Exhibit 10.1
Clean Diesel Technologies, Inc.
Loan Commitment Letter
This letter is directed at persons having professional experience in matters
relating to investments and any investment in the Company hereunder will be
engaged in only with such persons. Persons who do not have professional
experience in matters relating to investments should not sign this letter.
Kanis S.A. (the “Lender”), with an address c/o S G Associates Limited, 82Z
Portland Place, London, England, W1B 1NS, hereby agrees with Clean Diesel
Technologies, Inc., a Delaware corporation (the “Company”), with an office at
4567 Telephone Road, Suite 206, Ventura, California, USA 93003 to lend to the
Company US$1,500,000 (the “Loan”) upon the terms set forth below, as to which
Company and Lender agree. In connection with the Loan, the Company will issue to
the Lender warrants (“Warrants”) to purchase 25,000 shares of the Company’s
common stock, par value $0.01 per share (the “Warrant Shares”), as set forth
below (the “Offering”). The Offering is made pursuant to and in reliance upon
Regulation S promulgated under the U.S. Securities Act of 1933, as amended (the
“Act”).

     
Commitment:
 
Lender agrees to loan to the Company US$1,500,000 on or before December 31,
2010, and, subject to the terms and conditions set forth herein, Company agrees
to issue to Lender the Note and the Warrants. Lender acknowledges that this
commitment (i) is irrevocable, (ii) is conditioned upon acceptance by or on
behalf of the Company and may be accepted or rejected in whole or in part by the
Company in its sole discretion and (iii) will expire if not accepted by the
Company on or prior to December 31, 2010.
 
   
Promissory Note:
 
The Loan shall be evidenced by a promissory note (the “Note”) in the form of
Schedule A hereto.
 
   
Warrant:
 
The Warrants shall be exercisable commencing upon the Maturity Date (as defined
in the Note), and have an exercise price per Warrant Share equal to the average
of the closing price per Share for the 5 trading days immediately preceding the
closing of the Loan. The Warrants will have an expiration date upon the earlier
to occur of (x) the date that is three years from the Maturity Date or (y) the
thirtieth day after the Company provides notice to the holder of the Warrant
that the Closing Bid Price had exceeded 130% of the exercise price for ten
consecutive trading days (which ten day period begins on or after the Maturity
Date). The Warrants would not be publicly traded or registered on any securities
exchange. The form and the terms and conditions of the Warrants shall be that of
Schedule B attached to this Commitment Letter and the terms and conditions set
forth on said Schedule B, and not the summary set forth in this paragraph, shall
govern the interpretation of the Warrants.

 

 

--------------------------------------------------------------------------------

 

     
Lender Status:
 
Lender represents that it is a “Qualified Investor” within the meaning of
Section 86 of the Financial Services and Markets Act 2000 and an “investment
professional” within the meaning of Article 19 of the FSMA 2000 (Financial
Promotion) Order 2005 and is not a “U.S. Person” within the meaning of Rule 902
of Regulation S promulgated under the Act.
 
   
Voting Rights:
 
Warrant Shares shall have one vote per share in accordance with Delaware law.
Warrant Shares shall have no voting rights until the Warrants are exercised and
the Warrant Shares are issued and outstanding. Warrants shall have no voting
rights.
 
   
Resale Limitations:
 
Lender agrees to not sell any Warrants or any Warrant Shares for a period of not
less than six (6) months from the date of issuance by the Company of the
relevant Warrant or Warrant Shares to Lender. Moreover, the purchase and sale of
the Warrants and Warrant Shares are subject to Regulation S promulgated under
the Act by the U.S. Securities and Exchange Commission and relating to an
available exemption from registration for the sale of securities by U.S.
companies in offshore transactions. To that end Lender represents, certifies and
agrees that (i) it is not a “U.S. Person” (within the meaning of Regulation S)
and is not acquiring the Warrants and Warrant Shares for the account or benefit
of any U.S. Person, (ii) Lender did not become aware of the Company or the Units
through any form of “directed selling efforts” (as defined in Rule 902 of
Regulation S), and no general solicitation or general advertising in violation
of the Act has been or will be used nor will any offers by means of any directed
selling efforts in the United States be made by Lender or any of its
representatives in connection with the offer and sale of’ any of the Warrants or
the Warrant Shares, (iii) at the time of the origination of contact concerning
the transactions contemplated by this Commitment Letter and on the date of
execution and delivery of this Commitment Letter by Lender, Lender was outside
the United States, (iv) with respect to the Warrants and Warrant Shares, it
shall comply with the Transfer Restrictions set out on Schedule B attached to
this Commitment Letter and made a part hereof, (v) that such Transfer
Restrictions shall be set out in a legend on certificate(s) representing the
Warrant Shares and the Warrants, and (vi) that the Company will refuse (or cause
its transfer agent and registrar to refuse) transfer and registration of any
Warrant Shares or Warrant transferred other than in accordance with the Transfer
Restrictions.

 

2

--------------------------------------------------------------------------------

 

     
Funding:
 
Lender shall deliver US$1,500,000 by wire transfer to the Company’s account, in
U.S. Dollars, on or before December 31, 2010.
 
   
Law:
 
This Commitment Letter and the purchase of the Warrants and the Warrant Shares
shall be governed by Delaware law and the Note shall be governed by California
law, in each case without reference to the conflicts of laws rules of any
jurisdiction.
 
   
Miscellaneous:
 
This Commitment Letter is not assignable by Lender without the consent of the
Company. The representations and warranties made by the Lender in this
Commitment Letter shall survive the closing of the transactions contemplated
hereby. Schedule C is an integral part of this Commitment Letter and shall be
deemed incorporated by reference herein. This Commitment Letter may be executed
in one or more counterparts, all of which together shall constitute one
instrument.
 
   
Signatures:
 
This Commitment Letter has been executed and delivered by the following
authorized representatives of the Lender and the Company.

[Signature page follows.]

 

3

--------------------------------------------------------------------------------

 

[Signature Page to Clean Diesel Technologies, Inc.
Loan Commitment Letter]

                      CLEAN DIESEL TECHNOLOGIES, INC.       KANIS, S.A.    
 
                   
By
  /s/ Nikhil A. Mehta
 
Name: Nikhil A. Mehta       By   /s/ S. A. Godfrey for Marek Services LLC
 
Name: Susan Godfrey    
 
  Title: Chief Financial Officer           Title: Company Secretary    
 
  Dated: December 30, 2010           Dated: December 30, 2010    

 

4

--------------------------------------------------------------------------------

 

Schedule A
to Clean Diesel Technologies, Inc.
Loan Commitment Letter
PROMISSORY NOTE

Principal Amount US$1,500,000.00   Ventura, California     December 30, 2010    
 

For value received, the undersigned Clean Diesel Technologies, Inc., a Delaware
corporation (“Maker”), promises to pay to Kanis, S.A. (“Payee”), or order, c/o S
G Associates Limited, 82Z Portland Place, London, England, W1B 1NS, the
principal sum of One Million Five Hundred Thousand United States Dollars
($1,500,000.00), together with interest at the rate hereinafter provided for on
the unpaid principal balance of this promissory note (this “Note”) from time to
time outstanding until paid in full and the Payment Premium (as defined below).
Interest shall accrue on the unpaid and outstanding principal balance of this
Note commencing on the date hereof and continuing until repayment of this Note
in full at a rate per annum equal to Six Per Cent (6.00%), with interest only
payable quarterly on each March 31, June 30, September 30 and December 31,
commencing March 31, 2011. The principal, along with any accrued but unpaid
interest, and the Payment Premium shall be due and payable in full on June 30,
2013 (the “Maturity Date”). This Note shall bear no prepayment penalty.
As used herein, Payment Premium means the amount determined by multiplying
US$200,000 times a fraction, the numerator of which is the number of days that
have elapsed between December 30, 2010 and the Maturity Date, and the
denominator of which is 913; provided that the Payment Premium in no event shall
be greater than US$200,000 or less than US$100,000.
Maker shall make all payments hereunder to Payee in lawful money of the United
States and in immediately available funds. Payments shall be applied first to
accrued and unpaid interest, then to principal.
The maturity of this Note may be accelerated by Payee in the event Maker is in
breach or default of any of the terms, conditions or covenants of this Note or
any other agreement of Maker with Payee or its affiliates.
Maker waives presentment, demand, notice of demand, protest, notice of protest
or notice of nonpayment in connection with the delivery, acceptance,
performance, default or enforcement of this Note or of any document or
instrument evidencing any security for payment of this Note.
Failure at any time to exercise any of the rights of Payee hereunder shall not
constitute a waiver of such rights and shall not be a bar to exercise of any of
such rights at a later date.

 

A-1

--------------------------------------------------------------------------------

 

Maker agrees to pay all reasonable costs of collection and enforcement of this
Note, including but not limited to reasonable attorney’s fees and disbursements,
whether or not any lawsuit or other legal action is instituted to enforce this
Note, including without limitation if Payee seeks the advice or assistance of an
attorney as a result of or in connection with any default, or if Maker becomes
the debtor or otherwise becomes the subject of any bankruptcy, insolvency or
other proceeding for the readjustment of indebtedness.
No addition to or amendment of this Note shall be admissible, enforceable or
effective unless it is set forth in a writing duly executed by the party against
whom the addition or amendment is sought to be enforced.
Nothing contained in this Note shall be deemed to require the payment of
interest or other charges by Maker or any other person in excess of the amount
which the Payee may lawfully charge under the applicable usury laws. In the
event that Payee shall collect moneys which are deemed to constitute interest
which would increase the effective interest rate to a rate in excess of that
permitted to be charged by applicable law, all such sums deemed to constitute
interest in excess of the legal rate shall be credited against the principal
balance of this Note then outstanding, and any excess shall be returned to
Maker.
This Note will be governed by and construed under the laws of the State of
California. In any action brought under or arising out of this Note, the Maker
hereto hereby consents to the jurisdiction of any competent court within the
State of California and consents to service of process by any means authorized
by the laws of the State of California.
IN WITNESS WHEREOF, the undersigned has caused this Note to be duly executed in
California as of the date first written below.

              Dated: December 30, 2010   Maker:    
 
                CLEAN DIESEL TECHNOLOGIES, INC.    
 
           
 
  By:   /s/ Nikhil A. Mehta
 
Name: Nikhil A. Mehta
Title: Chief Financial Officer    

 

A-2

--------------------------------------------------------------------------------

 

Schedule B
to Clean Diesel Technologies, Inc.
Loan Commitment Letter
Form of Warrant
WARRANT
No. 12-03
THIS WARRANT HAS NOT BEEN AND WILL NOT REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE HOLDER HEREOF, BY
PURCHASING THIS WARRANT, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS WARRANT
MAY NOT BE OFFERED, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED BY SUCH HOLDER PRIOR
TO THE LATER OF THE (X) SIX MONTHS FOLLOWING THE ISSUANCE HEREOF OR (Y) IF
APPLICABLE, THREE MONTHS AFTER IT CEASES TO BE AN AFFILIATE, OTHER THAN (1) TO
THE COMPANY, (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND IN ACCORDANCE
WITH ANY APPLICABLE LAWS OF ANY STATE OF THE UNITED STATES, (3) IN AN OFFSHORE
TRANSACTION COMPLYING WITH REGULATION S UNDER THE SECURITIES ACT, (4) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144,
IF APPLICABLE, UNDER THE SECURITIES ACT OR (5) IN A TRANSACTION THAT DOES NOT
REQUIRE REGISTRATION UNDER THE SECURITIES ACT BUT IS IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AND IN RELATION TO WHICH THE HOLDER HAS
FURNISHED TO THE COMPANY AN OPINION TO SUCH EFFECT FROM COUNSEL OF RECOGNISED
STANDING IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY PRIOR TO SUCH OFFER,
SALE, PLEDGE OR TRANSFER. THE HOLDER HEREOF, BY ACCEPTANCE OF THIS WARRANT,
REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS A NON-U.S.
PERSON, AND ACKNOWLEDGES THAT HEDGING TRANSACTIONS INVOLVING THIS WARRANT MAY
NOT BE CONDUCTED UNLESS CONDUCTED IN COMPLIANCE WITH THE SECURITIES ACT. THIS
WARRANT IS NOT IMMEDIATELY EXERCISEABLE.
December 30, 2010
25,000 Shares
Warrant for Purchase of Common Stock
of Clean Diesel Technologies, Inc.
(a Delaware Corporation)

 

B-1

--------------------------------------------------------------------------------

 

This Certifies that Kanis S.A. (the “Holder”), with an address c/o S G
Associates Limited, 82Z Portland Place, London, England, W1B 1NS, for value
received and subject to the provisions hereinafter set forth is entitled to
purchase from Clean Diesel Technologies, Inc., a Delaware corporation (the
“Company”), 25,000 shares of Common Stock of the Company, par value $.01 per
share (the “Shares”), at a price of USD$10.40 per share (the “Exercise Price”)
on or before 5:00 p.m. local time at the then executive offices of the Company
on or prior to the Expiration Date (as defined below). This Warrant shall be
void unless exercised on or before the Expiration Date.
1. Commitment Letter. This Warrant is issued pursuant to that certain Loan
Commitment Letter between the Holder and the Company (the “Commitment Letter”)
relating to the loan by Holder to the Company of US$1,500,000 (the “Loan”) and
the issuances by the Company to the Holder of this Warrant on the date hereof.
2. Exercise; Expiration Date. This Warrant may be exercised from time to time by
the Holder, on or after June 30, 2013, as to the whole or any lesser number of
the Shares upon tender of this Warrant at the then executive office of the
Company with a written notice signed by the Holder to the attention of the
Company Secretary expressing the Holder’s intent to exercise the same together
with payment to the Company of the Exercise Price of the Shares stated in the
notice to be purchased. If this Warrant is exercised in respect of fewer than
all of the Shares that may be purchased under this Warrant, the Company shall
execute a new warrant in the form of this Warrant for the remaining Shares
issuable under the original Warrant and deliver such new Warrant to the Holder.
This Warrant and all rights hereunder will expire if not exercised by 5:00 p.m.
prevailing local time in New York, New York on the date (the “Expiration Date”)
that is the earlier to occur of (i) June 30, 2016, and (ii) that date which is
thirty (30) days after the giving of notice by the Company to the Holder that
the Fair Market Value of one Share has exceeded 130% of the Exercise Price for
ten (10) consecutive days (which 10-day period means, if the Shares are then
listed or traded on an exchange or otherwise quoted, 10 consecutive days
commencing on or after June 30, 2013 for which the Closing Bid Price is
reported), and that the Warrant will therefore expire if not exercised prior to
the Expiration Date.
“Fair Market Value” means (i) the consolidated closing bid price of one Share as
reported on the NASDAQ Stock Market, LLC or on any other principal national
securities exchange on which the Shares are then listed or admitted for trading
or (ii) if the Shares are not then listed or admitted for trading on any
national securities exchange, the last reported sale price or, in case no such
sale takes place on each day during the 10-day period referred to above, the
average of the highest reported bid and the lowest reported asked quotation for
the Shares, either case as reported on any authorized interdealer quotation
system (in each case, the “Closing Bid Price”). If the Shares are not listed or
admitted for trading on any national securities exchange or quoted by any
interdealer quotation system or a similar service, Fair Market Value means the
fair market value of a Share as determined by a majority of the directors of the
Company’s Board of Directors.
3. No Stockholder Rights. This Warrant does not confer upon the Holder or the
Holder’s permitted Assignees any right whatsoever as a stockholder of the
Company, including without limiting the generality of the foregoing, the right
to vote, to receive notices and the right to receive dividends, prior to the
exercise of the Holder’s rights to purchase the Shares as provided herein.

 

B-2

--------------------------------------------------------------------------------

 

4. Compliance with Securities Laws. This Warrant and the Shares have not been
registered under the Securities Act of 1933, as amended (the “Act”), or
qualified under the securities laws of the several states of the United States
(“State Laws”). The Holder is aware that the issuance of this Warrant and the
issuance of the Shares are being made in reliance on Regulation S under the Act.
This Warrant and the Shares have been purchased for investment and not with a
view to distribution or resale, and may not be assigned, sold or made subject to
a security interest, pledged, hypothecated, or otherwise transferred without an
effective registration statement for such Warrant or Shares under the Act and
qualification under State Laws, pursuant to an exemption from registration and
qualification, or an opinion of counsel satisfactory to the Company that such
registration and qualification are not required. Any Shares issued upon the
exercise of this Warrant (unless pursuant to an effective registration statement
under the Act) shall bear the following legend:
THIS SECURITY HAS NOT BEEN AND WILL NOT REREGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS
SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED BY SUCH
HOLDER PRIOR TO THE LATER OF (X) SIX MONTHS FOLLOWING THE ISSUANCE HEREOF OR
(Y) IF APPLICABLE, THREE MONTHS AFTER IT CEASES TO BE AN AFFILIATE, OTHER THAN
(1) TO THE COMPANY, (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE LAWS OF ANY STATE OF
THE UNITED STATES, (3) IN AN OFFSHORE TRANSACTION COMPLYING WITH REGULATION S
UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144, IF APPLICABLE, UNDER THE SECURITIES ACT
OR (5) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES
ACT BUT IS IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND IN RELATION
TO WHICH THE HOLDER HAS FURNISHED TO THE COMPANY AN OPINION TO SUCH EFFECT FROM
COUNSEL OF RECOGNISED STANDING IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY
PRIOR TO SUCH OFFER, SALE, PLEDGE OR TRANSFER. THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS A
NON-U.S. PERSON, AND ACKNOWLEDGES THAT HEDGING TRANSACTIONS INVOLVING THESE
SECURITIES MAY NOT BE CONDUCTED UNLESS CONDUCTED IN COMPLIANCE WITH THE
SECURITIES ACT.
5. Sale; Assignment. (a) This Warrant may not be transferred, sold, or made
subject to a security interest or charge, pledged, hypothecated, or otherwise
transferred absent compliance with the transfer restrictions set forth above in
this Warrant.
(b) Upon such compliance with the transfer restrictions and upon the delivery to
the Company at its then executive offices of this Warrant along with a duly
completed Assignment Form substantially in the form of Exhibit A hereto (and the
required legal opinion, if any), the Company shall execute and deliver a new
Warrant in the form of this Warrant (including the legend set forth above on the
first page hereof, unless registered under the Act and any applicable State
Laws), but registered in the name of the assignee, to purchase the number of
Shares or that fraction of the Shares issuable under the original Warrant
assigned to the assignee. In case the Holder shall assign this Warrant with
respect to fewer than all of the Shares that may be purchased under this
Warrant, the Company shall execute a new warrant in the form of this Warrant for
the balance of such Shares or the remaining fraction of the Shares issuable
under the original Warrant and deliver such new warrant to the Holder.

 

B-3

--------------------------------------------------------------------------------

 

(c) Any transfer or sale or attempted transfer or sale of this Warrant in
violation of any provision of this Warrant shall be void, and the Company shall
not record such transfer on its books or treat any purported transferee of the
Warrant as the owner of the Warrant for any purpose.
6. Representations of Holder. The Holder represents and covenants to the Company
by acceptance of this Warrant, as follows:
(a) That the Holder is not a U.S. Person (as defined in Rule 902 of Regulation S
promulgated under the Act and is not acquiring the Warrant for the account or
benefit of any U.S. Person.
(b) The Holder acquired this Warrant from the Company and will acquire Shares
issuable upon exercise hereof, for its own account, for investment purposes only
and not with a view to the resale and distribution thereof, in whole or in part.
(c) The Holder shall comply with the transfer restrictions set out above and in
the Commitment Letter (including, without limitation, Schedule C attached
thereto and made a part thereof) and the Holder understands that this Warrant
and the Shares issuable on exercise hereof must be held indefinitely unless
subsequently registered under the Act and qualified under any applicable State
Laws, or unless exemptions from registration and qualification are otherwise
available.
(d) The Holder acknowledges and agrees that hedging transactions involving this
Warrant or the Shares issuable upon exercise of this Warrant may not be
conducted unless conducted in compliance with the Act.
7. Capital Adjustments. The Exercise Price and the number of Shares purchasable
hereunder are subject to adjustment from time to time, as follows:
(a) If at any time there shall be a merger or consolidation of the Company with
or into another corporation when the Company is not the surviving corporation,
then, as part of such merger or consolidation, lawful provision shall be made so
that the Holder shall thereafter be entitled to receive upon exercise of this
Warrant, during the period specified herein and upon payment of the aggregate
Exercise Price then in effect, the number of Shares of stock or other securities
or property of the successor corporation resulting from such merger or
consolidation, to which the Holder would have been entitled in such merger or
consolidation, if this Warrant had been exercised immediately before such merger
or consolidation.
(b) If the Company at any time shall, by subdivision, combination or
reclassification of securities or otherwise, change any of the Shares into the
same or a different number of securities of any other class or classes, this
Warrant shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with respect
to the Shares immediately prior to such subdivision, combination,
reclassification or other change.
(c) If the Company at any time shall split or subdivide its Common Stock, the
Exercise Price shall be proportionately decreased and the number of Shares
issuable pursuant to this Warrant shall be proportionately increased. If the
Company at any time shall combine its Common Stock, the Exercise Price shall be
proportionately increased and the number of Shares issuable pursuant to this
Warrant shall be proportionately decreased.

 

B-4

--------------------------------------------------------------------------------

 

8. Governing Law. This Warrant shall be governed by and construed for all
purposes by in accordance with the laws of the State of Delaware without
reference to the conflicts of laws rules of any jurisdiction.
9. Notices. Any notice effecting an exercise of this Warrant shall, if in
writing, be effective upon receipt by the Company of the Warrant, notice of
exercise and payment of the Exercise Price. Other notices shall, if in writing,
be effective on receipt, if delivered in person or by facsimile transmission,
or, if given by mail, four (4) days after deposit in the mail service, air-mail
postage pre-paid, in any case to the then executive office of the Company to the
attention of the Company Secretary, or, if to the Holder, to the address given
above or to such other address by notice so given.
10. Holidays. If the last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall be a Saturday, Sunday
or a legal holiday, then such action may be taken or such right may be exercised
on the next succeeding day not a Saturday, Sunday or a legal holiday.
11. Lost Warrants. The Company covenants with the Holder that, upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant and, in the case of any such loss, theft, or
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Company will make and deliver a new Warrant of like tenor,
in lieu of the lost, stolen, destroyed or mutilated Warrant.
12. Fractional Shares. Fractional Shares may not be purchased hereunder. In lieu
of fractional Shares the Holder shall be entitled to receive a cash payment
equal to the fair market value for such fractional share. Fair market value
shall be the consolidated closing bid price on the NASDAQ Stock Market, LLC on
the date of exercise, or, if the Shares are not listed on such exchange, the
closing price on such recognized exchange on which the Shares may then be
listed, or, if the Shares shall not be listed on an exchange, then the average
of the bid and asked prices of the Shares, if the Shares are traded in an
over-the-counter market, or, if not regularly traded in an over the counter
market, or if the Directors of the Company determine that the trading prices do
not represent fair value, then such fair value as determined by the Directors.
14. Headings. The headings in this Warrant are for convenience of reference only
and shall in no way modify or affect the meaning or construction of any of the
terms or provisions of this Warrant.
[Signature page follows.]

 

B-5

--------------------------------------------------------------------------------

 

WITNESS the seal of the Company and the signature of its duly authorized
officers as of the date first written above.

         
CLEAN DIESEL TECHNOLOGIES, INC.
   
 
       
By:
  /s/ Nikhil A. Mehta
 
Name: Nikhil A. Mehta
Title: Chief Financial Officer    

         
Attest:
  /s/ David E. Shea
 
Name: David E. Shea
Title: Corporate Controller    

 

B-6

--------------------------------------------------------------------------------

 

Exhibit A to Warrant
Form of Assignment
[To be executed only upon permitted transfer of Warrant]
To: Clean Diesel Technologies, Inc.
For value received, the undersigned registered holder of the attached Warrant
hereby sells, assigns and transfers unto [insert name of transferee] pursuant to
and in accordance with the terms of such Warrant, the right represented by such
Warrant to purchase Shares of Clean Diesel Technologies, Inc. to which such
Warrant relates and appoints Attorney to make such transfer on the books of
Clean Diesel Technologies, Inc. maintained for such purpose, with full power of
substitution in the premises.
Warrant Holder
By:
Name:
Title:
Signed in the presence of:
Date:

 

B-7

--------------------------------------------------------------------------------

 

Schedule C
to Clean Diesel Technologies, Inc.
Loan Commitment Letter
TRANSFER RESTRICTIONS
The Warrants and Warrant Shares (collectively, the “Warrant Securities”) have
not been registered under the U.S. Securities Act of 1933, as amended (the
“Securities Act”), and may not be offered or sold to or for the account or
benefit of “U.S. Persons” (as defined in Rule 902 of Regulation S promulgated
under the Securities Act), except pursuant to Regulation S, the registration
requirements of the Securities Act or an exemption from the registration
requirements of the Securities Act.
Accordingly, the Warrant Securities are being placed outside the U.S. to
non-U.S. Persons in an offshore transaction in reliance on Regulation S under
the Securities Act. The terms “United States” and “U.S. Person” have the
respective meanings given to those terms in Regulation S under the Securities
Act.
Each holder of Warrant Securities will be deemed to have represented and agreed
as follows:

A.  
It is acquiring the Warrant Securities for its own account or an account with
respect to which it exercises sole investment discretion and that it and any
such account or person is not a U.S. Person, and it is aware that the
acquisition of Warrant Securities is being made in reliance on Regulation S
under the Securities Act.

B.  
It acknowledges that the Warrant Securities have not been registered under the
Securities Act and may not be offered or sold except as provided below.

C.  
It understands and agrees:

  1.  
that the Warrant Securities are being offered only outside the United States to
non-U.S. Persons in an offshore transaction in reliance upon Regulation S under
the Securities Act; and

  2.  
that it shall not offer, sell, pledge or otherwise transfer any Warrant Security
within six (6) months after the date of original issuance of such Warrant
Security or, in the case of an affiliate (as defined in Rule 144 promulgated
under the Securities Act) of the Company, at any time until the later of (i) one
(1) year after the date of original issuance of such Warrant Security and
(ii) three months after it ceases to be an affiliate of the Company, other than
(in each case as indicated and certified by the transferor, in the case of
Primary Shares or New Warrant Shares, in the Certificate of Transfer on the
reverse of the certificate representing such Primary Shares or New Warrant
Shares, and, in the case of New Warrants, in a certificate furnished by the
transferor to the Company upon request for transfer):

  (a)  
to the Company;

  (b)  
pursuant to an effective registration statement under the Securities Act and in
accordance with any applicable securities laws of any state of the United
States;

 

B-8

--------------------------------------------------------------------------------

 

  (c)  
in an offshore transaction in accordance with Regulation S under the Securities
Act;

  (d)  
pursuant to an exemption from the registration requirements of the Securities
Act; or

  (e)  
in a transaction that does not require registration under the Securities Act but
is in accordance with applicable state securities laws and in relation to which
the transferor has furnished to the Company an opinion to such effect from
counsel of recognized standing in form and substance satisfactory to the Company
prior to such offer, sale, pledge or transfer.

D.  
It understands that in any resale and transfer of Warrant Securities it will,
and each subsequent holder thereof is required to, notify any purchaser of
Warrant Securities of the resale restrictions referred to above, if then
applicable. This notification requirement will be satisfied by virtue of the
fact that the following legend will be placed on the certificates representing
the Primary Shares, the New Warrants and the New Warrants Shares, unless
otherwise agreed to by the Company:

THIS SECURITY HAS NOT BEEN AND WILL NOT REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS
SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED BY SUCH
HOLDER PRIOR TO THE LATER OF THE (X) SIX MONTHS FOLLOWING THE ISSUANCE HEREOF OR
(Y) IF APPLICABLE, THREE MONTHS AFTER IT CEASES TO BE AN AFFILIATE, OTHER THAN
(1) TO THE COMPANY, (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE LAWS OF ANY STATE OF
THE UNITED STATES, (3) IN AN OFFSHORE TRANSACTION COMPLYING WITH REGULATION S
UNDER THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144, IF APPLICABLE, UNDER THE SECURITIES ACT
OR (5) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES
ACT BUT IS IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AND IN RELATION
TO WHICH THE HOLDER HAS FURNISHED TO THE COMPANY AN OPINION TO SUCH EFFECT FROM
COUNSEL OF RECOGNISED STANDING IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY
PRIOR TO SUCH OFFER, SALE, PLEDGE OR TRANSFER. THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS A
NON-U.S. PERSON, AND ACKNOWLEDGES THAT HEDGING TRANSACTIONS INVOLVING THESE
SECURITIES MAY NOT BE CONDUCTED UNLESS CONDUCTED IN COMPLIANCE WITH THE
SECURITIES ACT.

E.  
It acknowledges that the foregoing restrictions apply to holders of beneficial
interests in the Warrant Securities as well as to holders of Warrant Securities.

F.  
It acknowledges that it shall not engage in any hedging transactions involving
the Warrant Securities unless in compliance with the Securities Act.

G.  
It is a “Qualified Investor” within the meaning of Section 86 of the Financial
Services and Markets Act 2000 and an “investment professional” within the
meaning of Article 19 of the FSMA 2000 (Financial Promotion) Order 2005.

 

B-9