and Insurance
                       ----------------------------------

16.1 The  Cooperative  Company shall pay all taxes and duties required under the
     national and local laws and regulations of China. The Cooperative Company's
     Chinese  and  expatriate  personnel  shall  pay  individual  income  tax in
     accordance  with the Individual  Income Tax Law of the Peoples  Republic of
                          ------------------------------------------------------
     China or other relevant laws and regulations.
     -----

16.2 The Cooperative  Company will submit an application for confirmation of the
     Cooperative  Company as a Technologically  Advanced  Enterprise pursuant to
     relevant regulations and, upon receipt of such confirmation, shall register
     with the local tax authorities for the preferential  tax treatment  granted
     to Technologically Advanced Enterprises.

16.3 Throughout  the Contract  Term,  the  Cooperative  Company  shall  maintain
     insurance  coverage  of the  types  and in the  amounts  determined  by the
     General  Manager and approved by the Board of  Directors.  The  Cooperative
     Company may obtain  insurance  from  insurance  companies or  organizations
     inside  and  outside  China,  subject  to  compliance  with  the  laws  and
     regulations of China.

                           Article 17: Confidentiality
                           ---------------------------

17.1 Prior to and during the  Contract  Term,  each Party has  disclosed  or may
     disclose  to the  other  Party  confidential  and  proprietary  information
     concerning their respective  businesses,  financial condition,  proprietary
     technology,  research  and  development  and  other  confidential  matters.
     Furthermore,  during the Contract Term, the Parties may obtain confidential
     and  proprietary  information  concerning the  Cooperative  Company and the
     Cooperative  Company may obtain  confidential  and proprietary  information
     concerning  the  Parties.  Except  as may be  provided  in  other  relevant
     confidentiality agreements, each of the Parties and the Cooperative Company
     receiving  all  such  information  as  aforesaid,   including  written  and
     unwritten   information,   (hereinafter   referred   to  as   "Confidential
                                                                    ------------
     Information")  shall,  during  the  Contract  Term  and for  one  (1)  year
     -----------
     thereafter:

     (1)  maintain the confidentiality of such Confidential Information; and

     (2)  not  disclose it to any person or entity,  except to their  respective
          other  employees  who need to know such  Confidential  Information  to
          perform their work responsibilities;

     provided   that   Party  A  shall   not  be  bound  by  the  one  (1)  year
     confidentiality  term if this  Contract  is  terminated  prior  to  Party B
     contributing Four Hundred and Sixty Thousand US Dollars (US$460,000) to the
     registered capital of the Cooperative Company.

                                       27
<PAGE>

17.2 The  provisions  of  Article  17.1  above  shall not apply to  Confidential
     Information that:

     (1)  can be proved to have been  known by the  receiving  party by  written
          records made prior to disclosure by the disclosing party;

     (2)  is or becomes  public  knowledge  otherwise than through the receiving
          party's breach of this Contract; or

     (3)  was obtained by the  receiving  party from an Other  Entity  having no
          obligation  of  confidentiality  with  respect  to  such  Confidential
          Information.

17.3 If  required by either  Party,  the  Cooperative  Company  shall  execute a
     separate secrecy agreement in respect of Confidential  Information obtained
     by  the  Cooperative  Company  from  such  Party  or  its  Affiliates  with
     provisions similar to those set out in this Article 17.

17.4 Each  Party  and  the   Cooperative   Company  shall  formulate  rules  and
     regulations to cause its directors,  senior management personnel, and other
     employees,  and  those  of  their  Affiliates,  also  to  comply  with  the
     confidentiality  obligations  set forth in this Article 17. All  directors,
     managers and other employees of the  Cooperative  Company shall be required
     to sign a confidentiality undertaking in a form acceptable to both Parties.

17.5 The  provisions  of this  Article 17 shall not apply to the  disclosure  of
     information to any Affiliate,  to any public or private lender or financing
     agency  or  institution,  to any  contractors  or  subcontractors  that the
     Parties may engage,  to employees and  consultants of the Parties or to any
     Other Entity to which a Party  contemplates  the Transfer of all or part of
     its share of the registered  capital of the Cooperative  Company;  provided
     that in any such  case only such  information  as such  person or entity to
     whom disclosure is made shall have a legitimate business need to know shall
     be disclosed and such person or entity shall first undertake in writing the
     confidential  nature of such information at least to the same extent as the
     Parties are obligated to do under this Article 17.

     The provisions of this Article 17 shall also not apply to the disclosure of
     information to any government or any agency or department  thereof,  to the
     extent  required  by law or in response  to a  legitimate  request for such
     information,  provided  that the Party being  required or requested to make
     such  disclosure  shall   immediately   notify  the  other  Party  of  such
     requirement and the terms thereof prior to such disclosure. The other Party
     shall  have the  right to  object to the  government  agency or  department
     concerned  to such  disclosure  and to seek  confidential  treatment of any
     Confidential information to be disclosed on such terms as such Party shall,
     in its  sole  discretion,  determine,  so as to  cause  the  same not to be
     disclosed.

                                       28
<PAGE>

17.6 Without being  limited to the foregoing  provisions of this Article 17, the
     other  Parties  may not  unreasonably  refuse  and no Party  shall make any
     public  announcement  or public  disclosure  of  information  regarding the
     Cooperative Company, including Confidential Information,  without the prior
     written  consent of the other  Party as to the  content  and timing of such
     announcement  or  disclosure,  which  consent  shall  not  be  unreasonably
     withheld;  provided that nothing in this Article 17.6 shall prevent a Party
     from  making,  according to its good faith  judgment,  an  announcement  or
     disclosure  which  is  required  by  applicable  law,  regulation  or stock
     exchange rule.2

17.7 The  provisions of this Article 17 shall remain binding upon any natural or
     legal  person  who has been a party to this  Contract  after  such  person,
     through  an  assignment  of  registered  capital  participation  ratio  and
     corresponding  rights  and  obligations,  ceases  to  be a  party  to  this
     Contract.  In addition,  the rights and  obligations  under this Article 17
     shall survive the expiration or earlier  termination of this Contract,  and
     shall remain in effect for the periods stated herein,  notwithstanding  the
     dissolution of the Cooperative Company.

                            Article 18: Contract Term
                            -------------------------

18.1 The Contract Term shall  commence upon the Effective  Date and shall extend
                                                                ---
     for a term of thirty (30) years from the date of  issuance of the  Business
     License.

18.2 If the Cooperative  Company finds a commercial mine through its Exploration
     activities  and Develops such mine,  the Contract Term specified in Article
     18.1 shall be extended, based on actual remaining service life of the mine.
     Accordingly,  the cooperation between the Parties will continue through the
     end of the actual service life of the mine.

18.3 If  the  cooperation  is  terminated  because  the  Cooperative   Company's
     cooperation  term has expired and does not need to be extended,  the mining
     industry rights (exploration  rights,  Mining rights) shall be recovered by
     Party A.

18.4 If the Board of Directors of the Cooperative  Company decides to extend the
     term of this Contract then an  application  to extend the Contract Term for
     the additional period of time recommended by the Board shall be made to the
     Examination and Approval Authority.  The Contract Term may be extended only
     upon approval of the Examination and Approval Authority.

                     Article 19: Termination and Liquidation
                     ---------------------------------------

19.1 In any of the  following  circumstances,  a Party  shall  have the right to
     terminate  this Contract by giving thirty (30) days prior written notice to
     the other Party:

     (1)  the  terminating  Party has the right  pursuant to the  provisions  of
          either Article 22.4 or 24.2 to terminate this Contract; or

                                       29
<PAGE>

     (2)  the  Board  of  Directors   determines  that  the  activities  of  the
          Cooperative  Company are for any reason no longer  commercially viable
          or determines that the Cooperative Company be dissolved.

19.2 Under any of the following  circumstances,  a Party shall have the right to
     terminate  this Contract  with  immediate  effect by written  notice to the
     other Party:

     (1)  the  terminating  Party has the right  pursuant to the  provisions  of
          Article 5.4(1) to terminate this Contract;

     (2)  the  other  Party  changes  all  or  any  part  of  its  share  of the
          Cooperative   Company's   registered   capital  in  violation  of  the
          provisions of this Contract;

     (3)  the other  Party  otherwise  materially  breaches,  this  Contract  or
          materially  violates the Articles of  Association,  and such breach or
          violation is not cured within sixty (60) days of written notice to the
          breaching/violating Party;

     (4)  the  terminating  Party has the right  pursuant to the  provisions  of
          Article 5.6 to terminate this Contract; or

     (5)  the other Party is declared bankrupt, or is the subject of proceedings
          for bankruptcy,  dissolution or liquidation,  or becomes unable to pay
          its debts as they become due.

19.3 Without being limited to the  generality of the provisions of Articles 19.1
     and 19.2:

     (1)  Party A shall have the right to terminate  this Contract in accordance
          with the provisions of Article 5.4(1).

     (2)  Party B shall  have the right to  terminate  this  Contract  by giving
          written  notice to Party A provided  that  Party B or the  Cooperative
          Company  through  the  Cooperative  Company  has paid all  direct  and
          indirect  fees or  liabilities  incurred by the Board of Directors and
          General Manager of the Cooperative Company.

     (3)  when terminating this Contract in accordance with Article 19.3 hereof,
          Party B shall transfer all of its interest in the Cooperative  Company
          to Party A without  consideration.  Thereafter,  Party B shall have no
          right to or power over the Cooperative  Company or its assets and will
          no longer have any further  obligation or liability  arising from this
          Contract,  except for those  obligations and  liabilities  which arose
          before Party A issued the said notification.

19.4 Upon termination of this Contract in accordance with Articles 19.1, 19.2 or
     19.3(2),  a meeting of the Board of  Directors  shall be convened  and both

                                       30
<PAGE>

     Parties  shall make all  possible  endeavors  to cause the  directors  each
     appointed  to vote in favor of a  resolution  to dissolve  the  Cooperative
     Company,  and the Cooperative Company shall forthwith submit an application
     for  dissolution  to the  Examination  and  Approval  Authority.  To effect
     termination of this Contract and  dissolution of the  Cooperative  Company,
     each Party  agrees to take all  actions and to sign all  documents,  and to
     cause its  appointees  on the Board of Directors to take all actions and to
     sign all documents that are legally required.

19.5 Upon  expiration  of the  Contract  Term or approval of an  application  to
     dissolve  the  Cooperative  Company  pursuant to this  Article 19, or under
     other circumstances in which this Contract is terminated or the Cooperative
     Company is  dissolved,  liquidation  of the  Cooperative  Company  shall be
     handled in accordance  with the relevant laws and  regulations of China and
     with the provisions set forth below (in so far as they do not conflict with
     such laws and regulations):

     (1)  The  liquidation  committee,  which  shall  report  to  the  Board  of
          Directors,  shall be made up of  three  (3)  members,  of whom one (1)
          shall be  appointed by Party A and two (2) shall be appointed by Party
          B;

     (2)  In developing  and executing the  liquidation  plan,  the  liquidation
          committee shall use every effort to obtain the highest  possible price
          for the Cooperative  Company's  assets and, subject to compliance with
          Chinese foreign exchange control regulations,  to sell such assets for
          United States Dollars or other freely convertible foreign currencies;

     (3)  Following the completion of such liquidation, the remaining net assets
          of the  Cooperative  Company  shall be  distributed  to the Parties in
          accordance with Articles 5.2(2), 5.3 and 15.11(2)(3).

     (4)  If it is necessary to appraise any of the assets to be liquidated, the
          liquidation  committee  shall  appoint a  Sino-Foreign  joint  venture
          accounting firm registered in China and independent of either Party to
          handle this work; and

     (5)  Party B, at its own expense,  shall have the right to obtain copies of
          all of the Cooperative  Company's accounting vouchers,  account books,
          account statements,  minutes and resolutions of the Board of Directors
          and other relevant documents after the conclusion of liquidation.

19.6 The  provisions  of Article  19.5 shall  survive  the  expiration  or early
     termination  of  this  Contract  and  shall  remain  in  effect  until  the
     conclusion of liquidation under Article 19.5.

19.7 After  termination  of this Contract  pursuant to Article 19.1 or 19.2 each
     Party shall be entitled to copies of all Mineral Data acquired or developed

                                       31
<PAGE>

     by the Cooperative Company before the effective date of termination but not
     previously furnished to that Party.

                         Article 20: Breach of Contract
                         ------------------------------

20.1 If a Party breaches this Contract,  it shall bear the  liabilities  arising
     from such breach. In the event that both Parties breach this Contract, each
     Party   shall  bear  the   liabilities   arising   from  its  own   breach.
     Notwithstanding  the foregoing,  neither Party shall be liable to the other
     for  any  indirect  or  consequential  loss or  damage  arising  from  this
     Contract.

                           Article 21: Non-Competition
                           ---------------------------

21.1 All transactions, contracts, purchases, operations, negotiations with Third
     Parties,  hiring of employees and any other  matters or acts  undertaken on
     behalf of the Parties,  either Party or the Cooperative Company in relation
     to  the  Cooperative  Company  or  the  conduct  of  Exploration  or  other
     activities  licensed by the Cooperative  Company's scope of business in the
     Cooperation Area3 shall be done, transacted, undertaken or performed in the
     name of the  Cooperative  Company  and neither  Party  shall do,  transact,
     perform or undertake  anything within the Cooperation  Area in its own name
     or in the name of the other Party or in the joint names of the Parties.

21.2 Subject to this Contract, the Parties shall have the right independently to
     engage in and receive full benefits from  business  activities,  whether or
     not  competitive  with  operations  conducted  by the  Cooperative  Company
     outside the Cooperation Area. However, each Party shall devote such time as
     may be  required  to  fulfill  any  obligations  assumed  by it under  this
     Contract.

21.3 If any Party  legally  acquires  any mining  industry  rights  (exploration
     rights,  Mining rights) for the area  surrounding  the "Party A Exploration
     Licenses",  it shall,  on a priority  basis,  transfer such mining industry
     rights  to the  Cooperative  Company  for a fee  permitted  by law or at an
     appropriate  price.  The said Party may transfer the mining industry rights
     to another company or entity only if the Cooperative  Company does not wish
     to accept the same offer.

                            Article 22: Force Majeure
                            -------------------------

22.1 "Force Majeure" shall mean all events which were  unforeseeable at the time
      -------------
     this Contract was signed,  the occurrence and  consequences of which cannot
     be  avoided  or  overcome,  and which  arise  after the  signature  of this
     Contract and prevent total or partial performance by any Party. Such events
     shall  include  earthquakes,   typhoons,  flood,  fire,  war,  failures  of
     international  or  domestic  transportation,  actions  of or  inactions  by
     governments or public agencies,  epidemics,  civil  disturbances,  strikes,
     impossibility  to access the  Cooperation  Area and other  events which are

                                       32
<PAGE>

     accepted as force majeure in general  international  commercial practice. A
     Party's lack of funds is not an event of Force Majeure.

22.2 If an event of Force  Majeure  occurs  and  affects  the  performance  of a
     Party's  obligations  under  this  Contract,   such  performance  shall  be
     suspended during the period of delay caused by the Force Majeure,  and this
     shall not constitute a breach of contract.

22.3 The Party claiming  Force Majeure shall promptly  inform the other Party in
     writing and furnish within fifteen (15) days thereafter sufficient evidence
     of the occurrence and duration of such Force Majeure.

22.4 In the event of Force Majeure,  the Parties shall immediately  consult with
     each  other  in order  to find an  equitable  solution  and  shall  use all
     reasonable endeavors to minimize the consequences of such Force Majeure. If
     the  occurrence  or  consequences  of  Force  Majeure  results  in a  major
     impairment to the  functioning of the  Cooperative  Company for a period in
     excess  of six (6)  months  and the  Parties  have not  found an  equitable
     solution after friendly  consultation  in accordance  with the principle of
     equity and mutual  benefit,  then either Party may terminate this Contract,
     provided that the  terminating  Party has performed its  obligations  under
     this Article 22.4.

                       Article 23: Settlement of Disputes
                       ----------------------------------

23.1 In the event any dispute arises out of or in relation to this Contract, the
     Parties shall attempt in the first instance to resolve such dispute through
     friendly  consultations.  If the  dispute is not  resolved  in this  manner
     within sixty (60) days after the date on which one Party has served written
     notice  on the other  Party for the  commencement  of  consultations,  then
     either Party may refer the dispute to  arbitration  in accordance  with the
     provisions of Article 23.2.

23.2 The  arbitration  shall be conducted  under the auspices of the Arbitration
     Institute  of the  Stockholm  Chamber of Commerce in  Stockholm,  Sweden in
     accordance with the Rules of said Institute. The place of arbitration shall
     be  Stockholm,  Sweden  and the  award  shall  be  issued  in  Sweden.  The
     arbitrators  shall be given  instructions  that: (i) all proceedings in any
     arbitration shall be conducted in Chinese and English;  (ii) there shall be
     three (3)  arbitrators,  none of whom shall be a  national  of the state of
     either  Party and all of whom shall be fluent in English  or  Chinese;  and
     (iii) Party A and Party B shall each select one (1)  arbitrator.  The third
     arbitrator shall be appointed by the Arbitration  Institute and shall serve
     as chairman of the arbitration  tribunal.  The  arbitration  award shall be
     final and binding on the Parties, and the Parties agree to be bound thereby
     and to act accordingly.

23.3 When any dispute occurs and when any dispute is under  arbitration,  except
     for the matters under dispute, the Parties shall continue to exercise their

                                       33
<PAGE>

     remaining   respective  rights,  and  fulfill  their  remaining  respective
     obligations, under this Contract.

23.4 In any  arbitration  proceeding  and in to enforce  any  arbitration  award
     between the Parties pursuant to or relating to this Contract,  in any legal
     proceeding,  and in any  legal  action  between  the  Parties,  each  party
     expressly  waives the defense of sovereign  immunity and any other  defense
     based on that Party being a fact or on the allegation that it is any agency
     or instrumentality of a sovereign state.

                           Article 24: Applicable Law
                           --------------------------

24.1 The formation,  validity,  interpretation and performance of this Contract,
     and any  disputes  arising  under this  Contract,  shall be governed by the
     current laws of China.  If there is no published  law in China  governing a
     particular  matter  relating to this Contract,  reference  shall be made to
     general international commercial practices.

24.2 If Party B's  economic  benefits  under this  Contract  are  adversely  and
     materially  affected by the  promulgation of any new laws or regulations of
     China or the amendment or  interpretation  of any existing  laws,  rules or
     regulations of China after the Effective Date of this Contract, the Parties
     shall  promptly  consult  with each other and use their best  endeavors  to
     implement any adjustments necessary to maintain Party B's economic benefits
     derived from this Contract on a basis no less  favorable  than the economic
     benefits  it would have  derived if such laws or  regulations  had not been
     promulgated  or  amended  or  so  interpreted.  If it is  not  possible  to
     implement such adjustments, Party B may terminate this Contract.

24.3 The Cooperative  Company and the Parties shall be entitled according to the
     law to enjoy  any tax,  investment  or other  preferential  treatment  that
     become available to foreign invested enterprises or foreign investors after
     the signing of this  Contract and which are more  favorable  than those set
     forth in this  Contract.  The  Parties  agree that they or the  Cooperative
                                                        ----
     Company  shall  promptly   apply,   as  required  by  law,  to  enjoy  such
     preferential treatment.

                      Article 25: Miscellaneous Provisions
                      ------------------------------------

25.1 Failure or delay on the part of any Party  hereto to exercise a right under
     this Contract shall not operate as a waiver  thereof;  nor shall any single
     or partial exercise of a right preclude any other future exercise thereof.

25.2 Neither  this  Contract  nor any rights and  obligations  hereunder  may be
     assigned  in whole or in part by any Party  except in  accordance  with the
     provisions of Article 5.9.

25.3 This  Contract  is made for the  benefit  of Party A and  Party B and their
     respective  lawful successors and assignees and is legally binding on them.

                                       34
<PAGE>

     This Contract may not be amended orally,  and any amendment  hereto must be
     agreed  to in a  written  instrument  signed  by both  Parties  and,  where
     required by law, approved by the Examination and Approval  Authority before
     taking effect.

25.4 The  invalidity  of any  provision  of this  Contract  shall not affect the
     validity of any other  provision of this Contract  which is not affected by
     the invalid provision.

25.5 This Contract is signed in the Chinese language in six (6) originals and in
     the English language in six (6) originals.  Both language versions shall be
     equally valid.

25.6 Any notice or written communication  provided for in this Contract from one
     Party to the other  Party or to the  Cooperative  Company  shall be made in
     writing in Chinese and English and sent by courier service delivered letter
     or by facsimile  confirmed by a  confirmation  copy of the courier  service
     delivered  letter.  The  date  of  receipt  of a  notice  or  communication
     hereunder shall be deemed to be seven (7) days after the letter is given to
     the  courier  service  or one  (1)  day  after  sending  in the  case  of a
     facsimile,  provided it is evidenced by a confirmation receipt and the sent
     confirmation  copy.  All  notices and  communications  shall be sent to the
     appropriate  address set forth below,  unless the same is changed by notice
     given in writing to the other Party.

     Party A:
     --------

     Geology Brigade 209 of the
     Nuclear Industry or Yunnan Province, China
     No. 182, West Dongfeng Road
     Kunming City, Yunnan Province 650031
     People's Republic of China.

     Facsimile No: 86 871 5328952
     Attention: Wang Gang

     Party B:
     --------

     In the case of a notice to Party B at:

     Magnus International Resources Inc.
     101 Convention Center Drive 7th Floor
     Las Vegas, Nevada 89109, U.S.A.

     Facsimile No: 001 (702) 2210904
     Attention:          Graham R. Taylor

     Cooperative Company:
     --------------------

     Long Teng Mining Ltd.

                                       35
<PAGE>

     Dushimingyuan Bldg., No. A-2708
     Central Renmin Road
     Kunming City, Yunnan Province 650031
     People's Republic of China

     Facsimile No.: 86 871 3642420
     Attention: Peter Smith

25.7 Appendixes 1(1), 1(2), 2(1), 2(2), 3 and 4 hereto are made an integral part
     of this Contract and are equally binding with these Articles 1 to 25.

25.8 This Contract  constitutes  the entire  agreement  between the Parties with
     respect to the subject  matter of this  Contract and  supersedes  all prior
     discussions,  negotiations and agreements  between them with respect to the
     subject matter of this Contract.  In the event of any conflict  between the
     terms and provisions of this Contract and the Articles of Association,  the
     terms and provisions of this Contract shall prevail.

25.9 Time is of the  essence in the terms and  conditions  of this  Contract.  A
     Party that fails to comply  shall  assume  responsibility  for any  adverse
     consequences.

25.10If  timing  causes  any  matter  to occur or expire on a day which is not a
     Business Day, the first  Business Day that follows shall be considered  the
     day of expiry or occurrence.

                                       36
<PAGE>

IN WITNESS WHEREOF, the duly authorized  representative of each Party has signed
this Contract in Kunming City,  Yunnan Province,  People's  Republic of China on
the date set forth below.

Geology Brigade 209 of the
Nuclear Industry or Yunnan
Province, China

By /s/ Cheng Minghui
  ----------------------
Name: Mr. Cheng Minghui
Nationality: Chinese
Date:  July 6, 2004
      -------------

Magnus International Resources Inc.

By: /s/ Graham R. Taylor
   ---------------------
Name:  Graham R. Taylor
Nationality: Canadian
Date:  July 6, 2004
      -------------

                                       37
<PAGE>

                                   Appendix I
                                   ----------

                             Map of Cooperation Area
                             -----------------------

                                       38
<PAGE>

                                   Appendix II
                                   -----------

                          Party A Exploration Licenses
                          ----------------------------

                                       39
<PAGE>

                                  Appendix III
                                  ------------

      Descriptions of Party A Exploration Licenses and Party A Mineral Data
      ---------------------------------------------------------------------

Party A
-------
Exploration Licenses
--------------------

<TABLE>
<CAPTION>
   License       Date of    Expiry    Location    Area (/m2)    Minimum     Restrictions
   Number       Issuance     Date                               Covered
-------------  ----------  --------  ----------  ------------  ---------  ----------------
<S>            <C>         <C>       <C>         <C>           <C>        <C>

</TABLE>

Party A Mineral Data
--------------------

[Please List]:

     1.

     2.

     3.

     4.

                                       40
<PAGE>

                                   Appendix IV
                                   -----------

                          Copies of Appraisal Documents
                          -----------------------------

                                       41
<PAGE>

Translator's notes
------------------

1.   Due to the way the phrase "at the expense of the  Cooperative  Company" has
     been translated, the Chinese text could also be interpreted to read "on the
     Cooperative  Company's  behalf,  the Cooperative  Company shall  contribute
     capital to procure all approvals ...."

2.   In the Chinese text,  the phrase "good faith  judgment"  qualifies the word
     "making",  not the word "required".  In other words, the Chinese  provision
     addresses  disclosures which are required by law (as opposed to disclosures
                                  ---
     which are judged to be required by law).
               ------------

3.   The phrase  "in  relation  to the  Cooperative  Company  or the  conduct of
     Exploration or other activities licensed by the Cooperative Company's scope
     of business in the  Cooperation  Area"  qualifies  only the phrase "and any
     other  matters  or  acts".   It  does  not  quality  the   foregoing   "All
     transactions,  contracts,  purchases,  operations,  negotiations with Third
     Parties, hiring of employees".

                                       42
<PAGE>

After  several  negotiations  between both Party A and Party B, Yunnan Long Teng
--------------------------------------------------------------------------------
Mining  Ltd.  is making the  following  supplementary  amendments  to the "Joint
--------------------------------------------------------------------------------
Venture Contract".
------------------

1.   Preliminary Statements C:

Original Paragraph:   Party A and  Party B  signed  a Preliminary  Joint Venture
                    Agreement on April 6, 2004  pursuant to which they agreed to
                    establish  a   cooperative   joint   venture   company  (the
                    "Cooperative   Company")   to   conduct   copper   and  gold
                     ---------------------
                    exploration and mining activities within an Eighty-two point
                    three nine (82.39) square  kilometer area (the  "Cooperation
                                                                     -----------
                    Area")  of  Huidong  County,   Sichuan  Province,   People's
                    ----
                    Republic of China (as shown on Appendix I).

Amended Paragraph:    Party A and  Party B signed  a Preliminary  Joint  Venture
                    Agreement on April 6, 2004  pursuant to which they agreed to
                    establish  a   cooperative   joint   venture   company  (the
                    "Cooperative  Company")  to  conduct  copper,  gold and iron
                     --------------------
                    exploration  and mining  activities  within an area of 44.02
                    square     kilometer     of    Luquan     County,     Yunnan
                    Province(Exploration  license  No.5300000410155) and an area
                    of 82.39  square  kilometer of the Huidong  county,  Sichuan
                    Province (Exploration license No.5100000430204) (as shown on
                    Appendix I) an  Eighty-two  point three nine (82.39)  square
                    kilometer area (the  "Cooperation  Area") of Huidong County,
                                          -----------------
                    Sichuan  Province,  People's  Republic of China (as shown on
                    Appendix I)

2.   Article 2.10:

Original Paragraph:  "Cooperation Area" means that distinct area of 82.39 square
                      ----------------
                    kilometers  which is  marked  for ease of  reference  on the
                    coordinate  map included as Appendix I, or other area as the
                    Parties mutually agree upon.

Amended Paragraph:   "Cooperation Area" means that distinct area of 44.02 square
                      ----------------
                    kilometers and 82.39 square  kilometers  which is marked for
                    ease of reference on the coordinate map included as Appendix
                    I, or other area as the Parties mutually agree upon.

3.   Article 3.4:

Original Paragraph:   The  name  of the  Cooperative Company shall  be  (Chinese
                    characters) in Chinese and Long Teng Mining Ltd. in English.

                                       43
<PAGE>

Amended Paragraph:    The  name of the Cooperative  Company  shall  be  (Chinese
                    characters)  in Chinese  and Yunnan Long Teng Mining Ltd. in
                    English.

4.   Article 5.2(1)

Original Paragraph:  As its Cooperative Conditions, Party A shall, in accordance
                    with the relevant terms of this Contract, transfer the Party
                    A  Exploration  Licenses and the Party A Mineral Data to the
                    Cooperative   Company.   The  value  of  the  said  Party  A
                    Exploration  Licenses  and  Party A  Mineral  Data  has been
                    appraised by a mining right appraisal  institution qualified
                    under Chinese law (Appendix IV). In accordance  with Article
                    15.11, the contribution of such Cooperative Conditions shall
                    entitle  Party  A  to  a  ten  percent  (10%)  interest  the
                    Cooperative Company.

Amended Paragraph:   As its Cooperative Conditions, Party A shall, in accordance
                    with the  relevant  terms  of this  Contract,  transfer  the
                    "Party A  Exploration  Licenses"  and the  "Party A  Mineral
                    Data"  to the  Cooperative  Company.  The  value of the said
                    "Party A  Exploration  Licenses"  and "Party A Mineral Data"
                    has been appraised by a mining right  appraisal  institution
                    qualified  under  Chinese law  (Appendix  IV). In accordance
                    with Article 15.11,  the  contribution  of such  Cooperative
                    Conditions shall entitle Party A to the following  interests
                    of the Cooperative Company.

                            (i)    10% of the iron,  copper and gold Exploration
                                   project of the Luquan County Aqiao  district,
                                   Yunnan Province;

                            (ii)   10% of the copper Exploration  project in the
                                   Sujiayakou,  Weiliancun,  Maanshan  district,
                                   Sichuan Province.

5.   Article 5.2(2):

Original Paragraph:   The Parties hold that the Party A Exploration Licenses and
                    the Party A Mineral Data shall have a total  appraised value
                    and  that:  (i)  the  total  appraised  value  became  valid
                    following confirmation by the appraisal report issued on the
                    5th day of July,  2004;  (ii) the report shall be filed with
                    the appropriate competent higher governmental authority; and
                    (iii) such report shall be attached hereto as an Appendix.

Amended Paragraph:    Both Parties  hold that the  copper Exploration project in
                    the  Sujiayakou,   Weiliancun,  Maanshan  district,  Sichuan
                    Province  shall have a total  appraised  value and that: (i)
                    the   total   appraised   value   became   valid   following
                    confirmation  by the appraisal  report issued on the 5th day
                    of July,  2004;  (ii)  the  report  shall be filed  with the
                    appropriate  competent higher  governmental  authority;  and
                    (iii) such report shall be attached hereto as an Appendix.

                                       44
<PAGE>

6.   Article 5.3(1):

Original Paragraph:   Subject to  Article 5.6,  Party B shall  contribute  Three
                    Million and Ten  Thousand US Dollars  (US$3,010,000)  as the
                    Cooperative  Company's  registered  capital.  Party  B shall
                    contribute the  registered  capital in United States Dollars
                    cash. In accordance with Article 15.11,  the contribution of
                    such capital  contributions  shall  entitle Party B to a 90%
                    interest in the Company.

Amended Paragraph:    Subject  to Article 5.6,  Party B shall  contribute  Three
                    Million and Ten  Thousand US Dollars  (US$3,010,000)  as the
                    Cooperative  Company's  registered  capital.  Party  B shall
                    contribute the  registered  capital in United States Dollars
                    cash. In accordance with Article 15.11,  the contribution of
                    such  capital  contributions  shall  entitle  Party B to the
                    respective interests in the Company.

                            (i)    90% of the iron,  copper and gold Exploration
                                   project of the Luquan County Aqiao  district,
                                   Yunnan Province;

                            (ii)   90% of the copper Exploration  project in the
                                   Sujiayakou,  Weiliancun,  Maanshan  district,
                                   Sichuan Province.

7.   Article 5.3(2):

Original Paragraph:   Any increase in the registered capital or total investment
                    of the Company  shall be  contributed  one  hundred  percent
                    (100%) by the Party B, and the Party A shall not be required
                    to contribute  further capital to the  Cooperative  Company,
                    but shall  retain its ten percent  (10%) share of the rights
                    and interests in the Cooperative Company.

Amended Paragraph:    Any increase in the registered capital or total investment
                    of the Company  shall be  contributed  one  hundred  percent
                    (100%) by the Party B, and the Party A shall not be required
                    to contribute  further capital to the  Cooperative  Company,
                    but shall  retain  its  respective  shares of the rights and
                    interests  in the  Cooperative  Company,  in  accordance  to
                    Article 5.2(1).

8.   Article 5.3(3):

Original Paragraph:   Within 30 days upon receipt of the business license of the
                    Cooperative  Company,  Party  B will  give  to  Party A Five
                    Hundred  Thousand  United  States  Dollars  (US$500,000)  of
                    equivalent  shares of common  stock of Magnus  International
                    Resources, Inc. listed on the U.S.A.'s NASDAQ market (Listed
                    On United  States NASD OTC Bulletin  Board),  and shall take

                                       45
<PAGE>

                    care of the  documentation  for such equity transfer as soon
                    as possible.

Amended Paragraph:    Within 15 days  upon receipt  of the business  license and
                    the completion of transfer of "Party A Exploration Licenses"
                    to the Cooperative Company, Party B will give to Party A:

                            (i)    in  reference  to the iron,  copper  and gold
                                   Exploration  project  of  the  Luquan  County
                                   Aqiao district,  Yunnan Province a payment of
                                   Two Hundred and Fifty Thousand  United States
                                   Dollars  (US$250,000) of equivalent shares of
                                   common   stock   of   Magnus    International
                                   Resources Inc.  listed on the U.S.A.'s NASDAQ
                                   market  (Listed  On  United  States  NASD OTC
                                   Bulletin Board);

                            (ii)   in  reference   to  the  copper   Exploration
                                   project   in  the   Sujiayakou,   Weiliancun,
                                   Maanshan district, Sichuan Province a payment
                                   of  Five  Hundred   Thousand   United  States
                                   Dollars  (US$500,000) of equivalent shares of
                                   common   stock   of   Magnus    International
                                   Resources Inc.  listed on the U.S.A.'s NASDAQ
                                   market  (Listed  On  United  States  NASD OTC
                                   Bulletin Board).

                            And shall  take care of the  documentation  for such
                            equity transfer as soon as possible.

IN WITNESS WHEREOF, the duly authorized  representative of each Party has signed
this  supplementary  amendments  in  Kunming  City,  Yunnan  Province,  People's
Republic of China on the date set forth below.

Geology Brigade 209 of the                  Magnus International Resources, Inc.
Nuclear Industry of Yunnan
Province, China

By  /s/ Cheng Minghui                       By   /s/ Graham R. Taylor
  -------------------------                    -------------------------
Name: Mr. Cheng Minghui                      Name: Graham R. Taylor
Nationality: Chinese                         Nationality: Canadian
Date:              , 2004                    Date:              , 2004
      -------------                                -------------

                                       46EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

     AGREEMENT made as of the 2nd day of September, 1986, by and between QNB,
Corp., a registered bank holding company ("QNB") and Thomas J. Bisko
(the "Executive").

                                W I T N E S S E T H:

     WHEREAS, the Executive is currently employed by QNB as its President, and
is willing to serve QNB on a full-time basis during the period, and on the terms
and conditions hereinafter set forth; and

     WHEREAS, QNB has determined that the future services of the Executive will
be of value to QNB and desires to provide an inducement to the Executive to
remain an employee of QNB;

     NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth, it is agreed as follows:

     1. Employment. QNB hereby employs the Executive and the Executive hereby
accepts employment upon the terms and conditions hereinafter set forth.

     2. Term of Employment. The term of this Agreement shall begin on September
1, 1986, and shall terminate on December 31, 2013; provided that either party
hereto may give three years prior written notice to the other party of the
intention of that party not to have the Agreement extended, in which case this
Agreement shall terminate three years from the date of such notice.

     3. Duties.

         3.1 Job Description. The Executive is engaged as President and agrees
       to perform such duties and render such services consistent therewith as
       may from time to time be reasonably required by him by the Board of
       Directors of QNB (the "Board"). In addition, the Executive is engaged as
       President of Quakertown National Bank, a wholly owned subsidiary of QNB
       (the "Bank") and agrees to perform such services as may be requested of
       him by The Quakertown National Bank's Board of Directors, provided that
       such services are consistent with his position as President. Executive
       shall devote his entire productive time, ability and attention (except
       for normal vacation periods or illness) to the performance of his duties
       for The Quakertown National Bank and QNB.

         3.2 Reassignment. The Executive may be reassigned and asked services
       consistent with his position as President to any other banking
       corporations which become affiliated with QNB and agrees to perform such
       services, provided, however, that the Executive shall not be appointed to
       a position at a location is excess of 15 miles from his personal
       residence in Quakertown, Pennsylvania.

         3.3 Evaluations. The Executive will report directly to the Board or to
       such other person as the Board may designate. Executive's job performance
       will be evaluated at least annually for consideration of merit increases
       in salary, bonus and any other form of supplemental income or benefits
       that QNB or The Quakertown National Bank may award to its senior
       officers.

     4. Base Salary and Reimbursement for Expenses.

         4.1 Base Salary. During the term of this agreement, QNB will pay to
       Executive a base salary at an annual rate not less than $ 67,580 subject

<page>

       to an annual review and subject to such upward adjustment based on
       performance as may be deemed appropriate by the Board or a designated
       committee thereof. Such base salary is payable at regular intervals in
       accordance with QNB's normal payroll practices now or hereafter in
       effect.

         4.2 Reimbursement for Expenses. QNB shall reimburse Executive for all
       expenses incurred by Executive which QNB determines to be reasonable and
       necessary (in accordance with its normal reimbursement practices now or
       hereafter in effect) for Executive to carry out his duties hereunder.

     5. Fringe Benefits.

         5.1 Programs. The Executive shall be entitled to participate in any and
       all fringe benefit programs presently offered or hereafter established by
       QNB, including without limitation, profit sharing plans, thrift and
       savings plans, insurance plans, supplemental insurance and benefit plans,
       and other benefits which are generally available to QNB's executives at
       the Executive's level. QNB shall establish and maintain fringe benefit
       programs for its executive officers substantially comparable to the
       fringe benefit programs for executive officers established and maintained
       by The Quakertown National Bank. However, nothing contained herein shall
       be construed as requiring The Quakertown National Bank to establish any
       fringe benefit program or QNB to maintain any fringe benefit programs not
       maintained by The Quakertown National Bank.

     6. Facilities. The Executive shall be furnished with such office, supplies
and personnel which, after consultation with the Board's Executive Committee,
The Quakertown National Bank shall deem necessary and appropriate for the
adequate performance by the Executive of this duties for The Quakertown National
Bank.

     7. Non-Disclosure. The Executive shall not, at any time during the term of
the Agreement of thereafter, except as properly required in the conduct of the
business of QNB, and as authorized by QNB, disclose or authorize anyone else to
disclose: (i) any secret, confidential, technical, planning or policy matter
relating to any aspect of QNB's business; (ii) any operational, technical,
management, financial control system or tax matter, information or process
relating to QNB or its customers; (iii) any trade name, trademark, patent,
copyright, product, design, system, formula, product composition, label,
document, book record, or any other printed or nonprinted matter used by, or
contemplated for use by QNB or any of its customers; or (iv) any mailing or
customer list.

     8. Termination.

         8.1 Discharge Prior to a Change in Control. Prior to a change in
       control, as defined in section 8.2 hereof, QNB may, at any time,
       discharge the Executive, provided that QNB has just or proper cause for
       such discharge. Without limiting the foregoing, such just or proper cause
       shall include:

         (a) Executive's failure to properly perform his duties under this
         Agreement;

         (b) Executive's violation of any covenants or commitments set forth in
         this Agreement;

         (c) Executive's failure or refusal to comply with the proper and
         reasonable written policies or directives of the Board which do not
         violate any of the provisions hereof.

         (d) Any conduct on the part of the Executive which violates any
         applicable state of federal law.

<page>

         (e) Any conduct on the part of the Executive which, in the reasonable
         discretion of the Board, would make Executive's continued employment
         hereunder prejudicial to the best interest of QNB.

         8.2 Discharge Following a Change in Control. If any one person or group
       obtains voting control of common shares representing 25% of the
       outstanding common stock of QNB (a "change in control"), thereafter
       Section 8.1 shall be inoperative and QNB may only terminate Executive's
       employment if Executive:

         (a) materially breaches his obligation hereunder;

         (b) fails or refuses to comply with the proper and reasonable written
         policies or directives of the Board which do not violate any of the
         provisions hereof;

         (c) is convicted of any felony.

         8.3 Deemed Termination. If the Executive is required to perform
       services inconsistent with his position as President, or it the Executive
       is appointed to a position at a location in excess of 15 miles from his
       personal residence in contravention of Paragraph 3.2 hereof, the
       executive's employment shall be deemed terminated by QNB for reasons
       other that conduct specified in Paragraph 8.1 or 8.2 hereof.

         8.4 Death or Disability. If the Executive dies or if in the opinion of
       a physician selected by QNB, he becomes mentally or physically disabled,
       and if he has for six successive months, or for shorter periods
       aggregating, 9 months in any period of 18 consecutive months, been unable
       to perform the duties assigned to him, Executive's employment hereunder
       shall terminate automatically.

         8.5 Payment Upon Termination. If Executive's employment hereunder is
       terminated by QNB for reasons other than death or disability or conduct
       specified in paragraphs 8.1 or 8.2 hereof or is deemed terminated
       pursuant to Paragraph 8.3 hereof, The Quakertown National Bank shall pay
       to the Executive, in a lump sum, severance pay equal to 2.99 times
       Executive's then current base salary, which shall be due and payable
       within 30 days of such termination.

         8.6 Payment Upon Death or Disability. If the Executive's employment
       hereunder is terminated due to death or disability pursuant to Paragraph
       8.4 hereof, The Quakertown National Bank shall pay to the Executive, the
       Executive's estate or a beneficiary designated by the Executive, as the
       case may be, in twelve equal monthly installments, an amount equal to the
       Executive's then current annual base salary. QNB's obligation hereunder
       shall be offset by all payments made to the Executive, the Executives
       estate or a designated Beneficiary, pursuant to any life or disability
       insurance contract maintained by, and at the expense of, QNB.

     9. Notices. Unless either party notifies the other to the contrary, any
notice required hereunder shall be duly given if delivered in person or by
registered first class mail:

                                      If to QNB, to:

                                          QNB, Corp.
                                          Third and West Broad Streets
                                          Quakertown, PA

                                      Attn: Chairman, Executive Compensation
                                            Committee, Board of Directors

                                      If to Executive, to:

                                             Thomas J. Bisko
                                             9 Clover Lane
                                             Quakertown, PA

<page>

     10. General Provisions.

       10.1 This Agreement shall be binding upon and inure to the benefit of QNB
       and its successors and assigns and Executive, his designees, and his
       estate. Neither Executive, his designees, nor his estate shall commute,
       pledge, encumber, sell of or otherwise dispose of the rights to receive
       the payments provided in this Agreement, which payments and the rights
       thereto are expressly declared to be nontransferable and nonassignable.

       10.2 This Agreement shall be governed by the laws of the Commonwealth of
       Pennsylvania from time to time in effect.

       10.3 If Executive resorts to the courts to recover any amounts due to him
       in the event his employment is terminated following a "change in
       control", Executive shall be reimbursed by QNB for his legal fees and the
       costs of the proceedings on a monthly basis. Provided, however, if a
       court later determines that Executive's action was commenced and
       maintained in bad faith, Executive shall repay such reimbursements to
       QNB. Further, provided, if Executive wins an award in such action
       resulting from a termination following a "change in control", he shall be
       entitled to receive interest on such award payable from the date of
       termination to the date of payment at the rate of prime plus 5% per
       annum, compounded monthly, with prime being equal to the rate designated
       as such by The Quakertown National Bank or its successor.

         10.4 This Agreement represents the entire agreement between Executive
       and QNB with respect to the subject matter hereof, and replaces all prior
       agreements between the parties. This Agreement may not be amended or
       modified except by a writing signed by the parties hereto. Any written
       amendment, waiver or termination hereof executed by QNB and Executive (or
       his estate) shall be binding upon them and upon all Persons, without the
       necessity of securing the consent of any other Person and no person shall
       be deemed to be a third party beneficiary under this Agreement.

         10.5 This Agreement may be executed in one or more counterparts, each
       of which shall be deemed an original, but all of which taken together
       shall constitute one and the same Agreement.

         10.6 Except as otherwise expressly set forth herein, no failure on the
       part of any party hereto to exercise and no delay in exercising any
       right, power or remedy hereunder shall operate as a waiver thereof; nor
       shall any single or partial exercise of any right, power or remedy
       hereunder preclude any other or further exercise thereof or the exercise
       of any other right, power or remedy.

         10.7 The headings of the Paragraphs of this Agreement have been
       inserted for convenience of reference only and shall in no way restrict
       any of the terms or provisions hereof.

<page>

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

ATTEST:                                     QNB CORP.

/s/ Donald T. Knauss                        /s/ Philip D. Miller
-----------------------                     ---------------------
Secretary                                   Chairman

WITNESS:                                    EXECUTIVE

/s/ Edgar L. Stauffer                        /s/ Thomas J. Bisko
------------------------                     ----------------------

Quakertown National Bank, intending to be legally bound hereby, agrees to act as
surety for and guarantor of all obligations of QNB to Executive under this
Agreement, and under any amendment hereto binding upon QNB and Executive,
regardless of whether Quakertown National Bank consents to such amendment.

ATTEST:                                     QUAKERTOWN NATIONAL BANK

/s/ Donald T. Knauss                        By: /s/ Philip D. Miller
--------------------                            -------------------
Secretary                                       Chairman

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