1
Exhibit 10.14
MEMORANDUM OF UNDERSTANDING
MADE
APRIL 12, 2000
BETWEEN
UCAR GRAPH-TECH INC.
AND
MAZARIN MINING CORPORATION INC.
2
Memorandum of Understanding made April 12, 2000 between UCAR Graph-Tech Inc., a
Delaware corporation ("GRAPH-TECH") and Mazarin Mining Corporation Inc., a
Quebec corporation ("Mazarin").
RECITALS:
1. Mazarin owns a 100% interest, except for rights currently held by the
Fonds d'exploration miniere du Nouveau-Quebec or its successors, in a
graphite deposit located at Lac Knife, Quebec, Canada, as more
particularly described in Appendix D (the "Deposit"). Mazarin also owns
rights in various graphite exploration properties and permits located
within 100 miles of the Deposit (the "Additional Permits", as listed
and shown in Appendix D (the Deposit and Additional Permits
collectively referred to as the "Ownership Interest")
2. GRAPH-TECH believes the graphite contained in the Deposit may be of use
in its production of advanced graphite materials. GRAPH-TECH, directly
or through a corporation affiliated with GRAPH-TECH, is willing to fund
the expenses of a feasibility study (the "Study") on the Deposit.
References herein to "GRAPH-TECH" shall mean GRAPH-TECH, or a
GRAPH-TECH affiliate.
3. Upon completion of the Study, GRAPH-TECH shall be entitled to an
ownership interest in the Vehicle (as defined in Section 1 below), as
described in Section 3 below, and have a period of time, which may be
extended by making option payments to Mazarin, to determine whether it
wishes to develop, jointly with Mazarin, the Deposit for purposes of
commercial production (a "Development Decision").
4. Conditional upon the Development Decision, GRAPH-TECH wishes to enter
into a long-term agreement for the purchase of graphite produced from
the Deposit including the terms described in Appendix C (the "Offtake
Contract").
5. This Memorandum sets out the basic terms pursuant to which the parties
will arrange for equity and debt financing of the development of the
Deposit if a Development Decision is made.
6. GRAPH-TECH will acquire an equity interest in Mazarin (the "Equity
Investment"), conditional upon execution of this Memorandum, on terms
described in Appendix B.
NOW THIS MEMORANDUM WITNESSES AS FOLLOWS:
1. THE VEHICLE. Within 30 days of the closing of the Subscription
Agreement, Mazarin shall establish a single-purpose corporation or other legal
entity without debt or other obligations, as agreed by the parties (the
"Vehicle"). Immediately upon creation of the Vehicle, Mazarin shall transfer the
entire Ownership Interest to the Vehicle, in the most efficient manner for tax
purposes.
The Vehicle shall be operated on a sound commercial basis as a
profit centre and shall be established in a form and in a jurisdiction agreeable
to the parties having regard to the tax implications to GRAPH-TECH and Mazarin
among other matters. GRAPH-TECH and Mazarin shall enter into a shareholders
agreement or equivalent agreement (the "Shareholders Agreement") no later than
upon the completion of Phase 1 of the Study. The Shareholders Agreement shall
contain terms consistent with this Memorandum and cover matters including
3
board composition, approval of budgets and programs, management and human
resources, the project and expansions, restrictions on transfers of interest,
default and compulsory sale of interest, dispute resolution and matters
requiring approval by special majorities, as some are more specifically
described in Schedule "A". The parties shall commence good faith negotiations as
to the content of the Shareholders Agreement upon the execution of this
Memorandum and shall execute the Shareholders Agreement no later than upon
completion of Phase One of the Study.
The Vehicle shall comply with all laws applicable to the
Vehicle and the business in which it operates, including but not limited to,
applicable health, environment and safety laws and regulations. The Vehicle
shall adopt a comprehensive health, safety and environmental compliance policy
with conditions as least as restrictive as those contained in GRAPH-TECH's then
current policy with the addition of those policies/procedures that would be
necessary or appropriate for the proper operation of a graphite mining and
processing facility.
2. STUDY. The Study shall be initiated and undertaken by
GRAPH-TECH, at its sole expense, in order to determine if the graphite to be
mined and processed from the Deposit is technically suitable for use in
GRAPH-TECH's business and mining of the Deposit is economically viable using
parameters acceptable to the Shareholders. GRAPH-TECH shall reimburse Mazarin
for its reasonable expenses for work performed during the Study and requested by
the Study Committee, as defined in Section 4. The Study shall consist of three
phases as described below.
Phase One, the pre-evaluation stage, will include the testing
of an approximately three (3) tonne sample of graphite concentrate from the
Deposit delivered to GRAPH-TECH's specifications for use in GRAPH-TECH's
production. Mazarin shall make available to GRAPH-TECH, at the location and
within the timetable set out in Appendix E, sufficient quantities of concentrate
in order to allow GRAPH-TECH to produce a sample within the quantity and size
specifications set out in Appendix E.
Phase Two, the bulk sample stage, will include the production
of a bulk sample of 100 to 200 tonnes of graphite concentrate to be produced and
delivered, at GRAPH-TECH's sole cost and expense, to GRAPH-TECH's specifications
for use in GRAPH-TECH's production. GRAPH-TECH may remove sufficient quantities
of ore from the Deposit in order to allow GRAPH-TECH to produce concentrate
within the quantity and size specifications set out in Appendix X. Xxxxxxx shall
assist GRAPH-TECH in obtaining all required authorizations in order to mine and
remove sufficient ore to produce such concentrate and in the coordination of the
removal of the ore. GRAPH-TECH shall produce, in addition to its requirements,
an additional five (5) tonne sample of graphite concentrate, having the same
specifications, for the benefit of the Vehicle.
Phase Three, the feasibility stage, shall include, without
limitation, the definition of ore reserves, the mining plan and equipment,
environmental surveys, process facilities, power supply, site layout, capital
and operating cost estimates, manpower and training requirements, services and
infrastructure, legal and permitting requirements, site restoration and waste
disposal, economic analysis, and project implementation and schedule for the
development of the Deposit The feasibility study shall conform to industry
standards and cover the scope of the activity described in this paragraph.
- 2 -
4
3. INITIAL INTEREST. Upon completion of the Study ("Study Completion"),
and in consideration thereof, Mazarin shall transfer to GRAPH-TECH a 25%
interest in the Vehicle (the "Initial Interest"). For purposes of this
Memorandum, Study Completion shall be deemed to have occurred on the date which
GRAPH-TECH delivers to the Study Committee (as hereinafter defined), a final
report as contemplated in Phase Three of the Study.
GRAPH-TECH may elect to discontinue the Study at any
time without any further obligation, by written notice to the Study Committee.
If GRAPH-TECH elects to discontinue the Study, all work product related solely
to the feasibility of the project shall be contributed to the Vehicle and all
work product related to the use of the graphite flake in GRAPH-TECH's production
shall remain GRAPH-TECH's property unless otherwise agreed in writing.
4. STUDY COMMITTEE. Upon execution of this Memorandum, the parties shall
establish a five (5) member Study Committee (the "Study Committee"), to which
GRAPH-TECH shall deliver the Study results. GRAPH-TECH shall appoint three
members of the Study Committee and Mazarin shall appoint two members. Either
party may replace or substitute its members on the Study Committee upon notice
to the Study Committee. Decisions of the Study Committee shall be made by
majority vote. The Study Committee shall agree on the specific terms and
objectives for Phase Three of the Study. Should GRAPH-TECH make a Development
Decision and elect to go forward with the development of the Deposit, the Study
Committee shall become the Vehicle's management committee and board of
directors. The management committee shall then appoint a Manager/President who
will be responsible for the day-to-day operation of the Vehicle.
5. OPTION. After completion of the Study, GRAPH-TECH shall have until
December 31, 2002 (the "Option Period") to determine if it wishes to make a
Development Decision or wishes to extend the time in which it may make the
Development Decision.
GRAPH-TECH may extend the Option Period for up to five (5) additional
consecutive one-year periods (each an "Extension Period"). The Development
Decision can be made at any time during the Option Period or through to and
including December 31 of each of the following Extension Periods upon delivering
payments ("Extension Payments") to Mazarin during the applicable Extension
Period in the amounts indicated below:
YEAR OPTION PAYMENT
---- --------------
2003 $ 500,000.00
2004 $1,000,000.00
2005 $1,500,000.00
2006 $2,000,000.00
2007 $2,500,000.00
A pro rata portion of each Extension Payment shall be paid
monthly by the last day of each month throughout the applicable Extension
Period. If, prior to a Development Decision being made during any Extension
Period, GRAPH-TECH fails to make an Extension Payment, Mazarin shall notify
GRAPH-TECH in accordance with Section 16 hereof and GRAPH-TECH shall have a
period of 30 days thereafter to make such payment, otherwise the
- 3 -
5
dilution provisions in the Shareholders Agreement shall apply.
GRAPH-TECH will give Mazarin a written notice of its intention
to extend the period in which it may make the Development Decision at least 30
days prior to the beginning of the applicable Extension Period. In the event
GRAPH-TECH elects not to make a Development Decision by December 31, 2002, or
prior to the termination of any applicable Extension Period, Mazarin may require
GRAPH-TECH to transfer its interest in the Vehicle to Mazarin for a sum of
$1,000,000.00 or GRAPH-TECH's interest shall be diluted on a basis to be set out
in the Shareholders Agreement.
6. DEVELOPMENT DECISION. Once the Development Decision is made
and notice thereof delivered to Mazarin, the Study Committee shall use the
approved feasibility study to delineate the initial project (the "Initial
Project") for the complete development of the Deposit. Immediately upon
GRAPH-TECH making a Development Decision, the Extension Payments to Mazarin
shall cease and the Vehicle shall initiate reasonable efforts to begin mining
operations within 24 months. Should the Vehicle be unable to begin operations
within the 24 months for reasons other than (i) a force majeure event or by (ii)
inaction or event caused or contributed to by Mazarin, which delay the beginning
of mining operations, GRAPH-TECH shall recommence Extension Payments to Mazarin.
The Extension Payments will recommence as if the Development Decision and the
time period in between had not occurred. The Extension Payments shall cease
permanently when the Vehicle is able to begin mining operations. For example if
GRAPH-TECH makes a Development Decision on June 30,2003 and then 25 months later
has through inaction, caused the Vehicle to fail to be able to begin mining
operations, the Extension Payment that would have been due for July, 2003 shall
then become due and payments would continue from that point as if no Development
Decision had been made. The Extension Payments would end when the Vehicle is
able to begin operations.
Upon making the Development Decision, the Vehicle shall enter
into the Offtake Contract with GRAPH-TECH. The Vehicle shall use reasonable
efforts to obtain non-recourse debt financing for 60% to 75% of the capital
requirements and start-up expenses for the Initial Project, in accordance with
the development budget and timetable to be set out in the Study.
7. SUBSEQUENT INTEREST AND FUNDING. Should GRAPH-TECH make a
Development Decision, GRAPH-TECH shall be entitled to and Mazarin shall hold in
escrow for subsequent transfer to GRAPH-TECH an additional thirty-five percent
(35%) interest (the "Subsequent Interest") in the Vehicle. The parties shall use
a method of transfer having regard to the tax implications to GRAPH-TECH and
Mazarin. Mazarin shall forthwith transfer an additional share of the Subsequent
Interest to GRAPH-TECH in consideration for each of GRAPH-TECH'S Remaining
Equity Financing (as defined below) contributions and in proportion to the
amount of each such contribution relative to GRAPH-TECH's portion of the
Remaining Equity Financing. For purposes of the transfer of the Subsequent
Interest, GRAPH-TECH'S portion of the Remaining Equity Financing shall be that
amount established in the feasibility study. Any cost overruns which require
additional equity financing shall be split by the parties on a 60% GRAPH-TECH
/40% Mazarin basis as set out below.
The parties will be responsible for providing in the form of
equity contributions, and in accordance with the development budget and
timetable, the remainder of the financing (the "Remaining Equity Financing" or
"REF") required for the capital requirements and other
- 4 -
6
start-up expenses of the Initial Project, in excess of the Initial Project debt
financing. Each party's responsibility for the Remaining Equity Financing shall
be calculated pursuant to the following formula:
GRAPH-TECH Equity Financing = ((PDEC+ REF) X 60%)) - GTPDEC
Mazarin Equity Financing = (PDEC + REF) X 40%)) - MZPDEC
PDEC = GTPDEC + MZPDEC
REF = Remaining Equity Financing
GTPDEC = GRAPH-TECH Pre-Development Decision Equity
Contribution (net of grants and subsidies actually received by
GRAPH-TECH. Total GTPDEC to be capped at $3,000,000.00 and to
exclude all costs for research and testing in GRAPH-TECH
facilities not related to testing graphite from the Deposit)
MZPDEC = Mazarin Pre-Development Decision Equity Contribution
= $6,000,000.00
By way of example, based on current estimates of the required Remaining Equity
Financing (presently estimated to be $24 million) the party's obligations and
ownership interest in the Vehicle would be as follows:
Remaining Equity Total Equity Final Ownership
Shareholder PDEC Financing (REF) Contributed Interest
----------- ---- --------------- ----------- --------
Mazarin $6 million $7.2 million $13.2 million 40%
GRAPH-TECH $3 million $16.8 million $19.8 million 60%
8. TERMINATION OF PARTICIPATION IN THE VEHICLE. After the
Development Decision is made, should GRAPH-TECH elect to withdraw from further
participation in the Initial Project, fail to provide the GRAPH-TECH Equity
Financing when due (as set out in the feasibility study and/or Shareholders
Agreement) or otherwise materially breach the terms of this Memorandum and/or
the agreements executed as a result of this Memorandum, and such defaults are
not cured within 30 days of the receipt of written notice of termination from
Mazarin, within 12 months of end of the cure period, GRAPH-TECH may seek to sell
its interest in the Vehicle, subject to Mazarin's right of first refusal. The
purchaser of GRAPH-TECH's interest shall then have an additional 30 days in
which to cure any material defaults which may then exist. If GRAPH-TECH is
unable to obtain a willing and able purchaser within the 12 month period,
Mazarin may require GRAPH-TECH to transfer its interest in the Vehicle to
Mazarin for a sum of $1,000,000.00 plus 60% of any Remaining Equity Financing
GRAPH-TECH may have provided or GRAPH-TECH's interest shall be diluted based on
the formula set out in Section 7.
At any time, should Mazarin elect to withdraw from further
participation in the Initial Project, fail to provide the Mazarin Remaining
Equity Financing when due (as set out in the feasibility Study and/or
Shareholders Agreement) or otherwise materially breach the terms of this
Memorandum and/or the agreements executed as a result of this Memorandum,
without cure within 30 days of the receipt of written notice of termination from
GRAPH-TECH (the "Time of Termination"), Mazarin will have the choice to have its
interest in the Vehicle diluted as per the formula in article 7 or to have its
interest in the Vehicle converted to a royalty payment on the
- 5 -
7
basis set out below:
- The royalty payment will be based on [text redacted]
- If at the Time of Termination, Mazarin has contributed none of its
required Remaining Equity Financing, its ownership interest in the Vehicle
shall be immediately transferred to GRAPH-TECH and replaced with a royalty
payment equal to [text redacted] (the "Pre-Contribution Payment").
- If at the Time of Termination, Mazarin has contributed 100% of its
required Remaining Equity Financing and elects to withdraw from
participation in the Initial Project, its ownership interest in the
Vehicle shall be immediately transferred to GRAPH-TECH and replaced with a
royalty payment equal to [text redacted] (the "Post-Contribution
Payment").
- If at the Time of Termination, Mazarin has contributed 100% of its
required Remaining Equity Financing and elects to withdraw from
participation in the Initial Project; its ownership interest in the
Vehicle shall be immediately transferred to GRAPH-TECH and replaced with a
royalty payment equal to [text redacted] (the "Post-Contribution
Payment").
- If at the Time of Termination, Mazarin has contributed a part but not all
of its required Remaining Equity Financing, its ownership interest in the
Vehicle shall be immediately transferred to GRAPH-TECH and replaced with a
royalty payment equal to a rate per tonne of graphite ore processed by the
Vehicle calculated as follows.
Royalty Rate = % of Mazarin Equity Financing actually contributed,
multiplied by (the difference between the Pre- and Post-Contribution
Payment plus the Pre-Contribution Payment).
The rate of all royalty payments is based on the assumption that the processed
ore shall contain [text redacted]. The percentage of graphite grade will be
determined by assaying representative head samples to the concentrator. The
royalty payment shall be adjusted proportionately for higher or lower grade and
paid monthly. The royalties contemplated in this Section are premised on the
accuracy of the 1991 Cambior feasibility study and the distribution of the
graphite flake sizes and grade as defined in that study. Should the feasibility
study to be completed in Phase Three of the Study demonstrate a graphite grade
or flake size distribution materially different than the 1991 Cambior study,
Graph-Tech shall have the right to renegotiate the terms of the royalty. For the
purpose of this paragraph, a material change shall be defined as [text
redacted].
For each new graphite deposit and or major expansion of the
Initial Project or of a new graphite deposit GRAPH-TECH will have the right to
renegotiate the terms of the royalty if the commercial plant projections of a
concentrate are yielding less than [text redacted].
The termination of either party's participation in the Vehicle
shall not affect any guarantees or other obligations of either party in respect
of the Vehicle, the party, or the other party, including but not limited to the
debt financing and the Offtake Contract between the Vehicle and GRAPH-TECH.
9. RIGHT OF FIRST REFUSAL. Should either party, at any time
after the Development Decision has been made, wish to sell or transfer its
interest in the Vehicle, it shall grant to the other party a right of first
refusal as to its interest to be further defined in the Shareholders
- 6 -
8
Agreement.
10. EQUITY INVESTMENT. Subject to prior receipt of regulatory
approval, the Equity Investment shall be made by the purchase from Mazarin, by
GRAPH-TECH, or a company to be owned by or affiliated with GRAPH-TECH, of two
million (2,000,000.00) Mazarin common shares at a price provided for in Appendix
B. As further consideration for the purchase, Mazarin shall simultaneously issue
to GRAPH-TECH one million common share purchase warrants together with the
common shares purchased. The subscription agreement in respect of the purchase
(the "Subscription Agreement") shall include the terms set out in Appendix X.
Xxxxxxx shall use the proceeds from the Equity Investment to eliminate any
rights currently held by the Fonds d'exploration miniere du Nouveau-Quebec or
its successors and resolve any prior interest that any third party may hold in
the Deposit including, but not limited to, any prior royalty interests. Mazarin
shall provide a full release of any and all third party claims on the Deposit to
the Vehicle and GRAPH-TECH prior to the completion of Phase 1 of the Study.
11. OFFTAKE CONTRACT. After negotiation of the Shareholders
Agreement and prior to making the Development Decision, GRAPH-TECH and Mazarin
shall in good faith commence the negotiation and settlement of the terms and
conditions of the Offtake Contract consistent with the terms and conditions set
out in Appendix C.
12. CONFIDENTIALITY AGREEMENT. The parties acknowledge that the
confidentiality agreement (the "Confidentiality Agreement") between UCAR
International Inc. and Mazarin, dated February 7, 2000, a copy of which is
attached as Appendix A, remains in force and effect in accordance with its terms
and shall apply to this Memorandum.
13. DUE DILIGENCE AND COOPERATION. Each Party and its legal and
other advisers shall be entitled, commencing on the date hereof, to conduct a
due diligence investigation of the other party and the Deposit to include, but
not limited to legal, environmental, financial and technical due diligence. For
this purpose the investigating party will be provided: i) free access to the
Deposit and other assets or facilities relating to the Deposit at all reasonable
times; ii) access to senior management and senior management of all assets or
facilities relating to the Deposit, at all reasonable times; and iii) free
access to all documentation relating to the Deposit and the investigated party
at all reasonable times in the possession of the investigated party or its
advisors, such information to be available in a data room at its principal
office. Each Party and its legal and other advisers shall be entitled to inspect
and to receive copies of all such information.
If at anytime prior to consummation of the Subscription
Agreement either party's diligence efforts reveal any material issue or any
information, not previously disclosed, which could prevent, hinder or
substantially increase the costs, risks or liabilities associated with the
Vehicle, Deposit or development of the Deposit, that party may terminate this
Memorandum and all related agreements without further obligation, except for
reasonable replacement costs of Mazarin's 3 ton sample supplied for Phase One of
the Study and article 14-III.
Each Party shall also cooperate with the other in respect of
all filings or other matters arising in respect of the transactions contemplated
in this Memorandum, including in relation to the Investment Canada Act (Canada)
and the Competition Act (Canada) or applicable securities laws.
- 7 -
9
14. REPRESENTATIONS, WARRANTIES AND COVENANTS.
I. Mazarin hereby represents, warrants and covenants to
GRAPH-TECH as follows:
(a) Other than any rights currently held by the Fonds d'exploration
miniere du Nouveau-Quebec or its successors, Mazarin holds good,
marketable legal title to the Ownership Interest and all rights
necessary to fully exploit the Deposit;
(b) the Ownership Interest is free of any encumbrances, legal
hypothecs, or other rights to acquire ownership interests
subject to the hypothecs affecting the universality of the
assets of Mazarin granted to National Bank of Canada and Fiducie
du Quebec;
(c) there are no existing or, to the knowledge of Mazarin after due
investigation, pending liabilities or obligations in respect of
the Deposit or the Ownership Interest, including in respect of
environmental matters, other than payments due to governmental
authorities or work requirements in the normal course of
Mazarin's business;
(d) Mazarin does not require any specific authorizations or consents
from its shareholders or from third parties, except for
regulatory approvals in due course, to execute the Memorandum or
to complete the transactions contemplated hereby other than
those authorizations already obtained;
(e) the Memorandum and the transactions contemplated hereby do not
contravene Mazarin's organizational documents or any other
material agreements in respect of which Mazarin is a party;
(f) there are no existing claims or, to the knowledge of Mazarin
after due investigation, pending claims in connection with the
Deposit or in respect of the Ownership Interest.
(g) Mazarin shall not sell or transfer, other than to the Vehicle,
the Ownership Interest without the prior written consent of
GRAPH-TECH;
(h) Mazarin shall not encumber or permit any encumbrances on or in
respect of the Ownership Interest or the Deposit with the
exception of any claims of Native Americans to the land on which
the Deposit is located (Mazarin represents that upon its
reasonable investigation and to the best of its knowledge no
claimsexist as of the date hereof); and
(i) Mazarin shall fully settle and obtain the release of any prior
claims on or interests in the Deposit including any interest
that may currently exist or may arise in the future including,
but not limited to, any royalty interest which may arise as a
result of a change of the ownership of the Deposit or change of
control of the Vehicle in the future
(j) Mazarin shall transfer the Deposit to the Vehicle free of any
encumbrances, legal
- 8 -
10
hypothec, or other rights to acquire Ownership Interest.
II. Representations, warranties and Covenants by GRAPH-TECH
(a) GRAPH-TECH does not require any specific authorizations or
consents from its shareholders or from third parties, except for
regulatory approvals in due course, to execute the Memorandum or
to complete the transactions contemplated hereby other than
those authorizations already obtained; and
(b) the Memorandum and the transactions contemplated hereby do not
contravene GRAPH-TECH's organizational documents or any other
material agreements in respect of which GRAPH-TECH is a party.
(c) GRAPH-TECH does not own directly or indirectly any mining right,
permit or option to buy mining rights or permits within 100 mile
radius of Lac Knife.
III. The representations, warranties and covenants contained in this Memorandum
shall survive the closing of the transactions contemplated in this Memorandum
and continue in effect until December 31, 2002 or any later date in respect of
which Extension Payments are being made pursuant to Section 5. Either party
shall defend, indemnify and hold the other party harmless from and against any
and all claims, actions, losses, damages, liabilities and costs that either
party may incur by or as a result of any breach of the representations,
warranties or covenants contained herein.
15. ANNOUNCEMENTS. The timing and content of any public announcement regarding
this Memorandum or the transaction contemplated herein, shall be agreed by the
parties in advance, such agreement and consent to not be unreasonably withheld.
Unless otherwise agreed in writing between the parties or required by law or the
rules of any stock exchange on which the securities of any of the parties are
listed no further public announcement regarding this Memorandum or any matters
referred to herein shall be made.
16. NOTICES. All notices shall be in writing and may be given by being delivered
or sent by facsimile or mail to the authorized address (as hereinafter defined)
of the party to whom the same may be addressed. No such notice shall be deemed
to have been given until it is actually received by facsimile or mail at the
authorized address of the party to whom it is addressed. The authorized address
of each party shall be (or such other address as the relevant party may from
time to time have specified by notice to the others):
In the case of GRAPH-TECH:
UCAR Graph-Tech Inc.
00000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
XXX
Attention: President
Telecopier No. (000) 000-0000
cc: UCAR International Inc.
- 9 -
11
0000 Xxxx Xxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, XX 00000
XXX
Attention: General Counsel
Telecopier No. (000) 000-0000
In the case of Mazarin:
Mazarin Mining Corporation Inc.
000, xxx Xxxxx-Xxxxxx
Xxxxxx, Xxxxxx X0X 0X0
Attention: President
Telecopier No. (000) 000-0000
17. COSTS. Except as specifically provided in Appendix E, all costs and
expenses, including legal costs and disbursements, incurred in connection with
the transactions provided for in this Memorandum shall be borne by the party
that incurred them.
18. ARBITRATION. Any dispute between the parties concerning any matter arising
under this Memorandum including, without limitation, its validity,
interpretation or performance, shall be submitted for final and binding
arbitration in accordance with the provisions of this Section. Any arbitration
hereunder shall be held at Xxxxxxx, Xxxxxxx, unless the parties otherwise agree
to hold it elsewhere. The law to be applied in connection with the arbitration
shall be the law of Ontario, including its conflict of law rules. The
arbitration shall be governed by the commercial arbitration rules of Ontario or
such other rules as the parties may agree and shall be conducted in the English
language.
19. COUNTERPARTS. This Memorandum may be executed in counterparts, each of which
so executed shall be deemed to be an original, and such counterparts together
shall constitute one and the same instrument and shall be deemed to bear date as
of the date first written above.
20. GOVERNING LAW. This Memorandum evidences a binding agreement between the
parties and shall be governed by and construed in accordance with the laws of
the Province of Ontario and the federal laws of Canada applicable therein.
21. FORCE MAJEURE. If either of GRAPH-TECH or Mazarin in the case of an
obligation required to be performed by it hereunder is rendered unable wholly or
in part to carry out its obligations as a result of force majeure affecting such
party, the affected party shall forthwith give to the other party notice setting
out all the relevant particulars, whereupon the obligations of the party shall
be suspended during but no longer than the continuance of the force majeure and
such further period thereafter as shall be reasonable in the circumstances. The
party giving the notice shall use all reasonable diligence to avoid or overcome
the cause of its/their inability to carry out its/their obligations as quickly
as practicable, provided that it/they shall not be liable to settle any strike,
stoppage, work ban, "go-slow", lockout or other industrial dispute or difficulty
on terms not acceptable to it. In this Memorandum "force majeure" shall include:
(a) war, whether declared or not, revolution or act of public enemies; (1,) riot
or civil commotion;
- 10 -
12
(c) strike, lockout or stoppage, work ban or restraint of labour, "go-slow" or
other industrial dispute or difficulty; (d) act of God; (e) fire, flood, unusual
severe weather, earthquake and washaway; (f) act or restraint of any government
or governmental or semi-governmental authority; (g) any other cause not
reasonably within the control of the party and/or affiliate affected.
22. CANADIAN DOLLARS. Unless otherwise specifically stated, references to "$" or
"dollars" herein shall mean Canadian dollars.
23. ENGLISH LANGUAGE. The parties have expressly required that this Memorandum
and all documents and notices relating hereto be drafted in English. Les parties
aux presentes ont expressement exige que la presente convention et tous les
documents et avis qui y sont afferents soient rediges en anglais.
24. ENTIRE AGREEMENT. This Memorandum, together with any agreements and other
documents to be delivered pursuant hereto, including the Confidentiality
Agreement, constitutes the entire agreement between the parties pertaining to
the subject matter hereof and supersedes all prior agreements, negotiations,
discussions and understandings, written or oral, between the parties. There are
no representations, warranties, conditions, other agreements or
acknowledgements, whether direct or collateral, express or implied, that form
part of or affect this Memorandum.
25. FURTHER ASSURANCES. Each party shall do such acts and shall execute such
further documents, conveyances, deeds, assignments, transfers and the like, and
will cause the doing of such acts and will cause the execution of such further
documents as are within its power as any other party may in writing at any time
and from time to time reasonably request be done and or executed, in order to
give full effect to the provisions of this Memorandum.
26. ASSIGNMENT. Neither party may assign any right, benefit or interest in this
Memorandum without the written consent of the other party, such consent not to
be unreasonably withheld, and any purported assignment without such consent will
be void. Notwithstanding the foregoing, upon notice to the other party, either
party may assign any benefit of this Agreement to an Affiliate of the assignor
without the other party's consent. Affiliate means a company that directly or
indirectly controls, is under common control with, or is controlled by the
assignor, and for the purposes hereof, a company will be deemed to control a
corporation if
(a) securities of the corporation to which are attached more
than 50% of the votes that may be cast to elect directors of
the specified corporation or other rights to elect a majority
of the directors are held, other than by way of security only,
by or for the benefit of the corporation, and
(b) the votes attached to those securities are sufficient, if
exercised, to elect a majority of the directors of the
corporation.
27. RIGHT OF FIRST REFUSAL ON FUTURE PROPERTIES. Each party shall grant to the
Vehicle a right of first refusal (or the opportunity to acquire on the same
terms available to that party in the case of any mineral or surface right, title
or interest not presently held) in respect of any graphite properties in
addition to the Ownership Interest within a 100 mile radius of the
- 11 -
13
Deposit ("Future Properties"). Should the Vehicle elect to exercise its rights
with regard to a Future Properties, the Vehicle shall reimburse the party
transferring the rights for any costs incurred in identifying, proving and
acquiring such Future Properties.
28. The cost of acquiring (maximum of Can$40,000), within 100 miles of the
Deposit, new exploration and surface permits by Mazarin during the three months
prior to the execution of this Memorandum for transfer to the Vehicle as per
article 1 shall be split 60% to GRAPH-TECH and 40% to Mazarin.
IN WITNESS WHEREOF the parties hereto have executed this Memorandum of
Understanding as of the date first above written.
UCAR GRAPH-TECH INC.
Per: /s/ Xxxx X. Xxxxxx
(Authorized Signature)
President
(Position)
Per: /s/ Xxxxx X. Xxxxxxxxx
(Authorized Signature)
Operations Manager
(Position)
MAZARIN MINING CORPORATION INC.
Per: /s/
(Authorized Signature)
President and Chief Executive Officer
(Position)
Per: /s/
(Authorized Signature)
Special Adviser
(Position)
- 12 -
14
APPENDIX A
CONFIDENTIALITY AGREEMENT
DATED FEBRUARY 7, 2000
[attached]
15
CONFIDENTIALITY AGREEMENT
This Agreement is made this ___ day of February 2000, by and between
UCAR International Inc. and its affiliates and Mazarin Mining Corporation Inc.
and its affiliates.
1. The recipient of confidential information ("Recipient") agrees to
maintain in confidence and not disclose to third parties, without the prior
written permission of the disclosing party, or except as otherwise permitted
herein, any information provided by the disclosing party to Recipient (whether
in oral or written form), including, but not limited to, business plans and
business prospects, financial information, sales, sales categories, operating
methods, inventory, gross margin, profit, expense or other data, reports,
surveys or similar information (hereinafter referred to as "Confidential
Information"), provided that Confidential Information which is the subject of
this Agreement (a) which is in writing shall be designated as confidential by
marking on the document that the information is "Confidential" prior to delivery
of the document to Recipient and (b) which is delivered orally by the disclosing
party to Recipient shall be identified as confidential at the time it is given
to Recipient
2. Recipient agrees to use the Confidential Information only for the
purpose of evaluating a potential business relationship with and for the benefit
of the disclosing party and for no other purpose.
3. The obligations of this Confidentiality Agreement shall apply to
Confidential Information disclosed prior to the date of this Agreement, provided
that such information was properly designated as "Confidential" at the time of
disclosure, as well as to that hereinafter disclosed.
4. Notwithstanding anything in this Confidentiality Agreement to the
contrary, Recipient shall not be restricted from using or required to keep
confidential any data which:
a) is already available or known to the public;
b) becomes available or known to the public through no
fault of Recipient or Recipient's agents, employees,
and associates;
c) is already known to Recipient at the time the
Confidential Information was received from the
disclosing party as can be shown by written evidence;
or
d) lawfully becomes available to Recipient from a third
party who is not known by Recipient to be under any
obligation of confidentiality with the disclosing
party or its affiliates, with respect to the
Confidential Information;
5. Recipient agrees not to make additional copies of the Confidential
Information except as directly needed to perform the agreed work.
6. Notwithstanding the above, Recipient may disclose the Confidential
Information to those of its agents and employees bound by terms of
confidentiality at least as restrictive as those setout in this agreement.
Recipient agrees that the Confidential Information will be disclosed only to
those of its employees and agents having a need to know the Confidential
Information for the purpose of evaluating the potential business relationship
with the disclosing party.
7. The original and all copies of the Confidential Information supplied
by the disclosing party to Recipient, or made by Recipient, shall remain the
property of the disclosing party and shall be promptly returned to the
disclosing party or destroyed at the disclosing party's request, except to the
extent Recipient is required to retain a copy by law, rule or regulation.
8. Recipient agrees to indemnify and hold the disclosing party harmless
from any loss, damages, or expenses (including reasonable attorneys' fees and
costs) caused by or arising out of Recipient's breach of its obligations under
this Confidentiality Agreement. In the event Recipient is requested, including
the request of any governmental or regulatory authority or self-regulatory
organization, or required (by oral questions, interrogatories, requests for
information or documents, subpoena, or some other process) to disclose any of
the Confidential
- 14 -
16
Information, it is agreed that Recipient shall, to the extent practicable under
the circumstances and not prohibited by applicable law, rule or regulation,
provide the disclosing party with prompt written notice of such request(s) so
that the disclosing party shall have the opportunity to seek an appropriate
protective order and/or waive compliance by Recipient with the requirements of
this Confidentiality Agreement. In the event that such protective order or other
remedy is not obtained or that the disclosing party waives compliance with the
provisions hereof, (a) Recipient may disclose to any requesting person or
tribunal only that portion of the Confidential Information which Recipient
believes in good faith is legally required to be disclosed, and shall exercise
its best efforts to obtain assurance that confidential treatment will be
accorded such, and (b) Recipient shall not be liable for any such disclosure.
9. No failure or delay by the disclosing party in exercising any right,
power or privilege under this Confidentiality Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any right, power, or
privilege.
10. Recipient agrees that the disclosing party, without prejudice to
any rights to judicial relief the disclosing party may otherwise have, shall be
entitled to seek equitable relief, including an injunction, in the event of any
breach by Recipient of the provisions of this Confidentiality Agreement.
Recipient also agrees that it will not seek' and agrees to waive any requirement
for the securing or posting of a bond by the disclosing party in connection with
the disclosing party obtaining such injunctive relief.
11. This Confidentiality Agreement shall be governed by, and construed
in accordance with the laws of the State of Delaware, without giving effect to
conflicts of law principles.
12. MI obligations under this Agreement shall terminate three years
from the date of last disclosure.
13. This Agreement shall be deemed to be the complete agreement of the
parties concerning the subject matter herein and shall supersede any prior such
agreements or the non-disclosure terms in any agreement between the parties
which may be in conflict with the terms stated herein. No amendment or
modification to this Confidentiality Agreement shall be effective unless it is
in writing, and signed by duly authorized representatives of both parties.
IN WITNESS WHEREOF, the parties hereby indicate their acceptance of the
terms stated herein by the signatures of their authorized representatives.
MAZARIN UCAR INTERNATIONAL INC.
MAZARIN MINING CORPORATION INC. UCAR INTERNATIONAL INC.
By: By:
---------------------------- --------------------------------
Name: Name:
---------------------------- -----------------------------
Title: Title:
---------------------------- ------------------------------
Date: Date:
-------------------------- ------------------------------
- 2 -
17
APPENDIX B
TERMS OF SUBSCRIPTION AGREEMENT
ISSUER: Mazarin
PURCHASER: GRAPH-TECH
OFFERING: Private placement from treasury of two
million (2,000,000.00) Mazarin common
shares. As further consideration for the
private placement Mazarin shall issue to
GRAPH-TECH one million common share purchase
warrants.
PRICE: The Price for each share including the
warrants as described below, shall be $1.09
per share, payable upon execution of the
Subscription Agreement.
USE OF PROCEEDS: Working capital.
LISTING: The shares, including the shares underlying
the warrants, will be listed on the Toronto
Stock Exchange.
RESTRICTIONS ON TRANSFER: SUBJECT TO ALL APPLICABLE HOLD PERIODS
PROVIDED FOR BY THE QUEBEC SECURITIES ACT,
GRAPH-TECH SHALL AGREE:
a). to not sell or transfer more
than 200,000- Mazarin common shares in any
one calendar month, without first providing
Mazarin with the opportunity to buy or
arrange for the sale of those shares in
excess of 200,000 ("Excess Shares") pursuant
to the following terms:
i). GRAPH-TECH shall provide
Mazarin with written notice stating the
number of Excess Shares that it intends to
transfer and the minimum price;
ii). Mazarin shall use reasonable
efforts to purchase or arrange for the sale
of the Excess Shares at the minimum price
within 10 days following receipt of the
notice;
iii). If Mazarin does not purchase
or arrange for the sale of the Excess Shares
within that 10 day period, then GRAPH-TECH
may transfer the number Excess Shares setout
in the notice without restriction.
b). If at any time the total number
of Mazarin shares held by GRAPH-TECH is less
than 200,000 then all restrictions shall be
extinguished and this section shall cease to
apply.
c). GRAPH-TECH may encumber any or
all Mazarin
18
shares at any time so long as the mortgagee
or lienholder takes the security interest
subject to the terms of the Subscription
Agreement.
d). GRAPH-TECH may assign any or
all Mazarin shares to an Affiliate (as
defined in the Memorandum) at any time so
long as the assignee takes its interest
subject to the terms of the Subscription
Agreement.
CLOSING DATE: The lesser of 45 days from the date of
execution of the Memorandum or as may be
required by the Toronto Stock Exchange. The
Closing shall be conditional on the results
of the due diligence contemplated in the
Memorandum of understanding which shall be
limited to 45 days from the date of
execution of the Memorandum
COMMISSION: None.
WARRANTS: Subject to regulatory approval, exercisable
at any time for a period of 3 years from the
Closing Date at an exercise price of $1.50
per share. Each Warrant shall entitle the
holder thereof to purchase at its option at
any time during a period of 3 years from the
Closing Date, one share at a price of $1.50
per share, subject to anti-dilution
provisions to be included in the definitive
documentation
ANTI-DILUTION: Subject to regulatory approval, GRAPH-TECH
shall have the right; but not the obligation
to maintain its percentage equity interest
in Mazarin in respect of all future public
or private issuances of equity of Mazarin
from treasury for cash. The price to
GRAPH-TECH shall be equal to the offer price
less any commission that would otherwise be
payable in respect of the offering. The
Subscription Agreement shall include normal
protections against consolidation, splits
and certain transactions outside the normal
course of business.
DOCUMENTATION: Subscription Agreement including customary
representations, warranties and covenants
and documentation required by the exchanges
and securities regulatory authorities.
GRAPH-TECH shall not be required to execute
any documentation which would not normally
be required of a foreign-based purchaser.
- 2 -
19
APPENDIX C
OFFTAKE CONTRACT TERMS
SELLER: Vehicle
BUYER: GRAPH-TECH
MATERIAL: Graphite delivered to GRAPH-TECH's
specifications, attached hereto.
TERM: A long-term contract for the duration of
the Initial Project commencing with
start-up of commercial production.
Commercial production shall be considered
to commence on the date the Vehicle
Operations have been in continuous
operation for three months at 50% of its
designed capacity.
QUANTITY: Subject to "Third Party Sales" below,
GRAPH-TECH to have the right to the entire
production of graphite.
SHIPMENTS: As needed by GRAPH-TECH.
DELIVERY: FOB Mine Site, in one-tonne sacks.
GRAPH-TECH may also request delivery to
other ports, subject to Vehicle's approval,
not to be unreasonably withheld, it being
understood that any increased costs
resulting therefrom will be for
GRAPH-TECH's account. GRAPH-TECH and the
Vehicle will work together to reduce
shipping, packaging and handling costs.
THIRD PARTY SALES: Beginning on the earlier of i) the
commencement of commercial production or
ii) January 1, 2004, and for five years
thereafter (the "Initial Period"),
GRAPH-TECH would agree to allow sales to
third parties under the following
conditions:
1. GRAPH-TECH has first priority to all
graphite available through the Vehicle and
the Vehicle shall sell only capacity in
excess of GRAPH-TECH's requirements to third
parties.
2. GRAPH-TECH would be granted most favored
customer status among its competitors and
other producers of exfoliated graphite
flake.
3. GRAPH-TECH will work with the Vehicle to
establish avenues for sale of the mesh sizes
not useable by GRAPH-TECH.
PRICE: During the Initial Period, prices payable
by GRAPH-TECH in United States Dollars
shall not exceed ("Maximum Prices"):
- 3 -
20
- US$ [text redacted]
The above Maximum Prices CIF Cleveland to be
adjusted to reflect a deduction of all
delivery costs including but not limited to
freight, insurance, duty, etc.. (currently
estimated to be C$75.00 per tonne) for
conversion to FOB Mine site prices.
If, after the Initial Period, world market
prices are at least [text redacted] %
higher or lower than the Maximum Prices, the
parties will negotiate an agreement to
gradually increase or decrease the price
over a five year period to bring the price
in line with world market price less [text
redacted]%. In no event will the prices be
increased more than [text redacted]% above
the Maximum Prices before December 31, 2020.
PAYMENT TERMS: Net [text redacted] days or as otherwise
agreed.
OTHER DEPOSITS: The Vehicle will agree to extend the
contract to cover any other deposits it may
develop or produce within 100 miles of the
Deposit.
OTHER TERMS & CONDITIONS: Graph-Tech Standard Terms and Conditions,
attached.
- 0 -
00
XXXXXXXX "X"
XXXXXXXXXX
Natural Graphite Flake
All products shall be shipped in 1 metric ton (approximate) bulk sacks with a
14-inch diameter bottom spout. The sacks will be palletized, shrink wrapped, and
banded. The sacks and pallets will be returned on shrink-wrapped pallets for
recycling.
Each sack will be identified with grade and lot numbers. Net weight will be on
the tag for each sack.
The actual screen analysis and carbon content for each sack will be reported for
each shipment. SPC charts for sizing and carbon content will be presented
monthly.
All products will have:
[text redacted]
Size requirement [text redacted]:
U.S. Standard Screens
[text redacted]
- 5 -
22
APPENDIX D
LEGAL DESCRIPTION OF DEPOSIT AND ADDITIONAL PERMITS
COLLECTIVELY REFERRED TO AS THE
OWNERSHIP INTEREST TO BE TRANSFERRED IN THE VEHICLE
1. The Deposit which includes mining rights, subject to exclusion in
Article 3 below, for the area shown and surrounded by a heavy black
line on Fig. 2 and described as follows:
(i) covered by the claims number 4660-313, 4660-303, 4660-292,
4660-275, 4660-241, 4660-234, 4660-235, 4660-312, 4660-302,
4660-291, 4660-274, 4660-263, 4660-252, 4660-233, 4537-393,
4537-394, 4660-311, 4660-301, 4660-285, 4660-273, 4660-262,
4660-251, 4660-232, 4537-395, 4537401, 4660-305, 4660-295,
4660-284, 4660-272, 4660-261, 4660-245, 4660-231, 4537402,
4537403, 4537-404, 4660-304, 4660-294, 4660-283, 4660-271,
4660-255, 4660-244, 4660-225, 4537-405, 4735-351, 4735-352,
4735-353, 4660-293, 4660-282, 4660-265, 4660-254, 4660-243,
4660-224, 4660-222, 4537-354, 4537-355, 4537-361, 4660-281,
4660-264, 4660-253, 4660-242, 4660-223, 4660-221, 4537-362,
4537-363, 4537-364, 4660-171, 4537-365, 4537-371, 5192-764,
and
(ii) the Pending Mining Exploration Permit immediately south of
claim 5192-751 and north of claim 5192-764, but excluding the
area east of the east edge of the lake, and
(iii) the north portion of Lac Knife and the area included between
the lake and the claims 4660-235,4537-394 and 4537401.
2. Additional Permits
The Additional Permits consist on the rights to explore only
for graphite and mine only graphite and associated minerals
and metals contained in economical graphite deposits in the
following areas:
(i) claims 5192-739, 5192-740, 5192-741, 5192-744, 5192-743,
5192-742, 5192-745, 5192-746, 5192-747, 5192-750, 5192-749,
5192-748, 5192-751, 5192-752, 5192-753, 5192-754, 5192-757,
5192-756, 5192-755, 5192-758, 5192-759, 5192-760, 5192-763,
5192-762, 5192-761, 5192-765, 5192-766, 5192-767, 5192-768,
5192-770, 5192-769 shown on fig. 1 and 2;
(ii)
- mining Exploration Permit #1512 (shown on fig. 1),
but excluding the portion included in the Deposit and
as shown in article 1 above;
- all Pending Mining Exploration Permits not included
in the Deposit and as shown on fig. 1 and 2;
- all other Pending Mining Exploration Permits within
100 miles of the deposit and applied for by Mazarin
before execution of this Memorandum
23
of Agreement;
(iii) the Pending Surface Minerals License shown on PRS location
maps (figure 3) and not included in the Deposit.
3. Exclusion - Rights not transferred in the Vehicle
It is understood that in the areas covered by the Deposit and by
Additional Permits, Mazarin retains all exploration and mining rights
for all minerals and metals except graphite and minerals and metals
inside mining areas of known economical graphite deposits.
4. Rights held by the Fonds d'exploration miniere du Nouveau-Quebec
On June 24, 1987, Mazarin entered into an agreement with Le Fonds
d'exploration miniere du Nouveau-Quebec Inc. (le <>) regarding
the exploration and the development of mining properties, including the
deposit. According to this agreement, each party will acquire undivided
rights in the mining properties in accordance with the amounts invested
for the development of such properties. However, if the undivided
rights of a party become less that 10%, then the undivided rights of
such party will be transferred to the other party. in return, the party
which received the undivided rights shall pay to the other party a
royalty of 1% of the net profit from the commercial exploitation of the
mining properties for each 1% individed rights transferred.
To fund its joint investment with Mazarin, the Fonds entered, on March
28, 1990, into an agreement with the Ministere de l'E'nergie et des
Ressources and the Office de la Planification et du De'veloppement du
Quebec. This agreement provided that the Government of Quebec may
acquire an interest in the mining properties acquired by the Fonds.
Mazarin intends to settle and obtain the releases of any prior claims
or interests in the Deposit.
- 2 -
24
APPENDIX E
TIMETABLE
Phase One - pre-evaluation stage
1. Mazarin shall make available to GRAPH-TECH an approximately 3 ton
sample of existing, Mazarin held natural graphite flake. Sample
specification: approximately [text redacted]. Carbon content of the
samples to be as is in the existing material SAMPLE AVAILABLE WITHIN 7
DAYS OF EXECUTION OF THIS MEMORANDUM.
2. GRAPH-TECH completes testing of sample material. APPROXIMATE COMPLETION
DATE: [text redacted].
PHASE TWO - bulk sample stage
1. GRAPH-TECH receives a minimum of 30 tons each of "run of mine": [text
redacted]. Carbon content of the bulk samples to be [text redacted]%
minimum, average of [text redacted]%. Ml product generated in producing
these samples is included in product shipped to GRAPH-TECH. Receipt by
[text redacted].
2. GRAPH-TECH completes testing of bulk sample. Approximate completion
date: [text redacted].
PHASE THREE - feasibility study
1. Feasibility study shall mean a study of such detail and scope as to be
acceptable to a bank or other financial institution for the purpose of
providing financing for the establishment and carrying out of the
proposed operations.
2. APPROXIMATE COMPLETION DATE: [text redacted].
25
SCHEDULE A
TO THE MEMORANDUM OF UNDERSTANDING
MADE AS OF APRIL ___,2000
BETWEEN UCAR GRAPH-TECH INC. ("GRAPH-TECH")
AND MAZARIN MINING CORPORATION INC. ("MAZARIN")
SHAREHOLDERS AGREEMENT - TERM SHEET
The parties to the Memorandum of Understanding acknowledges that the
Shareholders Agreement for the Vehicle, to be executed between them upon
completion of Phase I of the Study, shall include, without limitation, the
following elements:
MISSION OF THE VEHICLE
GRAPH-TECH shall be the long term preferred customer of the Vehicle. The Vehicle
will operate on a sound commercial basis as a profit centre, and will pursue
other business opportunities which may include the exploration for and the
mining of graphite around Lac Knife in order to increase graphite production and
sales for the benefit of its shareholders.
BOARD OF DIRECTORS AND COMMITTEE OF THE VEHICLE AND ITS SUBSIDIARIES
- Board of five (5) members;
- initial representation to the Board to be allocated as follows: three
(3) directors to be designated by Graph-Tech and two (2) directors to
be designated by Mazarin. Should either party's interest be diluted or
terminated pursuant to the Memorandum of Understanding, that party's
representation to the Board shall be redistributed on a proportional
basis to reflect the number of voting shares of each party Each party
shall retain a minimum of one (1) member so long as it retains a
minimum of a 10% equity interest in the Vehicle; and
- minimum number of one (1) meeting per quarter.
ASSIGNMENT OF INTEREST
No party may assign its interest in the Vehicle without either the prior consent
of the other party or in accordance with the right of first refusal or as
otherwise provided for in the Shareholders Agreement. No consent will be
required for an assignment by a party of its participation in the Vehicle in
favour of an affiliate (as such term is defined in the Memorandum of
Understanding).
EQUITY FUNDING PREEMPTIVE RIGHT
Each party shall contribute to the equity of the Vehicle as per the terms of the
Memorandum of Understanding. Thereafter, each party shall have the right to
subscribe in preference to any other person to any new issue of shares (over and
above their Remaining Equity Financing obligations) in proportion of their
participation in the equity of the Vehicle at such time.
26
RIGHT OF FIRST REFUSAL
A party may not transfer, cede or otherwise assign its participation in the
Vehicle without having previously offered within and subject to an agreed
decision period, said participation to the other party on the equivalent terms
and conditions as those contained in the proposed transfer, cession or
assignment.
CONDUCT OF BUSINESS
Each of the following decisions shall only be approved by the vote of a special
majority [75%] of the members of the Board, namely:
- the sale or other disposal of any material assets of the Vehicle;
- the filing of a notice of intention, of a proposal or of any assignment
of assets of the Vehicle or any other act done by the Vehicle under any
law with respect to bankruptcy or insolvency, including the nomination
of a trustee or a receiver to the assets of the Vehicle as well as any
decision relating to the winding-up or dissolution of the Vehicle;
- a material change in the mission of the Vehicle or the moving of the
head office of the Vehicle or of its principal place of business
outside of the Province of Quebec;
- the execution of any contract with a party who is related to the
Vehicle or to any of the parties with the exception of the Offtake
Contract with Graph-Tech or its affiliate; and
- generally, any operation or transaction outside the normal course of
business of the Vehicle.
Rights to explore, develop and mine additional graphite deposits on Additional
Permits
If after 3 years from the date the Vehicle begins commercial production, or less
than 3 years if the Vehicle has a positive cash flow, the Vehicle determines
that it is not interested in exploring for and or developing another graphite
deposit, so long as Mazarin maintains a 10% equity interest in the Vehicle,
Mazarin will have the right to proceed on its own or with a partner on any land
covered by Additional Permits (wholly outside the Deposit). In such case,
Mazarin will not have to pay consideration to the Vehicle for Additional
Permits.
Mazarin shall keep the Vehicle's Board of directors apprised of all reports
concerning progress on the exploration, development and feasibility study.
At any time, but not later than three months after completion of a feasibility
study (as per Phase Three of the M.O.U.) on the New Deposit, the Vehicle will
have the following choices:
1. The Vehicle may require Mazarin to transfer the New Deposit back to the
Vehicle and the Vehicle shall pay to Mazarin a price to repurchase the
rights in the New Deposit based on the following formula:
$2 million for the first $1 million expended by Mazarin on exploration
and development for graphite on all the Additional Permits, plus $3
million for the next $1 million expended and plus $5 for each
additional dollar expended in excess of $2 million; or to
- 2 -
27
2. let Mazarin proceed to production if it so wishes (on its own or with a
partner) and in exchange Graph-Tech would acquire a right to purchase
at market price all graphite produced from the New Deposit.
PIGGY-BACK RIGHTS
Should a party receive an offer to sell its interest in the Vehicle to a third
party which would result in a change of control of the Vehicle, the other party
may require, rather than exercising its right of first refusal, the sale of its
participation in the Vehicle to said third party on the same terms and
conditions than the one contained in the offer of said third party.
COMPULSORY SALE
Should a party become bankrupt or insolvent or benefits from the protection of
any law relating bankruptcy or insolvency, that party shall grant an irrevocable
option to the Vehicle or the other party, as the case may be, to purchase all of
its participation in the Vehicle at a price equal to its book value at such
time.
As otherwise provided in the Memorandum of Understanding.
CONVERSION OF MAZARIN PARTICIPATION INTO A ROYALTY PAYMENT
As per the terms of the Memorandum of Understanding.
DISPUTE RESOLUTION
Provisions to be similar to the provisions of the Memorandum of Understanding.
OTHER PROVISIONS
Usual terms and conditions of a shareholders' agreement including provisions for
the delivery of financial information on a regular basis to the shareholders.
- 3 -
