UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
of the
SECURITIES EXCHANGE ACT OF 1934
Date of Event Requiring Report: November 13, 2014
ABAKAN INC.
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
| 000-52784 (Commission File Number) | 98-0507522 (IRS Employer Identification Number) |
Robert H. Miller, Chief Executive Officer
2665 S. Bayshore Drive, Suite 450, Miami, Florida 33133
(Address of principal executive offices) (Zip code)
(786) 206-5368
Registrant’s telephone number, including area code
n/a
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
□
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
□
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
□
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
□
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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ITEM 1.01
ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On November 13, 2014, Abakan Inc. (“Abakan”), and its majority owned subsidiary MesoCoat, Inc., entered into a Letter Agreement with UP Scientech Materials Corp. (“UP Scientech”) in connection with securing a strategic equity investment of three million dollars ($3,000,000).
The terms of the Letter Agreement, in addition to providing for an equity investment in Abakan, includes the following:
·
The appointment of Kevin Chen, VP of Operations at UP Scientech Materials Corp, who until last week, served as the CEO of Suzhou UP Compound Materials Co. Ltd., a wholly owned subsidiary of UP Scientech, to Abakan’s board of directors;
·
A Shareholder Voting Agreement, intended to maintain Mr. Chen’s appointment to the board of directors for a defined period of time;
·
An exclusive Sales Agency Agreement for PComP sales in Japan, South Korea, China and Taiwan (the “Territories”); and
·
A series of options granted to UP Scientech that can be exercised over a defined period of time to cause Abakan to establish up to four joint venture companies for the manufacture and sale of PComP, CermaClad Plate and CermaClad Pipe.
o
One joint venture company is structured to build a PComP plant in Taiwan for the exclusive sale of PComP within the Territories.
o
Two of the joint venture companies are structured to build plants for the manufacture and sale of CermaClad Plate, one in Taiwan for the exclusive sale of CermaClad Plate worldwide, limited only by the building of a second CermaClad Plate plant, that would have the exclusive right to sell within the geographical boundaries of the territory in which it was built.
o
One joint venture company is structured to build a CermaClad Pipe plant in Taiwan for the exclusive sale of CermaClad Plate within the Territories.
·
Any new intellectual property created by the joint ventures would be assigned to a new entity owned by Abakan and UP Scientech on an equal basis.
The Letter Agreement is binding on both parties subject to the execution of definitive agreements that reflect the terms thereof.
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ITEM 3.02
UNREGISTERED SALES OF EQUITY SECURITIES.
On November 11, 2014, the board of directors of Abakan authorized the issuance of seven million five hundred thousand (7,500,000) restricted common shares to UP Scientech in exchange for three million dollars ($3,000,000) or $0.40 a share, which authorization was granted subject to the terms and conditions of a subscription agreement, in reliance upon the exemptions from registration provided by Section 4(2) and Regulation S of the Securities Act of 1933, as amended (the “Securities Act”).
Abakan complied with the exemption requirements of Section 4(2) of the Securities Act based on the following factors: (1) the authorization was an isolated private transaction by Abakan which did not involve a public offering; (2) the offeree had access to the kind of information which registration would disclose; and (3) the offeree is financially sophisticated.
Abakan complied with the exemption requirements of Regulation S of the Securities Act by having directed no offering efforts in the United States, by offering common shares to only to one offeree who was outside the United States at the time of the offering, and ensuring that the offeree to whom the common shares were offered and subsequently authorized was a non-U.S. offeree with an address in a foreign country.
ITEM 5.02
DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS
(d)
Effective November 13, 2014, the Board of Directors of Abakan appointed Kevin Chen to serve as a member of the Corporation’s Board of Directors.
Kevin Chen joined UP Scientech in1998. He currently serves as UP Scientech’s VP of Operations and until last week served as the CEO of UP Scientech’s wholly owned subsidiary, Suzhou UP Compound Materials Co. Ltd. (“Suzhou UP”). Suzhou UP is a leading competitor worldwide in wear resistant compound steel manufacturing. Mr. Chen’s initial responsibilities at Suzhou UP were tied to enhancing operating systems, growing manufacturing facilities, and building sales. Over the last five years Mr. Chen has built sales at Suzhou UP from three million dollars ($3,000,000) to fifty five million dollars ($55,000,000). Since 2012 to date, Mr. Chen’s focus at UP Scientech has transitioned to company management, financial planning and strategic investments, in anticipation of a public offering of UP Scientech common shares on the Taiwan Stock Exchange.
Mr. Chen earned his MBA from Western Michigan University and his BA in Economics at Chinese Culture University (Tiawan).
Mr. Chen is not related to any director, executive officer or person nominated or chosen by Abakan to become a Director or Executive Officer.
Mr. Chen is not an “independent director” as defined in NASDAQ Marketplace Rule 4200(a)(15).
Additional disclosure required by this Item 5.02 is provided in Item 1.01, and Item 3.02 above, being incorporated as if fully restated herein.
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______________________________________________________________________________
ITEM 7.01
REGULATION FD DISCLOSURE
The information contained herein includes a press release attached to this current report in Item 9.01 as Exhibit 99.1 which is incorporated by reference into this Item 7.01 in satisfaction of the public disclosure requirements of Regulation FD. The press release relates to Abakan’s the agreements with UP Scientech. This information is “furnished” and not “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. However, this information may be incorporated by reference in another filing under the Securities and Exchange Act of 1934, as amended, or the Securities Act, only if, and to the extent that, such subsequent filing specifically references the information incorporated by reference herein.
_________________________________________________________________________________
ITEM 8.01
OTHER INFORMATION
_______________________________________________________________________________
Legal Proceedings
Sonoro Invest S.A.
Sonoro Invest S.A. (“Sonoro”) initiated legal proceedings against Abakan on October 2, 2014, in the United States District Southern District of Florida. The claim is based on Abakan’s failure to pay amounts due on certain promissory notes. The complaint seeks $3,187,056.98 plus interest and legal fees.
On November 6, 2014, Sonoro was granted a Temporary Restraining Order and Preliminary Injunction, whereby Abakan was bound by the court to the original terms of the promissory notes which enjoin Abakan from conducting certain activities without Sonoro’s consent, which consent cannot be unreasonably withheld, as follows:
·
Paying, declaring or setting apart for payment any dividend or other distribution on shares of capital stock;
·
Directly or indirectly making any other payment or distribution in respect to its capital stock, other than the pending equity placement of up to 18,750,000 restricted shares at a price of $0.40 for which Sonoro’s prior consent was previously obtained;
·
Redeeming, repurchasing or otherwise acquiring shares of its capital stock, warrants, rights or options to purchase or acquire any shares;
·
Creating, incurring, assuming, guaranteeing, endorsing, agreeing to purchase or otherwise become liable for any new material debt (except borrowings for which the proceeds will be used to repay Sonoro);
·
Selling, leasing, or otherwise disposing of any significant portion of its assets; and
·
Lending money, giving credit, or making advances in excess of $100,000.
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ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d)Exhibits.
10.1 Letter Agreement dated November 13, 2014
10.2 Shareholders Voting Agreement dated November 11, 2014
99.1 Press Release dated November 14, 2014
_____________________________________________________________________________________
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Abakan Inc.
Name: Robert H. Miller Title: Chief Executive Officer
By: /s/ Robert H. Miller Date November 24, 2014
EXHIBIT 10.1
November 13, 2014
Mr. Robert Miller
Director and CEO
Abakan Inc.
2665 S. Bayshore Drive,
Suite 450, Miami,
Florida 33133
U.S.A.
Dear Mr. Miller:
UP Scientech Materials Corp. ("UP Scientech") is pleased to present Abakan Inc. ("Abakan") this letter
agreement regarding its proposed capital injection and business cooperation with respect to Abakan's and
its subsidiary MesoCoat, Inc.'s ("MesoCoat's") PCompP™ and CermaClad™ technologies. For purposes
of this letter, Abakan and MesoCoat shall be hereinafter jointly referred to as the "Company."
For purposes of this letter:
a) "PCompP™" shall mean coatings employing nano-structured ceramic-metal composites formed with
a nano-composite core and binder coating.
b) "CermaClad™" shall mean the use of a high intensity light source captured in a reflector to rapidly
fuse CRA, metal and ceramic coatings on steel pipe, plate, bar and other surfaces.
c) "CermaClad™ for Plate" shall mean CermaClad™ for coating steel plates.
d) "CermaClad™ for Other Applications" shall mean CermaClad™ for coating surfaces other than steel
plates such as steel pipes and bars.
e) "CermaClad™ for Pipes" shall mean CermaClad™ for coating steel pipes.
f) References to PCompP™ and CermaClad™ shall include future Company products and technologies
which fall within these definitions but shall not include other products or technologies.
We believe that this strategic alliance of UP Scientech and the Company constitutes a compelling
opportunity to commercialize and expand the markets for the unique and valuable technology developed
by the Company.
UP Scientech welcomes the prospect of working with the Company in order to consummate a mutually
beneficial transaction. This letter sets forth the basis upon which UP Scientech proposes, subject to
execution of definitive agreements, receipt of internal/regulatory approvals and satisfaction of certain
other conditions as described herein or in the definitive agreements, to proceed with such a transaction.
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1.
UP Scientech Purchase of Abakan Shares
UP Scientech and Abakan intend to enter into a share subscription agreement (the "SSA"), pursuant to
which UP Scientech shall purchase 7,500,000 voting common restricted shares of Abakan (constituting
9.52% of the total issued and outstanding voting shares of Abakan on a fully diluted basis, post the
issuance of the 7,500,000 shares to UP Scientech or 8.95% of the fully diluted total shares post the
issuance of the 7,500,000 shares) at a price of US$0.40 per share for an aggregate purchase price of
US$3,000,000.
The Company proposes to use the proceeds from this share subscription agreement as outlined below.
Description of Use of Proceeds
Amount Raised
$3,000,000
MesoCoat G&A, Taxes & Utilities
450,000
MesoCoat PComP Capex & Consumables
925,000
MesoCoat Cermaclad Budget
220,000
MesoCoat AP (including amounts owed to Powdermet)
810,000
Alberta
35,000
Abakan G&A, AP
560,000
TOTAL
$3,000,000
2.
Director Appointment
(a)
On the closing of the SSA, Abakan's 1) Board of Directors shall appoint one individual, tabled by
UP Scientech, to serve as a member of Abakan's Board of Directors for a term that shall end the
earlier of 3 years from the date of appointment or the date on which UP Scientech's fully diluted
ownership of Abakan falls below 6.0%; 2) over the duration of the term in which the director
tabled by UP Scientech serves on Abakan's Board of Directors, Robert Miller, Maria Maz, The
Thomas and Mario Miller Family Trust and the Tarija Foundation (the "Shareholders") shall
agree to vote in favour of the director tabled by UP Scientech at any annual or special meeting of
Abakan's shareholders called for the election of directors; and 3) Abakan shall cause the
Shareholders to issue a letter prior to or simultaneously upon execution of the SSA, undertaking
that they shall vote in favour of the director tabled by UP Scientech at any annual or special
meeting of Abakan's shareholders called for the election of directors during the term mentioned
above. Such appointed director shall have all rights that a non-executive director normally has,
including but not limited to discussion and approval at Board of Directors and committee
meetings of the budgets that are present by management, and the right to receive biweekly cash
flow statements.
(b)
Subsequent to the closing of the SSA, if the term of service of the individual, tabled by UP
Scientech, as a director expires, or such individual is not elected as a director at an annual or
special meeting of Abakan's shareholders, then Abakan's Board of Directors shall permit UP
Scientech to designate an observer to attend regularly scheduled or special meetings of the Board
of Directors and committee meetings, having access to any documents available to a non-
executive director, including but not limited to, the budgets that are presented by management
and biweekly cash flow statements, so long as UP Scientech holds no less than 6% of the voting
shares of Abakan.
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3.
Information to be Provided to UP Scientech
(a)
The Company shall further provide to UP Scientech necessary information and reasonable
resources and assign necessary people to assist UP Scientech to understand and evaluate the
strength and edge of the PComPTM products, including but not limited to providing product
manuals, brochures and information, delivering sufficient product samples for testing, and
furnishing training of UP Scientech's sales and technical representatives.
(b)
The Company has furnished UP Scientech with its plan to expand the production capacity of
PComPTM products to 18 tons (1.5 tons per month), and shall provide monthly updates of the
execution status to UP Scientech for its information.
4.
Agreement to Enter into Additional Transactions
UP Scientech and the Company intend to enter into the following additional transactions described in this
Section 4. The parties anticipate that to facilitate the proposed transactions, both parties need to further
negotiate, finalize, execute and deliver the following definitive agreements (containing customary
representations, warranties, covenants, indemnities and conditions to closing, as appropriate):
(a)
PCompP™ Exclusive Sales Agency Agreement. An exclusive agency agreement (the "Sales
Agency") for the PComPTM products between UP Scientech and the Company for the sale of
PComPTM products in Japan, Korea, China and Taiwan ("Jurisdictions").
(i)
UP Scientech shall earn a sales agency commission equal to 10% of the revenue
generated from the sale of PComPTM products in the Jurisdictions during the first year of
the term of the Sales Agency and a percentage to be negotiated for the period following
the first year of the Sales Agency.
(ii)
The Sales Agency shall have a three-year term, starting from the date on which the
Company can deliver to UP Scientech PComP™ W104, W333 and W611, PComP™ T45
and T48, PComP™ M144 and MB05™.
(iii)
Upon expiration of the initial three years, the Sales Agency Agreement shall be
automatically renewable for an additional one year renewal term upon the election of UP
Scientech, subject to satisfaction of the Minimum Sales Volumes for the initial three
years as shown on Exhibit A. The terms and conditions for renewal after such additional
one year renewal term shall be determined by the parties hereto.
(b)
Exclusive PComp™ License. After UP Scientech exercises its right to establish a PComP™ Joint
Venture and upon such PComP™ JV Company being duly incorporated under Section 5, the
Company shall grant to the PComP™ JV Company an indefinite exclusive non-royalty bearing
technology license agreement to use PCompP™ technology to engineer, build, own, operate and
maintain a plant to manufacture PComPTM powder products in Taiwan for sale in the
Jurisdictions.
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(c)
Exclusive CermaClad™ for Plate License. (i) Upon the CermaClad™ for Plate JV Company in
Taiwan being duly incorporated under Section 5 and/or (ii) after UP Scientech exercises its right
to establish a CermaClad™ for Plate Joint Venture Outside of the Jurisdictions (defined as those
territories outside of the Jurisdictions) and upon the CermaClad™ for Plate JV Company Outside
of the Jurisdictions being duly incorporated under Section 5, the Company shall grant to such
CermaClad™ for Plate JV an indefinite exclusive non-royalty bearing license agreement to use
CermaCladTM technology (i) to engineer, build, own, operate and maintain a production plant to
coat plate in Taiwan for sale globally (or globally but excluding the jurisdiction where such plant
is located if the CermaClad™ for Plate Joint Venture Outside of the Jurisdictions is established)
and/or (ii) to engineer, build, own, operate and maintain a production plant to coat plate Outside
of the Jurisdictions for sale in the jurisdiction where such plant is located unless otherwise agreed
by the parties, as applicable.
(d)
Exclusive CermaClad™ for Pipe License. After UP Scientech exercises its right to establish a
CermaClad™ for Pipe Joint Venture, and upon such CermaClad™ for Pipe JV Company being
duly incorporated under Section 5, the Company shall grant to the CermaClad™ for Pipe JV an
indefinite exclusive non-royalty bearing license agreement to use CermaCladTM technology to
engineer, build, own, operate and maintain a production plant to coat pipe in Taiwan for sale in
the Jurisdictions.
5.
Agreement to Establish Joint Ventures
UP Scientech and the Company shall establish a CermaClad™ for Plate Joint Venture in Taiwan. UP
Scientech shall have the right to require the Company to establish another up to two joint venture
companies in Taiwan and one joint venture company Outside of the Jurisdictions (together with the
CermaClad™ for Plate Joint Venture in Taiwan, "JV Companies") to build and operate plants to
manufacture PComPTM and CermaCladTM products. The primary terms of the joint ventures shall be as
follows:
PComPTM JV Plant
(a)
UP Scientech shall have two years to exercise its right to require the Company to establish a
PComP™ Joint Venture from the date the Company completes the expansion of its production
capacity of PComP™ to 18 tons per year (1.5 tons per month) and notifies UP Scientech in
writing (the "Initial Date") of the increased production capacity.
(b)
UP Scientech shall subscribe to 80% of the shares of the PComP™ JV Company in cash, which
subscription shall pay for 100% of the startup costs associated the PComP™ JV Company plant,
and the Company shall license the know-how and technology to the PComP™ JV Company in
exchange for 20% of the shares of the PComPTM JV Company.
(c)
The plant can only be built in Taiwan.
(d)
UP Scientech shall contribute operating expertise, sales channels for the product and assist the
PComP™ JV Company to protect PComPTM related technology.
(e)
The PComPTM JV Company shall be licensed to sell PComPTM products only within the
Jurisdictions, unless otherwise agreed by the Company.
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(f)
UP Scientech and the Company shall in good faith negotiate, agree on and execute a joint venture
agreement and the license agreement within three months of UP Scientech's exercise of its right
to form a PComP™ Joint Venture.
CermaCladTM Plate JV Plant - Taiwan
(a)
Within two (2) months after this letter is executed by Abakan, UP Scientech and the Company
shall in good faith and with best efforts (i) complete the financial projection and the timeline to
establish the CermaClad™ for Plate Joint Venture - Taiwan and the timeline to engineer, build,
own, operate and maintain the CermaClad™ Plate JV Company Plant – Taiwan, (ii) negotiate,
agree on and execute a joint venture agreement and the license agreement, and (iii) proceed with
establishment of the CermaClad™ for Plate Joint Venture - Taiwan.
(b)
UP Scientech shall subscribe to 51% of the shares of the CermaClad™ for Plate JV Company -
Taiwan in cash, which subscription shall pay for 51% of the startup costs associated with the
CermaClad™ Plate JV Company Plant – Taiwan, and the Company shall license without royalty
the know-how and technology to the CermaClad™ for Plate JV Company – Taiwan and shall pay
for 49% of the startup costs associated with the CermaClad™ Plate JV Company Plant – Taiwan
in exchange for 49% of the shares of the CermaClad™ Plate JV Company - Taiwan.
(c)
The plant can only be built in Taiwan.
(d)
UP Scientech shall contribute operating expertise, sales channels for the product and assist the
CermaClad™ for Plate JV Company - Taiwan to protect CermaCladTM Plate related technology.
(e)
The CermaClad™ Plate JV Company - Taiwan shall be licensed to sell CermaCladTM Plate
products globally, until such time, if ever, that UP Scientech exercises its right to require the
Company to establish the CermaClad™ for Plate Joint Venture – Outside of the Jurisdictions, and
upon then the CermaClad™ Plate JV Company – Taiwan's license to sell CermaCladTM Plate
products would be excluding the jurisdiction where such CermaClad™ Plate JV Company –
Outside of the Jurisdictions is located, unless otherwise agreed upon by UP Scientech and the
Company.
CermaCladTM Plate JV Plant – Outside of the Jurisdictions
(a)
UP Scientech may exercise its right to require the Company to establish the CermaClad™ for
Plate Joint Venture – Outside of the Jurisdictions until the later of two years from the Initial Date
or from the date that the Company opens its first CermaClad™ Plate plant.
(b)
UP Scientech shall subscribe to 49% of the shares of the CermaClad™ for Plate JV Company–
Outside of the Jurisdictions in cash, which subscription shall pay for 49% of the startup costs
associated with the CermaClad™ for Plate JV Plant– Outside of the Jurisdictions, and the
Company shall license without royalty the know-how and technology to the CermaClad™ for
Plate JV Company – Outside of the Jurisdictions and pay for 51% of the startup costs associated
with the CermaClad™ for Plate JV Plant– Outside of the Jurisdictions in exchange for 51% of the
shares of the CermaClad™ Plate JV Company – Outside of the Jurisdictions.
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(c)
UP Scientech shall contribute operating expertise, sales channels for the product and assist the
CermaClad™ for Plate JV Company – Outside of the Jurisdictions to protect CermaCladTM Plate
related technology.
(d)
The CermaClad™ Plate JV Company – Outside of the Jurisdictions shall be licensed to sell
CermaCladTM Plate products in the jurisdiction where such CermaClad™ Plate JV Company –
Outside of the Jurisdictions is located, unless otherwise agreed by UP Scientech and the
Company.
(e)
UP Scientech and the Company shall in good faith negotiate, agree on and execute a joint venture
agreement and the license agreement within three months of UP Scientech's exercise of its right
to form a CermaClad™ for Plate Joint Venture – Outside of the Jurisdictions.
CermaCladTM Pipe JV Plant
(a)
UP Scientech may exercise its right to require the Company to establish the CermaClad™ for
Pipe Joint Venture until the later of two years from the Initial Date or from the date that the
Company opens its first commercial four-line CermaClad™ pipe plant.
(b)
UP Scientech shall subscribe to 40% shares of the CermaClad™ for Pipe JV Company in cash,
which subscription shall pay for 50% of the start up costs associated with the CermaClad™ for
Pipe JV Plant, and the Company shall subscribe to 50% of the shares of the CermaClad™ for
Pipe JV Company in cash, which subscription shall pay for 50% of the start up costs associated
with the CermaClad™ Pipe JV Plant and license the know-how and technology to the
CermaClad™ for Pipe JV Company in exchange for another 10% shares of the CermaClad™ for
Pipe JV Company.
(c)
The plant can only be built in Taiwan.
(d)
UP Scientech shall contribute operating expertise, sales channels for the product and assist the
CermaClad™ for Pipe JV Company to protect CermaCladTM Pipe related technology.
(e)
The CermaClad™ for Pipe JV Company shall be licensed to sell CermaCladTM Pipe products only
in the Jurisdictions, unless otherwise agreed to by the Company.
(f)
UP Scientech and the Company shall in good faith negotiate, agree on and execute a joint venture
agreement and the license agreement within three months of UP Scientech's exercise of its right
to form the CermaClad™ Pipe Joint Venture.
6.
Ownership of Intellectual Property
Each party shall own its background intellectual property.
Any new improvements, derivatives or new methods to produce or deliver PCompP™ or CermaClad™
products or services developed by any of the respective JV Companies (“New IPs”) shall be owned
equally by UP Scientech and the Company and assigned to a new company, to be formed by the parties
hereto with equal equity ratio, and licensed to the respective JV Companies for no additional
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consideration. The new IPs shall not be assigned, entrusted, licenced, pledged, or abandoned without the
consent of both parties.
Both parties hereto shall have complete access to all JV facilities, equipment, books and records at all
times.
7.
Notices
Any and all notices or other communications or deliveries required or permitted to be provided hereunder
shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission,
if such notice or communication is delivered via facsimile (provided the sender receives a machine-
generated confirmation of successful transmission) at the facsimile number specified in this Section prior
to 6:30 p.m. (Florida time) on a Business Day, (b) the next Business Day after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number specified in this Section
on a day that is not a Business Day or later than 6:30 p.m. (Florida time) on any Business Day, (c) the
Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as follows:
If to Abakan:
Abakan, Inc.
2665 S. Bayshore Drive, Suite 450
Miami, Florida 33133
Attn: Robert Miller
Telephone: 1 786 206-5368
Fax: 1 305 487-7481
Email: robert.miller@abakaninc.com
If to UP Scientech:
UP Scientech Materials Inc.
No. 5-3, Jianguo Road
Guanyin Township
Taoyuan County, 32844
Taiwan R.O.C.
Attn: George Chang
Telephone: 886 3 4833690
Fax: 886 3 4834193
Email: George@upplate.com
8.
Arbitration
Any controversies incurred or related to this letter of intent shall be resolved in an amicable way,
provided that any controversies that cannot be resolved shall be submitted to the Hong Kong International
Arbitration Centre in Hong Kong for arbitration.
9.
Due Diligence
From time to time before and/or after closing of the capital injection of US$3 million under the SSA, UP
Scientech may need to conduct certain due diligence or require certain information, which may include
but not limited to the provision of information covering the technology owned, used, developed, and to be
developed by the Company and/or their affiliates as well as the technology licensed by any third parties to
the Company and/or their affiliates and the technology licensed by the Company and/or their affiliates to
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any third parties. The Company agrees to fully cooperate and provide such information as requested by
UP Scientech subject to those obligations of confidentiality attendant to any such information.
10.
Required Approvals and Others
The above proposal shall be subject to corporate and regulatory approvals required by UP Scientech,
including but not limited to the Board of Directors' approval and the approval of or report to the Central
Bank of Republic of China (Taiwan).
Abakan will hold a meeting of the Board of Directors prior to execution of this letter to duly approve the
terms and conditions of this letter, including but not limited to provision of the observer position to UP
Scientech under Section 2(b) hereof. Abakan shall cause MesoCoat to perform its obligations hereunder.
11.
Fees and Expenses
UP Scientech and the Company shall pay their respective costs and expenses related to the proposed
transactions, including the costs and expenses related to preparation and negotiation of the definitive
agreements.
12.
Legal and Confidentiality
Subject to provision by Abakan of a copy of Abakan's meeting minutes of its Board of Directors duly
approving the terms and conditions of this letter, including but not limited to provision of the observer
position to UP Scientech under Section 2(b) hereof, this letter shall be binding on the parties hereto,
subject to execution of definitive agreements, receipt of internal/regulatory approvals and satisfaction of
certain other conditions as described herein or in the definitive agreements, to proceed with such a
transaction.
This letter is governed by and construed in accordance with Taiwan laws, without regard to principles of
conflicts of laws thereof.
UP Scientech requests that neither the Company, its directors, officers and employees nor its advisors
make any announcement or disclosure to third parties of UP Scientech's interest in this proposed
transaction or of the contents of this letter unless otherwise required by applicable laws and regulations,
under which the content of the announcement or disclosure shall be agreed by UP Scientech in advance.
We look forward to working with you on this transaction.
Yours faithfully
for and on behalf of
UP SCIENTECH MATERIALS CORP.
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/s/ George Chang
George Chang, Chairman
Agreed and accepted this 13th day of
November, 2014 for and on behalf of:
ABAKAN INC.
/s/ Robert Miller
Robert Miller, Director and CEO
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EXHIBIT 10.2
SHAREHOLDER VOTING AGREEMENT
THIS SHAREHOLDER VOTING AGREEMENT, dated as of November 11, 2014 (this "Voting Agreement"), is between UP Scientech Materials Corp. ("UP Scientech"), and Robert H. Miller, Maria C. Maz, the Thomas and Mario Miller Family Irrevocable Trust U/A/D 12/01/2009 and the Tarija Foundation (each a "Shareholder" and collectively, the "Shareholders").
WITNESSETH:
Whereas UP Scientech and Abakan Inc. (“Abakan”) have entered into a Letter Agreement (“Letter Agreement”) of even date, pursuant to which, UP Scientech shall enter into a share subscription agreement (“SSA”), a Sales Agency Agreement and acquire the right to participate with Abakan in certain additional joint venture transactions as detailed in said Letter Agreement; and
Whereas, the Shareholders, individually or as trustees or custodians, subsequent to the closing of the SSA, shall be the beneficial owners of twenty four million one hundred and twenty thousand (24,120,000) shares or collectively in excess of thirty five percent (35%) of the issued and outstanding voting shares of Abakan's common stock (such shares, along with all other shares of capital stock of Abakan acquired by each Shareholder subsequent to the date hereof, are referred to herein collectively as the "Subject Shares"); and
Whereas, as a condition of entering into the Letter Agreement, UP Scientech has requested that the Shareholders agree, and the Shareholders have agreed, among other things, to vote and commit the Subject Shares upon the terms and subject to the conditions set forth herein.
Now, therefore, in consideration of the premises and the mutual representations, agreements and covenants hereinafter set forth, and intending to be legally bound hereby, the parties hereto hereby agree as follows:
1.
Agreement.
(a)
The Shareholders agree to vote the Subject Shares, during the period between the date hereof and the Expiration Date (as defined hereinafter), at any special or annual meeting of the shareholders, in favor of electing an individual nominated by UP Scientech to Abakan’s board of directors.
(b) Prior to the Expiration Date, the Shareholders shall not enter into any agreement or understanding with any person to vote or give instructions in any manner inconsistent with the preceding paragraph (a).
(c)
The Shareholders shall not vote, sell, deal in, assign, pledge, transfer or encumber in any manner whatsoever any of the Subject Shares, except; 1) the Subject Shares may be sold to third parties bound to the terms and conditions similar to those agreed herein; and 2) the Thomas and Mario Miller Family Trust and the Tarija Foundation are allowed to sell up to a maximum of 100,000 Subject Shares per quarter. in the public market in accordance with the rules and regulations of the United States Securities Act of 1993, as amended.
(d) Each Shareholder will agree to such other terms and conditions, if any, as may be requested by any underwriter of the Subject Shares or required by any securities regulatory authority having jurisdiction over Abakan, that do not conflict with this Voting Agreement.
(e) No person executing this Voting Agreement who is or becomes prior to the Expiration Date a director of Abakan, or any successor thereof, makes any agreement or understanding herein in his or her capacity as such director. Each Shareholder signs solely in his or her capacity as the owner, trustee or custodian of the Subject Shares.
2. Representations and Warranties of the Shareholders. Each Holder hereby represents andwarrants to UP Scientech, severally and not jointly, that:
(a) this Voting Agreement has been duly executed and delivered by each Shareholder and is the legal, valid and binding obligation of and fully enforceable in accordance with its terms against such Shareholder;
(b) no consent of any governmental entity, beneficiary, co-trustee or other person is necessary for the execution, delivery and performance of this Voting Agreement by each Shareholder;
(c) subsequent to the closing of the SSA, the Shareholders shall be the beneficial owners of twenty four million one hundred and twenty thousand (24,120,000) shares or collectively in excess of thirty five percent (35%) of the issued and outstanding voting shares of Abakan's common stock;
(d)
each Shareholder shall own the Subject Shares free and clear of any encumbrance other than this Voting Agreement and does not own, directly or indirectly, any other shares of Abakan's common stock or any option, warrant or other right to acquire any shares of Abakan's common stock;
(e) each Shareholder shall have the power and right to vote all of the Subject Shares;
(f) except as provided herein, each Shareholder has not (i) granted any power-of-attorney or other authorization or interest with respect to any of the Subject Shares, (ii) deposited any of the Subject Shares into a voting trust, or (iii) entered into any prior voting agreement or other arrangement with respect to any of the Subject Shares; and
(g)
the execution, delivery and performance of this Voting Agreement by the Shareholders does not and will not result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Shareholders are subject, or its constitutional documents in case of any Shareholder being a trust or foundation.
3. Covenants of the Shareholders. Each Shareholder hereby agrees and covenants that during the period between the date hereof and the Expiration Date, any shares of capital stock of Abakan (including, without limitation, Abakan's common stock) that any Shareholder purchases or with respect to which such Shareholder otherwise acquires beneficial ownership (including by reason of stock dividends, split-ups, recapitalizations, combinations, exchanges of shares or the like) shall be considered Subject Shares and subject to each of the terms and conditions of this Voting Agreement;
4. Expiration Date. This Voting Agreement to vote in favor for the election of UP Scientech’s nominee to Abakan’s board of directors at any annual or special meeting called for the purpose of electing directors shall expire on the earliest of (a) the expiration of the three (3) year commitment to so vote commencing on the date the nominee of UP Scientech is appointed as a director of Abakan; and (b) the date on which UP Scientech’s ownership of Abakan falls below six percent (6%) on a fully diluted basis (such earliest date being referred to herein as the "Expiration Date").
5. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, telecopy or by registered or certified mail (postage prepaid, return receipt requested) or by overnight courier to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 6):
UP Scientech Materials Corp.
No. 5-3, Jianguo Rd.
Guanyin Township
Taoyuan County 32844
Taiwan R.O.C.
Shareholders
Robert H. Miller
4801 Alhambra Circle
Coral Gables, Florida 33146
Maria C. Maz
4801 Alhambra Circle
Coral Gables, Florida 33146
Thomas and Mario Miller Irrevocable Family Trust U/A/D 12/01/2009
3757 Heron Ridge Lane,
Westin, Florida, 33331
Tarija Foundation
4527 West 10th Avenue
Vancouver, British Columbia V6R 2J2
6. Amendments; No Waivers.
(a) Any provision of this Voting Agreement may be amended or waived prior to the Expiration Date if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by UP Scientech and each of the Shareholders or in the case of a waiver, by the party or parties against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or privilege hereunder 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 other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
7. Expenses. All costs and expenses incurred in connection with the preparation and furtherance of this Voting Agreement shall be paid by the party or parties incurring such cost or expense.
8. Successors and Assigns. The provisions of this Voting Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Voting Agreement without the prior written consent of the other parties hereto.
9. Non-Survival of Representations and Warranties. All representations, warranties and agreements made by the Shareholders and UP Scientech in this Voting Agreement shall promptly terminate upon the Expiration Date.
10. Parties in Interest. Nothing in this Voting Agreement is intended to provide any rights or remedies to any person other than the parties hereto.
11. Counterparts. This Voting Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed an original but all of which taken together shall constitute one and the same agreement.
12.
Governing Law. This Voting Agreement will be construed and enforced in accordance with and governed by the laws of the State of Florida, without reference to principles of conflicts of law. Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the State of Florida in connection with any dispute arising under this Voting Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of such proceeding in such jurisdictions.
13.
Jury Trial Waiver. EACH PARTY HERETO HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INSTITUTED BY EITHER OF THEM AGAINST THE OTHER THAT PERTAINS DIRECTLY OR INDIRECTLY TO THIS VOTING AGREEMENT.
14. Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Voting Agreement was not performed in accordance with the terms hereof and that, in addition to any remedy to which they are entitled at law or in equity, the parties shall be entitled to an injunction or injunctions to prevent breaches of this Voting Agreement and to enforce specifically the terms and provisions of this Voting Agreement without the need to post a bond or prove special damages.
15. Interpretation. The descriptive headings contained in this Voting Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Voting Agreement. When a reference is made in this Voting Agreement to a Section, such reference shall be to a Section of this Voting Agreement unless otherwise indicated. Whenever the words "include," "includes" or "including" are used in this Voting Agreement they shall be deemed to be followed by the words "without limitation."
16. Entire Agreement. This Voting Agreement and the related irrevocable proxy constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior written and oral and all contemporaneous agreements and understandings with respect to the subject matter hereof. Each party acknowledges and agrees that no other party hereto makes any representations or warranties, whether express or implied, other than the express representations and warranties contained herein.
17.
Severability. If any term or other provision of this Voting Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, this Voting Agreement shall be interpreted and enforceable as if such provision were severed or limited, but only to the extent necessary to render such provision of this Voting Agreement enforceable.
IN WITNESS WHEREOF, each of the parties hereto has executed this Voting Agreement as of the date first set forth above.
UP SCIENTECH MATERIALS CORP.
/s/ George Chang
By: George Chang
Chairman
Shareholders
ROBERT H. MILLER
/s/ Robert H. Miller
Robert H. Miller
MARIA C. MAZ
/s/ Maria C. Maz
Maria C. Maz
THOMAS AND MARIO FAMILY IRREVOCABLE TRUST U/A/D 12/01/2009
/s/ Dennis Goetz
By: Dennis Goetz
Trustee
TARIJA FOUNDATION
/s/ Robert H. Miller
By: Robert H. Miller
Trustee
Abakan Secures Strategic Investment from Global Wear-Resistant Clad Plate Manufacturer
November 14, 2014
Abakan Inc. (OTCQB: ABKI) (“Abakan”), an emerging leader in the advanced coatings and metal formulations markets, today announced that it has secured a $3M strategic investment from the world’s largest wear-resistant clad plate manufacturer, UP Scientech Materials Corp. (“UP Scientech”). In addition to the investment, UP Scientech have entered into an agreement to develop, manufacture, and sell Abakan’s PComP thermal spray coating and CermaClad clad metal products in Taiwan, China, Japan, and Korea on a joint venture basis.
“UP Scientech is the largest global wear-resistant clad plate manufacturer and offers Abakan not only global sales and marketing channels but also significant financial commitments which will enable us to accelerate the scale-up our development and production efforts. This long-term strategic partnership validates anew the value proposition that our technologies and products offer,” said Abakan CEO, Robert Miller who also welcomes the CEO of UP Scientech, Mr. Kevin Chen, onto Abakan’s Board of Directors.
Abakan and UP Scientech intend to collaborate on both technology development and sales to complement each other’s capabilities. UP Scientech would initiate our collaborative relationship by facilitating sales of Abakan’s PComP thermal spray coating materials in Taiwan, China, Japan, and Korea with the intention of setting-up PComP powder production and coating facilities in Taiwan. UP Scientech and Abakan also intend to collaborate on the development of CermaClad wear-resistant clad plates, with intention of setting up the first Cermaclad clad plate manufacturing facility in Taiwan on a joint venture basis.
“We see a lot of value in Abakan’s suite of technologies and products. UP Scientech, as the world’s largest wear-plate manufacturer, is seeking opportunities to diversify its offerings. Both CermaClad clad metal product and PComP thermal spray powder fit our core business model. We understand the wear and abrasion market very well, and are confident that CermaClad wear-plates and PComP coatings will enable us to offer significantly higher value to our customers”, said UP Scientech’s CEO, Kevin Chen.
About UP Scientech:
UP Scientech is known worldwide as the most competitive company in the world for wear resistant compound steel plate manufacturing. In production capacity, UP Scientech is the largest manufacturer in the world with more than 250,000 square meters of annual production of compound steel plate. In hardfacing rebuilding services, the performance of components hardfaced by UPW process (UP Welding) have enabled significant cost savings and longer operation time, compared to new part replacement in either cast or forged. Through its extensive commercial network, UP Scientech has a global footprint with sales in more than 35 countries.
About Abakan Inc.
Abakan develops, manufactures, and markets advanced nano-composite materials, innovative fabricated metal products and highly engineered metal composites for applications in the oil and gas, petrochemical, mining, aerospace and defense, energy, infrastructure and processing industries. Abakan’s technology portfolio currently includes high-speed, large-area metal cladding technology and long-life nano-composite anti-corrosion and wear coating materials. Abakan's products have demonstrated longer life, higher productivity and extremely high strength-to-weight ratios compared to competing technologies. Abakan’s companies have been honored by The Wall Street Journal as the #1 Manufacturing Innovation across the globe, by Pipeline Industries Guild as the Top Subsea Pipeline Technology, by Forbes as the #1 Most Promising Material Science Company in the United States, by American Metals Market with the Steel Excellence Award, by Inc. 500 as one of the Fastest Growing Manufacturing Company in the U.S., and has received numerous other trade, industry and technology awards including five R&D 100 Awards and a Technology Innovation Award from the National Institute of Standards and Technology. Over $50 million has been invested in product development and testing by federal agencies, national labs and our companies in order to deliver products that offer improved performance over the current state of art. Abakan has successfully introduced its PComP W for metal asset protection and life extension in the oil and gas and mining industries, and is currently focusing on the scale-up and commercialization of its highly disruptive metal cladding products for the oil and gas, oil sands, and mining industries. Abakan currently operates from multiple locations in the United States, and intends to expand global operations to Canada, South-east Asia, Mexico and South America.
Forward-Looking Statements
A number of statements contained in this press release are forward-looking statements. These forward looking statements involve a number of risks and uncertainties including technological obsolescence, market acceptance of future products, competitive market conditions, and the sufficiency of capital resources. The actual results Abakan may achieve could differ materially from any forward-looking statements due to such risks and uncertainties. Abakan encourages the public to read the information provided here in conjunction with its most recent filings on Form 10-K, Form 10-Q and 8-K. Abakan’s public filings may be viewed at www.sec.gov.
Abakan Inc.
Robert Miller, Chief Executive Officer
Phone: 786-206-5368
Email: robert.miller@abakaninc.com
www.abakaninc.com
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Investor Relations
Surety Financial Group, LLC
Phone: 410-833-0078
www.suretyfingroup.com