Exhibit 10.2

CLEAN DIESEL TECHNOLOGIES INC.

1,385,000 shares of Common Stock

Series A Warrants to Purchase 388,393 shares of Common Stock

and

Series B Warrants to Purchase 168,571 shares of Common Stock

PLACEMENT AGENT AGREEMENT

November 4, 2014

Cowen and Company LLC

599 Lexington Avenue

New York, New York 10022

Dear Sirs:

1. INTRODUCTION. Clean Diesel Technologies Inc., a Delaware corporation (the
“Company”), proposes to issue and sell to the purchasers, pursuant to the terms
and conditions of this Placement Agent Agreement (this “Agreement”) and the
Subscription Agreements in the form of Exhibit A attached hereto (the
“Subscription Agreements”) entered into with the purchasers identified therein
(each a “Purchaser” and collectively, the “Purchasers”), up to an aggregate of
(i) 1,385,000 shares (the “Shares”) of common stock, $0.01 par value per share
(the “Common Stock”) of the Company (ii) Series A warrants (the “Series A
Warrants”) to purchase an aggregate of up to 388,393 shares of Common Stock (the
“Series A Warrant Shares”) and (iii) Series B Warrants (the “Series B Warrants”
and collectively with the Series A Warrants, the “Warrants”) to purchase an
aggregate of up to 168,571 shares of Common Stock (the “Series B Warrant Shares”
and collectively with the Series A Warrant Shares, the “Warrant Shares”). The
forms of each of the Warrants are attached hereto as Exhibits B-1 and B-2. The
Shares, the Warrants and the Warrant Shares are collectively referred to herein
as the “Securities.” The Company hereby confirms its agreement with Cowen and
Company, LLC (“Cowen”), the (the “Placement Agent”) to act as Placement Agent in
accordance with the terms and conditions hereof.

2. AGREEMENT TO ACT AS PLACEMENT AGENT; PLACEMENT OF SECURITIES. On the basis of
the representations, warranties and agreements of the Company herein contained,
and subject to all the terms and conditions of this Agreement:

(a) The Company hereby authorizes the Placement Agent to act as its exclusive
agent to solicit offers for the purchase of all or part of the Shares and the
Warrants from the Company in connection with the proposed offering of the Shares
and the Warrants (the “Offering”). Until the Closing Date (as defined in
Section 4 hereof) or earlier upon termination of this Agreement pursuant to
Section 9 the Company shall not, without the prior written consent of the
Placement Agent, solicit or accept offers to purchase the Shares and the
Warrants otherwise than through the Placement Agent.

(b) The Company hereby acknowledges that the Placement Agent has agreed, as an
agent of the Company, to use its reasonable efforts to solicit offers to
purchase the Shares and the Warrants from the Company on the terms and subject
to the conditions set forth in the Prospectus (as defined below). The Placement
Agent shall use reasonable efforts to assist the Company in obtaining
performance by each Purchaser whose offer to purchase Shares and Warrants has
been solicited by the Placement Agent and accepted by the Company, but the
Placement Agent shall not, except as otherwise provided in this Agreement, be
obligated to disclose the identity of any potential purchaser or have any
liability to the Company in the event any such purchase is not consummated for
any reason. Under no circumstances will the Placement Agent be obligated to
underwrite or purchase any Shares and Warrants for its own account and, in
soliciting purchases of Shares and Warrants, the Placement Agent shall act
solely as the Company’s agent and not as principal.

(c) Subject to the provisions of this Section 2, offers for the purchase of
Shares and Warrants may be solicited by the Placement Agent as agent for the
Company at such times and in such amounts as the

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Placement Agent deems advisable. The Placement Agent shall communicate to the
Company, orally or in writing, each reasonable offer to purchase Shares and
Warrants received by it as agent of the Company. The Company shall have the sole
right to accept offers to purchase Shares and Warrants and may reject any such
offer, in whole or in part. The Placement Agent shall have the right, in its
discretion reasonably exercised, without notice to the Company, to reject any
offer to purchase Shares and Warrants received by it, in whole or in part, and
any such rejection shall not be deemed a breach of this Agreement.

(d) The Shares and Series A Warrants are being sold to the Purchasers as units
(“Units”) with each Unit consisting of one Share and .28 of a Series A Warrant,
at an initial public offering price of $2.80 per Unit (the “Public Offering Unit
Price”). The Units will not be separately issued or certificated and the Shares
and the Series A Warrants shall be immediately separable and transferable upon
issuance. The Series B Warrants are being sold to Purchasers at an initial
public offering price of $2.79 per Series B Warrant (the “Public Offering Series
B Warrant Price”). The purchases of Units and/or Series B Warrants by the
Purchasers shall be evidenced by the execution of Subscription Agreements by
each of the Purchasers and the Company.

(e) As compensation for services rendered, on the Closing Date (as defined in
Section 4 hereof), the Company shall pay to the Placement Agent by wire transfer
of immediately available funds to an account or accounts designated by the
Placement Agent, an aggregate amount equal to seven percent (7%) of the gross
proceeds received by the Company (the “Placement Fee”) from the sale of the
Units and Series B Warrants on such Closing Date that were solicited by the
Placement Agent. The Placement Agent may retain other brokers or dealers to act
as sub-agents on its behalf in connection with the Offering, the fees of which
shall be paid out of the Placement Fee paid to the Placement Agent.

(f) No Units and Series B Warrants which the Company has agreed to sell pursuant
to this Agreement and the Subscription Agreements shall be deemed to have been
purchased and paid for, or sold by the Company, until such securities (including
the Shares and Warrants comprising such Units) shall have been delivered to the
Purchaser thereof against payment by such Purchaser. If the Company shall
default in its obligations to deliver such securities to a Purchaser whose offer
it has accepted, the Company shall indemnify and hold the Placement Agent
harmless against any loss, claim, damage or expense arising from or as a result
of such default by the Company in accordance with the procedures set forth in
Section 8(c) herein.

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to, and agrees with, the Placement Agent that:

(a) The Company has prepared and filed in conformity with the requirements of
the Securities Act of 1933, as amended (the “Securities Act”), and published
rules and regulations thereunder (the “Rules and Regulations”) adopted by the
Securities and Exchange Commission (the “Commission”), a “shelf” Registration
Statement (as hereinafter defined) on Form S-3 (File No. 333-181443), which
became effective on May 21, 2012 (the “Effective Date”), including a base
prospectus relating to the securities registered pursuant to such Registration
Statement (the “Base Prospectus”), and such amendments and supplements thereto
as may have been required to the date of this Agreement. The term “Registration
Statement” as used in this Agreement means such registration statement
(including all exhibits, financial schedules and all documents and information
deemed to be a part of the Registration Statement pursuant to Rule 430A under
the Rules and Regulations), as amended and/or supplemented to the date of this
Agreement, including the Base Prospectus. The Registration Statement is
effective under the Securities Act and no stop order preventing or suspending
the effectiveness of the Registration Statement or suspending or preventing the
use of the Prospectus has been issued by the Commission and no proceedings for
that purpose have been instituted or, to the knowledge of the Company, are
threatened by the Commission. The Company, if required by the Rules and
Regulations of the Commission, will file the Prospectus (as defined below), with
the Commission pursuant to Rule 424(b) under the Rules and Regulations. The term
“Prospectus,” as used in this Agreement means the Prospectus, in the form in
which it is to be filed with the Commission pursuant to Rule 424(b) under the
Rules and Regulations, or, if the Prospectus is not to be filed with the
Commission pursuant to Rule 424(b), the Prospectus in the form included as part
of the Registration Statement as of the Effective Date, except that if any
revised prospectus or prospectus supplement shall be provided to the Placement
Agent by the Company for use in connection with the offering and sale of the
Shares and the Warrants which differs from the Prospectus (whether or not such
revised prospectus or prospectus supplement is required to be filed by the
Company pursuant to Rule 424(b) under the Rules and Regulations), the term
“Prospectus” shall refer to such revised

 

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prospectus or prospectus supplement, as the case may be, from and after the time
it is first provided to the Placement Agent for such use. Any preliminary
prospectus or prospectus subject to completion included in the Registration
Statement or filed with the Commission pursuant to Rule 424 under the Rules and
Regulations is hereafter called a “Preliminary Prospectus.” Any reference herein
to the Registration Statement, any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 which were filed under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), on or before the last to
occur of the Effective Date, the date of the Preliminary Prospectus, or the date
of the Prospectus, and any reference herein to the terms “amend,” “amendment,”
or “supplement” with respect to the Registration Statement, any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include (i) the
filing of any document under the Exchange Act after the Effective Date, the date
of such Preliminary Prospectus or the date of the Prospectus, as the case may
be, which is incorporated by reference and (ii) any such document so filed. If
the Company has filed an abbreviated registration statement to register
additional securities pursuant to Rule 462(b) under the Rules and Regulations
(the “462(b) Registration Statement”), then any reference herein to the
Registration Statement shall also be deemed to include such 462(b) Registration
Statement.

(b) As of the Applicable Time (as defined below) and as of the Closing Date,
neither (i) any General Use Free Writing Prospectus (as defined below) issued at
or prior to the Applicable Time, and the Pricing Prospectus (as defined below)
and the information included on Schedule A hereto, all considered together
(collectively, the “General Disclosure Package”), (ii) any individual Limited
Use Free Writing Prospectus (as defined below), nor (iii) the bona fide
electronic road show (as defined in Rule 433(h)(5) under the Rules and
Regulations), if any, that has been made available without restriction to any
person, when considered together with the General Disclosure Package, included
or will include, any untrue statement of a material fact or omitted or as of the
Closing Date will omit, to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted from any
Issuer Free Writing Prospectus, in reliance upon, and in conformity with,
written information furnished to the Company by the Placement Agent specifically
for inclusion therein, which information the parties hereto agree is limited to
the Placement Agent’s Information (as defined in Section 17). As used in this
paragraph (b) and elsewhere in this Agreement:

“Applicable Time” means 9:00 A.M., New York time, on the date of this Agreement.

“General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus
that is identified on Schedule A to this Agreement.

“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as
defined in Rule 433 under the Rules and Regulations relating to the Securities
in the form filed or required to be filed with the Commission or, if not
required to be filed, in the form retained in the Company’s records pursuant to
Rule 433(g) under the Rules and Regulations.

“Limited Use Free Writing Prospectuses” means any Issuer Free Writing Prospectus
that is not a General Use Free Writing Prospectus.

“Pricing Prospectus” means the Preliminary Prospectus, if any, and the Base
Prospectus, each as amended and supplemented immediately prior to the Applicable
Time, including any document incorporated by reference therein and any
prospectus supplement deemed to be a part thereof.

(c) No order preventing or suspending the use of the Base Prospectus, any
Preliminary Prospectus, any Issuer Free Writing Prospectus or the Prospectus
relating to the Offering has been issued by the Commission, and no proceeding
for that purpose or pursuant to Section 8A of the Securities Act has been
instituted or threatened by the Commission, and each Preliminary Prospectus (if
any), at the time of filing thereof, conformed in all material respects to the
requirements of the Securities Act and the Rules and Regulations, and did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or warranties as to
information contained in or omitted from any Preliminary Prospectus, in reliance
upon, and in conformity with, written information furnished to the Company by
the Placement Agent specifically for inclusion therein, which information the
parties hereto agree is limited to the Placement Agent’s Information (as defined
in Section 17).

 

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(d) At the time the Registration Statement became or becomes effective, at the
date of this Agreement and at the Closing Date, the Registration Statement
conformed and will conform in all material respects to the requirements of the
Securities Act and the Rules and Regulations and did not and will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading; the Prospectus, at the time the Prospectus was issued and at the
Closing Date, conformed and will conform in all material respects to the
requirements of the Securities Act and the Rules and Regulations and did not and
will not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing representations and warranties in this paragraph (d) shall
not apply to information contained in or omitted from the Registration Statement
or the Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by the Placement Agent specifically for inclusion
therein, which information the parties hereto agree is limited to the Placement
Agent’s Information (as defined in Section 17).

(e) Each Issuer Free Writing Prospectus, if any, as of its issue date and at all
subsequent times through the completion of the public offer and sale of the
Shares and the Warrants or until any earlier date that the Company notified or
notifies the Placement Agent as described in Section 5(e), did not, does not and
will not include any information that conflicted, conflicts or will conflict
with the information contained in the Registration Statement, Pricing Prospectus
or the Prospectus, including any document incorporated by reference therein and
any prospectus supplement deemed to be a part thereof that has not been
superseded or modified, or includes an untrue statement of a material fact or
omitted or would omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances prevailing at the subsequent time, not misleading. The foregoing
sentence does not apply to statements in or omissions from any Issuer Free
Writing Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by the Placement Agent specifically for inclusion
therein, which information the parties hereto agree is limited to the Placement
Agent’s Information (as defined in Section 17).

(f) The documents incorporated by reference in the Prospectus, when they became
effective or were filed with the Commission, as the case may be, conformed in
all material respects to the requirements of the Securities Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission thereunder
and none of such documents contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; and any further documents so filed and incorporated by
reference in the Prospectus, when such documents become effective or are filed
with the Commission, as the case may be, will conform in all material respects
to the requirements of the Securities Act or the Exchange Act, as applicable,
and the rules and regulations of the Commission thereunder and will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.

(g) The Company has not, directly or indirectly, distributed and will not
distribute any offering material in connection with the Offering other than any
Pricing Prospectus, the Prospectus and other materials, if any, permitted under
the Securities Act and consistent with Section 5(b) below. The Company is not an
“ineligible issuer” in connection with the offering pursuant to Rules 164, 405
and 433 under the Securities Act. The Company will file with the Commission all
Issuer Free Writing Prospectuses (other than a “road show,” as defined in Rule
433(d)(8) under the Rules and Regulations), if any, in the time and manner
required under Rules 163(b)(2) and 433(d) under the Rules and Regulations.

(h) BDO USA LLP, who have certified certain financial statements and related
schedules included or incorporated by reference in the Registration Statement,
the General Disclosure Package and the Prospectus, is an independent registered
public accounting firm as required by the Securities Act and the Rules and
Regulations and the Public Company Accounting Oversight Board (United States)
(the “PCAOB”). Except as pre-approved in accordance with the requirements set
forth in Section 10A of the Exchange Act, BDO USA LLP has not been engaged by
the Company to perform any “prohibited activities” (as defined in Section 10A of
the Exchange Act).

 

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(i) The Company and each Subsidiary (as defined below) has been duly organized
and is validly existing as a corporation in good standing (or the foreign
equivalent thereof) under the laws of each of their respective jurisdictions of
organization. The Company and each Subsidiary is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
its ownership or lease of property or the conduct of its business requires such
qualification and has all power and authority necessary to own or hold its
properties and to conduct the business in which it is engaged, except where the
failure to so qualify, be in good standing or have such power or authority
(i) would not have, singularly or in the aggregate, a material adverse effect on
the condition (financial or otherwise), results of operations, assets,
properties or business or prospects of the Company or any Subsidiary, taken as a
whole, or (ii) impair in any material respect the ability of the Company to
perform its obligations under this Agreement or to consummate any transactions
contemplated by the Agreement, the Registration Statement, the General
Disclosure Package or the Prospectus (any such effect as described in clauses
(i) or (ii), a “Material Adverse Effect”). The Company owns or controls,
directly or indirectly, only the following corporations, partnerships, limited
liability partnerships, limited liability companies, associations or other
entities: Clean Diesel Technologies Limited, Catalytic Solutions, Inc., CSI
Aliso, Inc., Catalytic Solutions Holdings, Inc., ECS Holdings, Inc., Engine
Control Systems, Ltd., Engine Control Systems Limited, and CDTI Sweden AB (each,
a “Subsidiary” and, collectively, the “Subsidiaries”).

(j) The Company has the full right, power and authority to enter into this
Agreement, the Warrants and each of the Subscription Agreements and to perform
and to discharge its obligations hereunder and thereunder; and each of this
Agreement, the Warrants and each of the Subscription Agreements has been duly
authorized, executed and delivered by the Company, and constitutes a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as rights to indemnity hereunder may be limited by
federal or state securities laws and except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting the
rights of creditors generally and subject to general principles of equity.

(k) The shares of Common Stock and Warrants to be issued and sold by the Company
hereunder and under the Subscription Agreements and the shares of Common Stock
issuable upon exercise of the Warrants (the “Warrant Shares”) have been duly
authorized and the Common Stock, when issued and delivered against payment
therefor as provided herein and in the Subscription Agreements and the Warrant
Shares, when issued and delivered against payment therefore as provided in the
Warrants, will be validly issued, fully paid and non-assessable and free of any
preemptive or similar rights and will conform to the description thereof
contained in the General Disclosure Package and the Prospectus.

(l) The Company has an authorized capitalization as set forth in the
Registration Statement, the General Disclosure Package and the Prospectus, and
all of the issued shares of capital stock of the Company have been duly
authorized and validly issued, are fully paid and non-assessable, have been
issued in all material respects in compliance with United States federal and
state securities laws, and conform to the description thereof contained in the
Registration Statement, the General Disclosure Package and the Prospectus. As of
October 31, 2014, there were12,536,071 shares of Common Stock issued and
outstanding and no shares of Preferred Stock, par value $0.01 of the Company,
issued and outstanding. In addition, as of October 31, 2014, 2,253,585 shares of
Common Stock were issuable upon the exercise of all options, restricted share
units, warrants and convertible securities outstanding as of such date. Since
such date, the Company has not issued any securities, other than Common Stock of
the Company issued pursuant to the exercise of previously outstanding warrants,
or the exercise of stock options or settlement of restricted share units
previously outstanding under the Company’s equity incentive plans. All of the
Company’s options and warrants have been duly authorized and validly issued and
were issued in all material respects in compliance with United States federal
and state securities laws. None of the outstanding shares of Common Stock was
issued in violation of any preemptive rights, rights of first refusal or other
similar rights to subscribe for or purchase securities of the Company. There are
no authorized or outstanding shares of capital stock, options, warrants,
preemptive rights, rights of first refusal or other rights to purchase, or
equity or debt securities convertible into or exchangeable or exercisable for,
any capital stock of the Company or any Subsidiary other than those described
above or accurately described in the Registration Statement, the General
Disclosure Package and the Prospectus. The description of the Company’s stock
incentive plan, and other stock plans or

 

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arrangements, and the options or other rights granted thereunder, as described
in the Registration Statement, the General Disclosure Package and the
Prospectus, accurately and fairly present the information required to be shown
with respect to such plans, arrangements, options and rights.

(m) All the outstanding shares of capital stock of each Subsidiary have been
duly authorized and validly issued, are fully paid and non-assessable and,
except to the extent set forth in the Registration Statement, the General
Disclosure Package and the Prospectus, are owned by the Company directly or
indirectly through one or more wholly-owned Subsidiaries, free and clear of any
claim, lien, encumbrance, security interest, restriction upon voting or transfer
or any other claim of any third party.

(n) The execution, delivery and performance of this Agreement, the Subscription
Agreements and the Warrants by the Company, the issue and sale of the Securities
by the Company and the consummation of the transactions contemplated hereby and
thereby will not (with or without notice or lapse of time or both): (i) conflict
with or result in a breach or violation of any of the terms or provisions of,
constitute a default or Debt Repayment Triggering Event (as defined below)
under, give rise to any right of termination or other right or the cancellation
or acceleration of any right or obligation or loss of a benefit under, or give
rise to the creation or imposition of any lien, encumbrance, security interest,
claim or charge upon any property or assets of the Company or any Subsidiary
pursuant to, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary is bound or to which any of the property or
assets of the Company or any Subsidiary is subject (each, a “Contract” and,
collectively, the “Contracts”); (ii) result in any violation of the provisions
of the charter or by-laws (or analogous governing instruments, as applicable) of
the Company or any Subsidiary; or, (iii) to the Company’s knowledge, result in
the violation of any law, statute, rule, regulation, judgment, order or decree
of any court or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or any Subsidiary or any of their properties or
assets, except with respect to clauses (i) and (iii), any breaches, violations
or defaults which, singularly or in the aggregate, would not have a Material
Adverse Effect. A “Debt Repayment Triggering Event” means any event or condition
that gives, or with the giving of notice or lapse of time would give the holder
of any note, debenture or other evidence of indebtedness (or any person acting
on such holder’s behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Company or any
Subsidiary.

(o) Neither the Company nor any Subsidiary is in (i) violation of its charter or
by-laws (or analogous governing instrument, as applicable), (ii) default in any
respect, and no event has occurred which, with notice or lapse of time or both,
would constitute such a default, in the due performance or observance of any
term, covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other Contract, agreement or instrument to which it is
a party or by which it is bound or to which any of its property or assets is
subject or (iii) to the Company’s knowledge, violation of any law, ordinance,
governmental rule, regulation or court order, decree or judgment to which it or
its property or assets is subject except, in the case of clauses (ii) and
(iii) of this paragraph(s), for any violations or defaults which, singularly or
in the aggregate, would not have a Material Adverse Effect

(p) Except for the registration of the Securities under the Securities Act and
such consents, approvals, authorizations, registrations or qualifications as may
be required under the Exchange Act and applicable state or foreign securities
laws and the Financial Industry Regulatory Authority (“FINRA”) in connection
with the offering and sale of the Securities by the Company and the Nasdaq Stock
Market LLC in connection with the listing of the Shares by the Company, no
consent, approval, authorization or order of, or filing, qualification or
registration with, any court or governmental agency or body, foreign or
domestic, which has not been made, obtained or taken and is not in full force
and effect, is required for the execution, delivery and performance of this
Agreement, the Subscription Agreements and the Warrants by the Company, the
offer or sale of the Securities or the consummation of the transactions
contemplated hereby or thereby.

(q) The financial statements, together with the related notes and schedules,
included or incorporated by reference in the Registration Statement, the General
Disclosure Package and the Prospectus fairly present in all material respects
the financial position and the results of operations and changes in financial
position of the Company and its Subsidiaries and other consolidated entities at
the respective dates or for the respective periods therein specified. Such
statements and related notes and schedules have been prepared in accordance with
the generally accepted accounting principles in the United States (“GAAP”)
applied on a consistent basis throughout

 

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the periods involved except as may be set forth in the related notes included or
incorporated by reference in the General Disclosure Package. The financial
statements, together with the related notes and schedules, included or
incorporated by reference in the Registration Statement, the General Disclosure
Package and the Prospectus comply in all material respects with the Securities
Act, the Exchange Act, and the Rules and Regulations and the rules and
regulations under the Exchange Act. No other financial statements or supporting
schedules or exhibits are required by the Securities Act or the Rules and
Regulations to be described, or included or incorporated by reference in the
Registration Statement, the General Disclosure Package or the Prospectus. There
is no pro forma or as adjusted financial information which is required to be
included in the Registration Statement, the General Disclosure Package, or the
Prospectus or a document incorporated by reference therein in accordance with
the Securities Act and the Rules and Regulations which has not been included or
incorporated as so required. The pro forma and pro forma as adjusted financial
information and the related notes included or incorporated by reference in the
Registration Statement, the General Disclosure Package and the Prospectus have
been properly compiled and prepared in accordance with the applicable
requirements of the Securities Act and the Rules and Regulations and present
fairly the information shown therein, and the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances referred to
therein.

(r) Neither the Company nor any Subsidiary has sustained, since the date of the
latest audited financial statements included or incorporated by reference in the
Registration Statement, the General Disclosure Package and the Prospectus, any
material loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Registration Statement, the General Disclosure Package and
the Prospectus; and, since such date, there has not been any change in the
capital stock or long-term debt of the Company or any Subsidiary or any material
adverse changes, or any development involving a prospective material adverse
change, in or affecting the business, assets, management, financial position,
prospects, stockholders’ equity or results of operations of the Company or any
Subsidiary, otherwise than as set forth or contemplated in the Registration
Statement, the General Disclosure Package and the Prospectus

(s) Except as set forth in the Registration Statement, the General Disclosure
Package and the Prospectus, there is no legal or governmental action, suit,
claim or proceeding pending to which the Company or any Subsidiary is a party or
of which any property or assets of the Company or any Subsidiary is the subject
which is required to be described in the Registration Statement, the General
Disclosure Package or the Prospectus or a document incorporated by reference
therein and is not described therein, or which, singularly or in the aggregate,
if determined adversely to the Company or any Subsidiary could have a Material
Adverse Effect or prevent the consummation of the transactions contemplated
hereby; and to the best of the Company’s knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by others.

(t) The Company and each Subsidiary possesses all licenses, certificates,
authorizations and permits issued by, and have made all declarations and filings
with, the appropriate local, state, federal or foreign regulatory agencies or
bodies which are necessary or desirable for the ownership of its properties or
the conduct of their respective businesses as described in the Registration
Statement, the General Disclosure Package and the Prospectus (collectively, the
“Governmental Permits”) except where any failures to possess or make the same,
singularly or in the aggregate, would not have a Material Adverse Effect. The
Company and each Subsidiary is in compliance with all such Governmental Permits,
and all such Governmental Permits are valid and in full force and effect, except
where any non-compliance or the validity or failure to be in full force and
effect would not, singularly or in the aggregate, have a Material Adverse
Effect. To the Company’s knowledge, all such Governmental Permits are free and
clear of any restriction or condition that are in addition to, or materially
different from those normally applicable to similar licenses, certificates,
authorizations and permits. Neither the Company nor any Subsidiary has received
notification of any revocation or modification (or proceedings related thereto)
of any such Governmental Permit and, to the Company’s knowledge, there is no
reason to believe that any such Governmental Permit will not be renewed.

(u) Neither the Company nor any Subsidiary is or, after giving effect to the
offering of the Securities and the application of the proceeds thereof as
described in the Registration Statement, the General Disclosure Package and the
Prospectus, will become an “investment company” within the meaning of the
Investment Company Act of 1940, as amended, and the rules and regulations of the
Commission thereunder.

 

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(v) Neither the Company nor any Subsidiary, nor to the Company’s knowledge, any
of the Company’s and any Subsidiary’s officers, directors or affiliates has
taken or will take, directly or indirectly, any action designed or intended to
stabilize or manipulate the price of any security of the Company, or which
caused or resulted in, or which might in the future reasonably be expected to
cause or result in, stabilization or manipulation of the price of any security
of the Company.

(w) Except as disclosed in the Registration Statement, the General Disclosure
Package and the Prospectus, to the best of the Company’s knowledge, the Company
and each Subsidiary owns or possesses the right to use all patents, trademarks,
trademark registrations, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, software, databases, know-how, Internet domain
names, trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures, and other intellectual property
(collectively, “Intellectual Property”) necessary to carry on their respective
businesses as currently conducted, and as proposed to be conducted and described
in the Registration Statement, the General Disclosure Package and the
Prospectus, and the Company is not aware of any claim to the contrary or any
challenge by any other person to the rights of the Company or any Subsidiary
with respect to the foregoing except for those that could not have a Material
Adverse Effect. The Intellectual Property licenses described in the Registration
Statement, the General Disclosure Package and the Prospectus are valid, binding
upon, and enforceable by or against the parties thereto in accordance with their
terms. Except as disclosed in the Registration Statement, the General Disclosure
Package and the Prospectus, the Company and each Subsidiary has complied with,
and is not in breach nor has received any asserted or threatened claim of breach
of, any Intellectual Property license, and the Company has no knowledge of any
breach or anticipated breach by any other person to any Intellectual Property
license, except for any such breach or noncompliance that, individually or in
the aggregate, would not have a Material Adverse Effect. To the best of the
Company’s knowledge, the Company’s and each Subsidiary’s business as now
conducted and as proposed to be conducted does not and will not infringe or
conflict with any valid patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses or other Intellectual Property or franchise
right of any person, except for any such acts that would not have a Material
Adverse Effect. No claim has been made against the Company or any Subsidiary
alleging the infringement by the Company or any Subsidiary of any patent,
trademark, service mark, trade name, copyright, trade secret, license in or
other intellectual property right or franchise right of any person. Except as
disclosed in the Registration Statement, the General Disclosure Package and the
Prospectus, the Company and each Subsidiary has taken all reasonable steps to
protect, maintain and safeguard its rights in all Intellectual Property,
including the execution of appropriate nondisclosure and confidentiality
agreements, other than those that would not have a Material Adverse Effect. The
consummation of the transactions contemplated by this Agreement will not result
in the loss or impairment of or payment of any additional amounts with respect
to, nor require the consent of any other person in respect of, each of the
Company’s and each Subsidiary’s right to own, use, or hold for use any of the
Intellectual Property as owned, used or held for use in the conduct of its
business as currently conducted. The Company and each Subsidiary has at all
times complied in all material respects with all applicable laws relating to
privacy, data protection, and the collection and use of personal information
collected, used, or held for use by the Company or any Subsidiary in the conduct
of the Company’s or any Subsidiary’s business. No claims have been asserted or
threatened against the Company or any Subsidiary alleging a violation of any
person’s privacy or personal information or data rights and the consummation of
the transactions contemplated hereby will not breach or otherwise cause any
violation of any law related to privacy, data protection, or the collection and
use of personal information collected, used, or held for use by the Company or
any Subsidiary in the conduct of the Company’s or any Subsidiary’s business. The
Company and each Subsidiary takes reasonable measures to ensure that such
information is protected against unauthorized access, use, modification, or
other misuse.

(x) The Company and each Subsidiary has good and marketable title in fee simple
to, or have valid rights to lease or otherwise use, all items of real or
personal property which are material to the business of the Company and any
Subsidiary, free and clear of all liens, encumbrances, security interests,
claims and defects that do not, singularly or in the aggregate, materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company or any Subsidiary; and all
of the leases and subleases material to the business of the Company or any
Subsidiary, and under which the Company or any Subsidiary holds properties
described in the Registration Statement, the General Disclosure Package and the
Prospectus, are in full force and effect, and neither the Company nor any
Subsidiary has received any notice of any material claim of any sort that has
been asserted by anyone adverse to the rights of the Company or any Subsidiary
under any of the leases or subleases mentioned above, or affecting or
questioning the rights of the Company or any Subsidiary to the continued
possession of the leased or subleased premises under any such lease or sublease.

 

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(y) No organized labor disturbance by the employees of the Company or any
Subsidiary exists or, to the best of the Company’s knowledge, is imminent, and
the Company has no actual knowledge of any existing or imminent labor
disturbance by the employees of any of its or any Subsidiary’s principal
suppliers, manufacturers, customers or contractors, that could reasonably be
expected, singularly or in the aggregate, to have a Material Adverse Effect. The
Company is not aware that any key employee or significant group of employees of
the Company or any Subsidiary plans to terminate employment with the Company or
any Subsidiary.

(z) The operations of the Company and its subsidiaries are being conducted in
material compliance with applicable employment laws, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any governmental agency (collectively, the “Employee
Benefit Laws”) and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
or any of its subsidiaries with respect to the Employee Benefit Laws is pending
or, to the knowledge of the Company, threatened

(aa) No “prohibited transaction” (as defined in Section 406 of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder (“ERISA”), or Section 4975 of the
Internal Revenue Code of 1986, as amended from time to time (the “Code”)) or
“accumulated funding deficiency” (as defined in Section 302 of ERISA) or any of
the events set forth in Section 4043(b) of ERISA (other than events with respect
to which the thirty (30)-day notice requirement under Section 4043 of ERISA has
been waived) has occurred or could reasonably be expected to occur with respect
to any employee benefit plan of the Company or any Subsidiary which could,
singularly or in the aggregate, have a Material Adverse Effect. Each employee
benefit plan of the Company or any Subsidiary is in compliance in all material
respects with applicable law, including ERISA and the Code. The Company and each
Subsidiary has not incurred and could not reasonably be expected to incur
liability under Title IV of ERISA with respect to the termination of, or
withdrawal from, any pension plan (as defined in ERISA). Each pension plan for
which the Company or any Subsidiary would have any liability that is intended to
be qualified under Section 401(a) of the Code is so qualified, and nothing has
occurred, whether by action or by failure to act, which could, singularly or in
the aggregate, cause the loss of such qualification to the extent such loss
would have a Material Adverse Effect.

(bb) To the best of the Company’s knowledge, the Company and each Subsidiary is
in compliance with all foreign, federal, state and local rules, laws and
regulations relating to the use, treatment, storage and disposal of hazardous or
toxic substances or waste and protection of health and safety or the environment
which are applicable to its businesses (“Environmental Laws”), except where the
failure to comply would not, singularly or in the aggregate, have a Material
Adverse Effect. There has been no storage, generation, transportation, handling,
treatment, disposal, discharge, emission, or other release of any kind of toxic
or other wastes or other hazardous substances regulated by Environmental Laws
(“Hazardous Substances”) by or caused by the Company or any Subsidiary (or, to
the Company’s knowledge and without independent investigation, any other entity
for whose acts or omissions the Company or any Subsidiary is or may otherwise be
liable) upon any of the property now or previously owned or leased by the
Company or any Subsidiary, or upon any other property, in violation of any law,
statute, ordinance, rule, regulation, order, judgment, decree or permit or which
would, under any law, statute, ordinance, rule (including rule of common law),
regulation, order, judgment, decree or permit, give rise to any liability,
except for any violation or liability which would not have, singularly or in the
aggregate with all such violations and liabilities, a Material Adverse Effect;
to the Company’s actual knowledge and without independent investigation, there
has been no disposal, discharge, emission or other release onto property now
leased by the Company or any Subsidiary or into the environment surrounding such
property of any Hazardous Substance, except for any such disposal, discharge,
emission, or other release in violation of Environmental Laws which would not
have, singularly or in the aggregate with all such discharges and other
releases, a Material Adverse Effect.

(cc) The Company and each Subsidiary (i) has timely filed (or filed an extension
to file) all necessary federal, state, local and foreign tax returns, and all
such filed returns were true, complete and correct, (ii) has paid all federal,
state, local and foreign taxes, assessments, governmental or other charges due
and payable for which it is liable, including, without limitation, all sales and
use taxes and all taxes which the Company or any Subsidiary is obligated to
withhold from amounts owing to employees, creditors and third parties, and
(iii) does not

 

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have any tax deficiency or claims outstanding or assessed or, to the best of its
knowledge, proposed against any of them, except those, in each of the cases
described in clauses (i), (ii) and (iii) of this paragraph (bb), that would not,
singularly or in the aggregate, have a Material Adverse Effect. The Company and
each Subsidiary has not engaged in any transaction which is a corporate tax
shelter or which could be characterized as such by the Internal Revenue Service
or any other taxing authority. The accruals and reserves on the books and
records of the Company in respect of tax liabilities for any taxable period not
yet finally determined are adequate to meet any assessments and related
liabilities for any such period, and since December 31, 2010, the Company and
each Subsidiary has not incurred any liability for taxes other than in the
ordinary course.

(dd) The Company and each Subsidiary carries, or is covered by, insurance
provided by recognized, financially sound and reputable institutions with
policies in such amounts and covering such risks as is adequate for the conduct
of their respective businesses and the value of its properties and as is
customary for companies engaged in similar businesses in similar industries. The
Company has no reason to believe that it or any Subsidiary will not be able
(i) to renew its existing insurance coverage as and when such policies expire or
(ii) to obtain comparable coverage from similar institutions as may be necessary
or appropriate to conduct their respective businesses as now conducted and at a
cost that would not result in a Material Adverse Effect. Neither the Company nor
any Subsidiary has been denied any insurance coverage that it has sought or for
which it has applied.

(ee) The Company and each Subsidiary maintains a system of internal accounting
and other controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management’s general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. Except as described in the Registration Statement, the General
Disclosure Package and the Prospectus, since the end of the Company’s most
recent audited fiscal year, there has been (A) no material weakness in the
Company’s internal control over financial reporting (whether or not remediated)
and (B) no change in the Company’s internal control over financial reporting
that has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting.

(ff) The Company maintains disclosure controls and procedures (as such term is
defined in Rule 13a-15(e) under the Exchange Act) that comply with the
requirements of the Exchange Act; such disclosure controls and procedures have
been designed to ensure that material information relating to the Company and
its subsidiaries is made known to the Company’s principal executive officer and
principal financial officer by others within those entities; and such disclosure
controls and procedures are effective.

(gg) The minute books of the Company and each Subsidiary have been made
available to the Placement Agent and counsel for the Placement Agent, and such
books (i) contain a complete summary in all material respects of all meetings
and actions of the board of directors (including each board committee) and
stockholders of the Company and each Subsidiary (or analogous governing bodies
and interest holders, as applicable), since January 1, 2011 through the date of
the latest meeting and action, and (ii) accurately, in all material respects,
reflect all transactions referred to in such minutes.

(hh) There is no franchise, lease, contract, agreement or document required by
the Securities Act or by the Rules and Regulations to be described in the
Registration Statement, the General Disclosure Package and the Prospectus or a
document incorporated by reference therein or to be filed as an exhibit to the
Registration Statement or a document incorporated by reference therein which is
not described or filed therein as required; and all descriptions of any such
franchises, leases, contracts, agreements or documents contained in the
Registration Statement, the General Disclosure Package and the Prospectus or in
a document incorporated by reference therein are accurate and complete
descriptions of such documents in all material respects. Other than as described
in the Registration Statement, the General Disclosure Package and the
Prospectus, no such franchise, lease, contract or agreement has been suspended
or terminated for convenience or default by the Company or any Subsidiary or any
of the other parties thereto, and neither the Company nor any Subsidiary has
received notice nor does the Company have any other knowledge of any such
pending or threatened suspension or termination, except for such pending or
threatened suspensions or terminations that would not reasonably be expected to,
singularly or in the aggregate, have a Material Adverse Effect.

 

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(ii) No relationship, direct or indirect, exists between or among the Company
and any Subsidiary on the one hand, and the directors, officers, stockholders
(or analogous interest holders), customers or suppliers of the Company or any
Subsidiary or any of their affiliates on the other hand, which is required to be
described in the Registration Statement, the General Disclosure Package and the
Prospectus or a document incorporated by reference therein and which is not so
described.

(jj) No person or entity has the right to require registration of shares of
Common Stock or other securities of the Company or any Subsidiary because of the
filing or effectiveness of the Registration Statement or otherwise, except for
persons and entities who have expressly waived such right in writing or who have
been given timely and proper written notice and have failed to exercise such
right within the time or times required under the terms and conditions of such
right. Except as described in the Registration Statement, the General Disclosure
Package and the Prospectus, there are no persons with registration rights or
similar rights to have any securities registered by the Company or any
Subsidiary under the Securities Act.

(kk) Neither the Company nor any Subsidiary owns any “margin securities” as that
term is defined in Regulation U of the Board of Governors of the Federal Reserve
System (the “Federal Reserve Board”), and none of the proceeds of the sale of
the Securities will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security, for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the Securities
to be considered a “purpose credit” within the meanings of Regulation T, U or X
of the Federal Reserve Board.

(ll) Except for this Agreement, neither the Company nor any Subsidiary is a
party to any contract, agreement or understanding with any person that would
give rise to a valid claim against the Company or the Placement Agent for a
brokerage commission, finder’s fee or like payment in connection with the
offering and sale of the Shares and the Warrants or any transaction contemplated
by this Agreement, the Registration Statement, the General Disclosure Package or
the Prospectus or, to the Company’s knowledge, any other arrangements,
agreements, understandings, payments or issuances with respect to the Company
that may affect the Placement Agent’s compensation, as determined by FINRA.

(mm) No forward-looking statement (within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act) contained in either the
Registration Statement, the General Disclosure Package or the Prospectus has
been made or reaffirmed without a reasonable basis or has been disclosed other
than in good faith.

(nn) The Company is subject to and in compliance in all material respects with
the reporting requirements of Section 13 or Section 15(d) of the Exchange Act.
The Common Stock is registered pursuant to Section 12(b) of the Exchange Act and
is listed on the Nasdaq Capital Market under the symbol “CDTI”, and the Company
has taken no action designed to, or reasonably likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from the Nasdaq Capital Market, nor has the Company
received any notification that the Commission, the Nasdaq Capital Market or
FINRA is contemplating terminating such registration or listing. The Company has
obtained or will have obtained, or has made or will have made, as applicable,
all necessary consents, approvals, authorizations or orders of, or filing,
notification or registration with, the Nasdaq Capital Market as required for the
listing and trading of the Shares and the Warrant Shares on the Nasdaq Capital
Market.

(oo) The Company is in material compliance with all applicable provisions of the
Sarbanes-Oxley Act of 2002 and all rules and regulations promulgated thereunder
or implementing the provisions thereof (the “Sarbanes-Oxley Act”).

(pp) The Company is in material compliance with all applicable corporate
governance requirements of the Nasdaq Capital Market.

(qq) Neither the Company nor any Subsidiary, nor, to the best of the Company’s
knowledge, any employee or agent of the Company or any Subsidiary, has made any
contribution or other payment to any official of, or candidate for, any federal,
state, local or foreign office in violation of any law (including the Foreign
Corrupt Practices Act of 1977, as amended) or of the character required to be
disclosed in the Registration Statement, the General Disclosure Package or the
Prospectus or a document incorporated by reference therein.

 

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(rr) There are no transactions, arrangements or other relationships between
and/or among the Company or any Subsidiary, any of their affiliates (as such
term is defined in Rule 405 of the Securities Act) and any unconsolidated
entity, including, but not limited to, any structured finance, special purpose
or limited purpose entity that could reasonably be expected to materially affect
the Company’s or any Subsidiary’s liquidity or the availability of or
requirements for their capital resources required to be described in the
Registration Statement, the General Disclosure Package and the Prospectus or a
document incorporated by reference therein which have not been described as
required.

(ss) There are no outstanding loans, advances (except normal advances for
business expenses in the ordinary course of business) or guarantees or
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of their respective family members, except as
disclosed in the Registration Statement, the General Disclosure Package and the
Prospectus.

(tt) The statistical and market related data included in the Registration
Statement, the General Disclosure Package and the Prospectus are based on or
derived from sources that the Company believes to be reliable and accurate, and
such data agree with the sources from which they are derived and the Company has
obtained the written consent to the use of such data from such sources, to the
extent required, other than such consents the failure of which to obtain is not
reasonably likely to result in a Material Adverse Effect.

(uu) The operations of the Company and each Subsidiary are and have been
conducted at all times in compliance with applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions Reporting Act of
1970, as amended, applicable money laundering statutes and applicable rules and
regulations thereunder (collectively, the “Money Laundering Laws”), and no
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any Subsidiary with
respect to the Money Laundering Laws is pending, or to the best knowledge of the
Company, threatened.

(vv) Neither the Company nor any Subsidiary nor, to the knowledge of the
Company, any director, officer, agent, employee or affiliate of the Company or
any Subsidiary is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and
the Company will not directly or indirectly use the proceeds of the offering, or
lend, contribute or otherwise make available such proceeds to any Subsidiary,
joint venture partner or other person or entity, for the purpose of financing
the activities of any person currently subject to any U.S. sanctions
administered by OFAC.

(ww) Neither the Company, nor any Subsidiary, nor any of their affiliates
(within the meaning of FINRA Rule 5121(b)(1)(a)) directly or indirectly
controls, is controlled by, or is under common control with, or is an associated
person (within the meaning of Article I, Section l(ee) of the By-laws of FINRA)
of, any member firm of FINRA.

(xx) No approval of the stockholders of the Company under the rules and
regulations of the Nasdaq Capital Market is required for the Company to issue
and sell the Securities.

(yy) No supplier, customer, distributor or sales agent of the Company has
notified the Company that it intends to discontinue or decrease the rate of
business done with the Company, except where such decrease is not reasonably
likely to result in a Material Adverse Effect.

(zz) Except as set forth in the Registration Statement, the General Disclosure
Package and the Prospectus, the Company has not made any direct or indirect
payments (in cash, securities or otherwise) to (i) any person, as a finder’s
fee, investing fee or otherwise, in consideration of such person raising capital
for the Company or introducing to the Company persons who provided capital to
the Company, (ii) any FINRA member, or (iii) any person or entity that has any
direct or indirect affiliation or association with any FINRA member within
the180 day period prior to the date on which the Prospectus relating to the
Securities most recently was filed with the Commission (“Filing Date”) or
thereafter.

 

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(aaa) None of the net proceeds of the offering will be paid by the Company to
any participating FINRA member or any affiliate or associate of any
participating FINRA member, except as specifically authorized herein.

(bbb) Except as set forth in the Registration Statement, the General Disclosure
Package and the Prospectus, to the Company’s knowledge, no (i) officer or
director of the Company or its subsidiaries, (ii) owner of 5% or more of the
Company’s unregistered securities or that of its subsidiaries or (iii) owner of
any amount of the Company’s unregistered securities acquired within the 180-day
period prior to the Filing Date, has any direct or indirect affiliation or
association with any FINRA member. The Company will advise the Placement Agent
and its counsel if it becomes aware that any officer, director or stockholder of
the Company or its subsidiaries is or becomes an affiliate or associated person
of a FINRA member participating in the offering.

(ccc) The statements set forth in the Registration Statement, the General
Disclosure Package and the Prospectus under the caption “Description of Capital
Stock” insofar as they purport to constitute a summary of the terms of the
Securities and documents referred to therein, are accurate, complete and fair.

(ddd) Except as set forth in the Registration Statement, the General Disclosure
Package and the Prospectus, the Company has not sold or issued any shares of
Common Stock during the six-month period preceding the date of the Prospectus,
including any sales pursuant to Rule 144A under, or Regulations D or S of, the
Securities Act, other than shares issued pursuant to employee benefit plans,
stock option plans or other employee compensation plans or pursuant to
outstanding options, rights or warrants.

(eee) The Company’s revenue for the fiscal quarter ended September 30, 2014 was
$9.3 million. Including discontinued operations, the Company’s revenue for the
fiscal quarter ended September 30, 2014 was $10.3 million. The Company expects
to report an operating loss from continuing operations for the fiscal quarter
ended September 30, 2014 of between approximately $2.0 million and $2.5 million.

(fff) Any certificate signed by or on behalf of the Company and delivered to the
Placement Agent or to counsel for the Placement Agent shall be deemed to be a
representation and warranty by the Company to the Placement Agent as to the
matters covered thereby.

4. THE CLOSING. The time and date of closing and delivery of the documents
required to be delivered to the Placement Agent pursuant to Sections 5 and 7
hereof shall be at 11:00 A.M., New York time, on November     , 2014 (the
“Closing Date”) at the office of Loeb & Loeb LLP, 345 Park Avenue, New York, New
York 10154.

5. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the Placement
Agent:

(a) To prepare the Rule 462(b) Registration Statement, if necessary, in a form
approved by the Placement Agent and file such Rule 462(b) Registration Statement
with the Commission on the date hereof; to prepare the Prospectus in a form
approved by the Placement Agent containing information previously omitted at the
time of effectiveness of the Registration Statement in reliance on Rules 430A,
430B and 430C of the Rules and Regulations and to file such Prospectus pursuant
to Rule 424(b) under the Rules and Regulations not later than the second
(2nd)business day following the execution and delivery of this Agreement or, if
applicable, such earlier time as may be required by Rule 430A under the Rules
and Regulations; to notify the Placement Agent immediately of the Company’s
intention to file or prepare any supplement or amendment to any Registration
Statement or to the Prospectus and to make no amendment or supplement to the
Registration Statement, the General Disclosure Package or to the Prospectus to
which the Placement Agent shall reasonably object by notice to the Company after
a reasonable period to review; to advise the Placement Agent, promptly after it
receives notice thereof, of the time when any amendment to any Registration
Statement has been filed or becomes effective or any supplement to the General
Disclosure Package or the Prospectus or any amended Prospectus has been filed
and to furnish the Placement Agent copies thereof; to file promptly all material
required to be filed by the Company with the

 

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Commission pursuant to Rule 433(d) or 163(b)(2) of the Rules and Regulations, as
the case may be; to file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of the Prospectus and for so long as the delivery of a prospectus (or
in lieu thereof, the notice referred to in Rule 173(a) under the Rules and
Regulations) is required in connection with the offering or sale of the
Securities; to advise the Placement Agent, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus, any Issuer Free
Writing Prospectus or the Prospectus, of the suspension of the qualification of
the Securities for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by the
Commission for the amending or supplementing of the Registration Statement, the
General Disclosure Package or the Prospectus or for additional information; and,
in the event of the issuance of any stop order or of any order preventing or
suspending the use of the Base Prospectus, any Preliminary Prospectus, any
Issuer Free Writing Prospectus or the Prospectus or suspending any such
qualification, and promptly to use its best efforts to obtain the withdrawal of
such order.

(b) The Company represents and agrees that, unless it obtains the prior consent
of the Placement Agent, it has not made and will not, make any offer relating to
the Securities that would constitute a “free writing prospectus” as defined in
Rule 405 under the Rules and Regulations unless the prior written consent of the
Placement Agent has been received (each, a “Permitted Free Writing Prospectus”);
provided that the prior written consent of the Placement Agent hereto shall be
deemed to have been given in respect of the Issuer Free Writing Prospectus[es]
included in Schedule A hereto. The Company represents that it has treated and
agrees that it will treat each Permitted Free Writing Prospectus as an Issuer
Free Writing Prospectus, comply with the requirements of Rules 164 and 433 under
the Rules and Regulations applicable to any Issuer Free Writing Prospectus,
including the requirements relating to timely filing with the Commission,
legending and record keeping and will not take any action that would result in
the Placement Agent or the Company being required to file with the Commission
pursuant to Rule 433(d) under the Rules and Regulations a free writing
prospectus prepared by or on behalf of the Placement Agent that the Placement
Agent otherwise would not have been required to file thereunder.

(c) If at any time when a Prospectus relating to the Securities is required to
be delivered under the Securities Act, any event occurs or condition exists as a
result of which the Prospectus, as then amended or supplemented, would include
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, or the Registration Statement, as
then amended or supplemented, would include any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein
not misleading, or if for any other reason it is necessary at any time to amend
or supplement any Registration Statement or the Prospectus to comply with the
Securities Act or the Exchange Act, the Company will promptly notify the
Placement Agent, and upon the request of the Placement Agent, the Company will
promptly prepare and file with the Commission, at the Company’s expense, an
amendment to the Registration Statement or an amendment or supplement to the
Prospectus that corrects such statement or omission or effects such compliance
and will deliver to the Placement Agent, without charge, such number of copies
thereof as the Placement Agent may reasonably request. The Company consents to
the use of the Prospectus or any amendment or supplement thereto by the
Placement Agent.

(d) If the General Disclosure Package is being used to solicit offers to buy the
Securities at a time when the Prospectus is not yet available to prospective
purchasers and any event shall occur as a result of which, in the judgment of
the Company or in the reasonable opinion of the Placement Agent, it becomes
necessary to amend or supplement the General Disclosure Package in order to make
the statements therein, in the light of the circumstances then prevailing, not
misleading, or to make the statements therein not conflict with the information
contained or incorporated by reference in the Registration Statement then on
file and not superseded or modified, or if it is necessary at any time to amend
or supplement the General Disclosure Package to comply with any law, the Company
promptly will either (i) prepare, file with the Commission (if required) and
furnish to the Placement Agent and any dealers an appropriate amendment or
supplement to the General Disclosure Package or (ii) prepare and file with the
Commission an appropriate filing under the Exchange Act which shall be
incorporated by reference in the General Disclosure Package so that the General
Disclosure Package as so amended or supplemented will not, in the light of the
circumstances then prevailing, be misleading or conflict with the Registration
Statement then on file, or so that the General Disclosure Package will comply
with law.

 

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(e) If at any time following issuance of an Issuer Free Writing Prospectus there
occurred or occurs an event or development as a result of which such Issuer Free
Writing Prospectus conflicted or will conflict with the information contained in
the Registration Statement, the Base Prospectus, any Pricing Prospectus or the
Prospectus, including any document incorporated by reference therein and any
prospectus supplement deemed to be a part thereof and not superseded or modified
or included or would include an untrue statement of a material fact or omitted
or would omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances prevailing at the subsequent time, not misleading, the Company has
promptly notified or will promptly notify the Placement Agent so that any use of
the Issuer Free Writing Prospectus may cease until it is amended or supplemented
and has promptly amended or will promptly amend or supplement, at its own
expense, such Issuer Free Writing Prospectus to eliminate or correct such
conflict, untrue statement or omission. The foregoing sentence does not apply to
statements in or omissions from any Issuer Free Writing Prospectus in reliance
upon, and in conformity with, written information furnished to the Company by
the Placement Agent specifically for inclusion therein, which information the
parties hereto agree is limited to the Placement Agent’s Information (as defined
in Section 17).

(f) To the extent not available on the Commission’s EDGAR system or any
successor system, to furnish promptly to the Placement Agent and to counsel for
the Placement Agent a signed copy of the Registration Statement as originally
filed with the Commission, and of each amendment thereto filed with the
Commission, including all consents and exhibits filed therewith.

(g) To the extent not available on the Commission’s EDGAR system or any
successor system, to deliver promptly to the Placement Agent in New York City
such number of the following documents as the Placement Agent shall reasonably
request: (i) conformed copies of the Registration Statement as originally filed
with the Commission (in each case excluding exhibits), (ii) the Base Prospectus,
(iii) each Preliminary Prospectus, (iv) any Issuer Free Writing Prospectus,
(v) the Prospectus (the delivery of the documents referred to in clauses (i),
(ii), (iii), (iv) and (v) of this paragraph (g) to be made not later than 10:00
A.M., New York time, on the business day following the execution and delivery of
this Agreement), (vi) conformed copies of any amendment to the Registration
Statement (excluding exhibits), (vii) any amendment or supplement to the General
Disclosure Package or the Prospectus (the delivery of the documents referred to
in clauses (vi) and (vii) of this paragraph (g) to be made not later than 10:00
A.M., New York City time, on the business day following the date of such
amendment or supplement) and (viii) any document incorporated by reference in
the Registration Statement, the General Disclosure Package or the Prospectus
(excluding exhibits thereto) (the delivery of the documents referred to in
clause (viii) of this paragraph (g) to be made not later than 10:00 A.M., New
York City time, on the business day following the date of such document).

(h) To make generally available to its stockholders as soon as practicable, but
in any event not later than eighteen (18) months after the effective date of
each Registration Statement (as defined in Rule 158(c) under the Rules and
Regulations), an earnings statement of the Company and any Subsidiary (which
need not be audited) complying with Section 11(a) of the Securities Act and the
Rules and Regulations (including, at the option of the Company, Rule 158); and
to furnish to its stockholders as soon as practicable after the end of each
fiscal year an annual report (including a balance sheet and statements of
income, stockholders’ equity and cash flows of the Company and its consolidated
subsidiaries certified by independent public accountants) and as soon as
possible after each of the first three fiscal quarters of each fiscal year
(beginning with the first fiscal quarter after the effective date of such
Registration Statement), consolidated summary financial information of the
Company and its subsidiaries for such quarter in reasonable detail.

(i) To take promptly from time to time such actions as the Placement Agent may
reasonably request to qualify the Securities for offering and sale under the
securities or Blue Sky laws of such jurisdictions (domestic or foreign) as the
Placement Agent may designate and to continue such qualifications in effect, and
to comply with such laws, for so long as required to permit the offer and sale
of the Securities in such jurisdictions; provided that the Company shall not be
obligated to qualify as foreign corporations in any jurisdiction in which they
are not so qualified or to file a general consent to service of process in any
jurisdiction.

(j) To the extent not available on the Commission’s EDGAR system or any
successor system, during the period of two (2) years from the date hereof, to
deliver to the Placement Agent, (i) as soon as they are available, copies of all
reports or other communications furnished to stockholders (other than reports,
proxy

 

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statements and other information that is electronically filed with the
Commission via EDGAR or any successor system), and (ii) as soon as they are
available, copies of any reports and financial statements furnished or filed
with the Commission or any national securities exchange or automatic quotation
system on which the Company’s securities are listed or quoted.

(k) During the period commencing on and including the date hereof and ending on
and including the 90th day following the date of this Agreement (as the same may
be extended as described below, the “Lock-Up Period”) the Company will not,
without the prior written consent of the Placement Agent (which consent may be
withheld at the sole discretion of the Placement Agent), directly or indirectly
offer, sell (including, without limitation, any short sale), assign, transfer,
pledge, contract to sell, establish an open “put equivalent position” within the
meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of, or
announce the offering of, or file any registration statement under the
Securities Act in respect of, any Common Stock, options, rights or warrants to
acquire Common Stock or securities exchangeable or exercisable for or
convertible into Common Stock (other than is contemplated by this Agreement) or
publicly announce any intention to do any of the foregoing; provided, however,
that the Company may (i) issue Common Stock, restricted share units and options
to purchase Common Stock, shares of Common Stock underlying options or
restricted share units granted and other securities, each pursuant to any
director or employee equity incentive plan, stock option plan, stock ownership
plan or dividend reinvestment plan of the Company in effect on the date hereof
and described in the General Disclosure Package; (ii) issue Common Stock
pursuant to the conversion of securities or the exercise of warrants, which
securities or warrants are outstanding on the date hereof and described in the
General Disclosure Package; (iii) issue warrants to purchase up to 80,000 shares
of Common Stock to Kanis S.A. and (iv) adopt a new equity incentive plan or
increase the share reserve under an existing equity incentive plan, and file a
registration statement on Form S-8 under the Securities Act to register the
offer and sale of securities to be issued pursuant to such existing or new
equity incentive plan, and issue securities pursuant to such new or existing
equity incentive plan (including, without limitation, the issuance of shares of
Common Stock upon the exercise of options or the settlement of restricted share
units or other securities issued pursuant to such new equity incentive plan),
provided that (1) such existing or new equity incentive plan satisfies the
transaction requirements of General Instruction A.1 of Form S-8 under the
Securities Act and (2) this clause (iii) shall not be available unless each
recipient of shares of Common Stock, or securities exchangeable or exercisable
for or convertible into or settled with Common Stock, pursuant to such existing
or new equity incentive plan shall be contractually prohibited from selling,
offering, disposing of or otherwise transferring any such shares or securities
during the remainder of the Lock-Up Period. Notwithstanding the foregoing, if
(A) during the last 17 days of the Lock-Up Period, the Company issues an
earnings release or material news or a material event relating to the Company
occurs or (B) prior to the expiration of the Lock-Up Period, the Company
announces that it will release earnings results during the 16-day period
beginning on the last day of the Lock-Up Period, then in each case the Lock-Up
Period will be extended until the expiration of the 18-day period beginning on
the date of the issuance of the earnings release or the occurrence of the
material news or material event, as applicable, unless the Placement Agent
waives, in writing, such extension (which waiver may be withheld at the sole
discretion of the Placement Agent), except that such extension will not apply if
(x) the Common Stock is an “actively traded security” (as defined in Regulation
M), (y) the Company meets the applicable requirements of Rule 139(a)(1) under
the Securities Act in the manner contemplated by NASD Conduct Rule 2711(f)(4),
and (z) the provisions of NASD Conduct Rule 2711(f)(4) do not restrict the
publication or distribution, by any of the Placement Agent, of any research
reports relating to the Company during the 15 days before or after the last day
of the Lock-up Period (before giving effect to such extension). The Company will
provide the Placement Agent with prior notice of any such announcement that
gives rise to an extension of the Lock-up Period. In addition, The Company will
cause each person and entity listed in Schedule B to furnish to the
Representative, prior to the Closing Date, a letter, substantially in the form
of Exhibit C hereto

(l) To supply the Placement Agent with copies of all correspondence to and from,
and all documents issued to and by, the Commission in connection with the
registration of the Securities under the Securities Act or the Registration
Statement, any Preliminary Prospectus or the Prospectus, or any amendment or
supplement thereto or document incorporated by reference therein.

(m) Prior to the Closing Date, to furnish to the Placement Agent, as soon as
they have been prepared, copies of any unaudited interim consolidated financial
statements of the Company for any periods subsequent to the periods covered by
the financial statements appearing in the Registration Statement and the
Prospectus.

 

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(n) Prior to the Closing Date, not to issue any press release or other
communication directly or indirectly or hold any press conference with respect
to the Company, its condition, financial or otherwise, or earnings, business
affairs or business prospects (except for routine oral marketing communications
in the ordinary course of business and consistent with the past practices of the
Company and of which the Placement Agent is notified), without the prior written
consent of the Placement Agent, unless in the judgment of the Company and its
counsel, and after notification to the Placement Agent, such press release or
communication is required by law.

(o) Until the Placement Agent shall have notified the Company of the completion
of the offering of the Securities, that the Company will not, and will cause its
affiliated purchasers (as defined in Regulation M under the Exchange Act) not
to, either alone or with one or more other persons, bid for or purchase, for any
account in which it or any of its affiliated purchasers has a beneficial
interest, any Securities, or attempt to induce any person to purchase any
Securities; and not to, and to cause its affiliated purchasers not to, make bids
or purchase for the purpose of creating actual, or apparent, active trading in
or of raising the price of the Securities.

(p) Not to take any action prior to the Closing Date which would require the
Prospectus to be amended or supplemented pursuant to Section 5.

(q) To at all times comply in all material respects with all applicable
provisions of the Sarbanes-Oxley Act in effect from time to time.

(r) To apply the net proceeds from the sale of the Shares and the Warrants as
set forth in the Registration Statement, the General Disclosure Package and the
Prospectus under the heading “Use of Proceeds.”

(s) To list the Shares and the Warrant Shares on the Nasdaq Capital Market and
to maintain the listing of the Common Stock on the Nasdaq Capital Market.

(t) To use its best efforts to assist the Placement Agent with any filings with
FINRA and obtaining clearance from FINRA as to the amount of compensation
allowable or payable to the Placement Agent.

(u) To use its best efforts to do and perform all things required to be done or
performed under this Agreement by the Company prior to the Closing Date and to
satisfy all conditions precedent to the delivery of the Shares and the Warrants.

6. PAYMENT OF EXPENSES. The Company agrees to pay, or cause to be paid (a) all
expenses incurred in connection with the delivery to the Purchasers of the
Securities; (b) all expenses and fees (including, without limitation, fees and
expenses of the Company’s counsel, but excluding fees and expenses of the
Placement Agent’s counsel) in connection with the preparation, printing, filing,
delivery and shipping of the Registration Statement, the Base Prospectus, any
Preliminary Prospectus, any Pricing Prospectus, Any Issuer Free Writing
Prospectus, the General Disclosure Package, the Prospectus, and any amendments,
supplements and exhibits thereto or any document incorporated by reference
therein; (c) all reasonable filing fees and reasonable fees and disbursements of
the Company’s counsel incurred in connection with the qualification of the
Securities for offering and sale by the Company to the Purchasers under the
securities or blue sky laws of the states and other jurisdictions that the
Placement Agent shall have designated and any associated work performed by the
Placement Agent’s counsel; (d) the fees and expenses of any transfer agent or
registrar; (d) the reasonable filing fees and reasonable fees and disbursements
of Placement Agent’s counsel incident to any required review and approval by
FINRA, of the terms of the sale of Securities; (e) listing fees, if any, and
(f) all other costs and expenses incident to the performance of the obligations
of the Company under this Agreement, including the fees and expenses of the
Company’s independent accountants and the travel and other reasonable documented
expenses incurred by the Company personnel in connection with any “road show”
hereunder that are not otherwise specifically provided for herein (all of the
foregoing, the “Company Expenses”). The Company will also reimburse the
Placement Agent for all out-of-pocket accountable expenses, including, but not
limited to, reasonable fees and disbursements of counsel, travel expenses,
postage, facsimile and telephone charges) incurred by the Placement Agent in
connection with their respective obligations hereunder. Notwithstanding anything
contained herein, the maximum amount payable by the Company for the Placement
Agent’s counsel fees, disbursements and other out of pocket expenses pursuant to
this Section 6, exclusive of the Company Expenses, shall be $80,000.

 

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7. CONDITIONS TO THE OBLIGATIONS OF THE PLACEMENT AGENT AND THE PURCHASERS, AND
THE SALE OF THE SHARES AND THE WARRANTS. The respective obligations of the
Placement Agent hereunder and the Purchasers under the Subscription Agreements,
and the Closing of the sale of the Shares and the Warrants, are subject to the
accuracy, when made and as of the Applicable Time and on the Closing Date, of
the representations and warranties of the Company contained herein, to the
accuracy of the statements of the Company made in any certificates pursuant to
the provisions hereof, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:

(a) No stop order suspending the effectiveness of the Registration Statement or
any part thereof, preventing or suspending the use of any Base Prospectus, any
Preliminary Prospectus, any Pricing Prospectus, the Prospectus or any Permitted
Free Writing Prospectus or any part thereof shall have been issued and no
proceedings for that purpose or pursuant to Section 8A under the Securities Act
shall have been initiated or threatened by the Commission, and all requests for
additional information on the part of the Commission (to be included or
incorporated by reference in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to the reasonable satisfaction of the
Placement Agent; the Rule 462(b) Registration Statement, if any, each Issuer
Free Writing Prospectus, if any, and the Prospectus shall have been filed with
the Commission within the applicable time period prescribed for such filing by,
and in compliance with, the Rules and Regulations and in accordance with
Section 5(a) and the Rule 462(b) Registration Statement, if any, shall have
become effective immediately upon its filing with the Commission; and FINRA
shall have raised no objection to the fairness and reasonableness of the terms
of this Agreement or the transactions contemplated hereby.

(b) The Placement Agent shall not have discovered and disclosed to the Company
on or prior to the Closing Date that the Registration Statement or any amendment
or supplement thereto contains an untrue statement of a fact which, in the
opinion of counsel for the Placement Agent, is material or omits to state any
fact which, in the opinion of such counsel, is material and is required to be
stated therein or is necessary to make the statements therein not misleading, or
that the General Disclosure Package, any Issuer Free Writing Prospectus or the
Prospectus or any amendment or supplement thereto contains an untrue statement
of fact which, in the opinion of such counsel, is material or omits to state any
fact which, in the opinion of such counsel, is material and is necessary in
order to make the statements, in the light of the circumstances in which they
were made, not misleading.

(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of each of this Agreement, the Subscription
Agreements, the Securities, the Registration Statement, the General Disclosure
Package, each Issuer Free Writing Prospectus, if any, and the Prospectus and all
other legal matters relating to this Agreement and the transactions contemplated
hereby shall be reasonably satisfactory in all material respects to counsel for
the Placement Agent, and the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable them to
pass upon such matters.

(d) DLA Piper LLP (US) shall have furnished to the Placement Agent such
counsel’s written opinion and negative assurance statement, as counsel to the
Company, addressed to the Placement Agent and dated the Closing Date, to the
effect set forth in Schedule C attached hereto, and Stewart McKelvey, as counsel
to Engine Control Systems Limited shall have furnished to the Placement Agent
such counsel’s written opinion to the effect as set forth in Schedule D.

(e) The Placement Agent shall have received from BDO USA LLP, a letter,
addressed to the Placement Agent, executed and dated on the Closing Date, in
form and substance satisfactory to the Placement Agent (i) confirming that they
are an independent registered accounting firm with respect to the Company and
any Subsidiary within the meaning of the Securities Act and the Rules and
Regulations and PCAOB and (ii) stating the conclusions and findings of such
firm, of the type ordinarily included in accountants’ “comfort letters” to
placement agents of offerings of the type contemplated by this Agreement, with
respect to the financial statements and certain financial information contained
or incorporated by reference in the Registration Statement, the General
Disclosure Package and the Prospectus.

(f) The Company shall have furnished to the Placement Agent a certificate, dated
the Closing Date, of its Chief Executive Officer, its President or a Vice
President and its Chief Financial Officer stating that (i) such officers have
carefully examined the Registration Statement, the General Disclosure Package,
any Permitted Free Writing Prospectus and the Prospectus and, in their opinion,
the Registration Statement and each

 

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amendment thereto, at the Applicable Time and as of the date of this Agreement
and as of the Closing Date did not include any untrue statement of a material
fact and did not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the General
Disclosure Package, as of the Applicable Time and as of the Closing Date, any
Permitted Free Writing Prospectus as of its date and as of the Closing Date, the
Prospectus and each amendment or supplement thereto, as of the respective date
thereof and as of the Closing Date, did not include any untrue statement of a
material fact and did not omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances in which they
were made, not misleading, (ii) since the effective date of the Registration
Statement, no event has occurred which should have been set forth in a
supplement or amendment to the Registration Statement, the General Disclosure
Package or the Prospectus, (iii) to the best of their knowledge after reasonable
investigation, as of the Closing Date, the representations and warranties of the
Company in this Agreement are true and correct and the Company has complied with
all agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date, and (iv) there has not
been, subsequent to the date of the most recent audited financial statements
included or incorporated by reference in the Registration Statement, the General
Disclosure Package and the Prospectus, any material adverse change in the
financial position or results of operations of the Company or any Subsidiary, or
any change or development that, singularly or in the aggregate, would involve a
material adverse change or a prospective material adverse change, in or
affecting the condition (financial or otherwise), results of operations,
business, assets or prospects of the Company or any Subsidiary, except as set
forth in the Registration Statement, the General Disclosure Package and the
Prospectus.

(g) The Company shall have furnished to the Placement Agent, satisfactory
evidence of the good standing of the Company and each of its subsidiaries in the
respective jurisdictions of organization, in each case, in writing or any
standard form of telecommunication from the appropriate governmental authorities
of such jurisdictions.

(h) Since the date of the latest audited financial statements included in the
Registration Statement, the General Disclosure Package and the Prospectus or
incorporated by reference therein as of the date hereof, (i) neither the Company
nor any Subsidiary shall have sustained any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth in the Registration Statement, the
General Disclosure Package and the Prospectus, and (ii) there shall not have
been any change in the capital stock or long-term debt of the Company or any
Subsidiary, or any change, or any development involving a prospective change, in
or affecting the business, management, financial position, stockholders’ equity
or results of operations of the Company, otherwise than as set forth in the
Registration Statement, the General Disclosure Package and the Prospectus, the
effect of which, in any such case described in clause (i) or (ii) of this
paragraph (h) is, in the judgment of the Placement Agent, so material and
adverse as to make it impracticable or inadvisable to proceed with the sale or
delivery of the Securities on the terms and in the manner contemplated in the
General Disclosure Package.

(i) No action shall have been taken and no law, statute, rule, regulation or
order shall have been enacted, adopted or issued by any governmental agency or
body which would prevent the issuance or sale of the Securities or materially
and adversely affect or potentially materially and adversely affect the business
or operations of the Company or any Subsidiary; and no injunction, restraining
order or order of any other nature by any federal or state court of competent
jurisdiction shall have been issued which would prevent the issuance or sale of
the Securities or materially and adversely affect or potentially materially and
adversely affect the business or operations of the Company or any Subsidiary.

(j) Subsequent to the execution and delivery of this Agreement there shall not
have occurred any of the following: (i) trading in securities generally on the
New York Stock Exchange or the NASDAQ Stock Market or in the over-the-counter
market, or trading in any securities of the Company on any exchange or in the
over-the-counter market, shall have been suspended or materially limited, or
minimum or maximum prices or maximum range for prices shall have been
established on any such exchange or such market by the Commission, by such
exchange or market or by any other regulatory body or governmental authority
having jurisdiction, (ii) a banking moratorium shall have been declared by
Federal or state authorities or a material disruption has occurred in commercial
banking or securities settlement or clearance services in the United States,
(iii) the United States shall have become engaged in hostilities, or the subject
of an act of terrorism, or there shall have been an outbreak of or

 

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escalation in hostilities involving the United States, or there shall have been
a declaration of a national emergency or war by the United States or (iv) there
shall have occurred such a material adverse change in general economic,
political or financial conditions (or the effect of international conditions on
the financial markets in the United States shall be such) as to make it, in the
judgment of the Placement Agent, impracticable or inadvisable to proceed with
the sale or delivery of the Securities on the terms and in the manner
contemplated in the Registration Statement, the General Disclosure Package and
the Prospectus.

(k) The Nasdaq Capital Market shall have approved the listing of the Shares and
the Warrant Shares, subject only to official notice of issuance.

(l) The Placement Agent shall have received on or prior to the date of this
Agreement the written agreements, substantially in the form of Exhibit C hereto,
of the executive officers and directors, of the Company listed in Schedule B to
this Agreement.

(m) The Company shall have entered into Subscription Agreements with each of the
Purchasers and such agreements shall be in full force and effect.

(n) FINRA shall have raised no objection as to the amount of compensation
allowable or payable to the Placement Agent as described in the General
Disclosure Package, any Pricing Prospectus or any Preliminary Prospectus.

(o) Prior to the Closing Date, the Company shall have furnished to the Placement
Agent such further information, opinions, certificates, letters or documents as
the Placement Agent shall have reasonably requested.

All opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Placement Agent.

8. INDEMNIFICATION AND CONTRIBUTION.

(a) The Company shall indemnify and hold harmless the Placement Agent, its
respective affiliates and each of its respective directors, officers, members,
employees, representatives and agents and its respective affiliates, and its
respective directors, officers, members, employees, representatives and agents
and each person, if any, who controls the Placement Agent within the meaning of
Section 15 of the Securities Act of or Section 20 of the Exchange Act
(collectively the “Placement Agent Indemnified Parties,” and each a “Placement
Agent Indemnified Party”) against any loss, claim, damage, expense or liability
whatsoever (or any action, investigation or proceeding in respect thereof),
joint or several, to which the Placement Agent Indemnified Party may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, expense, liability, action, investigation or proceeding arises out of or
is based upon (A) any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, the Base Prospectus, any
Preliminary Prospectus, any Pricing Prospectus, any Issuer Free Writing
Prospectus, any “issuer information” filed or required to be filed pursuant to
Rule 433(d) under the Rules and Regulations, or the Prospectus, or in any
amendment or supplement thereto or document incorporated by reference therein,
(B) the omission or alleged omission to state in the Registration Statement, the
Base Prospectus, any Preliminary Prospectus, any Pricing Prospectus, any Issuer
Free Writing Prospectus, any “issuer information” filed or required to be filed
pursuant to Rule 433(d) under the Rules and Regulations, or the Prospectus, or
in any amendment or supplement thereto or document incorporated by reference
therein, a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (C) any breach of the representations and
warranties of the Company contained herein or in the Subscription Agreements or
failure of the Company to perform its obligations hereunder or thereunder or
pursuant to any law, any act or failure to act, or any alleged act or failure to
act, by the Placement Agent in connection with, or relating in any manner to,
the Securities or the Offering, and which is included as part of or referred to
in any loss, claim, damage, expense, liability, action, investigation or
proceeding arising out of or based upon matters covered by subclause (A), (B) or
(C) above of this Section 8(a) (provided that the Company shall not be liable in
the case of any matter covered by this subclause (C) to the extent that it is
determined in a final judgment by a court of competent jurisdiction that such
loss, claim, damage, expense or liability resulted directly from any such act or

 

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failure to act undertaken or omitted to be taken by the Placement Agent through
its gross negligence or willful misconduct), and shall reimburse the Placement
Agent Indemnified Party promptly upon demand for any legal fees or other
expenses reasonably incurred by that Placement Agent Indemnified Party in
connection with investigating, or preparing to defend, or defending against, or
appearing as a third party witness in respect of, or otherwise incurred in
connection with, any such loss, claim, damage, expense, liability, action,
investigation or proceeding, as such fees and expenses are incurred; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, expense or liability arises out of or is
based upon an untrue statement or alleged untrue statement in, or omission or
alleged omission from the Registration Statement, the Base Prospectus, any
Preliminary Prospectus, any Pricing Prospectus, any Issuer Free Writing
Prospectus, any “issuer information” filed or required to be filed pursuant to
Rule 433(d) under the Rules and Regulations, or the Prospectus, or in any
amendment or supplement thereto or document incorporated by reference therein
made in reliance upon and in conformity with written information furnished to
the Company by the Placement Agent specifically for use therein, which
information the parties hereto agree is limited to the Placement Agent’s
Information (as defined in Section 17). This indemnity agreement is not
exclusive and will be in addition to any liability, which the Company might
otherwise have and shall not limit any rights or remedies which may otherwise be
available at law or in equity to the Placement Agent Indemnified Party.

(b) The Placement Agent shall indemnify and hold harmless the Company and its
directors, its officers who signed the Registration Statement and each person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (collectively the “Company
Indemnified Parties” and each a “Company Indemnified Party”) against any loss,
claim, damage, expense or liability whatsoever (or any action, investigation or
proceeding in respect thereof), joint or several, to which such Company
Indemnified Party may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, expense, liability, action, investigation
or proceeding arises out of or is based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement, the
Base Prospectus, any Preliminary Prospectus, any Pricing Prospectus, any Issuer
Free Writing Prospectus, any “issuer information” filed or required to be filed
pursuant to Rule 433(d) under the Rules and Regulations, or the Prospectus, or
in any amendment or supplement thereto or document incorporated by reference
therein, or (ii) the omission or alleged omission to state in the Registration
Statement, the Base Prospectus, any Preliminary Prospectus, any Pricing
Prospectus, any Issuer Free Writing Prospectus, any “issuer information” filed
or required to be filed pursuant to Rule 433(d) under the Rules and Regulations,
or the Prospectus, or in any amendment or supplement thereto or document
incorporated by reference therein, a material fact required to be stated therein
or necessary to make the statements therein not misleading, but in each case
only to the extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by the Placement Agent specifically
for use therein, which information the parties hereto agree is limited to the
Placement Agent’s Information as defined in Section 17 and shall reimburse the
Company for any legal or other expenses reasonably incurred by such party in
connection with investigating or preparing to defend or defending against or
appearing as third party witness in connection with any such loss, claim,
damage, liability, action, investigation or proceeding, as such fees and
expenses are incurred. Notwithstanding the provisions of this Section 8(b) in no
event shall any indemnity by the Placement Agent under this Section 8(b) exceed
the total compensation received by the Placement Agent in accordance with
Section 2.5.

(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, the indemnified party shall, if a
claim in respect thereof is to be made against an indemnifying party under this
Section 8 notify such indemnifying party in writing of the commencement of that
action; provided, however, that the failure to notify the indemnifying party
shall not relieve it from any liability which it may have under this Section 8
except to the extent it has been materially prejudiced by such failure; and,
provided, further, that the failure to notify an indemnifying party shall not
relieve it from any liability which it may have to an indemnified party
otherwise than under this Section 8. If any such action shall be brought against
an indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party, to
assume the defense of such action with counsel reasonably satisfactory to the
indemnified party (which counsel shall not, except with the written consent of
the indemnified party, be counsel to the indemnifying party). After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such action, except as provided herein, the indemnifying party shall
not be liable to the indemnified party under Section 8 for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense of such action other

 

21

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than reasonable costs of investigation; provided, however, that any indemnified
party shall have the right to employ separate counsel in any such action and to
participate in the defense of such action but the fees and expenses of such
counsel (other than reasonable costs of investigation) shall be at the expense
of such indemnified party unless (i) the employment thereof has been
specifically authorized in writing by the Company in the case of a claim for
indemnification under Section 8(a) or Section 2.6 or the Placement Agent in the
case of a claim for indemnification under Section 8(b), (ii) such indemnified
party shall have been advised by its counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party, or (iii) the indemnifying party has failed
to assume the defense of such action and employ counsel reasonably satisfactory
to the indemnified party within a reasonable period of time after notice of the
commencement of the action or the indemnifying party does not diligently defend
the action after assumption of the defense, in which case, if such indemnified
party notifies the indemnifying party in writing that it elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of (or, in the case of a
failure to diligently defend the action after assumption of the defense, to
continue to defend) such action on behalf of such indemnified party and the
indemnifying party shall be responsible for legal or other expenses subsequently
incurred by such indemnified party in connection with the defense of such
action; provided, however, that the indemnifying party shall not, in connection
with any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for all such indemnified parties (in
addition to any local counsel), which firm shall be designated in writing by the
Placement Agent if the indemnified parties under this Section 8 consist of the
Placement Agent Indemnified Party or by the Company if the indemnified parties
under this Section 8 consist of any Company Indemnified Parties. Subject to this
Section 8(c), the amount payable by an indemnifying party under Section 8 shall
include, but not be limited to, (x) reasonable legal fees and expenses of
counsel to the indemnified party and any other expenses in investigating, or
preparing to defend or defending against, or appearing as a third party witness
in respect of, or otherwise incurred in connection with, any action,
investigation, proceeding or claim, and (y) all amounts paid in settlement of
any of the foregoing. No indemnifying party shall, without the prior written
consent of the indemnified parties, settle or compromise or consent to the entry
of judgment with respect to any pending or threatened action or any claim
whatsoever, in respect of which indemnification or contribution could be sought
under this Section 8 (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party in form and
substance reasonably satisfactory to such indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party. Subject to the provisions of the following sentence, no
indemnifying party shall be liable for settlement of any pending or threatened
action or any claim whatsoever that is effected without its written consent
(which consent shall not be unreasonably withheld or delayed), but if settled
with its written consent, if its consent has been unreasonably withheld or
delayed or if there be a judgment for the plaintiff in any such matter, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or judgment.
In addition, if at any time an indemnified party shall have requested that an
indemnifying party reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated herein effected without its written
consent if (i) such settlement is entered into more than forty-five (45) days
after receipt by such indemnifying party of the request for reimbursement,
(ii) such indemnifying party shall have received notice of the terms of such
settlement at least thirty (30) days prior to such settlement being entered into
and (iii) such indemnifying party shall not have reimbursed such indemnified
party in accordance with such request prior to the date of such settlement.

(d) If the indemnification provided for in this Section 8 is unavailable or
insufficient to hold harmless an indemnified party under Section 8(a) or
Section 8(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid, payable or otherwise incurred
by such indemnified party as a result of such loss, claim, damage, expense or
liability (or any action, investigation or proceeding in respect thereof), as
incurred, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company on the one hand and the Placement Agent on the
other hand from the offering of the Securities, or (ii) if the allocation
provided by clause (i) of this Section 8(d) is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) of this Section 8(d) but also the relative fault of
the Company on the one hand and the Placement Agent on the other with respect to
the statements, omissions, acts or failures to act which resulted in such loss,
claim, damage, expense or liability (or any action, investigation or proceeding
in respect thereof) as well as any other relevant equitable considerations. The

 

22

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relative benefits received by the Company on the one hand and the Placement
Agent on the other with respect to such offering shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Securities
purchased under this Agreement (before deducting expenses) received by the
Company bear to the total Placement Fee received by the Placement Agent in
connection with the Offering, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of the Company on the one hand
and the Placement Agent on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or the Placement Agent on
the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such untrue statement,
omission, act or failure to act; provided that the parties hereto agree that the
written information furnished to the Company by the Placement Agent for use in
the Registration Statement, the Base Prospectus, any Preliminary Prospectus, any
Pricing Prospectus, any Issuer Free Writing Prospectus, any “issuer information”
filed or required to be filed pursuant to Rule 433(d) under the Rules and
Regulations, or the Prospectus, or in any amendment or supplement thereto or
document incorporated by reference therein, consists solely of the Placement
Agent’s Information as defined in Section 17. The Company and the Placement
Agent agree that it would not be just and equitable if contributions pursuant to
this Section 8(d) were to be determined by pro rata allocation or by any other
method of allocation that does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage, expense, liability, action,
investigation or proceeding referred to above in this Section 8(d) shall be
deemed to include, for purposes of this Section 8(d). any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating, preparing to defend or defending against or appearing as a third
party witness in respect of, or otherwise incurred in connection with, any such
loss, claim, damage, expense, liability, action, investigation or proceeding.
Notwithstanding the provisions of this Section 8(d), neither of the Placement
Agent shall be required to contribute any amount in excess of the total
compensation received by the Placement Agent in accordance with Section 2.5 less
the amount of any damages which the Placement Agent has otherwise paid or become
liable to pay by reason of any untrue or alleged untrue statement, omission or
alleged omission, act or alleged act or failure to act or alleged failure to
act. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.

9. TERMINATION. The obligations of the Placement Agent and the Purchasers
hereunder and under the Subscription Agreements may be terminated by the
Placement Agent in their absolute discretion by notice given to the Company
prior to delivery of and payment for the Shares and the Warrants if, prior to
that time, (i) any of the conditions to closing in Section 7 shall not have been
satisfied in full and shall not have been expressly waived in writing by the
Placement Agent, (ii) any of the events described in Section 7(a), (b), (h) or
(i) shall have occurred or (iii) the Purchasers shall decline to purchase the
Shares and the Warrants for any reason permitted under this Agreement or the
Subscription Agreements.

10. REIMBURSEMENT OF PLACEMENT AGENT’S EXPENSES. Notwithstanding anything to the
contrary in this Agreement, if (a) this Agreement shall have been terminated
pursuant to Section 9, (b) the Company shall fail to tender the Shares and the
Warrants for delivery to the Purchasers for any reason not permitted under this
Agreement, (c) the Purchasers shall decline to purchase the Shares and the
Warrants for any reason permitted under this Agreement or (d) the sale of the
Shares and the Warrants is not consummated because any condition to the
obligations of the Placement Agent set forth herein is not satisfied or because
of the refusal, inability or failure on the part of the Company to perform any
agreement herein or to satisfy any condition or to comply with the provisions
hereof, then subject to the limitations set forth in Section 6 the Company shall
reimburse the Placement Agent for the reasonable documented and accountable fees
and expenses of the Placement Agent’s counsel and for such other out-of-pocket
expenses as shall have been reasonably incurred by them in connection with this
Agreement and the proposed purchase of the Shares and the Warrants, and upon
demand the Company shall pay the full amount thereof.

11. ABSENCE OF FIDUCIARY RELATIONSHIP. The Company acknowledges and agrees that:

(a) the responsibility of the Placement Agent to the Company is solely
contractual in nature, the Placement Agent have been retained solely to act as
Placement Agent in connection with the Offering and no fiduciary, advisory or
agency relationship between the Company and the Placement Agent has been created
in respect of any of the transactions contemplated by this Agreement,
irrespective of whether the Placement Agent has advised or is advising the
Company on other matters;

 

23

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(b) the price of the Shares and the Warrants set forth in this Agreement was
established by the Company following discussions and arms-length negotiations
with the Placement Agent and the Purchasers, and the Company is capable of
evaluating and understanding, and understands and accepts, the terms, risks and
conditions of the transactions contemplated by this Agreement;

(c) it has been advised that the Placement Agent and its respective affiliates
are engaged in a broad range of transactions which may involve interests that
differ from those of the Company and that the Placement Agent does not have any
obligation to disclose such interests and transactions to the Company by virtue
of any fiduciary, advisory or agency relationship; and

(d) it waives, to the fullest extent permitted by law, any claims it may have
against the Placement Agent for breach of fiduciary duty or alleged breach of
fiduciary duty and agrees that the Placement Agent shall have no liability
(whether direct or indirect) to the Company in respect of such a fiduciary duty
claim or to any person asserting a fiduciary duty claim on behalf of or in right
of the Company, including stockholders, employees or creditors of the Company.

12. SUCCESSORS; PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the Placement Agent, the Company,
and their respective successors and assigns. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person (including
the Purchasers), other than the persons mentioned in the preceding sentences,
any legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained, this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person; except that the
representations, warranties, covenants, agreements and indemnities of the
Company contained in this Agreement shall also be for the benefit of the
Placement Agent Indemnified Parties and the indemnities of the Placement Agent
shall be for the benefit of the Company Indemnified Parties. It is understood
that the responsibility of the Placement Agent to the Company is solely
contractual in nature and the Placement Agent does not owe the Company, or any
other party, any fiduciary duty as a result of this Agreement.

13. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES, ETC. The respective
indemnities, covenants, agreements, representations, warranties and other
statements of the Company and the Placement Agent, as set forth in this
Agreement or made by them respectively, pursuant to this Agreement, shall remain
in full force and effect, regardless of any investigation made by or on behalf
of the Placement Agent, the Company, the Purchasers or any person controlling
any of them and shall survive delivery of and payment for the Securities.
Notwithstanding any termination of this Agreement, including without limitation
any termination pursuant to Sections 9 or 10, the indemnity and contribution
agreements contained in Section 8 and the covenants, representations, warranties
set forth in this Agreement shall not terminate and shall remain in full force
and effect at all times.

14. NOTICES. All statements, requests, notices and agreements hereunder shall be
in writing, and:

(a) if to the Placement Agent, shall be delivered or sent by mail, telex,
facsimile transmission or overnight courier to Cowen and Company, LLC, 599
Lexington Avenue, New York, New York 10022, Attention: Head of Capital Markets,
Fax: (415)-646-7391 with a copy (which shall not constitute notice) to: Loeb &
Loeb LLP, 345 Park Avenue, New York, New York 10154, Attention: Angela M. Dowd,
Esq. Fax: (212) 407-4990; and

(b) if to the Company, shall be delivered or sent by mail, telex, facsimile
transmission or overnight courier to Clean Diesel Technologies, Inc., 1621 Fiske
Place, Oxnard, California 93033, Attention: David E. Shea, Chief Financial
Officer, Fax: (805) 639-9466, with a copy (which shall not constitute notice)
to: DLA Piper LLP (US), 2525 East Camelback Road, Suite 1000, Phoenix, Arizona
85016, Attention: Steven Pidgeon, Esq., Fax: (480) 646-5524.

 

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Any such statements, requests, notices or agreements shall take effect at the
time of receipt thereof, except that any such statement, request, notice or
agreement delivered or sent by email shall take effect at the time of
confirmation of receipt thereof by the recipient thereof.

15. DEFINITION OF CERTAIN TERMS. For purposes of this Agreement, “business day”
means any day on which the New York Stock Exchange, Inc. is open for trading.

16. GOVERNING LAW, AGENT FOR SERVICE AND JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
including without limitation Section 5-1401 of the New York General Obligations
Law. No legal proceeding may be commenced, prosecuted or continued in any court
other than the courts of the State of New York located in the City and County of
New York or in the United States District Court for the Southern District of New
York, which courts shall have jurisdiction over the adjudication of such
matters, and the Company and the Placement Agent each hereby consents to the
jurisdiction of such courts and personal service with respect thereto. The
Company and the Placement Agent hereby consents to personal jurisdiction,
service and venue in any court in which any legal proceeding arising out of or
in any way relating to this Agreement is brought by any third party against the
Company or the Placement Agent. The Company and the Placement Agent hereby waive
all right to trial by jury in any legal proceeding (whether based upon contract,
tort or otherwise) in any way arising out of or relating to this Agreement. The
parties agree that a final judgment in any such legal proceeding brought in any
such court shall be conclusive and binding upon the Company and the Placement
Agent and may be enforced in any other courts in the jurisdiction of which the
parties are or may be subject, by suit upon such judgment.

17. PLACEMENT AGENT’S INFORMATION. The parties hereto acknowledge and agree
that, for all purposes of this Agreement, the Placement Agent’s Information
consists solely of the following information in the Prospectus: the information
in the second paragraph under the heading “Plan of Distribution.”

18. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of any section,
paragraph, clause or provision of this Agreement shall not affect the validity
or enforceability of any other section, paragraph, clause or provision hereof.
If any section, paragraph, clause or provision of this Agreement is for any
reason determined to be invalid or unenforceable, there shall be deemed to be
made such minor changes (and only such minor changes) as are necessary to make
it valid and enforceable.

19. GENERAL. This Agreement constitutes the entire agreement of the parties to
this Agreement and supersedes all prior written or oral and all contemporaneous
oral agreements, understandings and negotiations with respect to the subject
matter hereof. In this Agreement, the masculine, feminine and neuter genders and
the singular and the plural include one another. The Section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company and the Placement Agent.

20. COUNTERPARTS. This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument and such signatures may be
delivered by facsimile.

 

25

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If the foregoing is in accordance with your understanding of the agreement
between the Company and the Placement Agent, kindly indicate your acceptance in
the space provided for that purpose below.

 

Very truly yours, CLEAN DIESEL TECHNOLOGIES, INC. By:  

/s/ David E. Shea

Name:   David E. Shea Title:   Chief Financial Officer

 

Accepted as of the date first above written:

COWEN AND COMPANY, LLC

 

By:  

/s/ Eric J. Helenek

  Name: Eric J. Helenek   Title: Managing Director

 

26

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SCHEDULE A

General Use Free Writing Prospectuses

[None]

 

Schedule A-1

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

SCHEDULE B

Persons to Execute Lock-Up Agreements

Lon E. Bell

Pedro Lopez-Baldrich

Stephen Golden

Christopher Harris

David Shea

Bernard Cherry

Charles Engles

Mungo Park

Matthew Beale

 

Schedule B-1

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

SCHEDULE C

 

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

SCHEDULE D

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

EXHIBIT A

Form of Subscription Agreement

 

Exhibit A-1

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

EXHIBIT B

Form of Warrant

 

Exhibit B-1

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

EXHIBIT C

Form of Lock Up Agreement

November     , 2014

COWEN AND COMPANY, LLC

599 Lexington Avenue

New York, New York 10022

 

Re: Clean Diesel Technologies, Inc. – Offering of Shares of Common Stock and
Warrants

Dear Sirs:

This Agreement is being delivered to you in connection with the proposed
Placement Agent Agreement (the “Placement Agent Agreement”) between Clean Diesel
Technologies, Inc., a Delaware corporation (the “Company”) and Cowen and
Company, LLC (“Cowen”), the “Placement Agent”, to be named therein, relating to
the proposed public offering of shares of the common stock (the “Offering”), par
value $.01 per share (the “Common Stock”) of the Company and warrants to
purchase shares of Common Stock of the Company (“Warrants” and collectively with
the Common Stock, the “Securities”).

In order to induce you to enter into the Placement Agent Agreement, and in light
of the benefits that the offering of the Securities will confer upon the
undersigned in its capacity as a securityholder and/or an officer, director or
employee of the Company, and for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the undersigned agrees with
each Placement Agent that, during the period beginning on the date hereof
through and including the date that is the 90th day after the date of the
Placement Agent Agreement (the “Lock-Up Period”), the undersigned will not,
without the prior written consent of Cowen, directly or indirectly, (i) offer,
sell, assign, transfer, pledge, contract to sell, or otherwise dispose of, or
announce the intention to otherwise dispose of, any shares of Common Stock
(including, without limitation, Common Stock which may be deemed to be
beneficially owned by the undersigned in accordance with the rules and
regulations promulgated under the Securities Act of 1933, as the same may be
amended or supplemented from time to time (such shares, the “Beneficially Owned
Shares”)) or securities convertible into or exercisable or exchangeable for
Common Stock, (ii) enter into any swap, hedge or similar agreement or
arrangement that transfers in whole or in part, the economic risk of ownership
of the Beneficially Owned Shares or securities convertible into or exercisable
or exchangeable for Common Stock, whether now owned or hereafter acquired by the
undersigned or with respect to which the undersigned has or hereafter acquires
the power of disposition, or (iii) engage in any short selling of the Common
Stock or securities convertible into or exercisable or exchangeable for Common
Stock.

If (i) the Company issues an earnings release or material news or a material
event relating to the Company occurs during the last 17 days of the Lock-Up
Period, or (ii) prior to the expiration of the Lock-Up Period, the Company
announces that it will release earnings results during the 16-day period
beginning on the last day of the Lock-Up Period, the Lock-Up Period shall be
extended and the restrictions imposed by this Agreement shall continue to apply
until the expiration of the 18-day period beginning on the issuance of the
earnings release or the occurrence of the material news or material event,
except that such extension will not apply if, (i) the Common Stock is an
“actively traded security” (as defined in Regulation M under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), (ii) the Company meets
the applicable requirements of Rule 139(a)(1) under the Securities Act in the
manner contemplated by NASD Conduct Rule 2711(f)(4) and (iii) the provisions of
NASD Conduct Rule 2711(f)(4) do not restrict the publication or distribution, by
any of the Placement Agents, of any research reports relating to the Company
during the 15 days before or after the last day of the Lock-Up Period (before
giving effect to such extension).

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The restrictions set forth in the immediately preceding paragraph shall not
apply to:

(1) if the undersigned is a natural person, any transfers made by the
undersigned (a) as a bona fide gift to any member of the immediate family (as
defined below) of the undersigned or to a trust the beneficiaries of which are
exclusively the undersigned or members of the undersigned’s immediate family,
(b) by will or intestate succession upon the death of the undersigned or (c) as
a bona fide gift to a charity or educational institution,

(2) if the undersigned is a corporation, partnership, limited liability company
or other business entity, any transfers to any stockholder, partner or member
of, or owner of a similar equity interest in, the undersigned, as the case may
be, if, in any such case, such transfer is not for value,

(3) if the undersigned is a corporation, partnership, limited liability company
or other business entity, any transfer made by the undersigned (a) in connection
with the sale or other bona fide transfer in a single transaction of all or
substantially all of the undersigned’s capital stock, partnership interests,
membership interests or other similar equity interests, as the case may be, or
all or substantially all of the undersigned’s assets, in any such case not
undertaken for the purpose of avoiding the restrictions imposed by this
agreement or (b) to another corporation, partnership, limited liability company
or other business entity so long as the transferee is an affiliate (as defined
below) of the undersigned and such transfer is not for value,

(4) transactions relating to Common Stock or other securities convertible into
or exercisable or exchangeable for Common Stock acquired in open market
transactions after completion of the Offering, provided that no such transaction
is required to be, or is, publicly announced (whether on Form 4, Form 5 or
otherwise) during the Lock-Up Period, [and]

(5) the entry, by the undersigned, at any time on or after the date of the
Placement Agent Agreement, of any trading plan providing for the sale of Common
Stock by the undersigned, which trading plan meets the requirements of Rule
10b5-1(c) under the Exchange Act, provided, however, that such plan does not
provide for, or permit, the sale of any Common Stock during the Lock-up Period
and no public announcement or filing is voluntarily made or required regarding
such plan during the Lock-Up Period; [and]

[(6) any transfers up to a maximum of 10,000 shares in total for all such
transfers made by the undersigned to the Company or broker assisted sales to
satisfy tax withholding obligations pursuant to the Company’s equity incentive
plans or arrangements disclosed in the Prospectus (as defined in the Placement
Agent Agreement);]

provided, however, that in the case of any transfer described in clause (1),
(2) or (3) above, it shall be a condition to the transfer that (A) the
transferee executes and delivers to Cowen, acting on behalf of the Placement
Agents, not later than one business day prior to such transfer, a written
agreement, in substantially the form of this agreement (it being understood that
any references to “immediate family” in the agreement executed by such
transferee shall expressly refer only to the immediate family of the undersigned
and not to the immediate family of the transferee) and otherwise satisfactory in
form and substance to Cowen, and (B) in the case of any transfer described in
clause (1) or (2), above, if the undersigned is required to file a report under
Section 16(a) of the Securities Exchange Act of 1934, as amended, reporting a
reduction in beneficial ownership of shares of Common Stock or Beneficially
Owned Shares or any securities convertible into or exercisable or exchangeable
for Common Stock or Beneficially Owned Shares during the Lock-Up Period (as the
same may be extended as described above), the undersigned shall include a
statement in such report to the effect that, (A) in the case of any transfer
pursuant to clause (1) above, such transfer is being made as a gift or by will
or intestate succession, (B) in the case of any transfer pursuant to clause (2)
above, such transfer is being made to a

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stockholder, partner or member of, or owner of a similar equity interest in, the
undersigned and is not a transfer for value, (C) in the case of any transfer
pursuant to clause (3) above, such transfer is being made either (a) in
connection with the sale or other bona fide transfer in a single transaction of
all or substantially all of the undersigned’s capital stock, partnership
interests, membership interests or other similar equity interests, as the case
may be, or all or substantially all of the undersigned’s assets or (b) to
another corporation, partnership, limited liability company or other business
entity that is an affiliate of the undersigned and such transfer is not for
value, (D) in the case of any transfer pursuant to clause (6) above, such
transfer is being made to satisfy tax withholding obligations]. For purposes of
this paragraph, “immediate family” shall mean a spouse, child, grandchild or
other lineal descendant (including by adoption), father, mother, brother or
sister of the undersigned; and “affiliate” shall have the meaning set forth in
Rule 405 under the Securities Act of 1933, as amended.

For avoidance of doubt, nothing in this Agreement prohibits the undersigned from
exercising any options or warrants to purchase Common Stock (which exercises may
be effected on a cashless basis to the extent the instruments representing such
options or warrants permit exercises on a cashless basis), it being understood
that any Common Stock issued upon such exercises will be subject to the
restrictions of this Agreement.

In order to enable this covenant to be enforced, the undersigned hereby consents
to the placing of legends or stop transfer instructions with the Company’s
transfer agent with respect to any Common Stock or securities convertible into
or exercisable or exchangeable for Common Stock.

The undersigned further agrees that it will not, during the Lock-Up Period (as
the same may be extended as described above), make any demand or request for or
exercise any right with respect to the registration under the Securities Act of
1933, as amended, of any shares of Common Stock or other Beneficially Owned
Shares or any securities convertible into or exercisable or exchangeable for
Common Stock or other Beneficially Owned Shares.

This Agreement and all authority herein conferred are irrevocable and shall
survive the death or incapacity of the undersigned and shall be binding upon the
heirs, personal representatives, successors and assigns of the undersigned.

The undersigned hereby represents and warrants that the undersigned has full
power and authority to enter into this agreement and that this agreement has
been duly authorized (if the undersigned is not a natural person), executed and
delivered by the undersigned and is a valid and binding agreement of the
undersigned. This agreement and all authority herein conferred are irrevocable
and shall survive the death or incapacity of the undersigned (if a natural
person) and shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.

This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York applicable to agreements made and to be
performed in such state.

If (i) the Company notifies Cowen in writing that it does not intend to proceed
with the Offering, (ii) the Placement Agent Agreement is not executed by
November 14, 2014, or (iii) the Placement Agent Agreement (other than the
provisions thereof which survive termination) shall terminate or be terminated
for any reason prior to payment for and delivery of any Securities to be sold
thereunder, then this Agreement shall immediately be terminated and the
undersigned shall automatically be released from all of his or her obligations
under this Agreement. The undersigned acknowledges and agrees that whether or
not any public offering of Common Stock actually occurs depends on a number of
factors, including market conditions.

[Signature page follows]

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Very truly yours,

 

(Name of Stockholder - Please Print)

 

(Signature)

 

(Name of Signatory if Stockholder is an entity - Please Print)

 

(Title of Signatory if Stockholder is an entity - Please Print)

Address: