Leader Mining International Inc.
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding "MOU" is made and entered into on this 20th day
of October, 1999 by and among:
LEADER MINING INTERNATIONAL INC. a corporation incorporated under the laws of
the province of Alberta and having an office at 530, 400 Fifth Avenue S.W.,
Calgary, Alberta, T2P 0L6. "Leader"
KOREA RESOURCES CORPORATION a corporation incorporated under the law of Korea
and having an office at 686-48 Shindaebang Dong, Dongjak-ku, Seoul 156-706,
Korea.
This MOU does not intend to bind both parties legally.
Leader Mining International Inc. (Leader) is entering into a Joint Venture
Agreement with Korea Resources Corporation (Kores) for the exploration and
subsequent exploitation of any mineral deposits known or discovered on mineral
properties in which leader has interests and which cover 860 sq.km. surrounding
Knife Lake in the Scimitar Complex in the Northern Mining District of the
province of Saskatchewan, Canada (Property). Kores may earn up to 50% working
interest in the Property by making cash payments totaling $1,200,000 to Leader
and funding exploration expenditures totaling $4,000,000 over a four year
period.
1. Earn-In Requirements
To earn the interest set forth below, Kores must make the following payments to
Leader on or before the dates indicated and fund the following expenditures by
the dates indicated:
PAYMENT DATE PAYMENT EXPENDITURES CUMULATIVE INTEREST
BY DATE AMOUNT SPENT EARNED
Effective Date $300,000 $1,000,000 on or $1,300,000 20.00%
before 1st
Anniversary Date
1st Anniversary $300,000 $1,000,000 on or $2,600,000 33.33%
Date before 2nd
Anniversary Date
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2nd Anniversary $300,000 $1,000,000 on or $3,900,000 42.86%
Date before 3rd
Anniversary Date
3nd Anniversary $300,000 $1,000,000 on or $5,200,000 50.00%
before 4th
Anniversary Date
Leader will also grant to Kores the option to acquire, on or before the second
anniversary, 500,000 common shares of Leader at a price of $1.00 per share.
The Effective Date will occur when certain conditions precedent are met
including the receipt by Kores of approval from the Korean government and the
Korean central bank, and the receipt by Leader of approval from the Alberta
Stock Exchange.
2. Vesting
(a) If Kores fails to either make the initial $300,000 payment or fund
expenditures of $1,000,000 on or before the first anniversary of the
Joint Venture Agreement, then the Agreement will terminate, Kores will
earn no interest, and neither party shall have any further
obligations.
(b) If on or after the first anniversary date Kores fails to make any
payment required or fails to fund the expenditures prior to the next
anniversary date, then Kores will be deemed to have terminated its
earn-in option and will retain only that interest which is relevant to
the cumulative amount it has spent as described above.
3. Joint Venture
(a) A Joint Venture will be formed with Leader contributing its interests
in the Property. The Joint Venture will be governed by a management
committee on which Kores will have the controlling vote during the
earn-in period. Thereafter, voting will be in proportion to the
parties' participating interests.
(b) After the earn-in period, a standard dilution formula will apply to
either party who elects not to contribute its pro-rata share of
expenditures in the Joint Venture.
(c) If either party's interest falls to 15% then its interest will be
converted to a 1% Net Smelter Return Royalty (NSR) and thereafter such
party will have no further rights or interest in the Property except
for the NSR.
The non-reduced party will have the right to purchase the NSR for
$1,000,000.
(d) If either party having at least a 25% interest declines to participate
in the development of a mineral deposit recommended for development,
then its interest will convert to a 25% carried interest in the
Property which will entitle it to receive 25% of production (net of
operating cost) after exploitation
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begins, subject to the contributing parties first recovering 200% of
the incurred development costs.
(e) Within 30 days after the start of commercial production, Kores will
pay to Leader a completion bonus of $300,000.
4. Operatorship
(a) Leader will be the Operator during the earn-in period. Leader will
resign as Operator in favour of Kores at Kores request after the
second anniversary of the Joint Venture Agreement.
(b) Leader will provide office space and general office support services
for up to 2 Kores representatives at no cost to Kores (except for
telephone, facsimile, and all other out of pocket expenses) for a
period of 2 years from the date of signing the Joint Venture
Agreement.
(c) Kores may assign up to two qualified representatives to perform work
for the Operator and shall be entitled to record $25,000 per quarter
as exploration expenditures for these personnel.
5. Records
Leader agrees to make available to Kores all pertinent records and exploration
work pertaining to the Property upon signing the contemplated Joint Venture
Agreement.
6. Pre-Emptive Rights
Each of the parties will have a pre-emptive right to purchase any interest of
the other party that the other party wishes to sell.
7. Area of Mutual Interest
If either Kores or Leader acquires any properties or lands for mineral
exploration within 50 kilometers of the Property boundary, at the election of
the other party such property or lands shall become part of the Property subject
to the Joint Venture Agreement.
8. Joint Venture Agreement
The parties will diligently prepare a formal Joint Venture Agreement by November
15, 1999. The Agreement will supercede this Memorandum of Understanding and
fully describe the Joint Venture relationship between Kores and Leader.
LEADER MINING INTERNATIONAL INC. KORES RESOURCES CORPORATION
Per:/s/ Per:/s/
Authorized Signatory Authorized Signatory
Date: Oct. 20, '99 Date: Oct. 20, '99
<PAGE>
JOINT VENTURE AGREEMENT
made between
LEADER MINING INTERNATIONAL INC.
and
KORES CANADA CORP.
in respect of the
KNIFE LAKE PROJECT, SASKATCHEWAN, CANADA
Dated as of the 10th a day of November, 1999
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
TABLE OF CONTENTS
Page
ARTICLE 1
INTERPRETATION
Definitions 1
Included words 9
Headings 9
References 9
Currency 9
Interest 9
Statutes 9
Schedules 9
Governing Law 10
Severability 10
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
Representations, Warranties and Covenants of Leader and Kores 10
Representations, Warranties and Covenants of Leader 10
Covenants of Leader 12
Survival of Representations, Warranties and Covenants 13
ARTICLE 3
EARN - IN PROGRAMS
Conditions Precedent 13
Earn-in Option 14
Earn-in Requirements 14
Termination During First Year 14
Termination After First Year 15
Report of Expenditures 15
Payments to Leader 15
Funding of Expenditures 16
Share Option 16
ARTICLE 4
JOINT VENTURE
Formation and Scope 16
Transactions in Name of Joint Venture 16
No Partnership 17
Liability for Costs 17
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Interest of Participants 17
Participants' Rights to Conduct Other Business 17
No Right of One Participant to Bind the Other 18
Bankruptcy of a Participant 18
ARTICLE 5
INTERESTS OF PARTICIPANTS
Interests 19
Dilution Formula 19
Multiple Participants 19
Dilution and Conversion to a Net Smelter Return Royalty 19
Net Smelter Return Royalty Calculation and Payment 20
Net Smelter Return Royalty Purchase Option 20
ARTICLE 6
OPERATOR
Rights and Powers of the Operator 20
Resignation of the Operator 21
Duties and Obligations of the Operator 21
Non-Performance By the Operator 22
Delivery of Assets by Former Operator to Successor Operator 23
Termination of Joint Venture If No Operator 23
Indemnification of Operator 23
No Indemnification for Gross Negligence 23
Certain Acts of the Operator Not Negligence 23
Indemnification in Proportion to Interests 24
No Liability for Special Damages 24
Emergency Expenditures 24
Kores Contributions 24
ARTICLE 7
PROGRAMS
Expenditures to Be Incurred Under Programs 25
Election To Participate in Programs 25
Effect of Election to Not Contribute 25
Operator Not to Proceed Unless Program Is Fully Funded 25
Obligation To Pay Expenditures and Overruns 26
Procedures For Payment 26
Meeting Required to Approve Excess Program Overruns 26
Effect of Default in Paying Expenditures 26
Program For a Feasibility Report 27
Participant's Feasibility Report 27
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Favourable Feasibility Report 27
Provision of Security 27
ARTICLE 8
PRODUCTION PROGRAM
Delivery of Proposed Production Program 27
Production Program to Proceed 28
Obligation to Pay Production Program Costs and Overruns 29
Procedures For Payment 29
Meeting Required To Approve Excess Production Program Cost Overruns 29
Curtailment of Production Program 29
Effect of Default in Paying Production Program Costs 30
Operator's Right to Curtail Production Program Upon Default 30
Completion Bonus 30
ARTICLE 9
OPERATING PLANS
Obligation to Pay Operating Costs and Overruns 30
Operating Plans 30
Excess Operating Cost Overruns 31
No Agreement on Operating Plans 31
Payment of Operating Costs 31
Effect of Default in Paying Operating Costs 31
Participant May Require Operations To Be Shut Down 32
Resumption of Operations 32
ARTICLE 10
MANAGEMENT COMMITTEE
Management Committee 32
Members 32
Time and Place of Meetings 33
Resolutions in Writing 33
Quorum 33
Voting 33
Secretary and Records 34
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
ARTICLE 11
DISPOSITION OF PRODUCTION
Taking in Kind 34
Valuing Mineral Products 34
Right to Share of Production 34
Non-Arm's Length Sale of Product 35
ARTICLE 12
CONFIDENTIAL INFORMATION
Obligation Not To Disclose 35
Consent To Disclose 35
No Liability For Actions of Third Parties 35
Approval of Kores Required 36
Approval of Leader Required 36
ARTICLE 13
RESTRICTIONS ON ALIENATION
No Sale of Interest Except as specified 36
Sales To Affiliates 36
Terms of an Offer 37
Effect of Acceptance of Offer 38
Effect of Not Accepting an Offer 38
No Coincident Offers 38
Operatorship Is Not Transferable Without Consent 38
Purchaser's Agreement To Be Bound 38
Obligation to Hold Interest Free of Encumbrances 39
Limited Right to Mortgage 39
Waiver of Right to Partition 39
ARTICLE 14
AREA IF INTEREST AND ABANDONMENT
Acquisition of Additional Rights 40
Notice of Acquisition of Additional Rights 40
Election to Acquire 40
Meaning of "Acquisition Costs" 40
Abandonment of Property 40
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
ARTICLE 15
OPERATOR'S LIEN
Operator's Lien 41
Enforcement of Lien By the Operator 41
Participant's Lien 42
Right of Participant To Deal With Mineral Product 42
ARTICLE 16
ARBITRATION
Arbitration of Disputes 43
Notice to Arbitrate 43
BCICAC Arbitration 43
Arbitration Award 43
ARTICLE 17
NOTICE
Means of Notice 43
Effective Time of Notice 44
Change of Address For Notice 44
ARTICLE 18
FORCE MAJEURE
Events 44
Extension of Time Periods 45
Obligation To Eliminate Events Causing Force Majeure 45
Notice of Occurrence 45
ARTICLE 19
GENERAL PROVISIONS
Entire Agreement 45
Waiver 45
Further Assurances 46
Manner of Payment 46
Termination 46
Default 47
Time of The Essence 47
Enurement 47
Rule Against Perpetuities 47
Remedies 47
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
EXECUTION
SCHEDULE 1 - Description of Property 48
SCHEDULE 2 - Net Smelter Return Royalty
SCHEDULE 3 - Accounting Procedures
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
This AGREEMENT made effective as of the 10th day of November, 1999
BETWEEN:
LEADER MINING INTERNATIONAL INC. a corporation incorporated under the laws
of the Province of Alberta and having an office at 530 - 400, Fifth Avenue
S.W., Calgary, Alberta, T2P 0L6
("Leader")
AND:
KORES CANADA CORP. a corporation incorporated under the laws of the Yukon
Territories and having its record office at 3081 Third Avenue, Whitehorse,
Yukon, Y1A 4Z7
("Kores")
WHEREAS:
(A) Leader is the owner of or has the right to acquire certain interests in the
Property (as hereinafter defined) as disclosed in Schedule I attached hereto.
(B) Leader has agreed to grant to Kores an exclusive option to acquire from
Leader a 50% interest in Leader's interests in the Property upon and subject to
the terms and conditions hereinafter set out; and
(C) Kores and Leader have agreed to form a joint venture to further explore and
develop the Property, all upon and subject to the terms and conditions
hereinafter set out.
NOW THEREFORE, THIS AGREEMENT WITNESSETH THAT, in consideration of the
mutual covenants and agreements herein contained, the parties shall mutually
agree as follows:
ARTICLE 1
INTERPRETATION
DEFINITIONS
In this Agreement the following words and phrases shall have the following
meanings:
"Affiliate" means, in respect of a party hereto, a corporation with which that
party is affiliated with in the meaning of section 2 of the Securities Act
(Alberta).
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
"Anniversary Date" means an anniversary date of the Effective Date.
"Area of Interest" means the area which is within 50 kilometres from the
outermost boundaries of the Property, as they exist as of the date of this
Agreement.
"Assets" means the Property and any assets acquired or held by the Participants
with respect to the Property or pursuant to this Agreement, as the same may
exist from time to time, including, without limiting the generality of the
foregoing, Other Tenements, Facilities, Mineral Products and all supplies and
equipment related to operations hereunder.
"Associated Company" in respect of a party hereto, means any corporation, which
beneficially owns or controls, directly or indirectly, voting securities
carrying more than 10% of the voting rights attached to the outstanding
securities of such party.
For the purposes hereof, beneficial ownership shall include securities deemed
beneficially owned within the meaning of section 5 of the Securities Act
(Alberta).
"Business Day" means a day, other than a Saturday or Sunday, on which the main
branch of Toronto Dominion Bank in Calgary, Alberta is open to the public for
the transaction of business.
"Carried Interest" means a 25% Interest in relation to which the holder is not
required to contribute to any Expenditures, Production Program Costs, Operating
Costs or any other costs and expenses hereunder for which the Participants are
required to contribute, nor entitled to participate in any Program, Production
Program or Operating Plan or on the Management Committee in relation thereto,
but otherwise having all the rights and obligations of the holder of an Interest
hereunder including, without limitation, the right to receive 25% of the Mineral
Products, net of the Operating Costs required to produce such share of Mineral
Products, or of any other distribution to the Participants hereunder which
constitutes a distribution of net profits or equivalent from Operating the
Property as a mine.
"Cash Call" means a statement delivered to the Participants detailing funds
required by the Operator:
(i) to meet Joint Venture Costs for the succeeding month pursuant to an
approved Program, Production Program or Operating Plan; or
(ii) to meet emergency or other unanticipated expenditures incurred by the
Operator pursuant to paragraph 6.12.
"Commercial Production" means the operation of the Property or any part thereof
as a mine but does not include milling for the purpose of testing or milling by
a pilot plant. Commercial Production shall be deemed to have commenced on the
first day of the month following the first 15 consecutive days during which
Mineral Products have been produced from the Property at an average rate not
less than 70% of the initial rated capacity of the Facilities.
"Completion Date" means the date on which Commercial Production shall be deemed
to have commenced.
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
"Copper Quest Agreement" means the agreement effective as of March 22, 1996
between Copper Quest Inc. and Leader.
"Copper Quest Claims" means the mineral claims described in Part II of Schedule
hereof;
"Cost Share" means the respective share of all Expenditures incurred in
connection with a Program, Production Program Costs incurred in connection with
a Production Program, Operating Costs and other liabilities hereunder, whether
incurred by the Operator or otherwise, to be borne by each Participant after the
Final Vesting Date and shall be equal to the respective Interest of each
Participant as determined from time to time or such greater amount as a
Participant may elect to pay pursuant to the terms hereof.
"Costs" means cash outlays, expenses, obligations and liabilities of whatever
kind or nature, but without duplication;
"Effective Date" means that day on which Kores notifies Leader of the fulfilment
or waiver of the conditions precedent, as contemplated in paragraph 3.1.
"Expenditures" means all Costs spent or incurred or deemed incurred hereunder
prior to the adoption of a Production Program by all of the Participants in
connection with the exploration and development of the Property including,
without duplication and without limiting the generality of the foregoing:
(i) monies expended in maintaining the Property in good standing,
including any monies expended in doing and filing assessment work and
any required vendor's or royalty payments;
(ii) monies expended in doing geophysical, geochemical and geological
surveys, drilling, assaying and metallurgical testing;
(iii) monies expended in acquiring Assets;
(iv) monies expended in paying the fees, wages, salaries and travelling
expenses of all employees of the Operator to the extent that they are
engaged in work with respect to and for the benefit of the Property,
together with proportionate amount for fringe benefits usually paid by
the Operator;
(v) monies expended in paying for the food, lodging and other reasonable
needs of the persons referred to in clause (iv) hereof;
(vi) a charge equal to 10% of all Expenditures, other than the charges
referred to in this clause (vi) and clause (x), for unallocable
overhead and head office expenses and all other expenses relating to
supervision and management of all work done with respect to and for
the benefit of the Property;
(vii)monies expended for environmental remediation and reclamation or any
bonding in relation thereto;
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
(viii) all Costs related to the preparation of Programs and reporting as to
the results thereof;
(ix) all Costs related to the preparation of a Feasibility Report and a
Production Program; and
(x) reimbursement of expenses of representatives of Kores, in the amount
of $100,000 per year, as referred to in paragraph 6.13(b);
but does not include any amount incurred in respect of Production Program Costs.
"Facilities" means all mines and plants including, without limitation, all pits,
shafts, haulageways and other underground workings, and all buildings, plants
and other structures, fixtures and improvements, and all other properties,
whether fixed or moveable, as the same may exist at any time in or on the
Property and relating to the Operation of the Property as a mine or outside the
Property if for the exclusive benefit of the Property only.
"Feasibility Report" means a detailed report prepared by a reputable independent
engineering consultant, containing information and analyses to a standard that
would enable a major Canadian bank to form a reasoned judgment to provide
project financing, showing the feasibility of placing the Property or any
portion thereof into Commercial Production and which includes at least the
following:
(i) a description of that part of the Property to be covered by the
proposed mine;
(ii) the estimated recoverable reserves of minerals and the estimated
composition and content thereof;
(iii) the proposed procedure for development, mining and production;
(iv) results of ore amenability tests (if any);
(v) the nature and extent of the Facilities proposed to be acquired which
may include mill facilities, if the size, extent and location of the
ore body makes such mill facilities feasible, in which event the study
shall also include a preliminary design for such mill;
(vi) the total costs, including capital budget, which are reasonably
required to purchase, construct and install all structures, machinery
and equipment required for the proposed mine, including a schedule of
timing of such requirements;
(vii) all environmental impact studies and costs;
(viii) the period in which it is proposed the Property shall be brought to
Commercial Production;
(ix) such other data and information as are reasonably necessary to
substantiate the existence of an ore deposit of sufficient size and
grade to justify development of a mine, taking into account all
relevant business, tax and other economic considerations;
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
(x) working capital requirements for the initial four months of Operation
of the Property as a mine or such longer period as may be reasonably
justified in the circumstances; and
(xi) an economic evaluation of the Property including sensitivity analysis.
"Final Vesting Date" means that date after the first anniversary of the
Effective Date which is the earlier of:
(i) the date that Kores is deemed to have terminated the Option as
contemplated in paragraph 3.5, and
(ii) the date that Kores completes the payments and Expenditures necessary
to earn a 50% Interest, as contemplated in paragraph 3.3(3)(b).
"Interest" means the undivided beneficial percentage interest of a party in the
Assets as determined pursuant to this Agreement, but does not include a Net
Smelter Return Royalty.
"Joint Venture" means the joint venture formed pursuant to paragraph 4.1
"Joint Venture Account" means the Joint Venture bank account established and
maintained by the Operator hereunder.
"Management Committee" means the committee formed pursuant to Article 10.
"Mineral Products" means the end products derived from Operating the Property as
a mine.
"Net Smelter Return Royalty" to which any party is entitled hereunder means 1%
of net sales which, for the purposes hereof, means the gross revenue from sales
of Mineral Products, less the following deductions:
(i) All charges made by a smelter, mill or any other purchaser including,
without limiting the generality of the foregoing, treatment, sampling,
penalties and all other deductions;
(ii) All costs of transportation of Mineral Products from the Property to
the purchaser or otherwise, as directed; and
(iii)All excise, severance, sales and/or production taxes applicable to
the Net Smelter Return Royalty payments.
"Non-Operator" means a Participant who is not the Operator.
"Operate the Property as a mine", "Operating the Property as a mine or
"Operation of the Property as a mine" means any or all of the mining, milling,
smelting, refining and other processing of ores, minerals, metals, tailings or
concentrates derived from the Property and other ancillary activities and
operations related thereto, on or in relation to the Property or any portion
thereof.
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
"Operating Costs" means, for any period after the Completion Date, all Costs,
incurred or chargeable, directly or indirectly, by the Operator in connection
with Operating Plans including, without duplication and without limiting the
generality of the foregoing, the following;
(i) all Costs of or related to operating employee facilities, including
housing;
(ii) all duties, charges, levies, royalties, taxes (excluding taxes levied
on the income of the parties) and other payments imposed by any
government or municipality or department or agency thereof upon or in
connection with Operating the Property as a mine;
(iii)all Costs of maintaining the Property in good standing, including any
required vendor's or royalty payments;
(iv) all reasonable Costs of the Operator for providing technical,
management and/or supervisory services;
(v) all reasonable Costs of consulting, legal, accounting, insurance and
other services;
(vi) all exploration expenditures incurred after the Completion Date;
(vii)all capital costs of Operating the Property as a mine including all
Costs of construction, equipment and mine development and including
maintenance, repairs and replacements, and any capital expenditures
relating to an improvements expansion, modernization or replacement of
the Facilities;
(viii) a reasonable amount of funds set aside to cover reclamation Costs;
(ix) all Costs incurred or to be incurred relating to a temporary or
permanent shut-down of the Facilities, including Costs to be incurred
after any shut-down; and
(x) a management fee payable to the Operator in respect of its unallocable
overhead and head office expenses equal to 2% of all Operating Costs
other than those referred to in clauses (iv), (viii) and (x) hereof,
and, except where specific provision is made otherwise, all Operating Costs
shall be determined in accordance with Canadian generally accepted accounting
principles applied consistently from year to year, provided however that such
costs shall not include any amount in respect of amortization of Expenditures or
Production Program Costs, depletion or depreciation.
"Operating Plan" means a plan for an Operating Year as contemplated in Article 9
including, inter alia, the following information:
(i) a written plan of the proposed mining operations for the Operating
Year, including any plans for exploration or for expansion of the
Facilities;
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
(ii) a detailed estimate of all Operating Costs plus a reasonable allowance
for contingencies, on a monthly basis, including any proposed cash
calls;
(iii)an estimate of the quantity and quality of the ore to be mined and of
the quality of Mineral Products to be produced on a monthly basis; and
(iv) such other facts as may be reasonably necessary to present the results
proposed to be achieved during the Operating Year.
"Operating Year" means a calendar year or such other fiscal year as the
Management Committee may approve and which is after the Completion Date. In the
case of the first Operating Year, unless otherwise decided by the Management
Committee, that Operating Year shall be:
(i) the remainder of the current calendar or fiscal year, if the
Completion Date occurs 2 months or more before the expiration of the
year, or
(ii) the period from the Completion Date to the end of the next succeeding
calendar or fiscal year, if the Completion Date occurs on or after the
date which is 2 months before the expiration of the year.
"Operator" means that party acting as operator from time to time in accordance
with Article 6 and includes any Affiliate acting as the agent or delegate of the
Operator in that regard.
"Option" means Kores' right to acquire up to a 50% Interest as described in
paragraph 3.2.
"Other Tenements" means all surface rights of and to any lands within or outside
the Property including surface rights held in fee or under lease, licence,
easement, right of way or other rights of any kind (and all renewals, extensions
and amendments thereof or substitutions therefor) acquired by or on behalf of
the parties with respect to the Property.
"Participant" means any party having an Interest and its successors and
permitted assigns and "Participants" means collectively all parties having an
Interest and their respective successors and permitted assigns and, for greater
certainty, does not include a party hereto which holds the Net Smelter Return
Royalty.
"Pine Channel Agreement" means the agreement effective as of February 3, 1997
between Consolidated Pine Channel Gold Corp. and Leader, as amended by agreement
between them effective August 10, 1999.
"Pine Channel Claims" means the mineral claims described in Part III of Schedule
hereof,
"Prime Rate" means the per annum rate declared from time to time by The Toronto
Dominion Bank, or any successor bank, as the rate of interest charged by it to
its largest and most creditworthy commercial borrowers for demand Canadian
dollar loans over $200,000.
"Production Program" means any program based on a Feasibility Report
contemplating the achievement of Commercial Production.
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
"Production Program Costs" means all Costs spent or incurred directly or
indirectly in connection with a Production Program in order to equip the
Property or a part thereof for Commercial Production, including, without
duplication and without limitation:
(i) all monies expended to develop, construct or acquire the Facilities
and other Assets, as contemplated in the Production Program;
(ii) working capital required for the initial four months of Operation of
the Property as a mine or for such longer period as may be reasonably
justified in the circumstances;
(iii)a contingency amount of not less than 10% of total Production Program
Costs as determined by the Management Committee;
(iv) a management fee payable to the Operator in respect of its unallocable
overhead and head office expenses equal to 2% of all Production
Program Costs other than those referred to in this clause (iv); and
(v) monies set aside or lodged as security for environmental remediation
and reclamation.
"Program" means, as the context requires:
(i) any program to carry out work and incur Expenditures after the
Effective Date and prior to the approval of a Production Program on or
in respect of the Property:
(ii) a document or documents wherein there is specified in reasonable
detail an outline of any and all research, prospecting and exploration
and development work proposed to be carried out during such Program,
the estimated Expenditures to be incurred in carrying out such work
and the area of the Property on which such work is to be undertaken;
and
(iii)the preparation of any Feasibility Report and of any Production
Program;
and shall include any amendments to a Program as may be agreed upon by the
Management Committee.
"Property" means the right, title and interest in and to the mining claims,
mineral lease, and other rights more particularly described in Schedule I hereof
and shall include any renewal thereof and any other form of successor or
substitute title therefore, and shall include any Additional Right made part of
the Property pursuant to paragraph 14.3, but shall exclude any mineral
properties claims or interests transferred or abandoned in accordance with
paragraph 14.5 or otherwise sold or disposed of by the Joint Venture.
"Underlying Agreements" means the Copper Quest Agreement and the Pine Channel
Agreement.
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Included Words
1.2 This Agreement shall be read with such changes in gender or number as the
context shall require.
Headings
1.3 The headings to the articles, paragraphs, parts or clauses of this Agreement
and the table of contents are inserted for convenience only and shall not affect
the construction hereof.
References
1.4 Unless otherwise stated, a reference herein to a numbered or lettered
article, paragraph, clause or schedule refers to the article, paragraph, clause
or schedule bearing that number or letter in this Agreement. A reference to
"this" article, paragraph, clause or schedule means the article, paragraph,
clause or schedule in which the reference appears. A reference to "this
Agreement", "hereof", "hereunder", "herein" or words of similar meaning, means
this agreement including the schedules hereto, together with any amendments
thereof.
Currency
1.5 All dollar amounts expressed herein refer to lawful currency of Canada.
Interest
1.6 Wherever interest is chargeable under this Agreement, unless otherwise
specifically provided, interest will be at the specified per annum rate,
calculated daily and compounded on the last day of each calendar month. For the
purposes hereof, the Prime Rate in effect for each day of a month shall be equal
to the Prime Rate declared at noon on the first Business Day of that month. For
greater certainty, the interest chargeable for any day will be based upon the
specified per annum rate in effect on that day.
Statutes
1.7 A reference to a statute, regulation or other legislation herein shall be
deemed to extend to and include any amendments thereto and successor
legislation.
Schedules
1.8 The following schedules are incorporated into this Agreement by reference:
Schedule Description
1 Description of Property
2 Net Smelter Return Royalty
3 Accounting Procedures
<PAGE>
10
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Governing Law
1.9 This Agreement shall be constructed and governed by the laws in force in the
Province of Saskatchewan and, except as provided in Article 16, the courts of
said Province shall have exclusive jurisdiction to hear and determine all
disputes arising hereunder. Each of the parties hereto irrevocably attorns to
the jurisdiction of said courts and consents to the commencement of proceedings
in such courts. This paragraph shall not be construed to affect the rights of a
party to enforce a judgement or award outside the said Province, including the
right to record or enforce a judgement or award in any jurisdiction in which
Assets are situate.
Severability
1.10 If any provision of this Agreement is or shall become illegal, invalid or
unenforceable, in whole or in part, the remaining provisions shall nevertheless
be and remain valid and subsisting and the said remaining provisions shall be
construed as if this Agreement had been executed without the illegal, invalid or
unenforceable portion.
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS
Representations, Warranties and Covenants of Leader and Kores
2.1 Each of Leader and Kores represent and warrant to the other that:
(a) it is a body corporate duly incorporated, organized and validly
subsisting under the laws of its incorporating jurisdictions;
(b) it has the full power and authority to carry on business and to enter
into this Agreement and any agreement or instrument referred to or
contemplated by this Agreement;
(c) neither the execution and delivery of this Agreement nor the
consummation of the transactions hereby contemplated conflict with,
result in the breach of or accelerate the performance required by any
agreement to which it is a party; and
(d) the execution and delivery of this Agreement will not violate or
result in the breach of the laws of any jurisdiction applicable or
pertaining thereto or of its constating documents.
Representations, Warranties and Covenants of Leader
2.2 Leader represents and warrants to Kores that:
(a) Leader is the beneficial owner of, or has a right to acquire a 100%
interest in, all of the mineral claims and the mineral lease comprised
in the Property except the Pine Channel Claims, free and clear of all
liens, charges, encumbrances and claims other than pursuant to the
Copper Quest Agreement. Leader has the right to acquire up to a 90%
interest in the Pine Channel Claims pursuant to the Pine Channel
Agreement, free and clear of all lines, charges, encumbrances and
claims other than pursuant to the Pine Channel Agreement.
<PAGE>
11
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
(b) Leader has the exclusive right to enter into this Agreement and to
dispose of its interests in the Property in accordance with the terms
of this Agreement;
(c) All of the mineral claims and the mineral lease comprised in the
Property are presently in good standing under the laws of Saskatchewan
and under (i) in the case of the Copper Quest Claims, the Copper Quest
Agreement, and (ii) in the case of the Pine Channel Claims, the Pine
Channel Agreement. The Underlying Agreements are in good standing,
unamended, and no party is in default thereunder, nor has any notice
of default or waiver been given or any consent or waiver been
requested thereunder.
(d) there is no adverse claim or challenge against or to the ownership of
or title to any of the mineral claims or the mineral lease comprised
in the Property (including, without limitation, by or on behalf of any
aboriginal peoples), nor to the knowledge of Leader is there any basis
therefor, and there are no outstanding agreements or options to
acquire or purchase such mineral claims, mineral lease or any portion
thereof or any production therefrom, and no person or corporation has
any royalty or other interest whatsoever in the Property or in
production therefrom, save and except pursuant to the Underlying
Agreements.
(e) all corporate authorizations have been obtained by Leader for the
execution of this Agreement and for the performance of its obligations
hereunder;
(f) no proceedings are pending for and Leader is unaware of any basis for
the institution of any proceedings leading to the dissolution or
winding-up of Leader or the placing of Leader into bankruptcy or
subject to any other laws governing the affairs of insolvent persons;
(g) the Property and its existing and prior uses comply and have at all
times complied with, and Leader is not in violation of, and has not
violated, in connection with the ownership, use, maintenance or
operation of the Property, any applicable federal, provincial,
municipal or local laws, regulations, orders or approvals relating to
its operations on such portion of the Property and environmental or
similar matters;
(h) without limiting the generality of subparagraph (g), Leader
(i) has operated the Property and has at all times received, handled,
used, stored, treated, shipped and disposed of all environmental
or similar contaminants in strict compliance with all applicable
environmental, health or safety laws, regulations, orders or
approvals, and
(ii) has removed from and off the Property all environmental or
similar contaminants;
(i) there are no writs, injunctions, orders or judgements outstanding, no
law suits, claims, proceedings or investigations pending or
threatened, relating to the use, maintenance or operation of the
Property, whether related to environmental, archaeological or similar
matters, or otherwise, nor, to Leader's knowledge, is there any basis
for such law suits, claims, proceedings or investigations being
instituted or filed;
(j) no hazardous or toxic materials, substances, pollutants, contaminants
or wastes have been released into the environment, or deposited,
discharged, placed or disposed of at, on or near the
<PAGE>
12
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Property as a result of Leader's operations carried out on the Property,
nor, to the best of Leader's knowledge, have any of the above occurred
nor to their knowledge has the Property been used at any time by any
person as a landfill or waste disposal site;
(k) to the best of Leader's knowledge
(i) no notices of any violation or apparent violation of any of the
matters referred to in subparagraphs (g) through (j) relating to
the Property or its use have been received by Leader, and
(ii) there are no writs, injunctions,orders or judgements outstanding,
no law suits, claims, proceedings or investigations pending or
threatened, relating to the use, maintenance or operation of the
Property, whether related to environmental or similar matters, or
otherwise, nor, to the knowledge of Leader, is there any basis
for such law suits, claims, proceedings or investigations being
instituted or filed;
(l) Leader's interests in the Property are not the whole or substantially
the whole of the assets or undertaking of Leader.
Covenants of Leader
2.3 Leader covenants with Kores that:
(a) it will, at its sole cost and expense, remove or take remedial action
with regard to any materials released by Leader or their contractors,
and agents, into the environment at, on or near the Property prior to
the date hereof for which any removal or remedial action is required
pursuant to any law, regulation, order or governmental action, whether
enacted, made or declared in force before as after the date hereof,
provided that
(i) no such removal or remedial action shall be taken except after
reasonable advance written notice has been given to Kores, and
(ii) any such removal or remedial action shall be undertaken in a
manner so as to minimize any impact on Leader's operation on the
Property;
(b) it will at all times retain any and all liabilities arising from the
handling, treatment, storage, transportation or disposal of
environmental or similar contaminants on or near the Property by
Leader or by any of Leader's contractors or agents;
(c) it will, during the currency of the Option, keep the Property free and
clear of all liens, charges and encumbrances, save and except those
arising from Joint Venture activities on the Property; and
(d) in the event of an adverse claim or claims (i) respecting the Property
which does not arise from Kores' activities on the Property, or (ii)
respecting defects of title affecting all or a portion of the
Property, Leader shall, all at its sole expense, take immediate steps
to defend against any such claim or claims or to cure any such default
of title until such adverse claim or claims is or are judicially or
otherwise fully settled and determined or such defects are otherwise
cured, and Kores
<PAGE>
13
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
shall be held harmless from and indemnified for any resulting loss from
adverse claims or other title defects. In the event that Leader is
unable or refuses to cure any defect in title to the Property
promptly, Kores may, without affecting Leader's obligations under this
subparagraph, at Kores' election, take steps to cure such defect and
shall be fully reimbursed for all costs incurred for that purpose,
plus interest at the Prime Rate plus 3% from the date the Costs are
incurred, and until reimbursed (and without limitation as to exercise
of other remedies) Kores may recover the Costs of such cure, including
legal fees and court costs, from amounts otherwise due to Leader
hereunder.
Survival of Representations, Warranties and Covenants
2.4 The representations, warranties, covenants, agreements and conditions
hereinbefore set out are conditions on which the parties have relied in entering
into this Agreement and shall survive the acquisition of any interest in the
Property hereunder and each party will indemnify and save the other harmless
from all loss, damage, costs, actions and suits arising out of or in connection
with any breach of any representation, warranty, covenant, agreement or
condition made by them and contained in this Agreement (including, without
limitation, lawyer's fees and disbursements).
ARTICLE 3
EARN - IN PROGRAMS
Conditions Precedent
3.1 There are conditions precedent to the Option and the Joint Venture hereunder
that:
(a) Kores has received approval from the Korean government and the Korean
central bank to proceed with the transactions contemplated hereunder;
and
(b) Leader has delivered to Kores confirmation, in form and substance
satisfactory to Kores' counsel, that a 100% interest in the Copper
Quest Claims have been registered with the mining recorder in
Saskatchewan in the name of Leader, free and clear of all recorded
liens, charges, encumbrances and claims;
(c) Leader has received approval from the Alberta Stock Exchange, and from
any other securities regulatory authority having jurisdiction, for the
option granted to Kores to purchase Leader shares as described in
paragraph 3.9; and
(d) the representations and warranties of Leader set forth in paragraph
2.2 remain true and correct.
Each of the parties will use all reasonable efforts to fulfil or assist in the
fulfilment of such conditions, but if any of the conditions precedent has not
been met or waived by Kores prior to the expiry of the 90-day period following
the date of this Agreement, then this Agreement will terminate and be of no
further force and effect. Upon such termination neither party will have any
obligation or liability to the other hereunder, except as may have accrued prior
to such termination. If the conditions precedent described in this paragraph 3.1
have been fulfilled or waived within the 90-day period, then Kores will notify
Leader on or before the expiry thereof and the date of such notification will be
the Effective Date.
<PAGE>
14
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Earn-In Option
3.2 Leader hereby grants to Kores, effective as of the Effective Date, the right
to acquire up to a 50% Interest by making payments to Leader and funding
Expenditures, all as hereinafter provided.
Earn-In Requirements
3.3
(1) To earn the Interest set forth below Kores must make the following
payments to Leader on or before the dates indicated and fund the
following Expenditures by the dates indicated:
Payment Date Payment Expenditures by Date Cumulative Interest
Amount Spent Earned
--------------------------------------------------------------------------------
Effective Date $300,000 $1,000,000 on or before $1,300,000 20.00%
1st Anniversary Date
1st Anniversary $300,000 $1,000,000 on or before $2,600,000 33.33%
Date 2nd Anniversary Date
2nd Anniversary $300,000 $1,000,000 on or before $3,900,000 42.86%
Date 3rd Anniversary Date
3rd Anniversary $300,000 $1,000,000 on or before $5,200,000 50.00%
Date 4th Anniversary Date
(2) The Expenditures will be funded according to Cash Calls received by
Kores and are cumulative such that any excess of Expenditures in one
period will be carried over into the next period. Any payment or
Expenditures may be accelerated at the option of Kores.
(3) For greater certainty:
(a) upon the date that Kores has made payments and funded
Expenditures in a cumulative amount and on time as set forth in
the table above, Kores will be vested with the Interest specified
for such amount; and
(b) for the maximum Interest of 50%, Kores must make payments to
Leader totalling $1,200,000 on or before the 3rd Anniversary Date
and fund Expenditures totalling $4,000,000 on or before the 4dI
Anniversary Date.
Termination During First Year
3.4 If Kores fails to make the payment required on the Effective Date then this
Agreement will terminate on the Effective Date. If Kores fails to fund the
Expenditures required by the first Anniversary Date, then this Agreement will
terminate on the first Anniversary Date. Upon such termination, Kores will have
no Interest nor any right to acquire an Interest, and neither party will have
any further obligation or liability hereunder except as may have arisen prior to
such termination.
<PAGE>
15
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Termination After First Year
3.5 If with respect to any Anniversary Date Kores:
(a) notifies Leader that it will not make any payment required on that
Anniversary Date or fund the Expenditures required prior to the next
Anniversary Date, or
(b) fails to make any payment required on that Anniversary Date or to fund
the Expenditures required by that Anniversary Date,
then upon such notice or Anniversary Date for which such failure has occurred,
Kores will be deemed to have terminated the Option and will have earned only
that Interest which is relevant to the cumulative amount it has spent to date,
as set forth in paragraph 3.3.
Report on Expenditures
3.6
(1) While the Option remains outstanding and Leader is the Operator,
within 60 days following each Anniversary Date Leader shall deliver to
Kores a statement showing in reasonable detail the Expenditures
incurred by Leader for the 12 month period ending on the Anniversary
Date. Kores shall have 90 days from the time of receipt of such
statement to question the accuracy thereof by notice to Leader,
failing which such statement shall be deemed to be correct and
unimpeachable thereafter.
(2) If the statement delivered pursuant to subparagraph (a) is questioned
by Kores,
(a) Kores shall have 12 months from the time of delivery of the
statement to have the amounts specified therein audited;
(b) the audited results shall be final and determinative of the
amount of Expenditures incurred for the audited period;
(c) if such audit discloses that there is a deficiency in the Joint
Venture Account as compared to the amount of Expenditures stated
to have been incurred and paid out of such account by Leader, or
that cost and expenses that do not qualify as Expenditures have
been paid out of funds from the Joint Venture Account, then
Leader will restore to the Joint Venture Account the amount of
such deficiency or payment within 30 days following receipt of
notice of such audited results; and
(d) the costs of the audit shall be borne by Leader if Leader's
statement understated or overstated Expenditures by more than 3%
and otherwise shall be borne by Kores.
Payments to Leader
3.7 All payments made by Kores to Leader pursuant to this Article 3 will be
deemed to have been made upon the date that funds in the amount of the payment
are deposited by electronic transfer to account number 0317694 at the Toronto
Dominion Bank in Calgary (Bank no. 004, Branch no. 80609), or such other bank
account in Canada as Leader may specify at least 15 days prior to the due date
for any payment.
<PAGE>
16
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Funding of Expenditures
3.8 All Expenditures funded by Kores pursuant to this Article 3 will be deemed
to have been funded upon the date that funds in the amount of the Expenditures
are deposited by electronic transfer to the Joint Venture Account.
Share Option
3.9 Leader hereby grants to Kores the option to acquire, on or prior to the
second Anniversary Date, 500,000 common shares in the capital of Leader at a
price of $1.00 per share. Kores may exercise the share option at any time and
from time to time during its currency with respect to some or all of the
optioned shares. To exercise the share option Kores must give notice to Leader
specifying the number of shares in respect of which the share option is being
exercised, accompanied by full payment (in cash or by certified cheque or by
electronic funds transfer) in the amount of the purchase price for such shares.
If while the share option is outstanding Leader undergoes a share subdivision or
consolidation, stock split, reorganization, amalgamation, arrangement,
acquisition of all of its shares or similar corporate change, then Leader will
make or cause to be made appropriate adjustments to the share option hereunder,
including the issue of a supplementary or replacement option if necessary.
ARTICLE 4
JOINT VENTURE
Formation and Scope
4.1 On the Effective Date, Leader and Kores shall and shall be deemed to form a
single purpose joint venture for the purpose of undertaking such activities as
are determined in accordance with the provisions hereof, to be necessary or
appropriate, directly or indirectly, to:
(a) explore and, if deemed warranted as herein provided, develop the
Property and equip it for Commercial Production;
(b) Operate the Property as a mine; and
(c) engage in such other activity as may be considered by the Participants
to be necessary or desirable in connection with the foregoing.
Leader hereby contributes its entire right, title and interest in the Property
to the Joint Venture.
Transactions in Name of Joint Venture
4.2 All transactions, contracts, employments, purchases, operations,
negotiations with third parties and any other matter or act undertaken on behalf
of the Participants in connection with the Property shall, subject to paragraph
4.5, be done, transacted, undertaken or performed in the name of the Joint
Venture, to the extent practicable, and otherwise in the name of the Operator,
and no party (other than the Operator acting in that capacity) shall do,
transact, perform or undertake anything in the name of another party hereto or
in the joint names of the Participants or in the name of the Joint Venture.
<PAGE>
17
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
No Partnership
4.3 After the Effective Date, the rights~ and obligations of the Participants
shall be, in each case, several, and shall not be or be construed to be either
joint or joint and several. Nothing contained in this Agreement shall, except to
the extent specifically authorized hereunder, be deemed to constitute a
Participant as a partner, an agent or legal representative of any other party.
It is intended that this Agreement shall not create the relationship of a
partnership between the Participants and that no act done by any Participant
pursuant to the provisions hereof shall operate to create such a relationship.
Liability for Costs
4.4 After the Final Vesting Date, except as otherwise provided herein each
Participant shall be liable for its Cost Share of all costs, debts, liabilities
or obligations arising from operations hereunder pursuant to approved Programs,
Production Programs and Operating Plans from and at the time incurred by the
Operator. Except as otherwise provided herein, any amount due to the Operator
hereunder shall bear interest from its due date at a per annum rate equal to the
prime Rate plus 2%.
Interest of Participants
4.5 Each Participant shall have such Interest as is determined in accordance
with the provisions of this Agreement, and any legal title to any of the Assets
shall be held by the Operator in trust for the Participants in proportion to
their respective Interests under the terms of this Agreement. Nothing herein
contained shall prevent a party hereto from registering notice of this Agreement
and its Interest against the title to the Property or any other Assets.
Participants' Rights to Conduct Other Business
4.6 Each Participant shall devote such time as may be required to fulfil any
obligation assumed by it hereunder but, subject to Article 14:
(a) each Participant shall be at liberty to engage in any other business
or activity outside the Joint Venture, including the ownership and
operation of any other mining permits, licenses, claims and leases;
(b) no Participant shall be under any fiduciary or other obligation to any
other party which shall prevent or impede such Participant from
practising in, or enjoying the benefits of, competing endeavours of a
nature similar to the business or activity undertaken by the
Participants hereunder;
(c) the legal doctrines of "corporate opportunity" or "business
opportunity" sometimes applied to persons occupying a relationship
similar to that of the Participants shall not apply with respect to
participation by any Participant in any business activity or endeavour
outside the Joint Venture, and, without implied limitation, a
Participant shall not be accountable to the others for participation
in any such business activity or endeavour outside the Joint Venture
which is in direct competition with the business or activity
undertaken by the Joint Venture; and
(d) unless otherwise agreed in writing, no Participant shall have any
obligations to mill, beneficiate or otherwise treat any Mineral
Products in any facility owned or controlled by any other
<PAGE>
18
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Participant, and the Joint Venture shall have no obligation to mill,
beneficiate or otherwise treat or accommodate any minerals produced by
a Participant from lands not comprising the Property.
No Right of One Participant to Bind the Other
4.7 A Participant shall not have authority to act for or assume any obligations
or liabilities on behalf of the other Participant except such as are
specifically authorized pursuant to and in accordance with the terms of this
Agreement, and each Participant shall indemnify and hold the other Participant,
and its officers, employees and agents, harmless from and against any and all
losses, claims, damages and liabilities arising out of any act or any assumption
of any obligations by it done or undertaken on behalf of the other Participant
other than as provided herein.
Bankruptcy of a Participant
4.8 If a Participant (a "bankrupt Participant") concurs in or suffers an
assignment for the benefit of its creditors, the appointment of a receiver for
all or substantially all of its assets, the filing of a petition in bankruptcy
or for reorganization or protection from creditors pursuant to applicable
legislation, or if it is otherwise adjudicated bankrupt or insolvent, with or
without its consent (an "event of bankruptcy"), then:
(a) if the event of bankruptcy occurs prior to the commencement of any
Production Program, the bankrupt Participant will be deemed to have
withdrawn from this Agreement and its Interest will be automatically
converted to the Net Smelter Return Royalty as of the occurrence of
such event and thereafter the bankrupt Participant will have no
further rights or interest in respect of the Assets or under this
Agreement, save and except the right to receive its Net Smelter Return
Royalty; or
(b) if the event of bankruptcy occurs after a Production Program but prior
to Commercial Production, the bankrupt Participant will be deemed to
have offered to sell its Interest to the other Participants pro rata
according to their relative Interests, at a price equal to the
cumulative amount that the bankrupt Participant has paid for its Cost
Share to the date of such event which, for these purposes, is deemed
to be the aggregate of its base costs as contemplated under paragraph
5.2 and all of its contributions towards Expenditures and Production
Program Costs subsequent to the Final Vesting Date plus, in the case
of Kores, all payments made to Leader under paragraph 3.3; or
(c) if the event of bankruptcy occurs after Commercial Production has
commenced, the bankrupt Participant will be deemed to have offered to
sell its Interest to the other Participants pro rata according to
their relative Interests, at a price equal to the fair market value of
such Interest, discounted by 20%.
<PAGE>
19
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
ARTICLE 5
INTERESTS OF PARTICIPANTS
Interests
5.1 On the Effective Date, Leader shall have an undivided 100% Interest and
Kores shall have 0% Interest. On the Final Vesting Date, Kores shall have the
Interest that it has earned pursuant to paragraph 3.3 and Leader shall have the
Interest equal to the percentage which when added to Kores' Interest totals
100%. Thereafter, each Participant shall have such Interest as is determined
from time to time in accordance with the provisions of this Agreement.
Dilution Formula
5.2 After the Final Vesting Date the respective Interests of the Participants
shall be determined from time to time as being equal to the product obtained by
multiplying 100% by a fraction of which the numerator is the aggregate of (i)
$5,200,000 (the "Leader base costs"), or (ii) the cumulative amount spent by
Kores according to the table set forth in paragraph 3.3 for Kores to have earned
the Interest which it acquired on the Final Vesting Date (the "Kores base
cost"), plus (iii) the amount of the relevant Participant's subsequent
contributions to Expenditures and Production Program Costs and the denominator
is the aggregate of the Leader base costs, the Kores base costs and the amount
of all contributions to Expenditures and Production Program Costs made
subsequent to the Final Vesting Date by all Participants.
Multiple Participants
5.3 If there are more than two Participants the dilution formula in paragraph
5.2 will be applied mutatis mutandis as required, provided that an assignment by
a Participant of all or part of its Interest will carry with it an assignment of
that proportion of the aggregate of the Participant's base costs, its
Expenditures and its Production Program Costs to the time of assignment which
equals the percentage of the Participant's Interest which is being assigned.
Dilution and Conversion to a Net Smelter Return Royalty
5.4 After the Final Vesting Date the respective Interests of the Participants
shall not change so long as they each contribute their respective Cost Shares of
every Program as set out in Article 7 and Production Program as set out in
Article 8. Subject to paragraph 8.2, at any time and from time to time after a
Participant elects or is deemed to have elected not to contribute to a Program
or Production Program, its respective Interest shall be reduced, and each other
Participant's Interest shall be proportionately increased, in accordance with
the formula set out in paragraph 5.2. If, as a result of such calculation, the
Interest of a Participant is reduced to or below 15%, its Interest shall be
deemed to be converted to the Net Smelter Return Royalty and thereafter such
party shall have no further rights or Interest in respect of the Assets or under
this Agreement, save and except for the Net Smelter Return Royalty. If a
Participant assigns part of its Interest the percentage Interest to which the
Participant's and the assignee's Interest must be diluted prior to its Interest
being converted to the Net Smelter Return Royalty shall remain at 15% for each
of them and the Net Smelter Return Royalty to which the assigning Participant's
or the assignee's Interest will be converted shall be pro rata according to
their respective Interests.
<PAGE>
20
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Net Smelter Return Royalty Calculation and Payment
5.5 Any Net Smelter Return Royalty shall be calculated and paid pursuant to
Schedule 2 by each Participant as to the Net Smelter Return Royalty relating to
its share of Mineral Products.
Net Smelter Return Royalty Purchase Option
5.6 The Net Smelter Return Royalty, or any portion thereof held by a Party, may
be purchased at any time by any Participant for the sum of $1,000,000 (or the
relevant portion thereof).
ARTICLE 6
OPERATOR
Rights and Powers of the Operator
6.1 Subject to paragraphs 6.2 and 6.4, Leader will act as the Operator under
this Agreement and as such shall, subject to the direction and control of the
Management Committee, have full right, power and authority to do everything
necessary or desirable to carry out the purposes of the Joint Venture and in
connection with this Agreement, including and without limiting the generality of
the foregoing, the right, power and authority to:
(a) prepare and present to the Management Committee, Programs in respect
of the Property and implement such Programs as are approved in
accordance with the terms of this Agreement;
(b) regulate access to the Property subject only to the right of
designates of the Participants duly authorized in writing to have
access to the Property at all reasonable times for the purpose of
inspecting work being done thereon, but at their own risk and expense;
(c) employ and engage such employees, agents, and independent contractors
as it may consider necessary or advisable to carry out its duties and
obligations hereunder and in this connection to delegate any of its
powers and rights to perform its duties and obligations hereunder, but
the Operator shall not, for the account of the Joint Venture, enter
into contractual relationships with a Participant or any Associated
Company of a Participant except upon terms that are commercially
competitive;
(d) after a Feasibility Report has been delivered, prepare and present to
the Participants a Production Program, and implement any Production
Program that is adopted in accordance with the terms of this
Agreement;
(e) after the Completion Date and subject to the authority of the
Management Committee, prepare, present and implement Operating Plans
and Operate the Property as a mine;
(f) prepare and present to the Participants Cash Calls, and pay when due
from the Joint Venture Account all Expenditures, Production Program
Costs and Operating Costs; and
(g) charge fees in respect of overhead costs as specified in the
definitions of Expenditures, Production Program Costs and Operating
Costs.
<PAGE>
21
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Resignation of Operator
6.2 (1) The Operator may resign at any time by giving 120 days' prior written
notice to the Non-Operators (or such shorter notice as the Non-Operators
accept).
(2) The Operator will be deemed to have resigned as Operator upon the
occurrence of any of the following events:
(a) if the Interest of the Operator becomes less than 50% and such
Interest is no longer the largest Interest; or
(b) if the Operator concurs in or suffers an assignment for the benefit of
its creditors, the appointment of a receiver for all or substantially
all of its assets, the filing of a petition in bankruptcy or for
reorganization or protection from creditors pursuant to applicable
legislation, or if it is otherwise adjudicated bankrupt or insolvent,
with or without its consent;
(3) Leader will be deemed to have resigned as Operator if Kores elects, by
notice in writing to Leader after the second Anniversary Date and prior to the
Final Vesting Date, to become Operator.
(4) If the Operator resigns or is deemed to have resigned pursuant to this
paragraph 6.2, then the Management Committee shall appoint another Participant
as Operator who consents to so act.
Duties and Obligations of the Operator
6.3 The Operator shall have such duties and obligation as the Management
Committee may from time to time determine including, without limiting the
generality of the foregoing, the following duties and obligations:
(a) to propose and, if they are approved or adopted, implement Programs,
any Production Program and Operating Plans;
(b) to manage, direct and control all exploration, development,
construction and producing operations in, on and under the Property,
in a manner consistent with good exploration, engineering and mining
practices and in compliance with all applicable laws, rules, orders
and regulations;
(c) to prepare and deliver to the Participants (i) during periods of
active field work, periodic progress reports no less frequently than
quarterly, (ii) during any Production Program, monthly progress
reports respecting the development of the Property, (iii) after the
Completion Date, weekly production results and monthly reports on
Operating the Property as a mine, and (iv) timely current reports and
information on any material results obtained from exploration, as well
as any material event otherwise affecting the project or the Operation
of the Property as a mine;
(d) subject to the terms and conditions of this Agreement, to pay all
costs and expenses of the Joint Venture when due and to keep the
Assets in good standing and free of liens, charges and encumbrances of
every character arising from operations (except liens for taxes not
yet due, other
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
inchoate liens and liens contested in good faith by the Operator) and
to proceed with all diligence to contest or discharge any such lien
that is filed;
(e) to account to the Participants for all contributions to and
expenditure of Expenditures, Production Program Costs and Operating
Costs;
(f) to maintain true and correct books, accounts and records of operations
hereunder in accordance with the accounting procedures set forth in
Schedule 3 hereto and, following the Completion Date, to prepare and
deliver to the Participants audited financial statements of the joint
venture within 120 days following the end of each Operating Year as
provided in such accounting procedures;
(g) to permit the Participants. at their own expense, to inspect, take
abstracts from or audit any or all of the records and accounts
referred to in subparagraph (f) hereof on reasonable notice during
normal business hours, and without undue disruption of the work and
operations of the Operator hereunder;
(h) to obtain and maintain, or cause any contractor engaged hereunder to
obtain and maintain, during any period in which active work is carried
out hereunder, such insurance as the Operator reasonably considers to
be appropriate in the circumstances in light of general industry
practice;
(i) to permit the Participants and their representatives appointed in
writing, at their own expense and risk, access to the Property and all
data derived from carrying out work thereon, on reasonable notice and
without undue disruption of the work and operations of the Operator
hereunder;
(j) to arrange for and maintain workers' compensation or equivalent
coverage for all eligible employees engaged by the Operator (including
the Kores representatives assigned to the Operator pursuant to
paragraph 6.13) in accordance with local statutory requirements;
(k) to transact, undertake and perform all transactions, contracts,
employments, purchases, operations, negotiations with third parties
and any other matter or thing undertaken on behalf of the parties in
the name of the Joint Venture, when practicable, and otherwise in the
Operator's name.
Non-Performance By the Operator
6.4 If the Operator fails to perform in a manner that is consistent with good
exploration, engineering and mining practices or otherwise fails to carry out
its duties and responsibilities under this Agreement, then the Management
Committee shall give to the Operator written notice setting forth particulars of
the Operator's default. The Operator will, as soon as possible after receipt of
such notice commence to remedy the default. Failure of the Operator promptly to
commence to remedy the default or to cure the default (and thereafter to proceed
continuously and diligently to complete all required remedial action) within the
30-day period after such notice will be grounds for termination of the
Operator's appointment; provided that if there shall be any disagreement between
the Management Committee and the Operator as to whether a default has occurred,
the matter may be submitted to arbitration under Article 16, and the Operator
shall not be considered in default of any obligation determined on the
arbitration if it commences to remedy the default within 10 days after the
arbitration
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
decision or within such longer period as may be fixed in the arbitration award.
On any termination of the Operator's appointment hereunder, a meeting of the
Management Committee shall forthwith be convened to appoint another party who
consents to act as Operator, and determine its terms of engagement. An Operator
in default hereunder shall not be entitled to vote as a Participant for the
purposes of this paragraph and the remaining Participant or Participants shall
be sufficient to form a quorum for such purposes.
Delivery of Assets by Former Operator to Successor Operator
6.5 Upon ceasing to be Operator, the former Operator shall forthwith deliver to
the successor Operator custody of all Assets and any books and records
pertaining to the Assets, which it prepared or maintained in its capacity as
Operator. The successor Operator shall assume all of the rights,
responsibilities, duties, and status of the previous Operator as provided in
this Agreement. The successor Operator shall have no obligation to hire any of
the employees of the former Operator.
Termination of Joint Venture If No Operator
6.6 If the Operator resigns or is removed and no other party consents to act as
Operator, the Joint Venture shall be terminated and the Assets shall be
liquidated or sold and the Assets or proceeds from the sale thereof distributed
to the Participants, net of liabilities hereunder or related thereto, in
accordance with their Interests. Each Participant shall be responsible for its
Cost Share of all costs and expenses related to such termination and
liquidation. If the Operator has voluntarily resigned, then the party which was
the Operator may, if it consents to act, continue to act as Operator to effect
such termination and liquidation and it shall have a lien on the Participants'
respective Interests in the Assets and any proceeds therefrom as security for
their respective Cost Shares of all costs, expenses and other liabilities owing
in respect of or as of the date of such termination.
Indemnification of Operator
6.7 Subject to paragraph 6.8, each Participant shall indemnify and save the
Operator harmless from and against any loss, liability, claim, demand, damage,
expense, injury and death (including, without limiting the generality of the
foregoing, legal fees) resulting from any acts or omissions of the Operator or
its officers, employees or agents.
No Indemnification for Gross Negligence
6.8 Notwithstanding paragraph 6.7, the Operator shall not be indemnified nor
held harmless by any of the Participants for any loss, liability, claim, demand,
damage, expense, injury or death (including, without limiting the generality of
the foregoing, legal fees) resulting from the gross negligence or wilful
misconduct of the Operator or its officers, employees or agents or the
Operator's breach of this Agreement.
Certain Acts of the Operator Not Negligence
6.9 An act or omission of the Operator or its officers, employees or agents done
or omitted to be done:
(a) at the direction, or within the scope of the direction, of the
Management Committee; or
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
(b) unilaterally and in good faith by the Operator to protect life, limb
or property; shall be deemed not to be negligence or wilful misconduct
Indemnification in Proportion to Interests
6.10 The obligation of a Participant to indemnify and save the Operator harmless
pursuant to paragraph 6.7 shall be in proportion to its Interest as at the date
that the loss, liability, claim, demand, damage, expense, injury or death
occurred or arose.
No Liability for Special Damages
6.11 The Operator shall not be liable to any Participant nor shall any
Participant be liable to the Operator in contract, tort or otherwise for special
or consequential damages, including, without limiting the generality of the
foregoing, loss of profits or revenues.
Emergency Expenditures
6.12 Notwithstanding anything herein contained to the contrary, the Operator
shall be entitled to incur, and the Participants shall be responsible for their
respective Cost Share of, any unexpected expenditures which the Operator deems
necessary to preserve or protect life, limb, property or the environment in
respect of the Property and the operations hereunder.
Kores Contributions
6.13 To further the development of other exploration and mining projects between
Leader and Kores and for the purposes of the Joint Venture:
(a) from the Effective Date for a period of two years, Leader will provide
to Kores at no charge office space and use of general office equipment
and support services (telephones, fax machines, secretarial and
reception services and the like but not including out-of-pocket costs
such as long distance charges) at Leader's offices in Calgary for
Kores' use as an independent Kores office;
(b) during the period that the Option remains outstanding and Leader is
the Operator, Kores may assign up to two qualified technical
representatives to perform work for the Operator on the Property or at
the Operator's head office in Calgary and in relation thereto will be
entitled to be record $25,000 per quarter as Expenditures for the
expenses of such representatives.
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
ARTICLE 7
PROGRAMS
Expenditures to Be Incurred Under Programs
7.1 Expenditures shall only be incurred under and pursuant to Programs prepared
by the Operator and approved by the Management Committee as provided in this
Article. Any Feasibility Report shall be prepared pursuant to a separate
Program.
Election To Participate in Programs
7.2 Within 30 days after the approval by the Management Committee of a Program
to be carried out after the Final Vesting Date, the Participants shall each give
written notice to the Operator stating whether or not they elect to contribute
their respective Cost Shares of such Program. Failure by a Participant to give
notice pursuant to this paragraph within such 30-day period shall be deemed to
be an election by that Participant not to contribute to such Program.
Effect of Election to Not Contribute
7.3 If a Participant (for the purposes hereof a "Non-Contributor") elects or is
deemed to have elected not to contribute its Cost Share of a Program, each other
Participant (for the purposes hereof a "Contributor") that has elected to
contribute its Cost Share of the Program may give notice in writing to the
Operator stating that it will contribute, in addition to its own Cost Share, the
Cost Share of the Non- Contributor. If more than one Participant gives such
notice, they shall contribute pro rata to their Interests or as they may
otherwise agree. In such event, subject to paragraph 7.4, the Operator will
proceed with such Program and, on completion of such Program, the Interests of
the parties shall be adjusted in accordance with paragraph 5.4; provided that,
if such Program is completed to the extent of less than 80% of the originally
estimated Expenditures thereunder, the Interests of the parties will not be
adjusted unless notice is first given to the Non-Contributor that the Program
was abated, together with notice of the amount of the actual Expenditures
thereunder, and the Non-contributor does not, within 20 days thereafter,
reimburse the Contributor or Contributors to the extent of its Cost Share
thereof (being the amount which the respective Contributor elected to and did
contribute instead of the Non- Contributor), together with interest thereon from
the date contributed by the contributor, at a per annum rate equal to the Prime
Rate plus 2%. If the Non-Contributor so reimburses the Contributor or
Contributors within such 20-day period, it shall be deemed to have elected to
contribute its Cost Share of such Program and the Interests of the Participants
shall not be adjusted. A Participant that elects or is deemed to have elected
not to contribute to a Program may, subject to paragraph 5.4, participate in
future Programs.
Operator Not to Proceed Unless Program Is Fully Funded
7.4 After the Final Vesting Date the Operator will not proceed with any Program
which is not fully subscribed except that the Operator shall at all times be
entitled to incur such expenditures as are necessary pursuant to paragraph 6.12
or to maintain the Property in good standing and the Participants shall be
liable for their Cost Share thereof, regardless of any election hereunder. If
the Participants fully subscribe to a Program, the Operator will proceed with
such Program.
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Joint Venture Agreement Leader Mining International Inc. and
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Obligation To Pay Expenditures and Overruns
7.5 An election by a Participant to contribute to a Program shall make that
Participant liable to pay its respective share of Expenditures actually incurred
under or pursuant to the Program including Program Overruns, as hereinafter
defined of up to but not exceeding 10%.
Procedures For Payment
7.6 After having elected to contribute to a Program which proceeds or if a
Participant is otherwise obligated to pay its Cost Share of Expenditures, a
Participant shall, within 15 days after receipt of a Cash Call from the
Operator, pay such portion of its share of Expenditures as the Cash Call may
require.
Meeting Required to Approve Excess Program Overruns
7.7 If it appears to the Operator that Expenditures will exceed those estimated
under a Program, the Operator shall immediately give written notice to the
Participants contributing to that Program outlining the nature and extent of the
additional costs and expenses (herein called "Program Overruns") and the reasons
therefore. If Program Overruns are estimated to exceed by 10% those approved
under the Program (herein called "Excess Program Overruns"), the notice of the
Operator shall contain a notice of a meeting of the Management Committee, to be
held no sooner than 5 Business Days after the date of delivery of the notice,
for the purpose of considering, and if deemed advisable, approving the Excess
Program Overruns. If the Excess Program Overruns are approved by the Management
Committee, the Participants contributing to that Program shall, within 15 days
after the receipt of a written request from the Operator, provide the Operator
with their Cost Share of such Excess Program Overruns. If such Excess Program
Overruns are not approved by the Management Committee, the Operator shall be
responsible for them unless it curtails or abandons such Program.
Effect of Default in Paying Expenditures
7.8 If a Participant at any time fails to pay its Cost Share of Expenditures
(including Program Overruns and approved Excess Program Overruns) as required
under paragraphs 7.4, 7.5 or 7.7, then the Operator may give written notice to
that Participant demanding payment and, if that Participant has not paid such
amount, together with interest thereon at Prime Rate plus 6% from the date on
which payment was due, within 15 days after receipt of such notice, the Interest
of that Participant shall be deemed to be converted to the Net Smelter Return
Royalty and thereafter that party will have no further rights or interest in
respect of the Assets or under this Agreement, save and except its Net Smelter
Return Royalty. Any interest paid by or recovered from the defaulting
Participant shall be for the account of the Participants that provided funds
required of them as a result of the default, pro rata to their contributions, or
otherwise shall be paid to the Participants not in default, pro rata to their
Interests. If, upon the default of a Participant pursuant to this paragraph 7.8,
the other Participant or Participants, if more than one, do not thereafter elect
to contribute pro rata to their Interests or as otherwise agreed by them, the
defaulting Participant's Cost Share of the remaining Expenditures, the Operator
shall have the right to curtail or abandon the Program.
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Program For a Feasibility Report
7.9 Any of the Participants holding in the aggregate not less than a 25%
Interest, shall be entitled to request, by written notice to the other
Participants for consideration at any meeting of the Management Committee, that
the Operator propose a Program for the preparation of a Feasibility Report. If
the Management Committee fails to approve such Program within 60 days following
receipt of such notice, then the Participant giving such notice shall be
entitled to prepare a Feasibility Report at its own expense. The preparation of
a Feasibility Report by a Participant or Participants under this paragraph shall
not affect the rights of the Operator to continue to propose and carry out
Programs as otherwise set forth in this Article.
Participant's Feasibility Report
7.10 In the event that a feasibility report prepared by one or more Participants
does not qualify as a Feasibility Report hereunder, then no further action shall
be taken in respect thereof and any expenses incurred by the Participant which
prepared such feasibility report shall be for its own account and shall not be
considered Expenditures made under this Agreement.
Favourable Feasibility Report
7.11 In the event that a feasibility report prepared by the Operator as a
Program or by one or more Participants pursuant to paragraph 7.9 qualifies as a
Feasibility Report hereunder, then it shall be delivered to the other
Participants and the provisions of Article 8 shall apply.
Provision of Security
7.12 To the extent that security (whether in the form of cash, negotiable
securities, letters of guarantee, irrevocable letters of credit or otherwise) is
required to be posted with or in favour of any regulatory authority or
government in connection with Programs, a Production Program or Operating Plan,
each of the Participants will lodge security, in such form as may be acceptable
to the particular authority, in an amount proportionate to its Interest at the
time and to the total amount of security then required by the authority, and if
the security will expire at a particular time a Participant will replace or
renew its security before that time if required by the authority.
ARTICLE 8
PRODUCTION PROGRAM
Delivery of Proposed Production Program
8.1 At any time after delivery to the Participants of a Feasibility Report
pursuant to paragraph 7.11, the Operator may, and shall within 120 days of
receipt by it from Participants holding in the aggregate not less than a 25%
Interest of a request in writing to do so, prepare and deliver to the
Participants a Production Program which shall be based on such Feasibility
Report. The preparation of the Production Program shall be deemed to be pursuant
to a Program in which each Participant has elected to pay its Cost Share of
Expenditures incurred thereunder. Within 180 days of the receipt by each
Participant from the Operator of a Production Program, each such Participant
shall give written notice to the Operator stating whether it elects to
contribute its Cost Share of the Production Program. Failure to
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
give such notice within such 180-day period shall be deemed to be an election by
such Participant not to contribute to the Production Program.
Production Program to Proceed
8.2 (1) If all of the Participants elect to contribute their respective Cost
Shares of a Production Program, then such Production Program will be deemed to
have been adopted by the Joint Venture and, subject to paragraph 8.3, the
Operator will proceed with such Production Program.
(2) If Participants whose Interests total 75% or more elect to contribute
their respective Cost Shares of a Production Program, then such Production
Program will be deemed to have been adopted by the Joint Venture. Subject to
paragraph 8.3, the Operator will forthwith proceed with such Production Program
and, on completion of such Production Program, the Interests of the Participants
shall be adjusted in accordance with paragraph 5.4.
(3) If Participants whose Interests total 50% or more but less than 75%
elect to contribute their respective Cost Shares of a Production Program, then
such Production Program will be deemed to have been adopted by the Joint
Venture. Subject to paragraph 8.3, the Operator will forthwith proceed with such
Production Program and the Interest of any Participant (the "non-contributing
Participant") who has elected not to contribute its Cost Share of such
Production Program, if such Interest is greater than 25%, will automatically be
reduced to the Carried Interest effective upon the election of the contributing
Participants. Thereafter, the contributing Participants will be obliged to bear
and pay pro rata the 25% Cost Share of the non-contributing Participant, but
following the Completion Date will have the right to receive pro rata according
to their relative Interests the 25% share of Mineral Products to which the non-
contributing Participant would be entitled, until such time as each has received
an amount of Mineral Products, valued in accordance with paragraph 11.2, at 200%
of the additional Cost Share borne by the contributing Participant. If a
Participant assigns part of its Interest then the Carried Interest to which it
and its assignee may become entitled will be in the same proportion as their
respective Interests after such assignment. The Interest of any non-contributing
Participant who has elected not to contribute its Cost Share pursuant to this
paragraph 8.2(3), if such Interest is 25% or less, shall be adjusted in
accordance with paragraph 5.4, along with the Interests of the contributing
Participants, upon completion of the Production Program.
(4) If Participants whose Interests total more than 50% elect not to
contribute their respective Cost Shares of a Production Program, then such
Production Program will be deemed to have been withdrawn.
(5) If the Feasibility Report on which a Production Program is based was
prepared by one or more Participants pursuant to paragraph 7.9, then 125% of the
costs thereof as incurred by such Participants and as supported by written
evidence shall be deemed to be Expenditures and, within 15 days following a
written demand therefor (together with such evidence), the other Participants
shall reimburse the Participant or Participants that prepared such Feasibility
Report to the extent of their respective Cost Shares thereof. Failure by a
Participant to reimburse its Cost Share thereof shall result in dilution of its
Interest under paragraph 5.4, with the non-reimbursed portion as aforesaid
deemed to have been contributed (in addition to its own Cost Share) by the
Participant that prepared the Feasibility Report, or, if more than one
Participant, such shall be apportioned among them in accordance with their
respective contributions to the Costs of preparing the Feasibility Report.
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
(6) Production Program Costs shall only be incurred under and pursuant to
Production Programs deemed to be adopted pursuant to this paragraph 8.2.
Obligation to Pay Production Program Costs and Overruns
8.3 An election to contribute to a Production Program shall make a Participant
liable to pay its Cost Share of all of the Production Program Costs actually
incurred under or pursuant to such Production Program, including Production
Program Overruns (as hereinafter defined) of up to but not exceeding 10%. The
Operator need not proceed with a Production Program until each Participant has
delivered proof, satisfactory to the Operator, of the Participant's ability to
pay its Cost Share of such Production Program including, if required by the
Operator from any Participant whose net worth (according to its last available
balance sheet) is less than 300% of its Cost Share of anticipated Production
Program Costs, letters of credit or other reasonable guarantees of availability
of funds.
Procedures For Payment
8.4 After having elected to contribute to a Production Program which proceeds,
each Participant shall, within 15 days after a Cash Call by the Operator, pay
such portion of its Cost Share of the Production Program Costs as the Cash Call
may require, and provide such security or additional security as may then be
required as contemplated in paragraph 7.12.
Meeting Required To Approve Excess Production Program Cost Overruns
8.5 If it appears to the Operator that Production Program Costs will exceed
those estimated under the Production Program, the Operator shall immediately
give written notice to the Participants outlining the nature and extent of the
additional costs and expenses (herein called "Production Program Overruns") and
the reasons therefor. If Production Program Overruns are estimated to exceed by
10% those estimated under the Production Program (herein called "Excess
Production Program Overruns"), the notice of the Operator shall contain a notice
of a meeting of the Management Committee, to be held no sooner than 5 Business
Days after the date of delivery of the notice, for the purpose of considering,
and if deemed advisable, approving the Excess Production Program Overruns. If
the Excess Production Program Overruns are approved by the Management Committee,
each Participant shall, within 15 days after the receipt of a written request
from the Operator, provide the Operator with its Cost Share of such Excess
Production Program Overruns.
Curtailment of Production Program
8.6 If Excess Production Program Overruns are not approved by the Management
Committee, as provided in paragraph 8.5, the Operator shall be responsible for
them but shall have the right to curtail or abandon the Production Program
unless a Participant that has approved such Excess Production Program Overruns
has advanced the amount of such Excess Production Program Overruns. On so doing,
such Participant shall be entitled to recover the amount of such advance from
the sale of Mineral Products of the other Participant or Participants, together
with interest thereon from the date advanced at a per annum rate equal to the
Prime Rate plus 5%, and the provisions of paragraph 11.3 shall apply with
respect thereto.
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Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Effect of Default in Paying Production Program Costs
8.7 If a Participant at any time fails to pay its Cost Share of Production
Program Costs (including Production Program Overruns and approved Excess
Production Program Overruns) in accordance with paragraph 8.4 or 8.5, the
Operator may give written notice to such Participant demanding payment and, if
such Participant has not paid such amount, together with interest thereon at
Prime Rate plus 6% from the date on which payment was due, within 15 days after
receipt of such notice, such Participant shall be deemed to be in default
hereunder and either, as the Management Committee (excluding the Participant in
default) may determine, (a) its Interest shall be deemed converted to a Net
Smelter Return Royalty, or (b) its Interest shall be diluted in accordance with
paragraph 5.4 and, in addition, it shall be liable for all damages occasioned to
the other Participants by its default hereunder, unaffected by the dilution in
its Interest. If the Management Committee adopts alternative (a), thereafter,
such defaulting Participant shall have no further rights or interest in respect
of the Assets or under this Agreement, save and except for such Net Smelter
Return Royalty, and such conversion shall otherwise not relieve the defaulting
Participant of any liability or obligation incurred up to the time of such
default and conversion. Any interest paid by or recovered from the defaulting
Participant shall be for the account of the Participants that provided funds
required of them as a result of the default pro rata to their contributions, or
otherwise shall be paid to the Participants not in default, pro rata to their
Interest.
Operator's Right to Curtail Production Program Upon Default
8.8 If, upon the default of a Participant pursuant to paragraph 8.7, the other
Participant or Participants, if more than one, do not thereafter elect to
contribute pro rata to their Interests or as otherwise agreed by them, the
defaulting Participant's Cost Share of remaining Production Program Costs, the
Operator shall have the right to curtail or abandon the Production Program.
Completion Bonus
8.9 Within 30 days after the Completion Date, Kores will pay to Leader a bonus
of $300,000 to reflect the achievement of Commercial Production from the
Property contributed by Leader to the Joint Venture.
ARTICLE 9
OPERATING PLANS
Obligation to Pay Operating Costs and Overruns
9.1 Following the Completion Date, each Participant shall be liable to pay its
Cost Share of all Operating Costs incurred under approved Operating Plans,
including Operating Cost Overruns (as hereinafter defined) of up to but not
exceeding 10%. Operating Costs shall only be incurred under and pursuant to
Operating Plans prepared by the Operator and approved by the Management
Committee as provided in this Article.
Operating Plans
9.2 At least 90 days prior to the date the Operator anticipates the Completion
Date will occur, the Operator will propose and deliver to the Participants an
Operating Plan for the first Operating Year.
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Joint Venture Agreement Leader Mining International Inc. and
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Subsequently, at least 90 days before the commencement of each succeeding
Operating Year, the Operator shall propose an Operating Plan by delivery of such
to each Participant for such succeeding Operating Year. Within 30 days of
delivery of a proposed Operating Plan hereunder, a meeting of the Management
Committee shall be convened to review, amend (if deemed appropriate) and approve
same.
Excess Operating Cost Overruns
9.3 Except as herein provided, the Operator shall have the power and authority
to deviate from or make modifications to Operating Plans from time to time, in
accordance with good engineering and mining practices. If it appears to the
Operator that Operating Costs will exceed those estimated under an Operating
Plan, the Operator shall immediately give written notice to the Participants
outlining the nature and extent of the additional costs and expenses (herein
called "Operating Cost Overruns") and the reasons therefor. If Operating Cost
Overruns are estimated to exceed by 10% those estimated under the Operating Plan
(herein called "Excess Operating Cost Overruns"), the notice of the Operator
shall contain a notice of a meeting of the Management Committee, to be held no
sooner than 5 Business Days after the date of delivery of the notice, together
with a proposed amendment to the Operating Plan. The meeting of the Management
Committee shall be convened to review, amend (if deemed appropriate) and approve
same. Excess Operating Cost Overruns not approved by the Management Committee
will be the responsibility of the Operator.
No Agreement on Operating Plan
9.4 If a proposed Operating Plan or amendment thereto is not approved by the
Management Committee, then the Operating Plan or its amendment will be
determined by a special arbitration according to the procedures established
under article 16 and this paragraph 9.4. In such arbitration, each Participant
will be entitled to submit to the arbitrator its proposal for the Operating Plan
or amendment thereto and the arbitrator will be entitled to choose from among
the submissions received the Operating Plan or amendment thereto which, in the
circumstances, provides the optimal return for the Participants over the life of
the mine having regard to the nature of the deposit, the condition of the
Facilities and current and projected market conditions, but will not be entitled
to make any other award. The Operating Plan or amendment thereto chosen by the
arbitrator will be deemed to be an Operating Plan or amended Operating Plan
approved by the Management Committee for the Operating Year in question.
Payment of Operating Costs
9.5 Following the Completion Date, a Participant shall, within 15 days after
receipt of a Cash Call from the Operator, pay such portion of its share of
Operating Costs (including Operating Cost Overruns and approved Excess Operating
Cost Overruns) as the Cash Call may require.
Effect of Default in Paying Operating Costs
9.6 If a Participant fails to pay all or any part of its Cost Share pursuant to
paragraph 9.5, the other Participant or Participants if more than one, shall be
entitled, pro rata to their Interests or as otherwise agreed by them, to pay all
or a portion of the unpaid Cost Share of the defaulting Participant. If the
other Participants pay such unpaid share, then they will be entitled to recover
the amount so paid from the sale of the defaulting Participant's share of
Mineral Products, together with interest thereon from the date so paid at a per
annum rate equal to the Prime Rate plus 6%, and the provisions of paragraphs
11.3 and 15.4 will apply.
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Joint Venture Agreement Leader Mining International Inc. and
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Participant May Require Operations To Be Shut Down
9.7 Any Participant shall be entitled, by notice in writing to the Operator and
the other Participant, to require that Operation of the Property as a mine be
suspended if for a period of 6 consecutive months:
(a) such Participant can demonstrate (as set forth in such notice) that
its Cost Share of Operating Costs has exceeded the proceeds from the
sale of its share of Mineral Products; and
(b) within 30 days after receipt of such notice, the other Participant has
not demonstrated to the Operator that the proceeds from the sale of
its share of Mineral Products have equalled or exceeded its Cost Share
of Operating Costs during such six month period.
If such notice is given to the Operator it shall prepare an Operating Plan for
placing the mine on care and maintenance and shall convene a meeting of the
Management Committee to approve such Operating Plan.
Resumption of Operations
9.8 If at any time after the suspension of operations pursuant to paragraph 9.7,
the Operator determines that the mine can be placed back into Commercial
Production with the Participants' Cost Share of Operating Costs being not more
than 80% of the proceeds which they should realize on the sale of their share of
Mineral Products, the Operator shall prepare an Operating Plan for the
resumption of Operation of the Property as a mine and shall convene a meeting of
the Management Committee to approve such Operating Plan.
ARTICLE 10
MANAGEMENT COMMITTEE
Management Committee
10.1 The Participants shall, as soon as is practicable after the Effective Date,
establish a Management Committee, which shall direct and control the operations
of the Joint Venture and for such purposes shall have full right, power. and
authority to direct and control the Operator in its conduct of activities
hereunder and to determine Joint Venture policies, objectives, procedures,
methods and actions under this Agreement.
Members
10.2 After the Effective Date, and before the first anniversary of this
Agreement, each Participant shall be entitled to two members on the Management
Committee. A Participant may from time to time revoke in writing the appointment
of any of its nominees on the Management Committee and appoint in writing
another in his place. A Participant may from time to time in writing appoint one
alternate member for any member theretofore appointed by such Participant.
Alternate members may attend meetings of the Management Committee and, in the
absence of the member, his alternate member may vote and otherwise act in the
place and stead of a member. Whenever any member or alternate member votes or
acts, his votes or actions shall for all purposes of this Agreement be
considered the actions of the
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Joint Venture Agreement Leader Mining International Inc. and
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Participant whom he represents. The Participants shall give written notice to
each other from time to time as to names, addresses and telephone, telex and
facsimile numbers of their respective members and alternates on the Management
Committee.
Time and Place of Meetings
10.3 Meetings of the Management Committee shall be held not less than quarterly
and in Calgary, Alberta unless all members of the Management Committee agree
otherwise. Any member of the Management Committee may call a meeting at any time
by giving seven days' notice to the other members of the time and place of such
meeting and the general nature of the business to be conducted. Any member of
the Management Committee, or his alternate, may waive in writing the giving of
such notice before or after such meeting. Otherwise, the giving of notices under
this Article shall be governed by Article 17. Any meeting may be held by
telephone conference provided that the representatives of Kores agree and that
during such conference all members present can hear and be heard by the other
members.
Resolutions in Writing
10.4 Any resolution in writing signed by all members of the Management Committee
in one or more counterparts shall be as valid and binding as if passed at a
meeting of the Management Committee duly called and constituted.
Quorum
10.5 Except as herein set out, a quorum for any meeting of the Management
Committee shall consist of a member or members representing each Participant
whose Interest is 25% or more provided that prior to the Final Vesting Date a
quorum shall include a member appointed by Kores. If a quorum is not present
within 30 minutes after the time fixed for holding any such meeting, the meeting
shall be adjourned to the 6th Business Day thereafter at the same time and
place. Notice of any adjournment shall be given forthwith to each member of the
Management Committee who was not present at the adjourned meeting. At the
meeting to which the prior meeting was adjourned, the members (or their
respective alternates) present in person shall form a quorum and may transact
the business for which the meeting was originally convened.
Voting
10.6 At any time, the members of the Management Committee (or their respective
alternates) shall in aggregate have the number of votes which is equal in number
to the Interest held by their appointing Participant at such time, half of which
votes shall be exercised by each member when both of them (or their respective
alternates) are present. The Management Committee shall decide all matters
coming before it at a meeting by the affirmative vote of a majority of the votes
entitled to be cast by members at the meeting. The representative of the
Operator shall act as Chair for each meeting of the Management Committee and, as
such, shall have an additional or casting vote in the case of an equality of
votes on any matter. Notwithstanding any other provision of this paragraph 10.6,
prior to the Final Vesting Date Kores will, solely for the purposes of this
paragraph 10.6, be deemed to have an Interest of 51% and the member it appoints
will in aggregate have 51 votes in respect of Management Committee matters.
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Joint Venture Agreement Leader Mining International Inc. and
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Secretary and Records
10.7 The Management Committee shall appoint a Secretary (who need not be a
member of the Management Committee) who shall keep a record of the meetings of
the Management Committee, and circulate to all members minutes of each meeting
promptly after the conclusion thereof. Each Participant shall have the right to
examine and take extracts of all records of the Management Committee (which
shall be maintained by the operator) at reasonable times and on reasonable
notice at the Operator's offices during regular business hours.
ARTICLE 11
DISPOSITION OF PRODUCTION
Taking In Kind
11.1 Each Participant shall, subject to paragraph 11.3 and Article 15, take in
kind and separately dispose of its share (in proportion to its Interest) of
Mineral Products.
Valuing Mineral Products
11.2 For the purposes of determining the value of Mineral Products taken in
kind, Mineral Products shall be valued and accounted for as of the time of
delivery to or settlement with the purchaser or purchasers thereof, after
deduction of all costs of or related to the marketing thereof, including without
limitation:
(a) all costs of storage and transportation, including insurance;
(b) all commissions and discounts;
(c) such reasonable charge for marketing Mineral Products as is consistent
with generally accepted industry marketing practices; and
(d) all taxes (other than income taxes), royalties or other charges or
imposts provided for pursuant to any law or legal obligation imposed
by any government if paid by the Operator for the account of a
Participant in connection with the disposition of Mineral Products
hereunder.
Right to Share of Production
11.3 If a Participant makes any payment on behalf of a defaulting Participant
pursuant to paragraph 9.6, or if a Participant advances Excess Production
Program Overruns pursuant to paragraph 8.6, then such Participant shall have the
prior and first right to receive the share of Mineral Products of the defaulting
Participant or the Participant which did not advance Excess Production Program
Overruns, as the case may be, until such Participant has received Mineral
Products in kind of a value, determined under paragraph 11.2, equal to the
amount advanced together with interest thereon at the rate specified in
paragraph 8.6 or 9.6, as the case may be.
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Joint Venture Agreement Leader Mining International Inc. and
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11.4 The accounts and records of the paying or advancing Participants relating
to Mineral Products taken in kind or to the calculation of proceeds from the
sale thereof as contemplated in paragraph 11.3 may, at the direction of the
defaulting or non-advancing Participant, be audited annually at the end of each
Operating Year. Any adjustments required by such audit shall be made forthwith
and a copy of the audited statements shall be delivered to the relevant
Participants. All such accounts and records shall be deemed to be correct and
accurate unless questioned by a Participant within 12 months following the end
of the Operating Year to which the accounts relate. The Participants shall make
all reasonable efforts to conduct audits in a manner, which will result in a
minimum of inconvenience to the Participant subject to the audit.
Non-Arm's Length Sale of Product
11.5 If a Participant or an Affiliate of a Participant is a purchaser of Mineral
Products hereunder, and if the value of such Mineral Products is used to
determine any matter arising under this Article, then the Participant shall be
deemed to have received no less than competitive prices for all Mineral Products
so sold.
ARTICLE 12
CONFIDENTIAL INFORMATION
Obligation Not To Disclose
12.1 Each party agrees that all information obtained hereunder shall be the
exclusive property of the parties and shall not be publicly disclosed or used
other than for the activities contemplated hereunder, except as required by law
or by the rules and regulations of any regulatory authority or stock exchange
having jurisdiction or in connection with the filing of an annual information
form, prospectus or similar document, or with the written consent of the other
parties, such consent not to be unreasonably withheld, provided that the
provisions of this Article do not apply to information which is or becomes part
of the public domain other than through a breach of the terms hereof.
Consent To Disclose
12.2 Consent to disclosure of information hereunder shall not be unreasonably
withheld where a party wishes to disclose any such information to a third party
for the purpose of arranging financing for its contributions hereunder or for
the purpose of selling its Interest in the Assets or its interest in this
Agreement, provided that such third party gives its undertaking to the
Participants that any such information not theretofore publicly disclosed shall
be kept confidential and not disclosed to others for a period agreed upon by the
Participants, which shall not be less than two years in duration.
No Liability For Actions of Third Parties
12.3 Where a request is made by written notice for permission to disclose
confidential information hereunder (which notice shall specify the reason for
the disclosure and the name of the person to whom disclosure is to be made), the
other parties shall reply thereto within three Business Days after receipt of
such request, failing which a party shall be deemed to have consented to such
disclosure in the limited circumstances specified in such request.
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Joint Venture Agreement Leader Mining International Inc. and
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Approval of Kores Required
12.4 Leader shall consult with Kores prior to issuing any press release or other
public statement regarding the Property or the activities of the parties with
respect thereto. In addition, Leader shall obtain prior approval from Kores
before issuing any press release or public statement using Kores' name or the
name of any of Kores' Associated Companies or any of the officers, directors or
employees of Kores or its Associated Companies.
Approval of Leader Required
12.5 Kores shall consult with Leader prior to issuing any press release or other
public statement regarding the Property or the activities of the parties with
respect thereto. In addition, Kores shall obtain prior approval from Leader
before issuing any press release or public statement using Leader's name or the
name of any of Leader's Associated Companies or any of the officers, directors
or employees of Leader or its Associated Companies.
ARTICLE 13
RESTRICTIONS ON ALIENATION
No Sale of Interest Except as specified
13.1 Except in accordance with this Agreement no party shall transfer, convey,
assign, mortgage or grant an option in respect of or grant a right to purchase
or in any manner transfer or alienate any or all of its Interest or transfer or
assign any of its rights under the Agreement including, without limitation, the
Net Smelter Return Royalty.
13.2 A party shall not sell any of its Interest or transfer or assign any of its
rights under this Agreement except:
(a) in the case of an assignment of a Net Smelter Return Royalty, in its
entirety and subject to paragraph 5.6;
(b) pursuant to an agreement in which the consideration is expressed only
in lawful money of Canada or of the United States of America;
(c) as a single transaction not directly or indirectly part of some other
sale or purchase or agreement for any additional consideration of any
nature whatsoever; and
(d) when there is no default of any of the covenants and agreements herein
contained by such party;
nor shall it make any assignment of less than its entire Interest if after
giving effect thereto it will hold less than or equal to a 15% Interest.
Sales To Affiliates
13.3 Nothing in the Article shall prevent:
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Joint Venture Agreement Leader Mining International Inc. and
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(a) a sale by a party of all or part of its Interest or a transfer or
assignment of all its rights under this Agreement to an Affiliate of
such party provided that such Affiliate first assumes and agrees to be
bound by the terms of this Agreement, and further provided that a
Participant may not, after such a sale or transfer to an Affiliate,
take or permit any action whereby the Affiliate will cease to be an
Affiliate without first either causing the Affiliate to retransfer
such Interest to the Participant from whom the Interest was acquired
or causing the Affiliate to offer the Interest at fair market value to
the other Participants in the manner provided in this Article. If the
other Participants do not agree with the fair market value placed upon
the Interest, they shall notify the offeror of such within 15 days of
receipt of the offer. If an agreement cannot be reached on the fair
market value of the Interest within 90 days of the expiration of the
15-day period, the value will be determined by arbitration pursuant to
Article 16;
(b) a joint disposition of the Property or all or any part of the other
assets constituting any part of the Assets to a third party by all the
Participants;
(c) an amalgamation or corporate reorganization involving a party hereto
which has the effect in law of the amalgamated or surviving
corporation possessing all the properties, rights and interests and
being subject to all the debts, liabilities and obligations of each
amalgamating or predecessor corporation; or
(d) a sale, forfeiture, charge, withdrawal, transfer or other disposition
or encumbrance which is otherwise specifically required or permitted
under this Agreement.
Terms of an Offer
13.4 Subject to the foregoing, any party hereto (in this Article called the
"Offeror") intending to sell all or part of its Interest or transfer or assign
any of its rights under this Agreement shall first give notice in writing to the
Participants (in this Article called the "Offeree") of such intention together
with the terms and conditions on which the Offeror intends to sell its Interest
or transfer or assign its rights under this Agreement.
13.5 If any party hereto (in this Article also called the "Offeror") receives an
offer to purchase any of its Interest or rights under this Agreement which meets
the requirements of paragraph 13.2 and which it intends to accept, the Offeror
shall not accept the same unless and until the Offeror has first offered to sell
such Interest or rights to the Participants (in this Article also called the
"Offeree") on the same terms and conditions as in the offer received and the
same has not been accepted by the Offeree in accordance with paragraph 13.7.
13.6 Any communication of an intention to sell pursuant to paragraph 13.4 or
13.5 shall be in writing delivered in accordance with Article 17 and shall:
(a) set out fully and clearly all of the terms and conditions of any
intended sale;
(b) if it is made pursuant to paragraph 13.5, include a true copy of the
offer received; and
(c) if it is made pursuant to paragraph 13.5, clearly identify the
offering party and include such information as is known by the Offeror
about such offering party;
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Joint Venture Agreement Leader Mining International Inc. and
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and such communication will be deemed to constitute an offer (the "Offer") by
the Offeror to the Offeree (if more than one the Offer shall be made to the
Offerees in proportion to their respective Interests) to sell the Offeror's
Interest or transfer or assign its rights under this Agreement to the Offeree on
the terms and conditions set out in such Offer.
13.7 Any Offer made as contemplated in paragraph 13.6 shall be open for
acceptance by the Offeree for a period of3O days from the date of receipt by the
Offeree.
Effect of Acceptance of Offer
13.8 If the Offeree accepts the Offer within the time provided in paragraph
13.7, then such acceptance shall constitute a binding agreement of purchase and
sale between the Offeror and the Offeree for the Offeror's Interest or rights
under this Agreement on the terms and conditions set out in the Offer. If there
is more than one Offeree that accepts, then the acceptance shall be in
proportion to their respective Interests or as otherwise agreed by them.
Effect of Not Accepting an Offer
13.9 If no Offeree accepts the Offer within the time limited, the Offeror may
complete the sale of its Interest or its rights under this Agreement on terms
and conditions no less favourable to the Offeror than those set out in the Offer
and, where applicable, only to the party making the original offer to the
Offeror as contemplated in paragraph 13.5, and in any event such sale will be
completed within 60 days from the expiration of the right of the Offeree to
accept such Offer or the Offeror must again comply with the provisions of this
Article.
No Coincident Offers
13.10 Following an Offer under paragraph 13.6, no other Offer may be made by the
Offeror unless and until the 60-day period referred to in paragraph 13.9 has
expired and no sale of the Offeror's Interest or rights has been completed in
accordance with the terms of the first-mentioned Offer.
Operatorship Is Not Transferable Without Consent
13.11 If a party which is the Operator sells its Interest or transfers or
assigns its rights under this Agreement to a third party, its rights and
obligations as Operator under this Agreement shall not be included in such sale
unless the third party is capable of assuming and performing the duties and
obligations of the Operator imposed under this Agreement and the consent of all
Participants is first had and obtained, such consent not to be unreasonably
withheld.
Purchaser's Agreement To Be Bound
13.12 As a condition of the purchase of an Interest or the rights of a party
hereto under this Agreement, the purchaser shall covenant and agree that it will
be bound by this Agreement, including this Article 13, and prior to the
completion of any such purchase, the purchaser shall deliver to each of the
other parties hereto notice to that effect in a form satisfactory to such
parties.
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Joint Venture Agreement Leader Mining International Inc. and
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Obligation To Hold Interest Free of Encumbrances
13.13 Except as hereinafter provided in this Article 13, a Participant shall not
encumber or suffer to exist any lien, charge or encumbrance on its Interest.
Limited Right to Mortgage
13.14 Notwithstanding the provisions of paragraph 13.13, a Participant may
pledge, mortgage, charge, grant a security interest in or otherwise encumber (in
this paragraph a "Charge") the whole or any part of its respective Interest in
order to finance its Cost Share of Production Program Costs or Operating Costs,
but only upon the condition that the holder of such Charge, (in this paragraph a
"Chargee"), first enters into a written agreement with the other Participants in
form satisfactory to counsel for such other Participants, binding upon the
Chargee, to the effect that:
(a) the Chargee will not enter into possession or institute any
proceedings for foreclosure or partition of the encumbering
Participant's Interest and that the Charge shall be subject to the
provisions of this Agreement including, without limitation, the
provisions of Articles 11 and 15; and
(b) the Chargee's remedies under the Charge shall be limited to the sale
of the whole, (but only of the whole), of the encumbering
Participant's secured Interest:
(i) to the other Participants, if more than one then in proportion to
their respective Interests at that time; or
failing any such sale then either:
(ii) at a public auction to be held after 90 days' prior notice to the
other Participants but with a reserve price and terms no more
favourable to a third party purchaser than those last offered by
the Chargee to, and declined by, the other Participants, or
(iii) through private sale;
and provided that, prior to completing the purchase, the purchaser delivers
an agreement, in form reasonably satisfactory to counsel for the other
Participants, that it assumes the obligations of the encumbering
Participant under this Agreement and agrees to be bound by the terms of
this Agreement as a Participant and party hereunder.
Waiver of Right to Partition
13.15 Each Participant hereto hereby waives its rights to seek partition of the
Property or any part thereof.
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Joint Venture Agreement Leader Mining International Inc. and
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ARTICLE 14
AREA OF INTEREST AND ABANDONMENT
Acquisition of Additional Rights
14.1 If, during the currency of this Agreement, any Participant or any Affiliate
or agent thereof (the Participant involved herein called an "Acquiring Party")
by staking or otherwise, directly or indirectly, acquires or proposes to acquire
any right to explore, to mine, to take water or to use surface lands (or any
interest in any such rights) in any area within the Area of Interest (herein
called an "Additional Right"), such Additional Right will be subject to the
terms of paragraphs 14.2, 14.3 and 14.4.
Notice of Acquisition of Additional Rights
14.2 The Acquiring Party will notify the Participants in writing (the
"Acquisition Notice") of the acquisition or proposed acquisition of Additional
Rights as contemplated hereby within thirty (30) days of making the acquisition
or developing the proposal. The Acquisition Notice will specify the nature and
location of the Additional Rights, the acquisition costs, the terms upon which
the acquisition is proposed to be made or was made and any other information
which may be relevant.
Election to Acquire
14.3 If the non-acquiring Participants elect to make an Additional Right subject
to this Agreement, the Operator will pay to the Acquiring Party the whole amount
of such acquisition cost and will include such costs in any subsequent Cash
Call. Such Additional Right will thereafter form part of the Property for all
purposes of this Agreement. The Operator will do or cause to be done all such
acts and things and will execute such instruments as are necessary to convey an
undivided beneficial and legal interest in and to the Additional Right to each
Participant in proportion to its Participation Interest. If the non-acquiring
Participants do not elect to make an Additional. Right subject to this Agreement
as herein provided, then all costs incurred by the Acquiring Party will be
solely for its own account and such Additional Right will be held by the
Acquiring Party free and clear of any further obligations to the Participants
under the provisions of this Agreement and the area covered by the Additional
Right will not thereafter form part of the Area of Interest.
Meaning of "Acquisition Costs"
14.4 For purposes of this Article 14, "Acquisition Costs" means the
consideration paid in respect of the acquisition of the Additional Right
including the purchase price, registration fees, legal costs and other
out-of-pocket costs, but does not include an allocation of the overhead of the
Acquiring Party or fees or payments paid by the Acquiring Party to any Affiliate
or to either of their employees, officers or directors. If any Acquisition Costs
are not expressed in money, such Acquisition Costs will be, for purposes of this
definition, the value of such costs in money calculated on the basis that the
Acquiring Party will make no profit or loss therefrom.
Abandonment of Property
14.5 The Management Committee may decide to surrender or abandon a portion of
the Property. provided such decision is made at least 180 days prior to the date
on which such portion shall cease to be in good standing in the records of the
appropriate governmental authority, and provided further that notice 2.. ~
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Joint Venture Agreement Leader Mining International Inc. and
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of such proposed abandonment is forthwith given to any Participant which was not
represented at the meeting at which such decision was made. Those Participants
which did not vote in favour of the abandonment may elect, by notice to the
Operator within 30 days following the meeting or such notification, as the case
may be, that the portion to be abandoned be transferred to it, or if more than
one, to them in proportion to their respective Interests, whereupon the Operator
and those Participants that voted in favour of the abandonment shall, forthwith
after the expiry of the applicable 30-day period, transfer, assign and quit
claim the subject portion to the Participant or Participants so electing.
Failing any such election, the subject portion may be abandoned or surrendered
as decided upon. Following a transfer or abandonment under this paragraph, the
portion so transferred or abandoned shall thereafter cease to form part of the
Property and shall no longer be subject to this Agreement, save and except with
respect to such obligations or liabilities of the Participants as have accrued
hereunder up to the date of such transfer or abandonment.
ARTICLE 15
OPERATOR'S LIEN
Operator's Lien
15.1 Each Participant hereby mortgages, charges, assigns and grants a security
interest (a "Lien") to and in favour of the Operator in:
(a) the undivided share of Mineral Products owned or to be owned by such
Participant;
(b) the Interest of such Participant; and
(c) all personal property in any form derived directly or indirectly from
any dealing with or comprised in or related to the collateral
described in subparagraphs (a) and (b), or the proceeds therefrom,
including insurance proceeds and any other payment representing
indemnity or compensation for loss of or damage thereto or the
proceeds therefrom,
(collectively, the "Collateral") as security for:
(d) their respective obligations from time to time to make contributions
to Operating Costs as contemplated in Article 9; and
(e) their respective shares of the costs of a termination and liquidation
under paragraph 6.6.
Enforcement of Lien By the Operator
15.2 Such Lien in respect of a Participant who is in default of one or more of
its obligations as specified in paragraph 15.1 (in this Article 15 a "Defaulting
Participant") may be enforced by the Operator against the Defaulting Participant
by any one or more of the following:
(a) the sale or lease (either to one or more of the other Participants, or
to a third party, but subject to Article 13) of all or part of the
Interest of the Defaulting Participant for cash or on credit or partly
for cash and partly on credit;
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Joint Venture Agreement Leader Mining International Inc. and
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(b) the sale of the Defaulting Participant's share of Mineral Products for
cash or on credit or partly for cash and partly on credit;
(c) the collection and/or retention of receipts due to the Defaulting
Participant from the sale of Mineral Products or any other Assets and
the application of the receipts so collected to the obligations,
amounts and costs referred to in subparagraphs 15.1(d) and (e); or
(d) without restricting the provisions of subparagraphs (a), (b) and (c),
the exercise by the Operator of any other rights and remedies
available at law or in equity, which may be exercised in the
alternative, concurrently or cumulatively.
In the case of the sale of the Defaulting Participant's Interest or the sale of
Mineral Products pursuant to subparagraph (a) and (b) respectively, the
Defaulting Participant shall execute and deliver to the purchaser on demand any
instrument reasonably necessary to confirm to the purchaser the title to the
property so sold and the Operator is hereby irrevocably authorized by each
Participant to execute on its behalf and in its name any such confirmatory
instrument.
Participant's Lien
15.3 Each Participant hereby grants a Lien to and in favour of each other
Participant in the Collateral as security for repayment by the Defaulting
Participant of all amounts paid or advanced by the Participant pursuant to
paragraphs 8.6, 9.6 and to which it may be entitled pursuant to paragraph 8.7,
together with interest thereon at the rate specified in paragraph 8.6, 8.7 or
9.6, as the case may be. The Lien under this paragraph 15.3 shall rank pari
passu with the Operator's lien under paragraph 15.1 and may be enforced in
accordance with the provisions of paragraph 15.2 mutatis mutandis.
Right of Participant To Deal With Mineral Product
15.4 The Liens hereby granted by each Participant to the Operator and to each of
the other Participants shall in no way hinder or prevent a Participant, at any
time or from time to time until the security interest hereby constituted shall
have become enforceable, from:
(a) selling, assigning, transferring, conveying or otherwise disposing of
all or any part of its Mineral Products, free from such Liens, in the
ordinary course of its business and for the purpose of carrying on the
same, provided that any forward sale commitment by a Participant shall
be without prejudice to enforcement by the Operator or another
Participant of its Lien in respect of any Mineral Products that have
not at the time been delivered to meet that commitment.
(b) selling, assigning, conveying, transferring or otherwise disposing of
all or an undivided part of its Interest in accordance with the
provisions of Article 13;
(c) granting a charge as contemplated in and in accordance with paragraph
13.14;
provided that any such action is not otherwise in breach of any provision of the
Agreement.
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Joint Venture Agreement Leader Mining International Inc. and
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ARTICLE 16
ARBITRATION
Arbitration of Disputes
16.1 All disputes arising out of or in connection with this Agreement, or in
respect of any defined legal relationship associated therewith or derived
therefrom, shall be referred to and finally resolved by arbitration under the
rules of the British Columbia International Commercial Arbitration Centre
("BCICAC") by a sole arbitrator.
Notice to Arbitrate
16.2 Any party may refer any such matter to arbitration by written notice to the
others and, within 30 days after receipt of such notice, the parties will
endeavour to agree on the appointment of an arbitrator, who shall be capable of
commencing the arbitration within 21 days of his appointment. The arbitrator
shall be a person who by a combination of education and experience is competent
to adjudicate the matter in dispute and who has indicated his willingness and
ability to act as arbitrator in accordance with this Article 16.
BCICAC Arbitration
16.3 The appointing authority for the arbitration shall be the BCICAC. The case
shall be administered by the BCICAC in accordance with its "Procedures for Cases
under the BCICAC Rules". The place of arbitration shall be Vancouver, British
Columbia, Canada, and the language of the arbitration shall be English.
Arbitration Award
16.4 The award of the arbitrator shall be final and binding upon each of the
parties and shall not be subject to appeal or judicial review.
ARTICLE 17
NOTICE
Means of Notice
17.1 Any notice, direction or other communication required or permitted to be
given under this Agreement shall be in writing and may be given by personal
delivery or by electronic means such as facsimile transfer or other similar form
of telecommunication, in each case addressed as follows:
(a) If to Leader Mining International Inc. at:
530 - 400 Fifth Avenue S.W.
Calgary, Alberta
T2P 0L6
Attention: Jasi Nikhanj
Fax: 1-403-234-7504
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Joint Venture Agreement Leader Mining International Inc. and
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b) If to Kores Canada Corp. at:
c/o Korea Resources Corporation
686-48 Shindaebang-Dong, Dongjak-Ku
Seoul 156-706, Korea
Attention: Sung-Hoon Kang
Fax: 82-2-840-5608
with a copy to:
Stikeman, Elliott
1700 -- 666 Burrard Street
Vancouver, British Columbia
V6C 2X8
Attention: Janis D. Busse
Fax:1-604-681-1825
Effective Time of Notice
17.2 Any notice, direction or other communication aforesaid will, if delivered,
be deemed to have been given and received on the day it was delivered and,
transmitted electronically, will be deemed to have been given and received on
the first Business Day following transmission thereof, unless the recipient can
demonstrate on the balance of probabilities that the transmission was not by
then received.
Change of Address For Notice
17.3 Any party may at any time give to any other party notice in writing of any
change of address detail for the party giving such notice, and from and after
the giving of such notice, the address details set for in paragraph 17.1 will be
deemed to be so modified.
ARTICLE 18
FORCE MAJEURE
Events
18.1 No party will be liable for its failure to perform any of its obligations
under this Agreement due to a cause beyond its control (except those caused by
its own lack of funds) including, but not limited to acts of God, fire, flood,
explosion, strikes, lockouts or other industrial disturbances, laws, rules and
regulations or orders of any duly constituted court or governmental authority,
nonavailability of materials or transportation or protests or demonstrations by
environmental lobbyists, First Nations or indigenous peoples' groups (each an
"Intervening Event").
<PAGE>
45
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Extension of Time Periods
18.2 All time limits imposed by this Agreement (other than for the payment of
monies) affected by an Intervening Event will be extended by a period equivalent
to the period of delay resulting from an Intervening Event described in this
Article.
Obligation To Eliminate Events Causing Force Majeure
18.3 A party relying on the provisions of this Article will take all reasonable
steps to eliminate any Intervening Event and, if possible, will perform its
obligations under this Agreement as far as practical. but nothing herein will
require such party to settle or adjust any labour dispute or to question or to
test the validity of any law, rule, regulation or order of any duly constituted
court or governmental authority or to complete its obligations under this
Agreement if an Intervening Event renders completion impossible.
Notice of Occurrence
18.4 A party relying on the provisions of this Article shall give notice to the
other parties forthwith upon the occurrence of the Intervening Event and
forthwith after the end of the period of delay when such Intervening Event has
been eliminated or rectified.
ARTICLE 19
GENERAL PROVISIONS
Entire Agreement
19.1 This Agreement constitutes the entire agreement between the parties and
replaces and supersedes all prior agreements, memoranda, correspondence
communications, negotiations and representations, whether oral or written,
express or implied, statutory or otherwise between the parties with respect to
the subject matter herein. This Agreement may not be amended or modified except
by an instrument in writing signed by each of the parties hereto except that
amendments to any part of this Agreement other than the definition of Net
Smelter Return Royalty and Schedule 2 may be made by the Participants and
without the execution thereof by any party that holds a Net Smelter Return
Royalty and shall be as effective as if executed by each such party.
Waiver
19.2 No consent or waiver, express or implied, by any party to or of any breach
or default by any other party of any or all of its obligations under this
Agreement will:
(a) be valid unless it is in writing and stated to be a consent or waiver
hereunder;
(b) be relied upon as a consent or waiver to or of any other breach or
default of the same or any other obligation;
(c) constitute a general waiver under this Agreement; or
<PAGE>
46
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
(d) eliminate or modify the need for a specific consent or waiver in any
other or subsequent instance.
Further Assurances
19.3 The parties will execute such further and other documents and do such
further and other things as may be necessary or convenient to carry out and give
effect to the intent of this Agreement.
Manner of Payment
19.4 Except as otherwise provided herein, all payments to be made to any party
hereunder may be made by cheque or draft mailed or delivered to such party at
its address for notice as provided herein, or for the account of such party at
such bank or banks in Canada as such party may designate from time to time by
written notice. Such bank or banks shall be deemed the agent of the designating
party for the purpose of receiving, collecting and receipting such payment.
Termination
19.5 (1) In addition to provisions for its termination elsewhere in this
Agreement, the Joint Venture will terminate:
(a) when there are only two Participants, upon the conversion of a
Participant's Interest to the Net Smelter Return Royalty, or to the
Carried Interest as contemplated in paragraph 8.2, or otherwise when
there is only one Participant remaining;
(b) if the Participants have agreed to wind up the Joint Venture or it has
been terminated pursuant to paragraph 6.6, then following the sale,
abandonment or liquidation of all of the Assets and the distribution
of the proceeds therefrom and any other Joint Venture funds, net of
any Joint Venture obligations and liabilities, to the Participants pro
rata according to their Interests, but only if all reclamation and
closure obligations of the Joint Venture have been paid or provided
for.
Upon any termination which results from there being only one Participant, such
Participant will continue to have and bear all of the Participant's rights and
obligations in relation to any Net Smelter Return Royalty (including, without
limitation, the purchase option described in paragraph 5.6) and any Carried
Interest remaining at the time of such termination.
(2) This Agreement will terminate upon the occurrence of the earliest of:
(a) the Effective Date or the first Anniversary Date, as described in
paragraph 3.4;
(b) the termination of the Joint Venture pursuant to paragraph 19.5(l)(b);
(c) after the Joint Venture has been terminated and only the Net Smelter
Return Royalty remains, upon the exercise of the purchase option
described in paragraph 5.6.
<PAGE>
47
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Default
19.6 Except for the provisions of this Agreement providing for elections to
contribute and contributions to Programs and Production Programs and Operating
Costs, with which the Participants must strictly comply, and except as otherwise
provided in this Agreement, if any Participant is in default of any requirement
herein set forth, any other Participant may give written notice to the
defaulting Participant specifying the default. The defaulting Participant will,
as soon as possible after receipt of such notice commence to remedy the default.
Failure to promptly to commence to remedy the default or to cure the default
(and thereafter to proceed continuously and diligently to complete all required
remedial action) within the 30-day period after such notice will be grounds any
non-defaulting Participant to seek any remedy to which it may be entitled on
account of such default; provided that if there is any disagreement between the
defaulting Participant and any other Participant as to whether a default has
occurred, then the matter may be submitted to arbitration under Article 16, and
the Participant in question shall not be considered in default of any obligation
determined by the arbitration so long as it commences to remedy the default
within 10 days after the arbitration decision or within such longer period as
may be fixed in the arbitration award.
Time of The Essence
Time shall be of the essence in the performance of this Agreement.
Enurement
19.8 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
Rule Against Perpetuities
19.9 If any right, power or interest of any party in any property under this
Agreement would violate the rule against perpetuities, then such right, power,
or interest shall terminate at the expiration of 20 years after the death of the
last survivor of all the lineal descendants of Her Majesty, Queen Elizabeth II
of England, living on the date of execution of this Agreement.
Remedies
19.10 Each of the Participants agrees that its failure to comply with the
covenants and restrictions set out in Articles 12, 13 and 14, could constitute
an injury and damage to the other Participants impossible to measure monetarily
and, in the event of any such failure, the other Participants shall, in addition
and without prejudice to any other rights and remedies at law or in equity, be
entitled to injunctive relief restraining, enjoining or specifically enforcing
any acquisition, sale, transfer, charge or encumbrance save in accordance with
or as required by the provisions of Articles 13 or 14, or restraining or
enjoining any breach of Article 12, as the case may be, and any party intending
to breach the provisions of said Articles 12, 13, or 14, hereby waives any
defence it might have in law to such injunctive or other equitable relief.
<PAGE>
48
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
EXECUTION
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written~
LEADER MINING INTERNATIONAL INC.
by:/s/
and: /s/
KORES CANADA CORP.
by:/s/
<PAGE>
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
SCHEDULE 1
to an Agreement between Leader Mining International Inc. and Kores Canada Corp.
dated as of the 10th day of November, 1999.
PROPERTY
PART I - LEADER PROPERTY
-registered owner: Leader Mining International Inc. 100%
Disposition Ha Work Due Credit $
ML 5269 648 Oct.8/OO 4,109,152.63
CBS 2128 1100 Feb.19/OO 4,426.16
CBS 3144 413 Jul.14/OO 1,661.82
CBS 6822 950 Jan.17/OO 13,610.77
CBS 6824 700 Mar.1O/OO 2,816.66
CBS 6825 100 Mar.19/OO 402.37
CBS 6826 1000 Mar.13/OO 4,023.79
CBS 6827 1000 Mar.13/OO 4,023.79
CBS 6828 840 Jan.27/OO 3,379.99
CBS 6829 700 Jan.28/OO 2,816.66
CBS 6830 900 Jan.28/OO 3,621.42
CBS 6833 408 Feb.1O/OO 1,641.70
CBS 6834 900 Jan.31/OO 2,086.25
CBS 6835 1275 Jan.31/OO 23,956.45
CBS 6935 1650 Mar.17/OO 6,639.25
CBS 8387 806 Mar.4/OO 3,243.17
CBS 8388 300 Mar.4/OO 1,207.13
CBS 8389 2065 Mar.4/OO 8,339.11
CBS 8390 1500 Mar.4/OO 6,035.67
CBS 8391 615 Mar.4/OO 2,474.64
CBS 8392 954 Feb.26/OO 3,838.69
CBS 8393 225 Feb.26/OO 905.36
CBS 8394 225 Feb.26/OO 905.36
CBS 8395 100 Feb.26/OO 402.37
<PAGE>
Schedule I-- Page 2
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Disposition Ha Work Due Credit $
CBS 8396 225 Feb.26/00 905.36
CBS 8397 100 Feb.26/00 402.37
CBS 8398 300 June 12/00 1,207.13
CBS 8399 225 June 12/00 905.36
CBS 8400 1600 June 12/00 6,438.05
CBS 8401 600 Mar.l0/00 2,414.28
CBS 8402 825 Mar.10/00 3,319.62
CBS 8403 1192 Mar.l0/00 4,796.36
S92754 790 Feb.20/00 3,298.80
S92755 1450 Feb.4/00 105,270.64
S95890 1100 Jan.31/00 14,492.83
S96198 940 Feb.7/00 69,265.51
S102633 1000 Feb.19/00 4,023.79
S102634 1250 Feb.19/00 5,029.72
S102635 800 Feb.26/00 3,219.03
S102636 150 Feb.24/00 603.57
S102637 100 Feb.26/00 96,893.52
S102638 250 Feb.26/00 343,404.33
S102639 565 Feb.26/00 2,273.44
S102640 416 Feb.19/00 1,673.89
S102641 225 Feb.25/00 905.36
S102642 100 Feb.25/00 402.37
S105553 3910 June 4/00 15,733.01
S105554 400 June 6/00 1,609.51
S105555 2515 June 4/00 10,119.82
S105556 135 June 4/00 543.22
S105557 1625 June 6/00 6,538.65
S105558 825 June 6/00 3,319.62
S105559 225 June 6/00 905.36
S105560 900 June 12/00 3,621.42
S105561 300 June 12/00 1,207.13
S105562 1800 June 12/00 221,939.51
<PAGE>
Schedule I -- Page 3
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Disposition Ha Work Due Credit $
S105563 86 Oct.6/00 62,203.73
S105564 531 Oct.21/00 30,595.84
S105565 1030 Oct.22/00 98,124.35
S105566 1361 Oct.27/00 63,776.15
S105567 2839 Oct.27/00 177,626.78
S105569 2269 Mar.17/00 9,129.97
S105570 782 Mar.17/00 3,146.61
S105571 215 Mar.17/00 865.00
S105572 1023 Mar.17/00 4,116.33
S105573 3420 Mar.24/00 13,761.35
S105574 1025 Mar.27/00 4,124.38
S105575 3698 Mar.24/00 14,879.96
S105576 233 Mar.27/00 937.55
S105577 28 Mar.27/00 112.67
S105578 113 Mar.27/00 454.68
S105579 2382 Apr.11/00 9,584.66
S105580 4264 Apr.1l/00 17,157.43
S105581 538 Oct.28/00 2,164.80
S105582 248 Oct.28/00 997.90
S105613 1560 Mar.9/00 24,997.12
S105614 999 Oct.28/00 4,019.76
S105615 900 Mar.9/00 14,421.42
S105616 280 Mar.20/00 4,486.67
S105996 1036 Apr.l/00 18,847.73
S105997 335 Apr.1/00 8,618.60
S106002 454 Mar.20/00 7,274.80
<PAGE>
Schedule I-- Page 4
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
PART II- COPPER OUEST PROPERTY
- registered owner: Copperquest Inc.
Disposition Ha Work Due Credit $
CBS 3187 437 Oct.18/00 3,182.86
CBS 3188 699 Oct.18/00 71,172.86
CBS 3189 1117 Oct.18/99 4,494.57
CBS 3190 515 Oct.18/00 44,960.54
CBS 3223 100 Oct.18/00 800.81
CBS 3224 312 Oct.18/00 14,616.47
CBS 3225 210 Aug.1/00 96,316.42
CBS 3226 225 Aug.1/00 414,711.89
<PAGE>
Schedule I -- Page 5
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
PART III - CONSOLIDATED PINE CHANNEL PROPERTY
-registered owner: Consolidated Pine Channel Gold Corp. 100%
Disposition Ha Work Due Credit $
S99064 76 Jan.23/00 1,883.01
899065 24 Jan.23/00 594.64
899066 40 Jan.23/00 991.07
8104649 560 Oct.13/99 434.74
8104835 150 Feb.20/00 116.46
8104836 270 Feb.20/0O 210.22
8104837 875 Dec.14/99 679.30
8104995 1575 Feb.20/00 1,222.74
8104996 620 Dec.14/99 481.34
8105168 420 Feb.20/00 326.09
8105169 144 Feb.20/00 111.81
<PAGE>
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
SCHEDULE 2
to an Agreement between Leader Mining International Inc. and Kores Canada Corp.
dated as of the 10th day of November, 1999.
NET SMELTER RETURN ROYALTY
Interpretation
1.1 Where used herein:
"Agreement" means the above-referenced agreement, including any amendments
thereto or renewals or extensions thereof;
"Deductions" means the deductions from Gross Sales that are permitted in
determining the Royalty under the Agreement;
"Gross Sales" means the gross revenues from sales of Mineral Products;
"Holder" means the person or persons that are from time to time entitled to
be paid the Royalty under the Agreement;
"Royalty" means the Net Smelter Return Royalty payable under the Agreement;
and all other defined terms used in this Schedule, which are not defined
herein, have the meanings ascribed thereto in the Agreement.
1.2 All calculations and computations relating to the Royalty shall be carried
out in accordance with Canadian generally accepted accounting principles to the
extent that such principles are not inconsistent with the provisions of the
Agreement and this Schedule 2.
Calculation and Payment of Royalty
2.1 The Royalty shall be:
(a) calculated by each Participant as to its respective share of Royalty.
and
(b) calculated and paid on a quarterly basis within 45 days after the end
of each quarter of the Operating Year, based on the Gross Sales and
Deductions for such quarter which relate to the Participant's share of
Mineral Products sold during the quarter.
2.2 The Royalty shall be payable by each Participant as follows:
(a) each payment of Royalty will be accompanied by an unaudited statement
indicating the calculation of the Royalty hereunder in reasonable
detail and the Holder will receive, within 3 months of the end of each
Operating Year, an annual summary unaudited statement (an "Annual
Statement") showing in reasonable detail the calculation of the
Royalty for the last completed Operating Year;
<PAGE>
Schedule 2 -- Page 2
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
(b) the Holder will have 45 days from the time of receipt of the Annual
Statement to question the accuracy thereof in writing and, failing
such objection, the Annual Statement will be deemed to be correct and
unimpeachable thereafter;
(c) if the Annual statement is questioned by the Holder, and if such
questions cannot be resolved between the Holder and the Participant
that prepared the Annual Statement, then the Holder will have 12
months from the time of receipt of the Annual Statement to have it
audited, which will initially be at the expense of the Holder;
(d) the audited Annual Statement will be final and determinative of the
calculation of the Royalty for the audited period and will be binding
on the Holder and the Participant that prepared the Annual Statement
and any overpayment of Royalty will be deducted from future payments
of Royalty and any underpayment of Royalty will be paid to the Holder
forthwith;
(e) the costs of the audit will be borne by the Participant that prepared
it if the Annual Statement overstated the Royalty payable or
understated the Royalty payable by more than 1% and otherwise will be
borne by the Holder, and if the party that prepared the Annual
Statement is obligated to pay for the audit it will forthwith
reimburse the Holder for any of the audit costs which it has paid; and
(f) the Holder will be entitled to examine, on reasonable notice and
during normal business hours, such books and records as are reasonably
necessary to verify the payment of the Royalty to it from time to
time, provided however that such examination shall not reasonably
interfere with or hinder the Participant's operations or procedures.
Inclusion of Income Taxes in Costs
3.1 Notwithstanding anything to the contrary herein contained, if there is any
tax ("Tax") on income paid or payable by a Participant by reason of the fact
that the Royalty, in whole or in part, is or becomes non-deductible to the
Participant for the purposes of calculating its taxable income:
(a) if the Royalty is not required to be included in determining the
taxable income of the Holder, the Participant may deduct from the
amount of Royalty otherwise payable by it hereunder, the full amount
of the Tax; and
(b) if the Royalty is in whole or in part required to be included by the
Holder in its taxable income, the Participant may deduct from the
amount of Royalty otherwise payable by it hereunder, that percentage
of such Tax that equals the percentage of the Royalty which is not
required to be included by the Holder in its taxable income, in order
for the Tax to be shared pro rata by the Participant and the Holder.
Segregation of Royalty
4.1 The determination of Royalty hereunder is based on the premise that
production will be developed solely on the Property. Other mining properties may
be incorporated with the Property into a single mining project and the metals,
ores or concentrates pertaining to each may be blended at the time of mining or
at any time thereafter, provided however, that the respective mining properties
(including the
<PAGE>
Schedule 2-- Page 3
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Property) shall bear and have allocated to them their proportionate part of
expenditures relating to the bringing of such single mining project into
Commercial Production and thereafter operating the same and shall have allocated
to them the proportionate part of the revenues realized from such single
operation all as determined in accordance with generally accepted accounting
principles and from records maintained by the Operator. The Holder shall have
the right, during reasonable business hours and upon prior notice to the
operator and Participant, to enter upon the mining properties and to inspect the
plant and procedures followed with respect to allocations made under this
paragraph provided that such entry shall be at the sole risk and cost of the
Holder. If the parties disagree on the allocation of actual proceeds received
and deductions therefrom, such shall be referred to arbitration in the manner
provided in Article 16 of the Agreement and the arbitrator shall have reference
first to the Agreement, and then, if necessary, to practices used in mining
operations that are of a similar nature. The arbitrator shall be entitled to
retain such independent mining consultants and financial advisors as he
considers necessary. The decision of the arbitrator shall be final and binding
on the parties.
END OF SCHEDULE 2
<PAGE>
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
SCHEDULE 3
to an Agreement between Leader Mining International Inc. and Kores Canada Corp.
dated as of the /c day of November, 1999.
ACCOUNTING PROCEDURES
PART I - GENERAL PROVISIONS
Definitions
1.1 Where used herein:
"Costs" means Expenditures, Production Program Costs and/or Operating
Costs;
"Fixed Assets" means those Assets which consists of plant and equipment
acquired for the Operations;
"Material" means those Assets which consist of materials, equipment and
supplies acquired for the Operations;
"Operations" means the activities hereunder in connection with the
exploration and development of the Property and with the Operation of the
Property as a mine;
"New Price" means the current price of new Material from a reputable
supplier from whom the Material is normally available;
"Non-Operator" means a Participant other than the Operator;
"Operating Account" has the meaning ascribed to that term in paragraph 2 of
these Accounting Procedures;
"Operation and Maintenance" means operation and maintenance of the
Property, any Mine and the Assets in accordance with the Agreement and
applicable Programs, Feasibility Studies and Operating Plans; and
"Proportionate Share" for any Participant means that percentage which is
equal to the Participant's Interest at the relevant time;
and all other defined terms used in this Schedule, which are not defined herein,
have the meanings ascribed thereto in the Agreement.
1.2 All books and records and the Joint Account shall be kept in accordance with
Canadian generally accepted accounting principles to the extent that such
principles are not inconsistent with the provisions of the Agreement and this
Schedule 3.
General Accounting Records
1.3 The Operator will maintain detailed and comprehensive cost accounting
records in accordance with these Accounting Procedures, including general
ledgers, supporting and subsidiary journals,
<PAGE>
Schedule 3--Page 2
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
invoices, cheques and other customary documentation, sufficient to provide a
record of Costs and periodic statements of financial position (collectively the
"Operating Account"). These records will be retained for the duration of the
period allowed the Participants for audit or the period necessary to comply with
tax or other regulatory requirements. The records will reflect all obligations,
advances and credits of the Participants.
Operating Statements
1.4 The Operator will provide an operating statement to each Non-Operator no
more than 45 days after the first day of each month commencing with the month
following the Completion Date showing the Non-Operator's Proportionate Share of
Costs for the preceding month. Operating statements will include the following:
(a) fixed Assets acquired with a value of $50,000 or more per item;
(b) ordinary charges and credits summarized by appropriate classifications
of the nature thereof;
(c) other unusual charges and credits, in reasonable detail; and
(d) a summarized trial balance for the Joint Operation.
1.5 During the period prior to the Completion Date, the Operator will provide an
operating statement showing the Costs incurred under such of items (a), (b), and
(c) above as are applicable and, after the Final Vesting Date, each
Participant's Proportionate Share thereof. These statements will be provided at
such intervals, if any, as are specified elsewhere in the Agreement or in the
absence of such specification, at such intervals as the Operator may decide.
Cash Calls and Payments
1.6 Not less than 15 days prior to the first day of each month the Operator may
bill each Non-Operator by way of a Cash Call, in which it will credit or deduct
an amount equal to any adjustment in the Costs recorded in any previous month.
Not later than the first day of the month to which the advance relates, or, if
the first day of the month is not a Business Day, then on the next succeeding
day that is a Business Day, each Non-Operator will remit its Proportionate Share
of the advance so requested.
1.7 The amount of any Cash Call billed in accordance with paragraph 1.7 may be
increased to include a special advance if authorized by the Management Committee
or if the Costs for the relevant month are expected by the Operator to exceed
the forecast Costs for the month as a result of the acceleration in the
incidence of Costs provided for in any Program, Production Program or Operating
Plan but previously forecast to arise in a subsequent month.
1.8 Each Non-Operator will pay Cash Calls from the Operator within 15 days after
receipt thereof.
1.9 All advances from the parties (including the Operator) will be deposited in
the Joint Venture Account maintained pursuant to the Agreement.
<PAGE>
Schedule 3--Page 3
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
Unpaid Accounts
1.10 If payment of any Cash Call is not made within the time stipulated in
paragraph 4.3 of these Accounting Procedures, then the provisions of paragraphs
7.9, 8.7 and 9.6 of the Agreement, as applicable, will apply.
Right to Protest Cash Calls
1.11 Payment of any Cash Calls will not prejudice the right of Non-Operator to
protest or question the correctness thereof. Subject to paragraph 3.6 of the
Agreement, all statements rendered to a Non-Operator will conclusively be
presumed to be true and correct after 90 days following the end of the calendar
year to which the statement relates, unless within the said 90-day period, the
Non-Operator takes written exception thereto and makes claim on the Operator for
adjustment in accordance with the provisions of paragraph 3.6 of the Agreement
mutatis mutandis. The provisions of this paragraph will not prevent adjustments
resulting from physical inventory of Material.
Audits
1.12 The Management Committee will appoint auditors to conduct an annual audit
of the Joint Operation on a calendar year basis and within 90 days after the end
of each calendar year.
1.13 In addition, each Non-Operator, upon notice in writing to the Operator,
will have the right to audit the Operator's accounts and records maintained for
the Operating Account for any Operating Year within the six month period next
following the end of the Operating Year. A request for such an audit will be
reasonable so as to minimize administrative problems for the Operator. Any
claims of discrepancies disclosed by an audit will be made in writing to the
Operator within the nine month period next following the end of the Operating
Year. Cost of such an audit will be borne by the requesting Non-Operator.
Records
1.14 The Operator will maintain records of Material in such a manner as to
enable an effective reconciliation of any physical inventory with the Operating
Account.
Inconsistency with Agreement
1.15 If any of the provisions of this Schedule 3 are inconsistent with the other
provisions of the Agreement, then the other provisions of the Agreement will
control.
PART II- DIRECT CHARGES
2.1 All Costs paid by the Operator will be for the Operating Account, including
but not limited to:
(a) Maintenance of Mining and Surface Rights: All lease, rental and
licensing fees and other similar payments required to maintain the
Property.
(b) Labour:
(i) Salaries and wages of the Operator's employees, to the extent
that they are engaged in the conduct of Operations at the
Property or elsewhere, in an amount calculated by taking the full
monthly salary or wage of each employee multiplied by that
<PAGE>
Schedule 3-- Page 4
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
fraction which has as its numerator the total time for the month
that the employee was directly engaged in the conduct of
Operations and as its denominator the total normal working time
of the employee for the month, which time shall be less than that
used in the numerator;
(ii) Holiday, vacation, sickness and disability benefits and other
customary allowances paid to employees whose salaries and wages
are for the Operating Account as provided under subparagraph 2.1
(b)(i); and
(iii)The expenses of employees referred to in subparagraph 2.1(b)(i)
paid by the Operator or for which they may be reimbursed in
accordance with the Operator's usual expense account practices,
including reasonable travel and living expenses.
(c)Employee Benefits:
(i) Compulsory: Assessments or contributions imposed by governmental
authority which are applicable to salaries and wages for
employees referred to in subparagraph 2. 1(b)(i).
(ii) Non-Compulsory: Employer contributions to established plans for
employee group life insurance, hospitalization, retirement,
savings and other plans of a like nature, applicable to the
Operator's employees referred to in subparagraph 2. 1(b)(i)
labour for the Operating Account, which will be chargeable at the
Operator's actual cost by way of percentage assessment or
otherwise.
(d) Material: Costs of Material purchased or furnished by the Operator for
use in the Operations. So far as it is reasonably practicable and
consistent with efficient and economical operation, only such Material
will be purchased for or transferred to the Property as may be
required for the conduct of the Operations.
(e) Services:
(i) Expenditures for services relative to the Operations incurred
under contracts entered into by Operator with contractors.
(ii) Charges for utility and other work and services procured from
outside sources including transportation costs of personnel or
material.
(f) Damages and Losses to Assets at the Property: Costs of repair or
replacement of Assets or repairs to any Facilities made necessary
because of damages or losses incurred by fire, flood, storm, theft,
accident or other causes and not covered by insurance proceeds. The
Operator will furnish each Non-Operator written notice of damages or
losses incurred as soon as practicable after the damage or loss has
been discovered.
(g) Offices: Costs of operating the office at any mine.
(h) Litigation, Judgements and Claims: Litigation, discharge of liens,
judgements and settlement of claims and other legal costs incurred in
conducting the Operations.
<PAGE>
Schedule 3-- Page 5
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
(i) Taxes: Taxes, rates, levies and assessments of every kind and nature
(exclusive of income taxes and mining taxes based on income).
(j) Insurance: Premiums paid for insurance required to be carried by the
Operator, together with all Costs incurred and paid in settlement of
any losses, claims, damages, judgements and other expenses, including
legal services, not recovered from an insurer.
(k) Ecological and Environmental: Requirements, whether statutory or
otherwise, relating to the ecology or environment at the Property and
costs of related studies.
(l) Audit of Outside Services: Costs of audits of contractor services.
(m) Hearings and Enquiries: All expenses associated with preparation of
supporting material for and providing testimony before governmental
hearings or boards of enquiry associated with obtaining approvals to
start, continue, alter, suspend or discontinue Operations.
(n) Other Expenditures: Any reasonable direct expenditure, other than
expenditures which are covered by the foregoing provisions, incurred
by the Operator for the necessary and proper conduct of Operations.
PART III - INDIRECT CHARGES
3.1 The Operator will be entitled to include in Costs a charge for management
supervision and corporate administration for which no direct charge is otherwise
included in Costs, amounting to those percentages permitted under the Agreement.
3.2 Notwithstanding paragraph 3.1 of these Accounting Procedures, it is hereby
declared to be the intention of the parties that by acting as Operator a party
should not realize any substantial profits or suffer any losses. The percentage
charges for management supervision and corporate administration as set out above
will therefore be reviewed annually by the Management Committee and, if proved
to be excessive or insufficient, will be adjusted.
PART IV - PRICING OF MATERIAL PURCHASES
Transfers and Dispositions
4.1 The Operator will make proper and timely charges and credits for all
Material movements affecting the Property. All sales or other dispositions of
Material, the original Cost of which is greater than $50,000 will be subject to
approval by the Management Committee. All other disposals of Materials will be
at the discretion of the Operator.
Purchases
4.2 Material purchased will be charged at the price paid by the Operator after
deduction of all discounts received. Credit for Material returned to vendor will
be for the Operating Account when adjustment has been received by the Operator.
Transfers and Dispositions
4.3 New Material furnished to the Property or transferred from the Property by
the Operator or any other Participant, unless otherwise agreed to by the
Management Committee, will be priced at the cost to
<PAGE>
Schedule 3-- Page 6
Joint Venture Agreement Leader Mining International Inc. and
Kores Canada Corp.
the Operator or such Participant. Used Material furnished to the Property or
transferred from the Property by the Operator or any Participant, will be valued
at fair market value.
<PAGE>
KORES CANADA CORP.
c/o Korea Resources Corporation
686-48 Shindaebang-Dong
Dongjak-Ku, 156-703
Seoul, Korea
November 10th, 1999
Leader Mining International Inc.
Suite 530, 400 Fifth Avenue S.W.
Calgary, Alberta, Canada T2P 0L6
Dear Sirs:
Re: Joint Venture Agreement ("Agreement") dated November 10,1999 between Kores
Canada Corp. and Leader Mining International Inc.
In connection with our joint venture pursuant to the Agreement, this will
evidence our agreed arrangements with respect to the marketing and sale of
certain of the Production from the joint venture property if any of such
Property should achieve Commercial Production as contemplated in the Agreement.
If Leader intends from time to time to market and sell in the Republic of Korea
any of its share of Production from the Property, then it will first offer to
conduct such marketing and sales utilizing Kores as its agent in the Republic of
Korea for such purposes. Provided that any commission that Kores then quotes in
response to Leader for carrying out such services is competitive in the industry
at such time for comparable services and a comparable quantity of mineral
products, then Leader will engage Kores as its agent entitled to the commission
quoted or as may be otherwise agreed for its services and otherwise on the
customary terms and conditions in the industry.
Capitalized terms used herein and not defined herein have the meanings ascribed
to those terms in the Agreement.
<PAGE>
-2-
Please indicate your agreement with the foregoing by signing the duplicate
original of this letter in the space indicated below and return it to us.
Yours very truly,
KORES CANADA CORP.
By:/s/Hyun Chul Lee
Hyun Chul Lee, Director
ACKNOWLEDGED and AGREED as of November 10th, 1999
LEADER MINING INTERNATIONAL INC.
By:/s/Jasi Nikhanj
Jasi Nikhanj, President
