SUPERIOR COURT (Commercial division)

Transcription

1 SUPERIOR COURT (Commercial division) CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL W IN THE MATTER OF THE PLAN OF COMPROMISE OR ARRANGEMENT OF : QUEBEC LITHIUM INC. Debtor/Respondent QLI METAUX INC. RB ENERGY I~IC. SIROCCO MINING INC. Debtors KPMG INC. -and- -and- Monitor CATERPILLAR FINANCIAL SERVICES LTD, a corporation having a place of business at 3457 Superior Court, Unit , Oakville, Ontario Petitioner AMENDED MOTION TO LIFT THE STAY OF PROCEEDINGS, TO TERMINATE CERTAIN LEASE CONTRACTS AND TO REPOSSESS CERTAIN ASSETS OF THE PETITIONER IN POSSESSION OF THE DEBTOR QUEBEC LITHIUM INC. (Sections 11 and of the Companies' Creditors Arrangement Act) TO THE HONOURABLE JUSTICE MARTIN CASTONGUAY, J.S.C., OR TO ONE OF THE HONOURABLE: JUDGES OF THE SUPERIOR COURT, SITTING IN COMMERCIAL DIVISION, IN AND FOR THE JUDICIAL DISTRICT OF MONTREAL, THE PETITIONER RESPECTFULLY SUBMITS THE FOLLOWING: I. BACKGROUND 1. On October 14, 2014, the Honourable Justice Martin Castonguay, J.S.C., issued a limited stay order followed by an Amended and Restated Initial Order on October 15, 2014, and followed by a Second Amended and Restated Initial Order on October 29, 2014 (the "Initial Order") pursuant to the Companies' Creditors Arrangement Act (the "CCAA") in

2 -2 - respect of Quebec Lithium Inc. ("QLI"), QLI Metaux Inc. ("QLlM"), RB Energy Inc. ("RBE") and Sirocco Mining Inc. ("Sirocco", together with QLI, QLlM and RBE, the "Debtors"), as more fully appears from the Court record; 2. Pursuant to the Initial Order, KPMG Inc. (the "Monitor") was appointed monitor of the Debtors a 1d a stay of proceedings (the "Stay of proceedings") was granted in favor of the Debtors until and including November 13, 2014; 3. On November 13, 2014, the Honourable Justice Martin Castonguay, J.S.C. issued an order approving a sale and investor solicitation process for the Debtors' assets (the "Sale Process") and extended the Stay of proceedings until April 30, 2015, as appears from the Court record; II. RELIEF SOUGHT 4. The Petitioner Caterpillar Financial Services Ltd. ("Caterpillar") is leasing equipment to the Debtor Quebec Lithium Inc. ("QLI"), the whole as more fully described below; 5. By the present motion, Caterpillar seeks, on an urgent basis, an order lifting the stay of proceedinqs to allow Caterpillar: a. to terminate a Master Funding and Lease Agreement and fifteen lease contracts tetween Caterpillar and QLI considering QLI's defaults and namely: i. QLI's failure to maintain in full force and effect maintenance services agreements in relation to the equipment leased by Caterpillar to QLI and QLI's failure to ensure the proper care and maintenance of the leased equipment since the beginning of the Stay of Proceedings; and ii. QLI's failure to pay the lease payments that have become payable under the lease contracts since the beginning of the Stay of Proceedings; b. to repossess the following leased equipment (collectively, the "Equipment") currently in QLI's possession: Lease # Equipment Description: Serial Number: 1 992D Wheel Loader 7MJ Cat777 Truck JRP Cat777 Truck JRP Cat777 Truck P MD5125 Excavator 2C03T45 6 D9T Track Type Tractor S D6T Track Type Tractor Y K Wheel Loader K CS56 Soil Compactor S M Motor Grader J DL Hydraulic Excavator H G3516 Gen Set Z00787

3 MD5125 Excavator Z G Truck R H Wheel Dozer X01255 III. THE MASTER FUNDING AND LEASE AGREEMENT AND THE LEASE CONTRACTS 6. Pursuant to a Master Funding and Lease Agreement dated April 4, 2012 between Caterpillar and QU, as amended on June 28, 2012 (the ""MFLA), Caterpillar has agreed to finance the purchase of the Equipment from third party and the leasing of such purchased Equipment to QU under the terms and conditions described in the MFLA, the whole as appears from a copy of the MFLA communicated herewith as Exhibit R-1; 7. At the request of QU, Caterpillar bought the Equipment from a third party and subsequently leased it to QU under fifteen distinct lease contracts, the whole as appears from the lease contracts for the Equipment (collectively, the "Lease Contracts"), communicated herewith as Exhibit R-2; 8. The total amount payable by QU until the end of the Lease Contracts is $ and the present value of the Equipment is estimated at $; 9. Caterpillar has duly registered its rights under the Lease Contracts and its right of ownership in the Equipment at the Register of Personal and Movable Real Rights (the "RPMRR") on April 5, 2012 under the number and , the whole as appears from a copy of the certified registration statements communicated herewith a s Exhibit R-3; 10. During the November 13, 2014 hearing, Caterpillar's counsel stated that, as discussed with QU, the Equipment was not included in the Debtor's assets subject to the Sale Process initiated by the Debtors and that Caterpillar reserved all of its rights to come back before the Court if the lease payments under the MFLA and the Lease Contracts were not made; IV. QU'S DEI=AULTS UNDER THE MFLA AND THE LEASES 11. QU is currently in default under the MFLA and the Lease Contracts as, amongst other things: a. it has failed to maintain in full force and effect maintenance services agreements ill relation to the Equipment and has failed to maintain the Equipment in working order; and b. it has failed to pay the lease payments of 64314$ due on December 1,2014, of Ei34 674$ due on January 1, 2015 and of $ due on March 1, 2015 and has announced that it will not pay the next lease payments of $ which will become payable on April 1, 2015; a) State of care and maintenance of the Equipment 12. Following the issuance of the Initial Order, Caterpillar requested that QU grants access to one of its representatives to assess the state of care and maintenance of the Equipment, inspect the Equipment;

4 Hewitt Eo uipment Limited ("Hewitt"), a Caterpillar dealer and Ol.l's subcontractor in. charge of the maintenance of the Equipment, inspected the Equipment in the first half of November 2014; 14. Caterpillar has recently been informed that OLi requested in October 2014 that Hewitt's on-site technician who was in charge of the maintenance and repair of the Equipment ceases to perform its services at OLl's mine in La Corne, Ouebec; 15. Since then, Hewitt has not provided any maintenance services to OLi in relation to the Equipment despite OLl's obligation to maintain in full force and effect maintenance services agreements with Hewitt pursuant to the MFLA and the Lease Contracts; 16. The termination of the maintenance service agreement between Hewitt and OLi and the failure to ensure proper maintenance of the Equipment as provided for by the MFLA is an event of default pursuant to Section 20.1 (d) of the MFLA; b) Lease payments 17. The schedule of payments for the period between the Initial Order and April 30, 2015 under the Lease Contracts is as follows: Date Amount Lease # December 1 st, $ Lease Contracts # 12 and 13 January 1 s t, $ Lease Contracts # 1,2,3,4, 5, 6, 7, 8,9,10,11,14 and 15 March 1 st, $ Lease Contract # 13 April 1 s t, $ Lease Contracts # 1, 2, 3, 4, 5, 6, 7, 8,9,10,11,14 and On Decenber 1,2014, OLi failed to remitto Caterpillar the lease payment of 64314$ (the "December Payment") that was due on that date despite representations that this lease payment would be made; 19. OLi has also neglected or refused to remit to Caterpillar the lease payment of $ that became due on January 1, 2015 (the "January Payment"); 20. Following OLl's default, Caterpillar contacted OLl's representatives and was informed that OLi did not intent to make the December and January Payments and did not intend to honour any subsequent payment that will become due under the MFLA and the Lease Contracts during the Stay of Proceedings; 21. Subsequently, OLi failed to remit to Caterpillar the lease payment of $ due on March 1, 2015 (the "March Payment", and collectively with the December and January Payments the "Outstanding Lease Payments"); 22. The next lease payment that will become due under the Lease Contracts until the end of the Stay (If Proceedings is a payment of $ on April 1 st, 2015 (the "April Payment")

5 - 5 - and a total of ,37$ will become due between April 2 and July 1 s " 2015 (collectively with the Aoril Payment, the "Subsequent Payments"); 23. As of the date of this Motion, the Outstanding Lease Payments amount to $ and the failure to remit such amount to Caterpillar constitutes an event of default pursuant to Section 20.1 (a) of the MFLA; 24. If the Sutsequent Payments are not paid, as announced by QLI, the total of the lease payments that will be outstanding as of July 1st, 2015 will be $; 25. Caterpillar asked QLI in early January 2015 to return the Equipment to Caterpillar which QLI refused or neglected to accomplish; V. GROUNDS FOR THIS MOTION 26. Pursuant ':0 sections 20.2 and 20.5 of the MFLA, upon a default by QLI under the Lease Contracts or the MFLA, Caterpillar is entitled to terminate the Lease Contracts and to have QLI return the Equipment to Caterpillar; 27. In this regard, paragraphs 14 and 15 of the Initial Order provide that, while Caterpillar is prevented from terminating or modifying the terms of the Lease Contracts and the MFLA during the Stay of Proceedings, Caterpillar is entitled to request payment for the use of the Equipment by QLI during such period; 28. For ease of reference, paragraphs 14 and 15 of the Initial Order read as follows: "14. ORDERS that during the Stay Period and subject to paragraph 15 hereof and subsection CCAA, all Persons having verbal or written agreements with the Petitioners or statutory or regulatory mandates for the supply of goods or services, including without limitation all computer software, communication and other data services, centralized banking services, payroll services, insurance, transportation, utility or other goods or services made available to the Petitioners, are hereby restrained until further order of this Court from discontinuing, altering, interfering with or terminating the supply of such goods or services as may be required by the Petitioners, and that the Petitioners shall be entitled to the continued use of their current premises, telephone numbers, facsimile numbers, internet addresses, domain names or other services, provided in each case that the normal prices or charges for all such goods or services received after the date of the Order are paid by the Petitioners, without having to provide any security deposit or any other security, in accordance with normal payment practices of the Petitioners or such other practices as may be agreed upon by the supplier or service provider and the Petitioners, with the consent of the Monitor, or as may be ordered by this Court." 15. ORDERS that, notwithstanding anything else contained herein and subject to subsection CCAA, no Person shall be prohibited from reguiring immediate payment for goods, services, use of leased or licensed property or other valuable consideration provided to the Petitioners on or after the date of this 'Jrder, nor shall any Person be under any obligation on or after the date of the Order to make further advance of money or otherwise extend any credit to the Petitioners." (our emphasis)

6 Ol.l's refusal to honour the Outstanding Payments and any Subsequent Payment under the MFLA and the Contract Leases, is a clear breach of the terms of the Initial Order and constitute a default under the terms of the MFLA and the Lease Contracts as Caterpillar has effect vely provided OLi with the use of the Equipment since the issuance of the Initial Order; 30. As described above, OLi has failed to ensure proper maintenance of the Equipment in accordance with the MFLA since at least October 2014 and Caterpillar has no evidence that maintenance has been performed on the Equipment since the inspection conducted in November 2014; 31. Caterpillar is thus entitled to seek on an urgent basis to repossess the Equipment which remains its property to ensure that appropriate care and maintenance is performed on the Equipment by an authorized service provider in order minimize its losses resulting from the present restructuring proceedings; VI. CONCLUSION 32. Considering Ol.l's actual or announced failure to make the payments that are or will become cue under the MFLA and the Lease Contracts and Ol.l's failure to ensure the proper me intenance of the Equipment since at least November 2014, Caterpillar is entitled to ask this Court to lift the Stay of Proceedings in order to allow Caterpillar to terminate the Lease Contracts and to repossess the Equipment in order to minimize its losses associated with Ol.l's restructuring proceedings; 33. In their motion for the issuance of an Initial Order, the Debtors have indicated that they have essentially ceased all operations at the lithium mine and processing facility in La Corne, Ouebec and it appears from the foregoing that the repossession of the Equipment by Caterpillar will not have any significant impact on the activates of the Debtors or the outcome of the Debtors' insolvency proceedings; 34. Considering the above and the urgency of the situation given the significant upcoming payments until April 15, 2015 and the need to ensure proper maintenance of the Equipment, Caterpillar respectfully requests the provisional execution of the orders sought herein to be rendered notwithstanding any appeal; 35. The prese nt motion is well founded in fact and in law. WHEREFORE, MAY THIS COURT: GRANT the Petitioner's Amended Motion to lift the stay of proceedings, to terminate certain tsese contracts and to repossess certain assets of the Petitioner in possession of the debtor Quebec Lithium Inc. (the "Motion"); DECLAI~E that the notices given of the present Motion are proper and sufficient; ORDER that the Stay of Proceedings with respect to Ouebec Lithium Inc. ("QU") be lifted for the sole purpose of allowing the Petitioner to terminate the Master Funding and Lease Agreement dated April 4, 2012 (the "MFLA") and the fifteen lease contracts between Caterpillar Financial Services Ltd. and OLi (collectively, the "Lease Contracts")

7 - 7 - at the earliest of May 29, 2015 or a date to be mutually agreed upon between QU and the Petit oner with respect to the following equipment (collectively, the "Equipment"): Lease # Equipment Description: Serial Number: 1 992D Wheel Loader 7MJ Cat777 Truck JRP Cat777 Truck JRP Cat777 Truck P MD5125 Excavator 2C03T45 6 D9T Track Type Tractor S D6T Track Type Tractor Y K Wheel Loader K CS56 Soil Compactor S M Motor Grader J DL Hydraulic Excavator H G3516 Gen Set Z MD5125 Excavator Z G Truck R H Wheel Dozer X01255 ALLOW the Petitioner to access the mine site and to relocate the Equipment at its rist and expenses upon termination of the Lease Contracts subject to the Petitioner providinq seven (7) days written notice of the date of proposed access to the mine site to QU; ALLOW the Petitioner to repossess the Equipment at its risk and expenses at the earliest of May 29, 2015 and the date to be agreed upon between QU and the Petitioner; ALLOW the Petitioner to exercise the right of inspection set forth in section 14.7 of the MFLA inasmuch as a minimum ten days prior notice is given to the debtor Quebec Lithium Inc.; THE WHOLE WITHOUT COSTS. Montreal, March 31st, 2015 Attorneys for etitioner Caterpillar Financial Services Ltd.

8 - 8 - CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL N !.SO-145 SUPERIOR COURT (Commercial division) IN THE MATTER OF THE PLAN OF COMPROMISE OR ARRANGEMENT OF: QUEBEC LITH IUM INC. Debtor/Respondent QLI METAUX INC. RB ENERGY IUC. SIROCCO MIN ING INC. Debtors KPMG INC. -and- -and- Monitor CATERPILLAI'~ FINANCIAL SERVICES LTD Petitioner NOTICE OF PRESENTATION TO : SERVICE LIST TAKE NOTICE that the Motion to lift the stay of proceedings, to terminate certain lease contracts and to repossess certain assets of the Petitioner in possession of the debtor Quebec Lithium Inc. will be presented for adjudication before the honourable judge Martin Castonguay, of the Superior Court, sitting in Commercial Division, at the Montreal courthouse, located at 1 Notre-Dame :3treet East, Montreal, Quebec, H2Y 186, on April 7,2015, a time and in a room to be determined by the honourable judge Martin Castonguay. DO GOVERN YOURSELVES ACCORDINGLY. Montreal, March 31st, 2015.f;it e(}u{dit FIE -ribcud/:: McCARTHY"Ji TRAULT LLP Attorneys for Petitioner Caterpillar Financial Services Ltd.