Certain portions of this exhibit have been omitted pursuant to Rule 24b-2 and are subject to a confidential treatment request. Copies of this exhibit containing the omitted information have been filed separately with the Securities and Exchange Commission. The omitted portions of this document are marked with a ***.

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Exhibit 10.1

 

 

THIS PURCHASE AGREEMENT (“Agreement”) is made as of November 29, 2007 (the “Effective Date”) by and between Altair Nanotechnologies Inc., a Canadian corporation (the “Company”), and Al Yousuf, LLC, a United Arab Emirates limited liability company (the “Investor”).

A.           The Company and the Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Regulation S (“Regulation S”), as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended; and

B.           The Investor wishes to purchase from the Company, and the Company wishes to sell and issue to the Investor, upon the terms and conditions stated in this Agreement, common shares of the Company (“Common Stock”); and

C.           Contemporaneous with the sale of the Common Stock, the parties hereto will execute and deliver a Registration Rights Agreement, in the form attached hereto as Exhibit A (the “Registration Rights Agreement”), pursuant to which the Company will agree to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, and applicable state securities laws.

In consideration of the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

 

 

 

 

1.           Definitions.  In addition to those terms defined above and elsewhere in this Agreement, for the purposes of this Agreement, the following terms shall have the meanings set forth below:

“Affiliate” means, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries Controls, is Controlled by, or is under common Control with, such Person.

“Business Day” means a day, other than a Friday, Saturday or Sunday, on which banks in New York City, New York and the United Arab Emirates are open for the general transaction of business.

“Common Stock” has the meaning set forth in the Recitals.

“Company’s Knowledge” (including any derivation thereof such as “known” or “knowing”) means the actual knowledge of the executive officers (as defined in Rule 405 under the 1933 Act) of the Company, after due inquiry, including, but not limited to, reviewing this Agreement.

“Confidential Information” means trade secrets, confidential information and know-how (including but not limited to ideas, formulae, compositions, processes, procedures and techniques, research and development information, computer program code, performance specifications, support documentation, drawings, specifications, designs, business and marketing plans, and customer and supplier lists and related information).

“Control” (including the terms “controlling”, “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Intellectual Property” means all of the following: (i) patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice); (ii) trademarks, service marks, trade dress, trade names, corporate names, logos, slogans and Internet domain names, together with all goodwill associated with each of the foregoing; (iii) copyrights and copyrightable works; (iv) registrations, applications and renewals for any of the foregoing; and (v) proprietary computer software (including but not limited to data, data bases and documentation).

“Material Adverse Effect” means a material adverse effect on (i) the assets, liabilities, results of operations, condition (financial or otherwise), prospects or business of the Company and its Subsidiaries taken as a whole, or (ii) the ability of the Company to perform its obligations under the Transaction Documents.

“Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

 

 

“Per Share Price” means $3.50 per Share.

 

“Predecessor” means, with respect to the Company, an entity substantially all of whose assets and business was acquired by the Company or one of its Subsidiaries, whether through merger, consolidation, asset purchase, stock purchase or otherwise.

“Purchase Price” means the product of the number of Shares multiplied by the Per Share Price (which is $40,000,002).

“Registration Statement” shall mean any registration statement of the Company filed under the 1933 Act that covers the resale of any of the Registrable Securities (as defined in the Registration Rights Agreement) pursuant to the provisions of the Registration Rights Agreement by and among the Company and the Investor as of the date hereof, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement.

“SEC Filings” has the meaning set forth in Section 4.6.

“Shares” means 11,428,572 shares of Common Stock.

“Subsidiary” means a Person of which the Company holds, directly or indirectly, more than 40% of the outstanding equity interests.

“Transaction Documents” means this Agreement and the Registration Rights Agreement.

“Transfer Agent” means Equity Transfer Services and Trust Company or the successor transfer agent of the Company.

“1933 Act” means the Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

“1934 Act” means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

2.           Purchase and Sale of the Shares.  Subject to the terms and conditions of this Agreement, on the Closing Date, the Investor shall purchase, and the Company shall sell and issue to, the Shares in exchange for the Purchase Price.

3.           Closings.

 

 

 

(a)           Two Closings. The closing of the purchase and sale of the Shares shall take place in two closings, each of which is referred to as a “Closing” and shall be deemed to have occurred at the time (the “Closing Date”) on which the Company receives truthful confirmation (including reference number) from the custodian of the London Account (as defined below) that the applicable portion of the Purchase Price has been transferred from the London Account (as defined below) to the Company Account. At each Closing, the Investor shall wire transfer the applicable portion of the Purchase Price to the London Account with irrevocable instructions to the custodian of such account that the applicable portion of the Purchase Price immediately be wire transferred to the Company Account (and that a reference number for such transfer immediately be provided to Edward Dickinson via email at ***@*** or by telephone at the U.S. number ###-###-####).

The “London Account” is:

           ***

The “Company Account” is:

***

(b)           Initial Closing.  At the initial Closing (the “Initial Closing”), the Investor shall purchase from the Company, and the Company shall sell to the Investor, 2,857,142 of the Shares (the “Initial Shares”) in exchange for $9,999,997 of the Purchase Price (the “Initial Purchase Price”).  The Initial Closing shall occur (i.e. the Initial Purchase Price shall be received in the Account) no later than November 30, 2007.  Within two (2) Business Days after the receipt by the Company of the Initial Purchase Price in the Company Account, the Company shall deliver to Akin Gump Strauss Hauer & Feld LLP, for the benefit of the Investor, at the following address, 2029 Century Park East, Suite 2400, Los Angeles, CA 90067-3012, Attn: Julie M Kaufer, Telephone ###-###-####, a single certificate representing the Initial Shares registered in the name of the Investor and with such legends as are contemplated by this Agreement.

(c)           Subsequent Closing.  At the subsequent Closing (the “Final Closing”), the Investor shall purchase from the Company, and the Company shall sell to the Investor, the remaining 8,571,430  of the Shares (the “Remaining Shares”) in exchange for the remaining $30,000,005 of the Purchase Price (the “Remaining Purchase Price”).  The Final Closing shall occur (i.e. the Remaining Price shall be received in the Account) no later than December 10, 2007. Within two (2) Business Days after the receipt by the Company of the Remaining Purchase Price, the Company shall deliver to JP Morgan Securities Inc., for the benefit of the Investor, at the address identified in Section 3(b) above, certificates representing the Remaining Shares registered in the name of the Investor and with such legends as are contemplated by this Agreement.  The certificates shall be issued in such denominations, adding up to the number of Remaining Shares, as reasonably requested by the Investor (and, absent specific instructions from the Investor, there shall be three certificates, with two issued in denominations representing approximately one-third of the total number of Shares and the third issued in a denomination representing the remainder after taking into account the Initial Shares, in each case with legends reflecting the different expiration periods of the lock up covenants described in Section 8).

 

 

 

4.           Representations and Warranties of the Company.  The Company hereby represents and warrants to the Investor that, subject to the exceptions fully, fairly and specifically disclosed in the disclosure letter (referencing the appropriate section and paragraph numbers) delivered by Company to the Investor dated as of the date hereof (the “Disclosure Letter”), which exceptions shall be deemed to be representations and warranties as if made hereunder, the following statements are true, accurate, complete and not misleading as of the Effective Date, except where another date is specified in the representation or warranty (for the avoidance of doubt, if any section in the Disclosure Letter discloses an item or information in such a way as to make its relevance to the disclosure required by another section of the Disclosure Letter readily apparent based on the substance of such disclosure, such matter shall be deemed to have been disclosed in such other section of the Disclosure Letter, notwithstanding the omission).   No other knowledge of the Investor relating to the Company will prevent or limit a claim made by the Investor for breach of any of the representations and warranties in this Section 4.  The Company may not put forward the Investor’s knowledge (actual, constructive or imputed) of any facts which might make any of the representations and warranties in this Section 4 untrue, inaccurate, incomplete or misleading as a defense to a claim for breach of any of the representations and warranties.

4. 1           Organization, Good Standing and Qualification.  Each of the Company and its Subsidiaries is a company duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite company power and authority to carry on its business as now conducted and to own its properties.  Each of the Company and its Subsidiaries is duly qualified to do business as a foreign company and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property makes such qualification or leasing necessary.

4. 2           Authorization.  The Company has full power and authority and has taken all requisite action on the part of the Company, its officers, directors and shareholders necessary for (i) the authorization, execution and delivery of the Transaction Documents, (ii) authorization of the performance of all obligations of the Company hereunder or thereunder, and (iii) the authorization, issuance (or reservation for issuance) and delivery of the Shares.  The Transaction Documents constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.

4. 3           Capitalization.  Section 4.3 of the Disclosure Letter sets forth as of November 26, 2007 (a) the authorized capital stock of the Company; (b) the number of shares of capital stock issued and outstanding; (c) the number of shares of capital stock issuable pursuant to the Company’s stock plans; and (d) the number of shares of capital stock issuable and reserved for issuance pursuant to securities (other than the Shares and options or other rights outstanding under the Company’s stock plans) exercisable for, or convertible into or exchangeable for any shares of capital stock of the Company.  The Company has not issued any shares of capital stock or any options, warrants or other rights exercisable for, convertible into or exchangeable for any shares of capital stock since the November 26, 2007. All of the issued and outstanding shares of the Company’s capital stock have been duly authorized and validly issued and are fully paid, nonassessable and free of pre-emptive rights and were issued in full compliance with applicable state and federal securities law and any rights of third parties.  No Person is entitled to pre-emptive or similar statutory or contractual rights with respect to any securities of the Company.  Except as described in the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2007 (the “Most Recent Form 10-Q”) and in the Disclosure Letter, (w) there are no outstanding warrants, options, convertible securities or other rights, agreements or arrangements of any character under which the Company or any of its Subsidiaries is or may be obligated to issue any equity securities of any kind and except as contemplated by this Agreement, (x) neither the Company nor any of its Subsidiaries is currently in negotiations for the issuance of any equity securities of any kind, (y) there are no voting agreements, buy-sell agreements, option or right of first purchase agreements or other agreements of any kind among the Company and any of the security holders of the Company relating to the securities of the Company held by them, and (z) other than under the Registration Rights Agreement, no Person has the right to require the Company to register any securities of the Company under the 1933 Act, whether on a demand basis or in connection with the registration of securities of the Company for its own account or for the account of any other Person (except for such registration rights that have been satisfied or are being satisfied by means of a currently effective registration statement filed by the Company).

 

 

 

The issuance and sale of the Shares hereunder will not obligate the Company to issue shares of Common Stock or other securities to any other Person (other than the Investor) and will not result in the adjustment of the exercise, conversion, exchange or reset price of any outstanding security.

Except as set forth in the Amended and Restated Shareholder Rights Plan dated October 15, 1999 between the Company and Equity Transfer Services, as rights agent, the Company does not have outstanding shareholder purchase rights or “poison pill” or any similar arrangement in effect giving any Person the right to purchase any equity interest in the Company upon the occurrence of certain events.

4.4           Valid Issuance.  The Shares have been duly and validly authorized and, when issued and paid for pursuant to this Agreement, will be validly issued, fully paid and nonassessable, and shall be free and clear of all encumbrances and restrictions (other than those created by the Investor), except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws.

4.5           Consents.  The execution, delivery and performance by the Company of the Transaction Documents and the offer, issuance and sale of the Shares require no consent of, action by or in respect of, or filing with, any Person, governmental body, agency, or official having jurisdiction over the Company or any of its Affiliates that has not been obtained, including without limitation, the NASDAQ Capital Market (the “NASDAQ Capital Market”) and the Company’s shareholders, other than (a) filings that have been made pursuant to applicable state securities laws and post-sale filings pursuant to applicable state and federal securities laws which the Company undertakes to file within the applicable time periods, (b) a Notification Form Listing Additional Shares to be filed with the NASDAQ Capital Market, which the Company undertakes to file promptly following the Effective Date, (c) a Current Report on Form 8-K describing the Transaction Documents and the transactions contemplated by the Transaction Documents, which the Company undertakes to file within four (4) Business Days after the Effective Date, and (d) filings required by the Registration Rights Agreement.   Subject to the accuracy of the representations and warranties of the Investor set forth in Section 5 hereof, the Company has taken all action necessary to exempt the issuance and sale of the Shares from the provisions of any shareholder rights plan or other “poison pill” arrangement, any anti-takeover, business combination or control share law or statute binding on the Company or to which the Company or any of its assets and properties may be subject and any provision of the Company’s Articles of Continuance or Bylaws that is or could reasonably be expected to become applicable to the Investor as a result of the transactions contemplated hereby, including without limitation, the issuance of the Shares and the ownership, disposition or voting of the Shares by the Investor or the exercise of any right granted to the Investor pursuant to this Agreement or the other Transaction Documents.

 

 

 

4.6           Delivery of SEC Filings; Business.

(i)           The Company has made available to the Investor through the EDGAR system, true and complete copies of the Company’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2006, and all other reports filed by the Company pursuant to the 1934 Act since December 31, 2006, and prior to the Effective Date (collectively, together with all Exhibits thereto and incorporated by reference therein, the “SEC Filings”).  The SEC Filings are the only filings required of the Company pursuant to the 1934 Act for such period.

(ii)           The Company and its Subsidiaries are engaged in all material respects only in the business described in the SEC Filings, and to the extent required by rules governing the content of the SEC Filings, the SEC Filings contain a complete and accurate description in all material respects of the business of the Company and its Subsidiaries, taken as a whole.

4.7           Use of Proceeds.  The net proceeds of the sale of the Shares hereunder shall be used by the Company for working capital, capital expenditures, and general corporate purposes, which may include acquisitions of complementary businesses, products or technologies.

4.8           No Material Adverse Change.  Since September 30, 2007, except as identified and described in the SEC Filings and filings made by Affiliates of the Company on EDGAR pursuant to the 1934 Act, there has not been:

(i)           any change in the consolidated assets, liabilities, financial condition or operating results of the Company from that reflected in the financial statements included in the Most Recent Form 10-Q, except for changes in the ordinary course of business which have not and could not reasonably be expected to have a Material Adverse Effect, individually or in the aggregate;

 

 

 

(ii)           any declaration or payment of any dividend, or any authorization or payment of any distribution, on any of the capital stock of the Company, or any redemption or repurchase of any securities of the Company;

(iii)           any material damage, destruction or loss, whether or not covered by insurance to any assets or properties of the Company or its Subsidiaries;

(iv)           any waiver, not in the ordinary course of business, by the Company or any Subsidiary of a material right or of a material debt owed to it;

(v)           any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company or a Subsidiary, except in the ordinary course of business and which is not material to the assets, properties, financial condition, operating results prospects or business of the Company and its Subsidiaries taken as a whole (as such business is presently conducted);

(vi)           any change or amendment to the Company’s Articles of Continuance or Bylaws, or material change to any material contract or arrangement by which the Company or any Subsidiary is bound or to which any of their respective assets or properties is subject;

(vii)          any labor union organizing activities or material labor difficulties with respect to employees of the Company or any Subsidiary;

(viii)         any material transaction entered into by the Company or a Subsidiary other than in the ordinary course of business;

(ix)           the loss of the services of any key employee, or material change in the composition or duties of the senior management of the Company or any Subsidiary;

(x)            any material changes in compensation arrangements with any key employee, senior management or directors;

(xi)           the loss or threatened loss in writing of any customer which has had or could reasonably be expected to have a Material Adverse Effect;

(xii)         any sale, assignment or exclusive license or transfer of the Company’s Intellectual Property;

(xiii)        any material change in contingent obligations of the Company by way of guaranty, endorsement, indemnity, warranty or otherwise; or

 

 

(xiv)        to the Company’s Knowledge any events, occurrences, changes, effects or conditions of any character that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect.

4.9           SEC Filings; S-3 Eligibility.

(a)           At the time of filing thereof, the SEC Filings complied as to form in all material respects with the requirements of the 1934 Act and did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

(b)           The Company is presently eligible to use Form S-3 to register the Registrable Securities (as such term is defined in the Registration Rights Agreement) for sale by the Investor as contemplated by the Registration Rights Agreement.

(c)           The Company is in compliance in all material respects with all provisions of the Sarbanes-Oxley Act of 2002 that are applicable to it as of the Effective Date.

4.10           No Conflict, Breach, Violation or Default.  The execution, delivery and performance of the Transaction Documents by the Company and the issuance and sale of the Shares will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under (i) the Company’s Articles of Continuance or the Company’s Bylaws, both as in effect on the Effective Date (true and complete copies of which have been made available to the Investor through the EDGAR system), or (ii)(a) any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company, any Subsidiary or any of their respective assets or properties, or (b) any agreement or instrument to which the Company or any Subsidiary is a party or by which the Company or a Subsidiary is bound or to which any of their respective assets or properties is subject.

4.11           Tax Matters.  The Company and each Subsidiary has timely prepared and filed all tax returns, as amended, required to have been filed by the Company or such Subsidiary with all appropriate governmental agencies and timely paid all taxes shown thereon or otherwise owed by it.  All such tax returns are true, complete, and correct in all material respects.  The charges, accruals and reserves on the books of the Company in respect of taxes for all fiscal periods are adequate in all material respects, and there are no material unpaid assessments against the Company or any Subsidiary nor, to the Company’s Knowledge, any basis for the assessment of any additional taxes, penalties or interest for any fiscal period or audits by any federal, state or local taxing authority except for any assessment which is not material to the Company and its Subsidiaries, taken as a whole.  All taxes and other assessments and levies that the Company or any Subsidiary is required to withhold or to collect for payment have been duly withheld and collected and paid to the proper governmental entity or third party when due, except where such failure to withhold or collect would not have a Material Adverse Effect.  There are no tax liens or claims pending or, to the Company’s Knowledge, threatened against the Company or any Subsidiary or any of their respective assets or property.  There are no outstanding tax sharing agreements or other such arrangements between the Company and any Subsidiary or other corporation or entity. No audit in respect of any tax liability is pending with respect to any tax liability shown on a tax return filed by the Company or any Subsidiary.

 

 

 

 

 

4.12         Title to Properties.  Except as disclosed in the SEC Filings, the Company and each Subsidiary has good and marketable title to all real properties and all other properties and assets owned by it, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or currently planned to be made thereof by them; and except as disclosed in the SEC Filings, the Company and each Subsidiary holds any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or currently planned to be made thereof by them.

4.13         Inventory.  The Company’s stock is of satisfactory quality and saleable in the usual course of its business in accordance with its current price list.  The Company has not supplied, or agreed to supply, defective or unsafe products or products which fail to comply with their terms of sale.  No products in a state ready for supply by the Company are defective or unsafe or will fail to comply with terms of sale similar to terms of sale on which similar products have previously been sold by the Company.  The Company’s level of stock is reasonable having regard to current and anticipated demand.

 

4.14         Compliance with Laws.  The Company is in compliance with all laws of any governmental body applicable to its business or operations, except where the failure to be in compliance would not have a Material Adverse Effect.  The Company has not received any written notice of or been charged with the violation of any laws, except where such violation would not have a Material Adverse Effect.

 

4.15         Certificates, Authorities and Permits.  The Company and each Subsidiary possess adequate certificates, authorities or permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by it, and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or such Subsidiary, could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate.  All such certificates, authorities and permits are validly held by the Company.  The Company has complied with all material terms and conditions thereof and the same will not be subject to suspension, modification, revocation or nonrenewal as a result of the execution and delivery of this Agreement or the consummation of the transaction contemplated hereby.

4.16         Employees and Labor Disputes.  (a) No labor dispute with the employees of the Company or any Subsidiary exists or, to the Company’s Knowledge, is imminent, (b) to the Company’s  Knowledge, no union organizational campaign is in progress with respect to the employees of the Company, (c) the Company is not engaged in any unfair labor practice, (d) there is no unfair labor practice charge or complaint against the Company pending, or, to the Company’s Knowledge, threatened, (e) there are no pending, or, to the Company’s Knowledge, threatened, charges against the Company or any current or former employee of the Company, (f) the Company has not received written notice during the past two years of the intent of any governmental body responsible for the enforcement of labor or employment laws to conduct an investigation of the Company and, to the Company’s Knowledge, no such investigation is in progress and (g) the Company is in compliance in all material respects with all laws and orders relating to the employment of labor and classification of persons as employees, including all such laws and orders relating to wages, hours, discrimination, civil rights, safety and the collection and payment of withholding and similar taxes and the provision of employee benefits, except where any such noncompliance shall not have a Material Adverse Effect.

 

 

 

4.17           Benefit Plans.  The Company is in compliance with all of its obligations under any employee benefit plan within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) under which any employee or former employee of the Company has any present of future right to benefits or under which the Company has or may have any present or future liability.  There is no multiemployer plan within the meaning of Section 3(37) of ERISA under which the Company has or may have any present or future liability.

4.18           Intellectual Property.

(a)           No Intellectual Property of the Company or its Subsidiaries which is necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as currently conducted has been or is now involved in any cancellation or litigation, and, to the Company’s Knowledge, no such action is threatened.  No patent of the Company or its Subsidiaries is involved in any interference, reissue, reexamination or opposition proceeding.

(b)           All of the licenses and sublicenses and consent, royalty or other agreements concerning Intellectual Property which are necessary for the conduct of the Company’s and each of its Subsidiaries’ respective businesses as currently conducted or currently planned to be conducted to which the Company or any Subsidiary is a party or by which any of their assets are bound (other than generally commercially available, non-custom, off-the-shelf software application programs) (collectively, “License Agreements”) are valid and binding obligations of the Company or its Subsidiaries that are parties thereto and, to the Company’s Knowledge, the other parties thereto, enforceable in accordance with their terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights generally, and there exists no event or condition which constitutes a material violation or breach of or constitute (with or without due notice or lapse of time or both) a default by the Company or any of its Subsidiaries under any such License Agreement.

(c)           The Company and its Subsidiaries own or have the valid right to use all of the Intellectual Property that is necessary for the conduct of the Company’s and each of its Subsidiaries’ respective businesses as currently conducted or currently proposed to be conducted and for the ownership, maintenance and operation of the Company’s and its Subsidiaries’ properties and assets, which ownership or right is, except as disclosed in the SEC Filings, free and clear of all liens, encumbrances, adverse claims or obligations to license (as licensor) all such owned Intellectual Property, other than licenses entered into in the ordinary course of the Company’s and its Subsidiaries’ businesses.

 

 

 

(d)           To the Company’s Knowledge, the conduct of the Company’s and its Subsidiaries’ businesses as currently conducted does not infringe or otherwise impair or conflict with (collectively, “Infringe”) any Intellectual Property rights of any third party or any confidentiality obligation owed to a third party, and, to the Company’s Knowledge, the Intellectual Property and Confidential Information of the Company and its Subsidiaries which are necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as currently conducted are not being Infringed in any material respect by any third party.  There is no litigation or order pending or outstanding against the Company or, to the Company’s Knowledge, threatened or imminent against the Company, that seeks to limit or challenge or that concerns the ownership, use, validity or enforceability of any Intellectual Property of the Company and its Subsidiaries and the Company’s and its Subsidiaries’ use of any Intellectual Property owned by a third party, and, to the Company’s Knowledge, there is no valid basis for the same.

(e)           The consummation of the transactions contemplated hereby and by the other Transaction Documents will not result in the alteration, loss, impairment of or restriction on the Company’s or any of its Subsidiaries’ ownership or right to use any of the Intellectual Property or Confidential Information which is necessary for the conduct of the Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted.

(f)           All software owned by the Company or any of its Subsidiaries, and, to the Company’s Knowledge, all software licensed from third parties by the Company or any of its Subsidiaries that is material to the conduct of the Company’s and its Subsidiaries’ business as currently conducted (i) is free from any material defect, bug, virus, or programming, design or documentation error; (ii) operates and runs in a reasonable and efficient business manner; and (iii) conforms in all material respects to the specifications and purposes thereof.

(g)           The Company and its Subsidiaries have taken reasonable steps to protect the Company’s and its Subsidiaries’ rights in their Intellectual Property and Confidential Information.  Each employee, consultant and contractor who has had access to Confidential Information, the continued confidentiality of which is necessary for the conduct of the Company’s and each of its Subsidiaries’ respective businesses as currently conducted has executed an agreement to maintain the confidentiality of such Confidential Information or is subject to a fiduciary duty requiring that such confidentiality be maintained.  Except under confidentiality obligations, to the Company’s knowledge, there has been no material disclosure by the Company of any of the Company’s or its Subsidiaries’ Confidential Information to any third party.  The Company and its Subsidiaries have secured from all parties (including employees thereof) who have created any portion of, or who would otherwise have any ownership rights in or to, the Company’s and its Subsidiaries’ Intellectual Property valid and enforceable written assignments of any such work, invention, improvement or other rights to the Company and each Subsidiary.

 

 

 

4.19           Environmental Matters.  Neither the Company nor any Subsidiary is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), owns or, to the Company’s knowledge, operates any real property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, and is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim has had or could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate; and there is no pending or, to the Company’s Knowledge, threatened investigation that could reasonably be expected to lead to such a claim.  None of the following exists at any property or facility owned or operated (whether by fee interest, leasehold interest, or otherwise) by the Company: (a) under or above-ground storage tanks, (b) asbestos containing material in any form or condition, (c) materials or equipment containing polychlorinated biphenyls, or (d) landfills, surface impoundments, or disposal areas.  Neither the Company nor any of its Predecessors or Affiliates has treated, recycled, stored, disposed of, arranged for or permitted the disposal of, transported, handled, or released any substance, including any Hazardous Materials, or owned or operated any property or facility (and no such property or facility is contaminated by any such substance) in a manner that has given or would give rise to any claim for damages, including any damages for response costs, corrective action costs, personal injury, property damage or natural resources damages, pursuant to any Environmental Laws.  For this section “Hazardous Materials” means any substance, pollutant, contaminant, material, or waste, or combination thereof, whether solid, liquid, or gaseous in nature, subject to regulation, investigation, control, or remediation under any Environmental Laws.  Neither the Company nor any of its Predecessors or Affiliates has, either expressly or by operation of law, assumed or undertaken any liability, including any obligation for corrective or remedial action, of any other person relating to Environmental Laws.  No facts, events or conditions relating to the past or present facilities, properties or operations of the Company, nor any of its Predecessors or Affiliates, will prevent, hinder, or limit continued compliance with any applicable Environmental Laws or give rise to any damages or any other liabilities under any Environmental Laws.

4.20           Litigation.  There are no pending actions, suits or proceedings against or affecting the Company, its Subsidiaries or any of its or their properties that could, if decided adversely to the Company, reasonably be expected to have a Material Adverse Effect, and to the Company’s Knowledge, no such actions, suits or proceedings are threatened or contemplated.  There are not pending governmental or other investigations or enquiries or proceedings concerning the Company, its Subsidiaries or any of their properties that could, if decided adversely to the Company, reasonably be expected to have a Material Adverse Effect, and to the Company’s Knowledge, no such investigations, enquiries or proceedings are threatened or contemplated.

4.21           Financial Statements.  The financial statements included in each SEC Filing comply with the rules and regulations of the SEC with respect thereto (including accounting requirements) as in effect at the time of filing of such reports and present fairly, in all material respects, the consolidated financial position of the Company as of the dates shown and its consolidated results of operations and cash flows for the periods shown.  Such financial statements have been prepared in conformity with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”) (except as may be disclosed therein or in the notes thereto, and, in the case of quarterly financial statements, as permitted by Form 10-Q under the 1934 Act).  Except as set forth in the financial statements of the Company included in the SEC Filings filed prior to the Effective Date, neither the Company nor any of its Subsidiaries has incurred any liabilities, contingent or otherwise, except those incurred in the ordinary course of business, consistent (as to amount and nature) with past practices since the date of such financial statements, none of which, individually or in the aggregate, have had or could reasonably be expected to have a Material Adverse Effect.  The Company recognizes revenue consistent with GAAP.

 

 

 

4.22           Undisclosed Liabilities.  The Company has no liability that would be required by GAAP to be set forth on a balance sheet other than (a) liabilities reflected in the SEC Filings, (b) accounts payable and accrued expenses accruing after September 30, 2007 in the ordinary course of business or in accordance with this Agreement, or (c) liabilities otherwise reflected herein or in the Disclosure Letter.

4.23           Insurance Coverage.  The Company and each Subsidiary maintains in full force and effect insurance coverage for the business being conducted and properties owned or leased by the Company and each Subsidiary that the Company believes is adequate against all liabilities, claims and risks against which would be prudent, given the totality of the circumstances, for the Company to insure. The premiums for the insurance policies have been fully paid.  The insurance afforded under such policies is comparable in type of coverage to that maintained by persons engaged in the manufacturing processes similar to that engaged in by the Company and in amounts comparable to manufacturing entities of similar size engaged in similar processes. Such policies are in full force and effect and will remain so through the Final Closing.  None of such insurance policies are subject to retroactive premium adjustment in respect of prior periods.

4.24           Product Warranty. The reserves set forth in the financial statements of the Company are sufficient to cover any liability associated with the failure of any product manufactured, sold, leased, or delivered by the Company to be in conformity with all applicable laws, contracts, and all express and implied warranties.  No product designed, manufactured, sold, leased, or delivered by the Company is subject to any guaranty, warranty, or other indemnity or similar liability beyond the guaranties, warranties and indemnities set forth in governing agreements.

4.25           Product Liability.  The Company does not have any liability (and, to the Knowledge of the Company, there is no basis for any present or future action against the Company giving rise to any liability) arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product designed, manufactured, sold, leased, or delivered by the Company.

4.26           Listing.  The Company’s Common Stock is quoted on the NASDAQ Capital Market.  The Company has not received any oral or written notice that its Common Stock will be delisted from the NASDAQ Capital Market nor that its Common Stock does not meet all requirements for the continuation of such quotation and the Company satisfies the requirements for the continued listing of its Common Stock on the NASDAQ Capital Market.

 

 

 

4.27           Brokers and Finders.  No Person will have, as a result of actions or omissions of the Company in connection with the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company, any Subsidiary or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company, other than as described in Section 4.21 of the Disclosure Letter.

4.28           No Directed Selling Efforts or General Solicitation.  In connection with the offer or sale of any of the Shares Neither the Company nor any Person acting on its behalf has conducted (a) any general solicitation or general advertising (as those terms are used in Regulation D promulgated by the SEC (“Regulation D”)), or (b) any direct selling efforts (as that term is used in Regulation S).

4.29           Private Placement.  Subject to the accuracy of the representations and warranties of the Investor in Section 5, the offer and sale of the Shares to the Investor as contemplated hereby is exempt from the registration requirements of the 1933 Act is being made pursuant to the exemption afforded by Regulation S.  The Company agrees not to register any transfer of the Shares not made in accordance with the provisions of Regulation S.

4.30           Questionable Payments.  Neither the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any of their respective current or former shareholders, directors, officers, employees, agents or other Persons acting on behalf of the Company or any Subsidiary, has on behalf of the Company or any Subsidiary or in connection with their respective businesses:  (a) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payments to any governmental officials or employees from corporate funds; (c) established or maintained any unlawful or unrecorded fund of corporate monies or other assets; (d) made any false or fictitious entries on the books and records of the Company or any Subsidiary; or (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any nature.

4.31           Transactions with Affiliates.  Except as disclosed in the SEC Filings or filings made by Affiliates of the Company on EDGAR pursuant to the 1934 Act, none of the officers or directors of the Company and, to the Company’s Knowledge, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than as holders of capital stock, stock options, warrants and/or other rights convertible into or exercisable for capital stock, and for services as employees, officers and directors), that is required by governing rules to be disclosed in any SEC Filings or filing by an Affiliate of the Company.

 

 

 

 

4.33           No Manipulation of Stock.  Neither the Company, nor any of its directors, officers or Controlling Persons (other than Persons that become Controlling Persons as a result of the transactions contemplated by this Agreement), has taken or will, in violation of applicable law, take, any action designed to or that might reasonably be expected to cause or result in, or which has constituted, stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Shares.

4.34           Company Not an “Investment Company”.  The Company has been advised of the rules and requirements under the Investment Company Act of 1940, as amended (the “Investment Company Act”).  The Company is not, and immediately after receipt of payment for the Shares will not be, an “investment company” or (except to the extent one of the Investor is an “investment company”) an entity “controlled” by an “investment company” within the meaning of the Investment Company Act and (except to the extent one of the Investor is an “investment company”) shall conduct its business in a manner so that it will not become subject to the Investment Company Act.

4.35           Contracts.  The contracts described in the SEC Filings that are currently material to the Company are in full force and effect on the Effective Date, and, except as described in the SEC Filings, neither the Company nor, to the Company’s Knowledge, any other party to such contracts is in breach of or default under any of such contracts which would have a Material Adverse Effect.

 

 

4.36           Insolvency.  No order has been made or petition presented or resolution passed for the winding up of the Company or for the appointment of a provisional liquidator to the Company or for an administration order in respect of the Company.  No receiver and manager has been appointed by any person of the whole or any part of the business or assets of the Company.

4.37           Disclosures.  Neither the Company nor any Person acting on its behalf has provided the Investor or its agents or counsel with any information that constitutes or might constitute material, non-public information, unless the Investor requested any such information and executed and delivered to the Company a confidentiality and non-disclosure agreement in respect of such information prior to its disclosure to the Investor.  The written materials delivered to the Investor in connection with the transactions contemplated by the Transaction Documents and the Transaction Documents themselves (including the exhibits and schedules thereto and the Disclosure Letter) do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading.  The information set out in this Agreement and the Disclosure Letter (including any annexures to the Disclosure Letter) is true, accurate, complete and not misleading.  The Company has provided all information requested by the Investor and not omitted to disclose any information which would be material to a purchase of shares in a transaction of the nature contemplated hereby.  For purposes of the preceding sentence, the Company shall be deemed to have disclosed to the Investor all information contained in the SEC Filings; provided, however, no information contained in the SEC Filings shall constitute an exception in respect of any representation or warranty set out in Section 4.1 through 4.36 inclusive unless, and only to the extent, expressly referenced or incorporated by reference in such representation or warranty.

5.           Representations and Warranties of the Investor.  The Investor hereby represents and warrants to the Company that:

5.1           Organization and Existence.  The Investor is a validly existing limited liability company and has all requisite limited liability company power and authority to invest in the Shares pursuant to this Agreement.

5. 2           Authorization.  The execution, delivery and performance by the Investor of the Transaction Documents have been duly authorized and will each constitute the valid and legally binding obligation of the Investor, enforceable against the Investor in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.

5. 3           Purchase Entirely for Own Account.  The Shares to be received by the Investor hereunder will be acquired for the Investor’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the 1933 Act, and the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the 1933 Act.  Except as disclosed in writing on the signature page of the Investor to this Agreement, the Investor is not a registered broker dealer or an entity engaged in the business of being a broker dealer.

 

 

 

5. 4           Investment Experience.  The Investor acknowledges that it can bear the economic risk and complete loss of its investment in the Shares and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment contemplated hereby.

5. 5           Disclosure of Information.  The Investor has had an opportunity to receive all additional information related to the Company requested by it and to ask questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the offering of the Shares.  The Investor acknowledges receipt of copies of the SEC Filings.  Neither such inquiries nor any other due diligence investigation conducted by the Investor shall modify, amend or affect the Investor’s right to rely on the Company’s representations and warranties contained in this Agreement.

5. 6           Restricted Securities/ Hedging Restrictions.  In addition to complying with all other restrictions set forth herein, the Investor agrees to resell the Shares only (and acknowledges and agrees that the Company shall be required to refuse to register any resale or other transfer of the Shares not made) in accordance with the provisions of Regulation S, pursuant to registration under the 1933 Act or pursuant to an available exemption from such registration.  The Investor acknowledges that, among other restrictions, Regulation S prohibits the transfer of the Shares to, or for the account or benefit of, any U.S. person or within the United States.  The Investor will not engage in any hedging transactions involving the Shares except in compliance with Regulation S.

5.7           Legends.  It is understood that, except as provided below, certificates evidencing the Shares may bear the following or any similar legend:

(a)           THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH REGULATION S PROMULGATED UNDER THE SECURITIES ACT, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION.  ANY SUCH DISPOSITION MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT SHALL NOT BE MADE UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.  HEDGING TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED HEREBY SHALL NOT BE CONDUCTED UNLESS IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.

(b)           If required by the laws and regulations of Canada, any state or any province in connection with the issuance or sale of the Shares, the legend required by such law or regulation.

 

 

 

Upon the earlier of (i) registration for resale pursuant to the Registration Rights Agreement and receipt by the Company of the Investor’s written confirmation that such Shares have been disposed in compliance with the prospectus delivery requirements of the 1933 Act or (ii) Rule 144(k) or successor provision becoming available, the Company shall, upon an Investor’s written request, promptly cause certificates evidencing the Shares to be replaced with certificates which do not bear such restrictive legends.

5.8           Non US Person.  The Investor is not a "U.S. Person" (as defined in Regulation S) and is not acquiring the Shares for the account or benefit of any U.S. Person.  Without limiting the generality of the foregoing, the Investor is not acquiring the Shares for the account or benefit of any of the following:  (i) a natural person resident in the United States, (ii) a partnership or corporation organized or incorporated under the laws of the United States or formed by a U.S. Person principally for the purpose of investing in securities not registered under the 1933 Act, (iii) an estate of which any executor or administrator is a U.S. Person, (iv) a trust of which any trustee is a U.S. Person, (v) an agency or branch of a foreign entity located in the United States, (vi) a non-discretionary account or similar account held by a dealer or other fiduciary for the benefit or account of a U.S. Person, or (vii) a non-discretionary account or similar account held by a dealer or other fiduciary organized, incorporated, or resident in the United States.  The Investor is domiciled in the United Arab Emirates and has no present intention of becoming a resident of any other country.  The Investor was not solicited to purchase the Shares while present in the United States.  The Investor was outside the United States at the time of executing this Agreement and delivering it to the Company.

5.9           No General Solicitation.  The Investor did not learn of the investment in the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar.

5.10           Brokers and Finders.  No Person will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company, any Subsidiary or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Investor.

5.11           Prohibited Transactions.  During the last thirty (30) days prior to the Effective Date, the Investor has not, directly or indirectly, nor has the Investor made any recommendation or suggestion regarding trading in the Common Stock to or known of any Person who has, effected or agreed to effect any short sale, whether or not against the box, established any “put equivalent position” (as defined in Rule 16a-1(h) under the 1934 Act) with respect to the Common Stock, granted any other right (including, without limitation, any put or call option) with respect to the Common Stock or with respect to any security that includes, relates to or derives any significant part of its value from the Common Stock or otherwise sought to hedge its position in the Shares (each, a “Prohibited Transaction”).

 

 

 

 

5.12           Compliance with Domestic Law.  The offer, sale and purchase of the Shares pursuant to this Agreement does not and will not violate any laws of the Investor’s jurisdiction of domicile and incorporation, including without limitation, any securities laws or  foreign exchange or foreign investment laws, and no governmental or other third party consents need to be obtained under the laws of Investor’s jurisdiction in connection with this Agreement and the closing of the transactions contemplated hereunder.

6.  Conditions to Closing.

6.1           Conditions to the Investor’s Obligations.  The obligation of the Investor to purchase the Shares at each Closing is subject to the fulfillment, on or prior to the respective Closing Date, of the following conditions, any of which may be waived by the Investor:

(a)           The representations and warranties made by the Company in Section 4 hereof shall be true and correct on the Effective Date and on the respective Closing Date, except to the extent any such representation or warranty expressly speaks as of a different date, in which case such representation or warranty shall be true and correct as of such different date.  The Company shall have performed in all material respects all obligations and conditions herein required to be performed or observed by it on or prior to the respective Closing Date.

(b)           Since the date of this Agreement, there shall not have occurred any events, occurrences, changes, effects or conditions of any character which, individually or in the aggregate, have had or could reasonably be expected to have, in the Investor’s opinion (acting reasonably), a Material Adverse Effect on the Company.

(c)           The Company shall have obtained in a timely fashion any and all consents, permits, approvals, and waivers necessary or appropriate for consummation of the purchase and sale of the Shares and the consummation of the other transactions contemplated by the Transaction Documents, all of which shall be in full force and effect (except for filings referenced as post-closing filings and described in Section 4.5).

(d)           The Company shall have executed and delivered the Registration Rights Agreement.

(e)           No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby or in the other Transaction Documents.

(f)           The Company shall have delivered at the Initial Closing to the Investor a copy of a Certificate, executed on behalf of the Company by its Chief Executive Officer or its Chief Financial Officer, dated as of the Initial Closing Date, certifying to the fulfillment of the conditions specified in subsections (a), (b), (c) and (e) of this Section 6.1.

 

 

 

(g)           The Company shall have delivered to the Investor at the Initial Closing a copy of a Certificate, executed on behalf of the Company by its Secretary, dated as of the Initial Closing Date, certifying the resolutions adopted by the Board of Directors of the Company approving the transactions contemplated by this Agreement and the other Transaction Documents and the issuance of the Shares, certifying the current versions of the Articles of Continuance and Bylaws of the Company and certifying as to the signatures and authority of persons signing the Transaction Documents and related documents on behalf of the Company.

(h)           The Investor shall have received opinion letters from Canadian and U.S. legal counsel for the Company, dated as of the Initial Closing Date, in form and substance reasonably acceptable to the Investor to and collectively contains affirmative opinions in substantially  the effect  set forth in Exhibit B.

(i)           No stop order or suspension of trading shall have been imposed by the SEC or any other governmental regulatory body or the NASDAQ Capital Market with respect to public trading in the Common Stock.

6.2           Conditions to Obligations of the Company.  The Company’s obligation to sell and issue the Shares at each Closing to the Investor is subject to the fulfillment to the satisfaction of the Company on or prior to the respective Closing Date of the following conditions with respect to the Investor, any of which may be waived by the Company:

(a)           The representations and warranties made by the Investor in Section 5 hereof shall be true and correct in all respects when made and shall be true and correct in all respects on the respective Closing Date with the same force and effect as if they had been made on and as of said date.  The Investor shall have performed in all material respects all obligations and conditions herein required to be performed or observed by it on or prior to the respective Closing Date.

(b)           The Investor shall have executed and delivered the Registration Rights Agreement.

(c)           The Investor shall have delivered the portion of the Purchase Price to the Company due on the respective Closing Date.

(d)           No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby or in the other Transaction Documents.

6.3           Termination of Obligations to Effect Closing; Effects.

(a)           The obligations of the Company, on the one hand, and the Investor, on the other hand, to effect the Closing shall terminate as follows:

 

 

 

(i)           Upon the mutual written consent of the Company and the Investor;

(ii)           By the Company if (A) any of the conditions set forth in Section 6.2 shall have become incapable of fulfillment, and shall not have been waived by the Company, or (B) the Company has satisfied all conditions set forth in Section 6.1 with respect to the respective Closing and the Closing has not occurred prior to 5:00 P.M. New York time on the deadline set forth in Section 3 with respect for the respective Closing Date.

By the Investor if (A) any of the conditions set forth in Section 6.1 shall have become incapable of fulfillment, and shall not have been waived by the Investor, or (B) the Investor has satisfied all conditions set forth in Section 6.2 with respect to the respective Closing and the Closing has not occurred prior to 5:00 P.M. New York time on the deadline set forth in Section 3 with respect for the respective Closing Date.

(iii)           By the Investor if the Company is in breach of any of the representations and warranties set forth in Section 4.

provided, however, that, except in the case of clauses (ii), (iii) or (iv) above, the party seeking to terminate its obligation to effect the Closing shall not then be in breach of any of its representations, warranties, covenants or agreements contained in this Agreement or the other Transaction Documents if such breach has resulted in the circumstances giving rise to such party’s seeking to terminate its obligation to effect the Closing.

(b)           If the Investor terminates this Agreement pursuant to clause (iii) or (iv) above, the Company shall reimburse the Investor for all attorneys fees relating to the negotiation, preparation, execution or termination of the Transaction Documents.

(c)           Nothing in this Section 6.3 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents.

7.           Covenants and Agreements of the Company.

7.1           No Conflicting Agreements.  The Company will not take any action, enter into any agreement or make any commitment that would conflict or interfere in any material respect with the Company’s obligations to the Investor under the Transaction Documents, including without limitation, any action or steps that would cause the offer and/or sale of the Shares to be integrated with other offerings.  The Company will not conduct any offering other than the transactions contemplated hereby that will be integrated with the offer or issuance of the Shares.

 

 

7.2           Compliance with Laws.  The Company will comply in all material respects with all applicable laws, rules, regulations, orders and decrees of all governmental authorities.

7.3           Listing of Underlying Shares and Related Matters.  Promptly following the Closing, the Company shall take all necessary action to cause the Shares to be listed on each national securities exchange, or quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and shall maintain such listing so long as any shares of Common Stock are listed on such exchange or quotation system. The Company will maintain the listing of its Common Stock on the NASDAQ Capital Market or, in its discretion, the American Stock Exchange, NASDAQ Global Market or New York Stock Exchange (any such exchange on which the Common Stock is listed, the “Principal Market”) and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal Market, provided that the foregoing shall not prohibit the Company from delisting if at any time as a result of a change of control or otherwise the Company is no longer required to register its Common Stock under Section 12 of the 1934 Act. The Company will provide within two (2) Business Days to the Investor copies of all notices it receives notifying the Company of the threatened and actual delisting of the Common Stock from the Principal Market.

7.4           Market Regulations.  The Company shall notify the SEC, the Principal Market and applicable state authorities, in accordance with their requirements, of the transactions contemplated by this Agreement, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Shares to the Investor.

7.5           Termination of Covenants.  The provisions of Sections 7.1 through 7.4 shall terminate and be of no further force and effect upon the earlier of (i) the mutual consent of the Company and the Investor or (ii) the date on which the Company’s obligations under the Registration Rights Agreement to register or maintain the effectiveness of any registration covering the Registrable Securities (as such term is defined in the Registration Rights Agreement) shall terminate.

7.6           Prohibited Transactions.  Prior to the earliest of (i) the termination of this Agreement, (ii) the date on which the Registration Statement has been declared effective, and (iii) the Effectiveness Deadline, the Investor shall not engage, directly or indirectly, nor shall any Person acting on behalf of or pursuant to any understanding with the Investor engage, in a Prohibited Transaction.  The Investor acknowledges and agrees that in order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to any of the Common Stock of the Investor or its transferee until such time as the Registration Statement has been declared effective.

8.           Lock-up; Leak-out.

8.1           Lock-Up.  In addition to any restrictions and limitations required by applicable securities laws, rule and regulations, Investor shall not at any time offer, sale, pledge, conveyance, transfer or make commitment to do any of the foregoing (each a “Transfer”) any of the Shares that are of Lock-Up Shares (as defined below).

 

 

 

8.2           Leak-Out.

(a)           Prior to and including the second anniversary of the Closing, all of the Shares shall be Lock-Up Shares and shall be subject to the restriction on Transfer set forth in Section 8.1.

(b)           Following the second anniversary of the Closing, two-thirds (round up to the nearest Share) of the Shares shall be Lock-Up Shares and shall be subject to the restriction on Transfer set forth in Section 8.1.

(c)           Following the third anniversary of the Closing, one-third (round up to the nearest Share) of the Shares shall be Lock-Up Shares and shall be subject to the restriction on Transfer set forth in Section 8.1

(d)           Following the fourth anniversary of the Closing, none of the Shares of the Shares shall be Lock-Up Shares.

8.3           Legends.  In addition to any other legend placed on the Shares pursuant to this Agreement, the following legend shall be imprinted on each stock certificate representing a Lock-Up Share (with the “Applicable Date” to be the date on which the Shares represented by the particular certificate cease to be Lock-Up Shares):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CONTRACTUAL PROHIBITIONS ON TRANSFER CONTAINED IN A PURCHASE AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL PURCHASER OF SUCH SECURITIES.  SUCH CONTRACTUAL PROHIBITIONS EXPIRE ON [APPLICABLE DATE], AT WHICH TIME THIS LEGEND MAY BE REMOVED. A COPY OF SUCH AGREEMENT IS AVAILABLE FROM THE ISSUER UPON REQUEST.

Upon any Share’s ceasing the be a Lock-Up Share, the Company shall, upon an Investor’s written request, promptly cause certificates evidencing the Shares to be replaced with certificates which do not bear such restrictive legend.

8.4           Stop Transfer Instructions. The Company may place stop transfer instructions on the Shares so as to restrict the Transfer of the Shares except in accordance with the terms of this Agreement.

8.5           Permitted Transfers during Lock-Up/Leak-Out Period.  Notwithstanding anything contained in this Section 8, the Investor may transfer Lock-Up Shares to its Affiliates or subsidiaries provided that the transferee executes an agreement to be bound by all the terms and conditions of this Agreement in connection with the Shares acquired.

 

 

 

8.6           Beneficial Rights; Additional Resale Restrictions. Except as otherwise provided in this Agreement or any other agreements between the parties hereto, the Investor shall be entitled to its beneficial rights of ownership of the Shares, including the right to vote the Shares for any and all purposes.  The resale restrictions on the Shares set forth in this Agreement shall be in addition to all other restrictions on transfer imposed by applicable United States and state securities laws, rules and regulations.

9.           Survival and Indemnification.

9.1          Survival.  The representations and warranties contained in this Agreement shall survive the Closing of the transactions contemplated by this Agreement, to the extent the Closing occurs, for a period of one year from the Closing Date.  Unless terminated as provided in the following sentence, the covenants and other provisions of this Agreement shall survive during the terms set forth with respect thereto in this Agreement, and if no such term is set forth herein, for one year from the date of Closing.  With respect to all parties, if the Closing does not occur, no representations, warranties, covenants or agreements shall survive termination under Section 6.3.

9.2           Indemnification.

(a)           The Company agrees to indemnify and hold harmless the Investor and its Affiliates and their respective manager, members, employees and agents from and against any and all losses, claims, damages, liabilities and expenses (including without limitation reasonable attorneys’ fees and disbursements and other expenses incurred in connection with investigating, preparing or defending any action, claim or proceeding, pending or threatened and the costs of enforcement thereof) (collectively, “Losses”) to which such Person may become subject as a result of any breach of representation, warranty, covenant or agreement made by or to be performed on the part of the Company under this Agreement, and will reimburse any such Person for all such amounts as they are incurred by such Person.

(b)           The Investor agrees to indemnify and hold harmless the Company and its Affiliates and its directors, officers, employees and agents from and against any and all Losses to which such Person may become subject as a result of any breach of representation, warranty, covenant or agreement made by or to be performed on the part of the Investor under this Agreement, and will reimburse any such Person for all such amounts as they are incurred by such Person.

9.3          Conduct of Indemnification Proceedings.  Promptly after receipt by any Person (the “Indemnified Person”) of notice of any demand, claim or circumstances which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to Section 9.2, such Indemnified Person shall promptly notify the person from which indemnification is sought (the “Indemnifying Person”) in writing and the Indemnifying Person shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Person, and shall assume the payment of all fees and expenses; provided, however, that the failure of any Indemnified Person to so notify promptly the Indemnifying Person shall not relieve the Indemnifying Person of its obligations hereunder except to the extent, and only to the extent, that the Indemnifying Person is materially prejudiced by such failure to notify promptly.  In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless: (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the retention of such counsel; or (ii) in the reasonable judgment of counsel to such Indemnified Person representation of both parties by the same counsel would be inappropriate due to actual or potential conflicts of interest between them.  The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Person shall indemnify and hold harmless such Indemnified Person from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment.  Without the prior written consent of the Indemnified Person, which consent shall not be unreasonably withheld, the Indemnifying Person shall not effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Person from all liability arising out of such proceeding.

 

 

 

10.           Miscellaneous.

10.1                      Successors and Assigns.  This Agreement may not be assigned by a party hereto without the prior written consent of the Company or the Investor, as applicable.  The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

10.2                      Counterparts; Faxes.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  This Agreement may also be executed via facsimile, which shall be deemed an original.

10.3                      Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

10.4                      Notices.  Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by telex or telecopier, then such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) ten (10)  days after such notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given two Business Days after delivery to such carrier.  All notices shall be addressed to the party to be notified at the address as follows, or at such other address as such party may designate by ten days’ advance written notice to the other party:

 

 

 

If to the Company:

Altair Nanotechnologies, Inc.

204 Edison Way

Reno, Nevada 89502

Attention: Alan Gotcher

Fax:   ###-###-####

email: ***@***

With a copy to:

Parr Waddoups Brown Gee & Loveless

185 South State Street, Suite 1300

Salt Lake City, UT  84111

Attn:  Bryan T. Allen

Fax: (801) 532-7750

Email: ***@***

If to the Investor:

Al Yousuf, LLC

By courier:

Mezzanine Floor, Yamaha Showroom

Sheikh Zayed Road

Dubai, United Arab Emirates

By mail:

P.O. Box 25

Dubai, United Arab Emirates

Attn: Iqbal Al Yousuf

Fax: +971.4 ###-###-####

Email: ***@***

With a copy to:

Akin Gump Strauss Hauer & Feld LLP

P.O. Box 120939

Dubai, United Arab Emirates

Attn: John Podgore

Fax: +971.4 ###-###-####

Email: ***@***

 

 

 

10.5     Expenses.  The parties hereto shall pay their own costs and expenses in connection herewith.  In the event that legal proceedings are commenced by any party to this Agreement against another party to this Agreement in connection with this Agreement or the other Transaction Documents, the party that does not prevail in such proceedings shall pay the reasonable attorneys’ fees and other reasonable out-of-pocket costs and expenses incurred by the prevailing party in such proceedings.

10.6           Amendments and Waivers.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Investor.  Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Shares purchased under this Agreement at the time outstanding, each future holder of all such Shares, and the Company.

10.7           Publicity.  No public release or announcement concerning the transactions contemplated hereby shall be issued (i) by the Investor without the prior consent of the Company (which consent shall not be unreasonably conditioned or withheld), or (ii) by the Company with the prior consent of the Investor identified therein (which consent shall not be unreasonably conditioned or withheld).  The foregoing shall not prohibit any party hereto from issuing any release or filing any report that is required by law or the applicable rules or regulations of any securities exchange or securities market.  The Investor understands that the Company is required to file a Current Report on Form 8-K describing the terms of the Transaction Documents and to include the Transaction Documents as Exhibits and hereby consents to such filing.

10.9           Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect.

10.10         Entire Agreement.  This Agreement, including the Exhibits and the Disclosure Letters, and the other Transaction Documents constitute the entire agreement among the parties hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof.

10.11        Further Assurances.  The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.

 

 

 

10.12         Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.  This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to the choice of law principles thereof.  Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of New York and United States District Court located in the New York City, New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby.  Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement.  Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court.  Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

10.13         Currency. All reference to dollars ($) or currency in this Agreement are to United States Dollars.

[signature page follows]

 

 

 

 

IN WITNESS WHEREOF, the parties have executed this Purchase Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

The Company:	ALTAIR NANOTECHNOLOGIES INC.
	By: /s/ Alan Gotcher
	Name: Alan Gotcher
	Title: President and CEO
Investor:	AL YOUSUF, LLC
	By: /s/ Ipbal Al Yousuf
	Name: Iqbal Al Yousuf
	Title: President

 

 

 

 

Exhibit A

to

Purchase Agreement

[see attached]

 

 

 

Exhibit B

to

Purchase Agreement

1.	The Corporation is a corporation existing under the laws of Canada.

 

2.	The Corporation has the corporate power and authority to enter into the Agreements, and to consummate the transactions contemplated thereby, including the issuance and delivery of the Shares to the Investor.

 

3.	The Corporation has taken all necessary corporate action to authorize the execution and delivery by it of the Agreements and the performance by the Corporation of its obligations under the Agreements, including the issuance and delivery of the Shares to the Investor.

 

4.	To the extent that such matters are governed by the laws of the Province of Ontario and the laws of Canada applicable therein, the Agreements has been duly executed and delivered by the Corporation.

 

5.	The Shares have been validly created and allotted and, when issued to the Investor in accordance with the terms of the Agreements, will be validly issued and outstanding as fully paid and non-assessable common shares of the Corporation.

 

6.

No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any governmental authority is required in connection with the execution and delivery by the Corporation of the Agreements or the performance by the Corporation of its obligations under the Agreements on the Closing.

 

1.           No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Corporation is required in connection with the consummation of the purchase and sale of the Shares under the Purchase Agreement, other than as set forth in Section 4.5of the Purchase Agreement.

2.           The Agreements constitutes the valid and binding agreement of the Corporation, enforceable against the Corporation in accordance with its terms.   [Relies on Canadian foundational opinions; Nevada and U.S. law]