MEMORANDUM OF AGREEMENT
THIS AGREEMENT made as of this 29th day of August, 1996 by and between:
CENTRAL PALAWAN MINING & INDUSTRIAL CORPORATION, with address at 0000 Xxxxx
Xxxxx Xxxxxx, Xxxxxxx, Xxxxxx, Xxxxx Xxxxxx, Xxxxxxxxxxx, represented in this
act by its duly authorized President, Engineer Xxxxxxxx X. Xxxxxxxx,
(hereinafter referred to as "CPMIC");
AND
FENWAY RESOURCES LTD., of #000-000 Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx
Xxxxxxxx, X0X 0X0, represented in this act by its duly authorized officers H.
Xxxx Xxxxxx and A. Xxxxxxx Xxxxxx, (hereinafter referred to as "Fenway");
WHEREAS:
A. CPMIC and Fenway entered into an option agreement dated March 21, 1992, as
amended June 2, 1992, June 30, 1994, November 17, 1995, May 27, 1996 and June
28, 1996 and other related agreements between the parties herein (collectively
the "Original Agreement"), pursuant to which CPMIC granted to Fenway an option
to particiapte, with others, in a joint operation for the purpose of quarrying
and mining raw materials for the production of cement, lime, clinker and all
other rock and mineral products derived from the Central Property, and to
establish a cement plant for the purposes of manufacturing cement in the
territory located in the Province of Palawan, Republic of the Philippines;
B. Pursuant to the terms of the Original Agreement, CPMIC received valuable
consideration and concessions from Fenway;
C. Pursuant to the terms of the Original Agreement, a pre-feasibility study on
the viability of the Palawan Cement Project was concluded;
D. Pursuant to the terms of the Original Agreement, a Feasibility Study was
prepard for Fenway, which Feasibility Study established the viability of the
Palawan Cement
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Project;
E. After consultation with CPMIC, the directors of Fenway passed a director's
resolution dated March 4,1996 accepting the Feasibility Study;
F. The Philippine government, through BMG-DENR, conducted an official geological
evaluation of the Central Property, which evaluation reported a reserve of more
than 230 million tons of suitable cement raw materials thereon;
G. By Deeds of Assignment notarized on February 25, 1990, CPMIC acquired from
the then claim owners the sole and exclusive right to and interest in the
beneficial use of the Central Property, which Deeds of Assignment were
registered on February 17, 1992 with BMG-DENR, Puerto Princesa, Palawan,
Philippines;
H. Whereas CPMIC has already brought the Central Property, in accordance with
Philippine laws, within the coverage of Executive Order No. 279 which requires
the execution of a Mineral Production Sharing Agreement with the Philippine
government covering the said mining claims and also within the coverage of
Republic Act No. 7942, otherwise known as the "Philippine Mining Act of 1995"
and has applied for the MPSA as hereinafter defined;
I. Fenway is a technically and financially capable resource company in the
Province of British Columbia, Canada; Fenway has advanced the necessary funds to
successfully undertake among others, the activities described on Recital (C),
(D). and 14.2 (d);
J. The parties wish to restate their rights, duties and obligations with respect
to the subject matter of the Original Agreement, to amend, modify and supersede
the same to the extent provided herein, and to implement the activities
contemplated and described under this Agreement;
NOW THEREFORE in consideration of the premises, the performance of the mutual
covenants contained herein and other good and valuable consideration given by
each party to the others, The receipt and sufficiency of which is hereby
conclusively acknowledged, it is hereby agreed as follows:
1. ENTIRE AGREEMENT
1.1 This Agreement, when executed, constitutes the whole agreement between all
the parties hereto and supersedes all the Original Agreements written, oral or
otherwise, and there are no representations or warranties, express or implied,
statutory or otherwise
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other than expressly set forth or referred to herein.
1.2 It is specifically acknowledged by the parties hereto that the Original
Agreement is superseded and cancelled and of no further force or effect.
1.3 This Agreement may not be amended, modified, released or discharged, in
whole or in part, except by an instrument in writing signed by all parties
hereto.
2. INTERPRETATION
2.1 For purposes of this Agreement, except as otherwise expressly provided, or
unless the context otherwise requires:
(a) "Acceptable Funding Commitment" means a bona fide commitment to provide
the Production Funds;
(b) "Activities" means all activities and operations relating to the
Central Property in accordance with this Agreement and within the scope and
purpose of CPCC as referred to in this Agreement.
(c) "Agreement" means this Memorandum of Agreement as from time to time
supplemented or amended by one or more agreements entered into pursuant to
the applicable provisions hereof, and includes every Schedule or Annex
attached hereto, if any;
(d) "BMG-DENR" means the Philippine Bureau of Mines and Geo-Sciences,
Department of Environment and Natural Resources;
(e) "Business Days" means any day during which Philippine chartered banks
are open for business in Metro Manila, Republic of the Philippines;
(f) "CPCC" means Central Palawan Cement Corporation, a company to be
incorporated pursuant to the laws of the Republic of the Philippines, or
any successor company however formed, whether as a result of merger,
amalgamation, in accordance with the terms of Paragraphs 4 and 10 of this
Agreement;
(g) "CPMIC" moans Central Palawan Mining & Industrial Corporation, a
company incorporated pursuant to the laws of The Republic of the
Philippines, or any successor company however formed, whether as a result
of merger, amalgamation, or other action;
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(h) "Central Property" means all existing mining claims and rights/quarrying
rights, mining right applications and Mineral Production Sharing Agreements as
defined in Republic Xxx 0000 (Philippine Mining Act of 1995) covering 4,941
hectares of land and more particularly described in Schedule "A" hereto and all
tenures in substitution or replacement therefor including, without restricting
the generality, all rights to enter upon the Central Property, explore, develop
and remove any minerals therefrom;
(i) "Closing Date" means the day ten (10) Business Days following the receipt of
Regulatory Approval, or such other date as the parties hereto shall mutually
agree;
(j) "Commercial Production" means:
i) the last day of a period of forty (40) consecutive days in which
Venture Products have been processed from the Central Property at not less
than 60% of its rated operating capacity; or
ii) the last day of a period of thirty (30) consecutive days during
which ore has been shipped from the Central Property for the purpose of
earning revenues, but not period of time during which ore or concentrate is
shipped from the Central Property for testing purposes, and no period of
time during which milling operations are undertaken as initial tune-up,
shall be taken into account in determining the date of Commercial
Production as determined by CPCC;
(k) "Effective Date" means March 21, 1992;
(1) "Exchange" means the Vancouver Stock Exchange;
(m) "Fair Market Value" means the highest price available in the open and
unrestricted market between informed, prudent parties acting at arm's length,
under no compulsion to act, expressed in terms of money or money's worth;
(n) "Feasibility Study" mcans the comprehensive report dated December 1995
prepared by Xxxxxxx Engineering Pacific Ltd., which provides a definite
technical, environmental and commercial base for determining the viability of
the Palawan Cement Project and which was accepted by both Fenway and CPMIC;
(o) "Fenway" means Penway Resources Ltd., a company incorporated pursuant to the
laws of the Province of British Columbia, Canada, or any successor company
however formed, whether as a result of merger, amalgamation, or other action;
(p) "Gross Proceeds" means, for any period, the aggregate gross proceeds
received by CPCC during the period from the sale of Venture Products derived
from the Central Property and any cash proceeds received during the period from
the disposition of any capital assets the cost of which has been treated as an
Operating Cost;
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(q) "Joint Venture" means the joint venture company to be formed as a result of
this Agreement or CPCC as defined in this Agreement;
(r) "Joint Venture Agreement" means the agreement governing the relationship
among the Parties herein and as to any third-party Participant with CPCC with
respect to the Palawan Cement Project, and the Central Property, as more fully
described in Paragraph 10 of this Agreement;
(s) "MPSA" means mineral production sharing agreement MPSA-IV(1)-13, as amended,
which brought the Central Property within the coverage of Executive Order No.
279 and also under coverage of the Philippine Mining Act of 1995, and which
confers upon CPMIC the priority right to the beneficial use of the Central
Property;
(t) "Mining and Production Facilities" means all mines, roads, structures,
buildings, machinery, equipment and other facilities necessary to mine, remove
and process ores from the Central Property and all mines and plants, including
without limitation, all pits, shafts, haulageways and other underground workings
and all buildings, plants, facilities and other structures, fixtures and
improvements and all other property, whether fixed or moveable, as the same may
exist at any time in, on or outside the Central Property and relating to the
production of Venture Products;
(u) "Net Profits" means, for any period, the excess, if any, of Gross Proceeds
for the period over the aggregate of:
i) Operating Costs for the period;
ii) Operating Costs for all previous periods to the extent that they
have exceeded Gross Proceeds from such periods and have not previously been
deducted in computing Net Profits; and
iii) such amount of cash as is required for the ensuing three month
period for working capital as, in the opinion of CPCC, is required for
CPCC, provided that this amount shall be added to Gross Proceeds when
calculating Net Profits for the next ensuing period;
(v) "Operating Costs" means, for any period, all costs, expenses, obligations,
liabilities and charges of whatsoever kind and nature incurred or chargeable,
directly or indirectly, by CPCC, after commencement of Commercial Production in
connection with CPCC during the period, which costs, expenses, obligations,
liabilities and charges shall include, without limiting the generality of the
foregoing, the following:
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i) all costs of or related to CPCC;
ii) all costs of or related to the quarrying, processing and marketing
of Venture Products including, without limitation, transportation, storage,
commissions, royalties and/or discounts;
iii) all costs of or related to providing and/or operating employee
facilities, including housing;
iv) all duties, charges, levies, royalties, taxes (excluding any act
of legislation which taxes the income of the parties hereto individual) and
other payments imposed upon or in connection with CPCC by any government or
municipality or department or agency thereof;
v) all actual costs of CPCC for providing technical, management and/or
supervisory services, the intent being that CPCC will neither realize a
profit nor suffer a loss as a result of its management activity;
vi) all costs of consulting, legal, accounting, insurance and other
services;
vii) all interest expenditures incurred after commencement of
Commercial Production;
viii) all costs of construction, equipment and mine development after
commencement of Commercial Production;
ix) all costs for pollution control, reclamation or any other similar
costs incurred or to be incurred by CPCC;
x) any cost or expense incurred or to be incurred relating to the
termination of this Agreement;
except where specific provision is made otherwise, all Operating Costs shall be
determined in accordance with generally accepted accounting principles
consistently applied;
(w) "Original Agreement" means the option agreement dated March 21, 1992, the
amended option agreements dated June 2, 1992, June 30, 1994, November 17, 1995,
May 27, 1996 and June 28, 1996 and other related agreements between the parties
herein.
(x) "Palawan Cement Project" means the joint operation for the purposes of,
without limitation:
i) quarrying and mining raw materials for the production of cement,
lime, clinker and all other rock and mineral products derived from the
Central Property; and
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ii) manufacturing cement from raw materials extracted from the Central
Property;
(y) "Participant(s)" means a Filipino third party or parties, acceptable to
Fenway, which party or parties shall provide Production Funds;
(z) "Party or Parties" means the parties to this Agreement and their respective
successors and permitted assigns which become parties pursuant to this
Agreement;
aa) "Philippine Mining Act of 1995" means Republic Act No. 7942 of the
government of the Philippines;
ab) "Production Funds" means the funds required in order to finance the Palawan
Cement Project, from sources whether domestic or foreign, which Production Funds
are to be obtained by Fenway, at its sole discretion;
ac) "Regulatory Approval" means filing and approval of mineral agreements and
their transfer or assignment as provided for in Sections 29 and 30 of Republic
Act No. 7942 enacted by the Philippine legislature in 1995 and as contemplated
in this Agreement as well as approval of this Agreement by all Regulatory
Authorities.
ad) "Regulatory Authorities" means both the Philippine Regulatory Authorities
and the British Columbia Regulatory Authorities;
(i) "British Columbia Regulatory Authorities" means the Exchange and,
where applicable, the British Columbia Securities Commission.
(ii)"Philippine Regulatory Authorities" means the BMG-DENR, the
Philippine Securities and Exchange Commission, local government units and
any governmental authorities located in the Republic of the Philippines;
ae) "Schedules" means those schedules attached hereto and forming part of this
Agreement which are more particularly described as follows:
Schedule "A": Description of the Central Property
at) "Venture Products" means all ores, minerals, concentrates or other products
mined or produced from the Central Property and without limitation, all products
produced by CPCC.
2.2 Tnc words "paragraph", "subparagraph", "herein", "hereof" and "hereunder"
refer to the provision of this Agreement.
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2.3 The headings are for convenience only and do not form a part of this
Agreement nor are they intended to interpret, define or limit the scope; extent
or intent of this Agreement or any portion hereof.
2.4 This Agreement shall be governed by and construed in accordance with the
laws of the Province of British Columbia and in accordance with the rules and
guidelines of the governing Regulatory Authorities, if applicable; PROVIDED that
the laws of the Republic of the Philippines shall govern all matters relating to
the transfers of the interests provided for in this Agreement as well as the
development and operation of the joint venture company.
2.5 A reference to a statute includes all regulations made pursuant thereto, all
amendments to such statute or regulations enforced from time to time and any
statute or regulation which supplements or supersedes such statute or
regulation.
2.6 Wherever the singular or masculine are used throughout this Agreement, the
same shall be construed as being the plural or feminine or neuter when the
context so requires.
2.7 All accounting terms not defined in this Agreement shall have those meanings
generally ascribed to them in accordance with generally accepted accounting
principles, applied consistently.
2.8 All currency referred to herein is currency of the United States of America,
unless otherwise stated.
3. TRANSFER
3.1 Upon and subject to the terms and conditions of this Agreement, CPMIC hereby
agrees to transfer and set over to CPCC (the "Transfer") the Central Property
including the MPSA, in such form and by way of instruments authorized by the
Philippine Mining Law of 1995; to have and to hold the same, together with all
benefit and advantage to be derived therefrom.
3.2 The rights of the parties hereto may only be assigned with the prior written
consent of the other party hereto and with the approval of the Regulatory
Authorities, if required.
4. CENTRAL PALAWAN CEMENT CORPORATION
4.1 Upon receipt of an acceptable EIA report (as defined below) and the
Acceptable Funding Commitment, the parties hereto agree to the incorporation of
CPCC as a new Philippine company, the sole purpose of which shall be to act as
operator of the Joint Venture to undertake the Palawan Cement Project and to
hold all of the rights and interests of CPMIC and Fenway in and to the Central
Property, including the MPSA for the benefit of the parties hereto and the
Participant(s).
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4.2 The equity of CPCC shall be owned by Fenway (as to 40%), The Participant(s)
(as to 50%) and CPMIC (as to 10%).
4.3 Within ten (10) years of the Effective Date, the present stockholders of
CPMIC shall have the non-transferable right to purchase a further ten percent
(10%) equity interest in and to CPCC from Fenway's equity interest in CPCC at
the Fair Market Value thereof, such Fair Market Value of the shares to be
determined by any of the top six internationally recognized accounting firms,
and which option may only be exercised in its entirety.
4.4 The terms and principles governing the operation of CPCC shall be as set
forth in Paragraph 10 hereof.
5. CONSIDERATION
5.1 Subject to Paragraph 5.2 hereof, as consideration for the Transfer referred
to in Paragraph 3 of this Agreement, Fenway hereby agrees to issue to CPMIC
non-transferable share purchase warrants to purchase, either in whole or in
part, up to an aggregate of 2,000,000 common shares of Fenway (the "Shares") on
the following basis (the "Warrants"):
(a) 100,000 Shares, exercisable at a price of Canadian $2.00 per Share, at
any time commencing June 28, 1996 and for a period of one (1) year thereafter;
The receipt of which is hereby acknowledged through the delivery of the Shares
to a Trustee.
(b) 900,000 Shares, exercisable at a price of Canadian $2.00 per Share, at
any time on or before one (1) year from the date of acceptance by Fenway of the
Acceptable Funding Commitment;
(c) 1,000,000 Shares, exercisable at a price of Canadian $3.00 per Share,
at any time one within (1) year from the date of exercise of the Warrant
referred to in Paragraph 5.1(b) above.
5.2 It is expressly u r1derstood that the Warrants referred to in Paragraph
5.1(b) and (c) hereof may not be exercised by CPMIC until such time as Fenway
has received the Acceptable Funding Commitment.
5.3 Commencing upon receipt of the Production Funds, CPCC shall make maintenance
payments to CPMIC, subject to Paragraph 7, in the amount of CDN$1O0,000 per
annum (the "Maintenance Payments"), such payments to be paid quarterly
commencing ten (10) days after the end of CPCC's first quarterly period ended,
or as otherwise mutually agreed between CPMIC and Fenway.
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6. ROYALTY
6.1 If CPCC commences Commercial Production from the Central Property, CPMIC
shall be entitled to receive and CPCC shall pay to CPMIC a royalty equal to
$0.35 per tonne of raw materials extracted from the Central Property (the
"Royalty").
6.2 Subject to the provisions of Paragraph 5.3 hereof, CPCC shall be under no
obligation whatever to place the Central Property into Commercial Production
and, in the event it is placed into Commercial Production, CPCC shall have the
right at any time to curtail or suspend such production as it, in its absolute
discretion, may determine.
6.3 The Royalty payable to CPMIC hereunder shall be paid quarterly commencing
thirty (30) days after the end of CPCC'S first quarterly period ended, or as
otherwise mutually agreed between CPMIC and Fenway, the records relating to the
calculation of such Royalty during that quarterly period shall be audited and
any adjustments shall be audited and any adjustments shall be made forthwith and
the audited statements shall be delivered to CPMIC who shall have sixty (60)
days after receipt of such statements to question in writing the accuracy and
failing such question, the statements shall be deemed correct. All taxes on
royalties shall be the sole responsibility of CPMIC.
6.4 CPMIC or its representatives, duly appointed in writing, shall have the
right at all reasonable times, upon written request, to inspect those books and
financial records of CPCC as are relevant to the determination of the Royalty
and, at its own expense, to make copies thereof.
7. ADVANCE OF FUNDS
7.1 CPMIC acknowledges having received certain advances and monies from Fenway
from time to time (the "Funds"), which Funds were to be specifically used for
the purposes of furthering the Palawan Cement Project, as described in the
Original Agreement, and that a portion of the Funds so advanced were spent for
purposes other than the aforementioned objectives of furthering The Palawan
Cement Project.
7.2 CPMIC agrees that any Funds previously advanced or to be advanced in the
future, including the interest that has accrued or that will accrue thereon, for
purposes other than for the objectives of furthering the Palawan Cement Project,
as determined by Fenway's auditors, is hereby recognized and acknowledged by
CPMIC as a loan and shall be considered as loans to CPMIC and shall be repayable
with interest at the rate of 7% per annum for loans previously advanced, and
repayable to Fenway, at the sole discretion of Fenway, from proceeds due to
CPMIC from either the Maintenance Payments in paragraph 5.3 and/or the Royalty
in paragraph 6.
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8. CONDITIONS PRECEDENT
8.1 Fenway shall within thirty (30) days of the date of this Agreement, commence
an environment impact assessment ("EIA") at its own cost.
8.2 Closing (as hereinafter defined) shall be conditional upon:
(a) receipt by the government of the Philippines, CPMIC and Fenway of an
acceptable EIA report;
(b) the acceptance of the Acceptable Funding Commitment by Fenway;
(c) signing and execution of a Joint Venture Agreement in accordance with
the terms and conditions in Articles 4 and 10 of this Agreement.
(d) the incorporation of CPCC pursuant to the laws of the Republic of the
Philippines;
(e) submission by CPMIC of proof of the government-approvals for the
transfer of the Central Property including the MPSA to CPCC;
9. THE CLOSING
9.1 Completion (the "Closing") of the transactions contemplated by this
Agreement shall take place on the Closing Date, or such other date as the
parties hereto shall mutually agree, and shall take place at the offices of
CPMIC as set out on Page 1 of this Agreement.
9.2 Subject to the terms and conditions of this Agreement, on Closing CPMIC will
execute and deliver to CPCC the following:
(a) a deed of assignment, or other necessary documents, in recordable form,
to absolutely transfer and vest the Central Property and the MPSA to CPCC;
(b) evidence that the transfers, including the MPSA, is validly existing
and approved in accordance with the Philippine Mining Act of 1995;
(c) a certified true copy of the resolutions of the directors and
stockholders of CPMIC approving this Agreement, the transactions
contemplated under this Agreement and the authorized signatories;
(d) a certified true copy of the last audited financial statements of
CPMIC.
(e) submission of evidence of Philippine Regulatory Approvals from the
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proper Philippine Regulatory Authorities.
9.3 Subject to the terms and conditions of this Agreement, on the Closing Date,
Fenway will execute and deliver to CPMIC or to a Trustee, the following:
(a) evidence of Regulatory Approval from British Columbia Regulatory
Authorities;
(b) the Warrants referred to in Paragraph 5.1(b) and (c) hereof;
(c) a certified true copy of the last audited financial statements of
Fenway.
10. JOINT VENTURE
Formation of CPCC
10.1 Prior to Closing Date, the parties hereto agree to sign and conclude with a
suitable Participant(s) a Joint Venture Agreement leading to the formation of
CPCC, the Joint Venture corporation in accordance with Paragraphs 4 and 10 of
this Agreement.
10.2 The parties agree that the relationships between themselves and the
Participant(s) in CPCC will be governed in accordance with the terms of a full
and formal joint venture operating agreement, which will be drawn and finalized
by the parties and the Participant(s) acting in good faith, which agreement
shall cover all terms and conditions of CPCC (the "JV Agreement").
10.3 In addition to the provisions set out in this Paragraph 10, the Joint
Venture Agreement shall also set out terms governing the following:
(a) rights of first refusal with respect to the disposition of
participating interests in CPCC;
(b) rights and limitations with respect to the assignment of participating
interests in CPCC;
(c) default and termination.
Contributions to CPCC
10.4 CPMIC shall, by way of the Transfer of the Central Property including the
MPSA to CPCC, thereby effectively contribute The Central Property to CPCC.
10.5 Fenway and the Participant(s) will provide CPCC with the funds necessary to
finance CPCC.
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10.6 CPCC will fund each Approved Program and Budget.
10.7 All funds expended with respect to the Central Property after the formation
of CPCC shall be required to be made by CPCC.
Purposes of CPCC
10.8 CPCC shall have the following scope and primary and secondary purposes:
(a) exploring for and developing ores, minerals and other products from
the Central Property, including opening, developing and operating
mines and/or quarries on the Central Property;
(b) processing (including beneficiating, leaching, concentrating,
smelting, refining or otherwise treating) ores, minerals or other
products mined or produced from the Central Property for the purposes,
without limitation, of producing Venture Products;
(c) designing, engineering, constructing and operating Mining and
Production Facilities to mine and remove ores, minerals or other
products from the Central Property and to process such ores, minerals
or other products mined front the Central Property into Venture
Products;
(d) marketing, selling and delivering Venture Products;
(e) performing any other operation or activity necessary, appropriate or
incidental to any of the foregoing.
10.9 Unless the parties otherwise agree, CPCC shall be limited to its stated
scope and purposes and nothing in this Agreement shall be construed as to
enlarge the stated scope and purposes of CPCC.
Board of Directors
10.10 The affairs of CPCC will be governed by the direction and control of a
Board of Directors (the " Board") to be comprised of ten (10) members with the
following representation:
(a) From Fenway: 40% of total representatives
(b) From the Participant(s): 50% of total representatives
(c) From CPMIC: 10% of total representatives
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10.11 Voting will be on the basis of one (1) vote for each representative and,
unless otherwise provided, a decision or an action of the Board will require the
concurrence of at least six (6) representatives.
Operator
10.12 CPCC will be the operator of the Joint Venture.
Approved Programs and Budgets
10.13 All activities will be performed under programs and budgets approved in
advance by the Board of Directors ("Approved Programs and Budgets"). The Board
of Directors will meet initially to approve a program and budget for each
calendar quarterly period as may be necessary in order to have each program and
budget approved by at least one (1) month prior to the date of implementation.
Interests in Net Profits
10.14 Participation in the Net Profits of CPCC shall be as follows:
(a) to Fenway, 40% of Net Profits derived from the Central Property;
(b) to the Participant(s) 50% of Net Profits derived from the Central
Property.
(c) to CPMIC, 10% of Net Profits derived from The Central Property.
10.15 of this parties Any party may, at any time upon notice in accordance with
the notice provisions of this Agreement, surrender all or a portion of its
interest in Net Profits to the other by giving those parties notice of
surrender.
11. RIGHTS OF FENWAY PRIOR TO CLOSING
11.1 At all times from the Effective Date until the Closing Date, Fenway, its
employees, agents and independent contractors shall, subject to CPMIC giving
prior notice to the proper authorities, have the sole and exclusive right to:
(a) to enter upon the Central Property with full rights of access and
egress;
(b) to carry on all such other exploration activities including, without
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limitation, the right to remove from the Central Property, minerals,
metals, broken rock, samples; bulk samples and other material as Fenway
deems necessary or desirable to assess the potential of the Central
Property and the recoverability of ore and minerals therefrom.
12. COVENANTS
12.1 At all times during the currency of this Agreement, CPMIC shall:
(a) not do or permit or suffer to be done any act or thing which would or
might in any way adversely affect the rights of Fenway and CPCC hereunder;
(b) continue to make available to Fenway and its representatives all
records and files relating to the Central Property and will permit Fenway and
its representatives at their own expense to take abstracts therefrom and make
copies thereof;
(c) prior to the incorporation of CPCC with all government agencies and
institutions, at Fenway's expense, obtain all government incentives which may be
available for the Palawan Cement Project, obtain all rights from landholders or
any other rights holders as well as required licenses, work permits and other
necessary documents to develop the Central Property for the Palawan Cement
Project with the involvement of foreign partners, secure, without limitation,
water rights, plant site, pier site and warehouse site, from national and local
Philippine governments;
(d) prior to, during and after incorporation of CPCC and the Transfer,
promptly provide Fenway and/or CPCC with any and all notices and correspondence
from government agencies in respect of the Central Property;
(e) obtain the approval of the Philippine Regulatory authorities to this
Agreement where necessary; use its best efforts to expeditiously assist Fenway
in doing all things reasonably required to obtain the acceptance of the British
Columbia Regulatory Authorities to the terms of this Agreement;
(t) cooperate frilly with Fenway and/or CPCC in obtaining any additional
rights on or related to the Central Property as Fenway deems desirable;
(g) immediately notify Fenway and/or CPCC of any claims, actions, demands
of a civil, legal or judicial nature, filed against CPMIC in respect of the
Central Property as well as disclose any anticipated litigation or adverse
claims as set forth in the representations and warranties provision of this
Agreement.
(h) maintain in good standing all the rights comprising the Central
Property such as but not limited to the mineral claims and rights, renewals and
continuances thereof, by the doing and filing of any assessment work or the
making of payments in
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lieu thereof, by the payment of taxes and rentals, and the performance of all
other actions which may be necessary in that regard and in order to keep the
Central Property free and clear of all liens and encumbrances;
12.2 At all times during the currency of this Agreement, Fenway shall:
(a) not do or permit or suffer to be done any act or thing which would or
might in any way adversely affect the rights of CPMIC and CPCC hereunder;
(b) conduct all work on or with respect to the Central Property in a
careful and minerlike manner, including any reclamation work required in respect
of work performed by Fenway on the Central Property, and in accordance with the
applicable laws;
(c) permit CPMIC and its representatives, duly authorized by CPMIC in
writing, at their own risk and expense access to the Central Property at all
reasonable times and to the records prepared by Fenway in connection with work
done on or with respect to the Central Property;
(d) at its own expense, carry out any environmental cleanup which might be
required as a result of work performed by Fenway on the Central Property;
(e) obtain and maintain for itself and cause any contractor engaged
hereunder to obtain and maintain during any period in which active work is out
hereunder, adequate insurance and worker's compensation coverage, if applicable;
(t) use its best efforts to assist CPMIC in doing all things reasonably
required to obtain the approval of the Philippine Regulatory Authorities to the
terms of this Agreement;
(g) promptly provide CPMIC with any and all notices and correspondence from
government agencies in respect of the Central Property;
(h) cooperate fully with CPMIC in obtaining any additional rights on or
related to the Central Property as CPMIC deems desirable;
(i) immediately notify CPMIC of any claims, actions, demands of a civil,
legal or judicial nature, filed against Fenway in respect of the Central
Property;
(j) obtain the Production Funds;
17
13. DEFAULT AND TERMINATION
13.1 It is an event of default ("Default") if:
(a) the Production Funds are not received by Fenway by not later than the
close of business (Vancouver time) on June 30, 1997, unless otherwise extended
by the parties hereto in writing;
(b) either Fenway or CPCC fail to make any of the payments as and when
required pursuant to the terms hereof, or under any documents delivered in
connection herewith, except for the consideration in Par. 5.1(a) which has been
paid through a Trustee;
(c) CPMIC fails to take reasonable action to prevent or defend assiduously,
any action or proceeding which claims:
i) possession;
ii) sale;
iii) foreclosure;
iv) the appointment of a receiver or receiver-manager of the
Company's assets; or
v) forfeiture or termination;
of the Central Property, CPCC.
(d) any party becomes bankrupt or commits an act of bankruptcy or if a
receiver or receiver-manager of its assets is appointed or makes an assignment
for the benefit of creditors or otherwise;
(e) any party is unable or unwilling or otherwise fails to perform their
obligations as and when required hereunder; or
(f) if Fenway and CPMIC mutually consent in writing to the termination
hereof.
13.2 Subject to the provisions hereof, a notice of Default by the non-defaulting
party must be given to the defaulting party pursuant to the notice provisions of
this Agreement within thirty (30) days of the time when the non-defaulting party
is made aware of the event of Default and the defaulting party shall have ninety
(90) days from the notice of Default to cure such Default.
13.3 In the event that the defaulting party does not cure such Default within
the time provided for in Paragraph 13.2 hereof, then this Agreement shall
terminate forthwith and absolutely unless otherwise agreed to between the
parties.
18
13.4 In the event of a Default by Fenway, CPMIC shall have the right to obtain
its own financing to ensure the construction and/or operation of the cement
plant and/or the quarry, provided that Fenway shall first be reimbursed by CPMIC
and its stockholders for all of its costs and expenses, advances and loans to
CPMIC or any of its stockholders or officers to the date of Default. In no event
however, will the proportion of ownership and representation of Fenway be
reduced below the percentage referred to in Section 10.10 and 10.14.
13.5 In the event of a material breach of the terms of this Agreement or of the
warranties, covenants and representations contained herein by either of the
parties hereto it shall be open to the aggrieved party to seek its remedy in
damages and it also shall be open to the parties to rescind the terms of this
Agreement upon the terms as herein set forth.
14. REPRESENTATIONS AND WARRANTIES
14.1 Each of the parties represents and warrants to the other that:
(a) it is a company duly incorporated, organized and validly subsisting and
in good standing under the laws of its incorporating jurisdiction and that it is
qualified to do business in those jurisdictions where it is necessary to fulfil
its obligations under this Agreement;
(b) it has full power and authority to carry on its 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 any of the
agreements referred to herein or contemplated hereby, nor the consummation of
the transactions hereby contemplated conflict with or result in any breach of or
accelerate performance under any covenants or agreements or constitute a
default, or result in the creation of any encumbrance under the provision of any
shareholders' or directors' resolution, indenture, agreement or other instrument
whatsoever to which it is a party or by which it is bound or to be which it is
subject;
(d) the execution and delivery of this Agreement and the agreements
contemplated hereby have been duly authorized by all necessary corporate action
on its part and will not violate or result in the breach of the laws of any
jurisdiction applicable or pertaining thereto or of its constitutive documents;
(e) except for the approval of this Agreement by the Exchange, if required,
there are no consents, approvals or conditions precedent to the signing and
execution of this Agreement which have not been obtained;
19
(f) no proceedings are pending, and the parties are unaware of any basis
for the institution of any proceedings leading to their respective dissolution
or winding up, or the placing of each of them in bankruptcy or any other laws
governing the affairs of insolvent corporations.
14.2 CPMIC hereby represents and warrants to Fenway that:
(a) it is, and will be at Closing, the 100% recorded and beneficial owner
of the Central Property including all MPSAs found thereon and has the exclusive
right to enter into this Agreement and all necessary authority to dispose of its
interests in and to the Central Property in accordance with the terms of this
Agreement. Further, CPMIC received warranties that in the event of a change in
the composition of stockholders of CPMIC, it will promptly notify Fenway in
writing;
(b) other than a royalty payable to the Republic of the Philippines, no
stockholder of CPMIC, other person, firm, corporation or entity has any
proprietary or possessory interest in the Central Property including the MPSA
other than CPMIC and no person is entitled to any royalty or other payment in
the nature of rent or royalty on any minerals, ores, metals or concentrates, or
any such other products removed from the Central Property;
(c) there are no actual, pending or threatened actions, suits, claims or
proceedings regarding the Central Property or any basis therefor of which it is
aware;
(d) the Central Property is accurately described in Schedule "A" to this
Agreement. As a result of advances made by Fenway, the Central Property and all
interests related thereto have been duly and validly staked, located, recorded
and registered in accordance with all applicable laws of the Philippines and all
such interests are free and clear of all liens, charges, encumbrances and third
party interest whatsoever;
(e) the corresponding licenses and permits covering the Central Property
and all interests therein including the MPSAs have been duly and validly issued
pursuant to the mining laws of the Republic of the Philippines and are in good
standing by the proper doing and filing of assessment work and the payment of
all fees, taxes and rentals in accordance with the requirements of the mining
laws of the Republic of the Philippines and the performance of all other actions
necessary in that regard;
(f) conditions on and relating to the Central Property and operations
conducted thereon by or on behalf of CPMIC are in compliance with all applicable
laws, regulations or orders;
(g) at the date hereof, there are no outstanding orders or directions
relating to environmental matters requiring any compliance, work, repairs,
construction or capital expenditures with respect to the Central Property and
the conduct of the operations related thereto, nor has CPMIC received any notice
of same;
20
(h) it has delivered and will continue to deliver to Fenway all available
geological information in its possession or control relating to the Central
Property and copies of all available permits, permit applications and
applications for exploration and exploitation rights respecting the Central
Property;
(i) it is not aware of any fact or circumstance which makes the
representations and warranties in this Agreement incomplete, inaccurate,
misleading and untrue or which would likely affect the decision of Fenway to
enter into this Agreement.
(j) it undertakes to cause its stockholders, directors, officers, assigns,
successors-in-interest and all relatives or third parties who may have any
interest in the subject matter Area of Interest referred to in paragraph 16
which conflicts with the interest of the Palawan Cement Project , to sell their
interest to CPCC at original acquisition cost.
(k) it is prohibited from selling, disposing, transferring, or creating any
encumbrance on any interest or rights in the Central Property;
(1) it obtained advise of counsel with respect to its rights and
obligations herein.
14.3 Fenway hereby represents and warrants to CPMIC that Fenway will allot and
issue the Shares free of all liens, claims, charges and encumbrances whatsoever
upon exercise of the Warrants.
14.4 The representations and warranties hereinbefore set out are conditions upon
which the parties have relied in entering into this Agreement and shall be true
and correct on the Closing Date and shall survive after the Closing Date.
14.5 Except for fraud and gross negligence, each of the parties 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 it and contained in this Agreement.
14.6 The parties acknowledge and agree with each other that they have entered
into this Agreement relying on the warranties and representations and other
terms and conditions of this Agreement and that no information which is now
known or which may hereafter become known to the parties shall limit or
extinguish the right to indemnify hereunder and in addition to any other
remedies it may pursue; PROVIDED that Fenway may deduct the amount of any such
loss or damage from any amounts payable by it or CPCC to CPMIC hereunder.
14.7 The parties shall each give all undertakings and assurances and shall each
make such filings as are reasonably required by the Regulatory Authorities as a
condition of any approval contemplated by this Agreement. All such undertakings,
assurances and filings shall be prepared at Fenway's sole expense.
21
15. DELIVERY OF INFORMATlON
All data and information regarding the Central Property coming into the
possession of any party under this Agreement shall be disclosed to the other
parties.
16. AREA OF INTEREST
CPMIC, its stockholders, directors, officers, assigns,
successors-in-interests including its nominees (the "Others"), hereby agree that
the Area of Interest shall cover a radius of three (3) kilometers from the
outside boundaries of the Central Property and the Plant Site (the "Area of
Interest") and shall be subject to paragraph 14.2 (j) of this Agreement.
17. RELATIONSHIP OF THE PARTIES
17.1 The rights, duties, obligations and liabilities of the parties shall be
several and not joint.
17.2 No party shall, except when required by this Agreement or by any law,
by-law, ordinance, rule, order or regulation, use, suffer or permit to be used,
directly or indirectly, the name of the other party for any purpose.
17.3 This Agreement shall not be construed so as to render the parties liable as
partners or as creating a mining, commercial or other partnership, or as
imposing upon any party any obligation or liability to the other party hereto
other than with respect to CPCC.
17.4 Without consulting the other party, both parties shall have the right
independently to engage in and receive full benefits from business activities
which are not in any way in conflict with, adverse to, or in competition with
CPCC. The doctrines of "corporate opportunity or business opportunity" shall not
be applied to any other activity, venture or operation of the parties and all
parties shall not be obliged to the other parties with respect to any
opportunity to acquire any mineral property available to it:
(a) outside the boundaries of the Area of Interest at any time; or
(b) within the boundaries of the Area of Interest after the termination of
this Agreement.
18. TERM
18.1 The corporate life of the Joint Venture company shall be for fifty (50)
years, renewable at the option of CPCC for further fifty (50) year period.
22
18.2 If any right, power or interest of any part of the Central Property would
violate the rule against perpetuities then such right, power or interest shall
continue for as long as may be permitted by Philippine law.
19. REGULATORY AND OTHER CONSIDERATIONS
19.1 It is hereby expressly acknowledged that Fenway is a company subject to the
discretionary jurisdiction of the British Columbia Regulatory Authorities and
that this Agreement may be subject to the prior approval of such British
Columbia Regulatory Authorities.
19.2 It is also hereby expressly acknowledged that CPMIC is a company subject to
the discretionary jurisdiction of the Philippine Regulatory Authorities and that
this Agreement may be subject to the prior approval of such Philippine
Regulatory Authorities.
19.3 This Agreement is subject to both Canadian and Philippine Regulatory
Authorities and may be subject to the prior approval of such Regulatory
Authorities.
19.4 The parties will file all such notices, agreements, forms or reports with
the proper Regulatory Authorities as may be necessary in furtherance of the
transaction contemplated herein, and shall supply copies of all such notices,
agreements, forms or reports as filed with the proper Regulatory Authorities for
the corporate files of Fenway and CPMIC, as the case may be. Any such notice
shall be made in accordance with the notice provisions of this Agreement.
20. CONFIDENTIAL INFORMATION
No information furnished by the parties hereunder in respect of this
Agreement shall be published by either party without the prior written consent
of the other party hereto, but such consent in respect of the reporting of
factual data shall not be unreasonably withheld, and shall not be withheld in
respect of information required to be publicly disclosed pursuant to applicable
laws of the Regulatory Authorities.
21. ARBITRATION
21.1 The parties hereto agree to refer any dispute arising between the parties
hereunder, as to interpretation of any provisions of this Agreement, to binding
arbitration (the "Arbitration").
21.2 All disputes, controversies or differences which may arise between the
Parties out of or in relation to or in connection with this Agreement, including
any issue as to this Agreement's validity or enforceability, or for the
construction, termination or breach thereof, shall be decided amicably by the
Parties. If such dispute, controversy or
23
difference cannot be amicably settled within thirty (30) calendar days of notice
by one Party to the other, the matter shall be finally settled by arbitration
conducted in accordance with the Rules of Conciliation and Arbitration of the
International Chamber of Commerce.
21.3 The place of the arbitration shall be Vancouver, Canada.
21.4 The Parties together shall appoint one (1) arbitrator and if they are
unable to agree upon the appointment of a single arbitrator within fourteen (14)
calendar days from receipt of the arbitration notice, each of the Parties shall
appoint one (1) arbitrator within twenty-one (21) calendar days of receipt of
the arbitration notice. The two (2) arbitrators thus appointed shall appoint a
third arbitrator within thirty-five (35) calendar days from receipt of the
arbitration notice and the third arbitrator thus shall be a lawyer experienced
in matters of international, financial and commercial matters and without
affiliation of any kind to any of the Parties.
21.5 The board of arbitration shall not be required to observe judicial
formality and shall not be bound by strict rules of evidence. The board of
arbitration shall render its award applying commercially reasonable principles
consistent with the terms of this Agreement and shall have the authority to
include in such award a decision binding upon the Parties, enjoining them to
take or refrain from taking specific action with respect to the matter in
dispute or disagreement. The arbitration award shall be issued in Vancouver,
Canada and shall be agreed by each Party to be a foreign arbitral award in
respect of the Philippines. The award of the board of arbitration shall be final
and binding on the Parties. The costs of arbitration shall be borne in
accordance with the determination of the board of arbitration. Except in the
case of termination, the Parties shall continue to perform all their obligations
under this Agreement pending the arbitration award.
21.6 All communications and testimonies, whether oral or written, during the
arbitration proceedings shall be in the English language.
21.7 The arbitral award may be enforced by proceedings in any court having
jurisdiction over any of the Parties. If enforcement is sought in the
Philippines, the award shall be enforced by judgement of the Regional Trial
Court of Makati City only. In this connection, the Parties agree to
submit themselves to the jurisdiction of the proper court for a non-arbitrable
dispute, or if enforcement of the arbitral award is sought.
22. BINDING EFFECT & ASSIGNMENT
22.1 This Agreement shall be binding upon and inure to the benefit of the
parties and their respective heirs, personal representatives, successors and
assigns, except as otherwise expressly provided herein.
22.2 CPMIC may not assign this Agreement or grant any participation without the
24
prior written consent of Fenway.
23. EXPENSES
Each party will be responsible for and bear its own costs and expenses,
including legal fees, whether or not the transaction contemplated by this
Agreement is completed or not.
24. NOTICE
24.1 All notices, requests, payments, demands or directions to the parties
hereto shall be in writing and delivered or sent by registered mail postage
prepaid, or by telex, telecopy, telegram or cable addressed to the parties
hereto at their addresses set out on the first page of this Agreement, or to
such other address(es) as may be specified by one party to the other in a notice
given in the manner herein provided. Any notice, request, demand or direction
given in such manner shall be deemed to have been received by the party to whom
it is given.
(a) On the 7th business day following the mailing thereof, if sent by
registered mail;
(b) On the 2nd business day following delivery, if personally delivered; or
(c) On the business day following the transmittal thereof, if sent by
telex, telecopy, telegram or cable.
24.2 If normal mail service, telex service or telegraph service is interrupted
by strike, slowdown, force majeure or other cause, then any notice, request,
demand or direction sent by the impaired means of communication will not be
deemed to be received until actually received, and the party sending the notice,
request, demand or direction shall utilize any other such services which have
not been interrupted or shall deliver such notice, request, demand or direction
in order to ensure prompt receipt thereof;
25. FORCE MAJEURE
25.1 In the event that any party is delayed or hindered in the performance of
their obligations hereunder by force majeure, this Agreement shall remain in
suspense until the cause thereof has ceased to delay or hinder performance. For
purposes of This Agreement, but not by way of limitation, force majeure shall
mean any cause beyond the reasonable control of the party liable to perform, and
shall include strikes, lockouts, civil
25
commotion; riot, war, threat of or preparation for war, fire; explosion,
sabotage, storm, flood, earthquake or other natural disaster.
25.2 Any party hereto claiming suspension of its obligations as aforesaid shall
promptly notify the other parties to that effect and shall take all reasonable
steps to remove or remedy the cause and effect of the force majeure described in
the said notice insofar as it is reasonably able so to do and as soon as
possible; Provided that the terms of settlement of any labor disturbance or
dispute, strike or lockout shall be wholly in the discretion of the party
claiming suspension of its obligations by reason thereof, and that said party
shall not be required to accede to the demands of its opponents in any such
labor disturbance or dispute, strike, or lockout solely to remedy or remove the
force majeure thereby constituted.
26. WAIVER
26.1 No consent or waiver, express or implied, by any party to or of any breach
or default by the other party of any or all of its obligations nnder this
Agreement will:
(a) be valid unless it is in writing and stated to be a consent or waiver
pursuant to this Paragraph;
(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
(d) eliminate or modify the need for a specific consent or waiver pursuant
to this Paragraph in any other or subsequent instance.
26.2 In the event that any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein, shall, for any reason,
be held to be invalid, illegal or unenforceable, such illegality, invalidity or
unenforceability shall to the extent practicable not affect the validity of this
Agreement.
27. GENERAL PROVISIONS
27.1 All parties hereto will, from time to time, at the request of the others,
execute and deliver all such other and additional instruments, notices,
releases, agreements, undertakings or other required documents and shall do all
such other acts and things as may be reasonably necessary to more fully assure
the carrying out of the intent and puipose of the terms of this Agreement.
27.2 Time is of the essence of this Agreement.
26
27.3 The parties acknowledge that although this Agreement was prepared by
Xxxxxxxxxx Anfield acting as counsel to Fenway, CPMIC and its stockholders
throughout the discussions and negotiations between the parties has been advised
by independent legal counsel with respect to its rights and obligations under
this Agreement.
27.4 The governing law of this Agreement shall be the laws of British Columbia,
Canada.
28. EXECUTION
28.1 This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, and all of which together shall constitute one and
the same instrument. The Parties may each execute this Agreement by signing any
such counterpart.
28.2 A facsimile copy of this Agreement shall be considered as an original and
shall, in all respects, be legally binding.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
CENTRAL PALAWAN MINING & FENWAY RESOURCES LTD.
INDUSTRIAL CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxxxx By: /s/ H. Xxxx Xxxxxx
------------------------------- ---------------------------------
Engineer Xxxxxxxx X. Xxxxxxxx H. Xxxx Xxxxxx
President President & CEO
/s/ A. Xxxxxxx Xxxxxx
---------------------------------
A. Xxxxxxx Xxxxxx
Secretary & CFO
27
The Corporate Seal of
CENTRAL PALAWAN MINING &
INDUSTRIAL CORPORATION
was hereunto affixed in the
presence of:
/s/ [ILLEGIBLE]
-------------------------------
The Corporate Seal of
FENWAY RESOURCES LTD.
was hereunto affixed in the
presence of:
/s/ [ILLEGIBLE]
-------------------------------
00
XXXXXXXXXXXXXX
XXXXXXXX XX XXX XXXXXXXXXXX)
XXXXXX, XXXXX XXXXXX )S.S.
Before me on the 29th of August 1996 in Makati, Metro Manila, personally
appeared the following:
Name CTC/Passport Date & Place of Issue
A. Xxxxxxx Xxxxxx for: BCO15961 7/25/94 - Vancouver
FENWAY RESOURCES LTD. Canada
Xxxxxxxx X. Xxxxxxxx for: 80957630 4/2/96 - Makati
CENTRAL PALAWAN MINING
INDUSTRIAL CORPORATION
to me known and known to me to be the same persons who executed the foregoing
Memorandum of Agreement consisting of __ pages, including this page, and they
acknowledged to me that the same is their free and voluntary act and deed and
the free and voluntary act and deed of the corporations they respectively
represent.
IN WITNESS WHEREOF, I have hereunto set my seal on the date and at the
place abovewritten.
/s/ XXXXXX X. XXXX
Xxxxxx X. Xxxx
Notary Public
until 31 December 1997
PTR No. 0276071
IBP #405858
Doc. No. 438;
Page No. 089;
Book No. III;
Series of 1996.
TECHNICAL DESCRIPTION
CONTRACTOR: CENTRAL PALAWAN MINING & INDUSTRIAL CORP.
0000 Xxxxx Xxxxx Xx., Xxxxxxx,
Xxxxxx, Xxxxx Xxxxxx
CONTRACT AREA
Location: Barangay Isugod-Pinaglabanan Area
Municipality of Quezon
Province of Palawan
Shape: Bounded by Coordinates
Longitude 117 58'30" to 118 05'30"
Latitude 9 12'00" to 9 18'30"
See attached map, marked Figure 2.
Size: Four Thousand Nine Hundred Forty One
Hectares (4,941)
ECONOMIC GEOLOGY
Sufficient reserves of cement raw materials, consisting of limestone and
shale, have been evaluated in the Isugod-Pinaglabanan area along the coast of
Quezon town facing South China Sea by the Bureau of Mines & Geosciences which
confirmed the feasibility of establishing a commercial plant therein. Chemical
ananlysis indicated the suitability of the materials for the manufacture of
portland cement.
[GRAPHIC OMITTED]
[GRAPHIC OMITTED]
