CHAR Technologies Ltd. — Regulatory Filings 2023

Jul 13, 2023

FORM 51-102F3 MATERIAL CHANGE REPORT

1.

Name and Address of Company

CHAR Technologies Ltd. (the " Corporation " or " CHAR ") 403-789 Don Mills Road

Toronto, ON M3C 1T5

2. Date of Material Change

July 4, 2023

3. News Release

A press release disclosing the material change was released on July 5, 2023 through the facilities of Globe Newswire.

4. Summary of Material Change

CHAR announced the closing a of strategic investment of C$6.6M by world’s leading steel and mining company ArcelorMittal S.A, through ArcelorMittal XCarb S.à r.l. (“ ArcelorMittal ”) and ArcelorMittal’s XCarb[®] Innovation Fund (the “ Fund ”). .

5.1 Full Description of Material Change

The Corporation announced that it has closed a C$6.6M strategic investment by the world’s leading steel and mining company, ArcelorMittal S.A., through ArcelorMittal and the Fund. With a presence in 60 countries and primary steelmaking facilities in 16 countries, including ArcelorMittal Dofasco in Hamilton, Ontario, ArcelorMittal S.A. generated revenues of US$79.8 billion in 2022.

CHAR also signed a Memorandum of Understanding under which ArcelorMittal Dofasco will purchase biocarbon produced at CHAR’s cutting-edge facility in Thorold, Ontario starting in 2023. CHAR’s proven technology transforms wood waste into renewable natural gas and biocarbon through a proprietary high-temperature pyrolysis cracking process.

This marks a milestone achievement for the collaborative efforts of CHAR and ArcelorMittal Dofasco to develop a drop-in replacement biocarbon to reduce ArcelorMittal Dofasco’s consumption of fossil-based carbon sources. Under the agreement, CHAR’s biocarbon, the first in Canada for steelmaking, is targeted for trial in the Electric Arc Furnace (EAF) with the aim of reducing GHG emissions by 35,000 tonnes over four years. Biocarbon produced by CHAR Technologies has been tested in the Blast Furnace at ArcelorMittal Dofasco since 2021 and this agreement will enable larger scale trials in the EAF process.

The XCarb® Innovation Fund’s global mandate is to invest in companies developing breakthrough technologies that will accelerate the steel industry’s transition to carbon neutral steelmaking. ArcelorMittal’s investment in CHAR marks the Fund’s seventh global investment and first ever in a Canadian company. This strategic partnership will be instrumental in propelling CHAR’s mission to revolutionize carbon-free solutions within heavy industries.

The XCarb® Innovation Fund investment will be utilized to maximize the impact of the Canadian and Ontario governments’ December 2022 investment of C$12.8M in CHAR. It aims to accelerate the scale up of production as well as research and development initiatives at CHAR’s Thorold, Ontario facility. This investment will also enable CHAR to expedite the development of additional project sites.

In accordance with a subscription agreement entered into between CHAR and ArcelorMittal on July 4, 2023, the Company issued 11,000,000 units (each, a “Unit”) to ArcelorMittal by way of private placement at a price of C$0.60 per Unit, for aggregate cash consideration of C$6,600,000, with each Unit comprised of one common share in the capital of the Company (each, a “Common Share”) and one-quarter of one non-transferrable Common Share purchase warrant (each whole warrant, a “Warrant”) (collectively, the “Offering”). Each Warrant is exercisable for one Common Share at an exercise price of C$0.70 per Common Share for a period of 24 months. Prior to the Offering, ArcelorMittal did not own or have control over any securities of CHAR, and following completion of the Offering, ArcelorMittal holds approximately 11.09% of the Company’s Common Shares on a non-diluted basis, and 13.87% of the Company’s Common Shares on a partially diluted basis. ArcelorMittal is acquiring the Units for investment purposes. In the future, ArcelorMittal may, from time to time, increase or decrease its investment in CHAR through market transactions, private arrangements, treasury issuances or otherwise.

In connection with the Offering, CHAR entered into an investor rights agreement with ArcelorMittal on July 4, 2023 (the “Investor Rights Agreement”), which grants certain rights to ArcelorMittal, including the right to appoint a director to the Company’s board of directors, a right to participate in future equity offerings, a top up right in respect of outstanding convertible securities, and certain information rights subject to the terms of the Investor Rights Agreement. Under the Investor Rights Agreement, ArcelorMittal is also subject to certain customary transfer and standstill restrictions. For full details, please find a copy of the Investor Rights Agreement that will be filed under the Company’s SEDAR profile at www.sedar.com.

CHAR intends to use the net proceeds of the Offering for general working capital needs, including to advance the development of both contracted and earlier stage projects. All securities issued under this Offering are subject to a statutory hold period ending four months and one day from the closing date of the Offering. No bonuses, finders’ fees or commissions were paid in connection with the Offering. The Offering is subject to final acceptance by the TSX Venture Exchange.

5.2 Disclosure for Restructuring Transactions

Not applicable

6. Reliance on subsection 7.1(2) of National Instrument 51-102

The report is not being filed on a confidential basis.

7. Omitted Information

No significant facts have been omitted from this Material Change Report.

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8. Executive Officer

For further information, contact Andrew White, Chief Executive Officer, Andrew.white@chartechnologies.com (866) 521-3654 or Galen Cranston, Director of Stakeholder Relations, gcranston@chartechnologies.com (647) 546-5633.

9. Date of Report

This report is dated July 13, 2023.

Cautionary Statement Regarding Forward-Looking Information

Certain statements contained in this material change report constitute "forward-looking information" as such term is used in applicable Canadian securities laws. Forward-looking information is based on plans, expectations and estimates of management at the date the information is provided and is subject to certain factors and assumptions, including, that the Company’s financial condition and development plans do not change as a result of unforeseen events and that the Company obtains regulatory approval. Forwardlooking information is subject to a variety of risks and uncertainties and other factors that could cause plans, estimates and actual results to vary materially from those projected in such forward-looking information. Factors that could cause the forward-looking information in this material change report to change or to be inaccurate include, but are not limited to, the risk that any of the assumptions referred to prove not to be valid or reliable, that occurrences such as those referred to above are realized and result in delays, or cessation in planned work, that the Company’s financial condition and development plans change, and delays in regulatory approval, as well as the other risks and uncertainties applicable the industries in which the Company operates and proposes to operate, and additional risks and uncertainties to the Company as set forth in the Company’s filing statement in respect of its qualifying transaction, filed under the Company’s profile at www.sedar.com. The Company undertakes no obligation to update these forward-looking statements, other than as required by applicable law.

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