EXHIBIT
10




EMPLOYMENT
AGREEMENT
 
 Clean
Diesel Technologies, Inc. – Michael L. Asmussen
 
 AGREEMENT
made as of the date set forth below by and between Michael L. Asmussen, 1731
Centennial Drive, Canton, MI  48187 (“Executive”) and Clean Diesel
Technologies, Inc., a Delaware corporation (the “Company”), having a place of
business at Suite 1100, 10 Middle Street, Bridgeport,
CT  06604.
 
 WHEREAS,
the Company desires certain services for itself and Executive desires to
contract with the Company to perform such services;
 
 NOW
THEREFORE, in consideration of the mutual covenants hereinafter recited, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
 
 1.        
     Term:  This
Agreement shall be effective as of the expiration of the seven (7) day
revocation period in Section 12, below (the “Commencement Date”), and shall
continue thereafter until terminated by either party as provided
below.
 
 2.        
     Scope of Work;
Title:  Retroactive to February 10, 2009, Executive shall be
President and Chief Executive Officer of the Company.  In such
employment, Executive shall on a full-time basis direct all of Executive’s
efforts toward the performance of such duties as shall be assigned to Executive
by the Board of Directors of the Company. “Full time” shall mean no outside
business activities without the Company’s prior consent.  Executive's
place of employment shall be the Company's corporate headquarters at the above
address.
 
 3.         
    Compensation:  (a)
Base Salary. As
of February 10, 2009, The Company agrees to cause Executive to be paid for
Executive’s services hereunder a Base Salary at the initial rate of Two Hundred
Eighty Five Thousand Dollars ($285,000) per
year.  Executive shall be paid such amounts by the Company according
to its normal and customary procedures from time to time in effect but not less
often than monthly. Such Base Salary shall be reviewed not later than February
10, 2010.
 
 (b) Restricted Shares.
The Company, effective upon the Commencement Date, shall issue to Executive
under the Company’s Incentive Plan, Forty Thousand Shares of the Company’s
Common Stock, par $0.01, restricted, however, so that of such Restricted Shares,
there may only be sold, assigned, transferred or hypothecated by the Executive
his heirs and assigns, Thirteen Thousand Three Hundred Thirty Three (13,333)
Shares after the vesting date of February 10, 2010; Twenty Six Thousand Six
Hundred Sixty Six (26,666) Shares after the vesting date of February 10, 2011;
and Forty Thousand (40,000) Shares after the vesting date of February 10, 2012;
and, provided further, that as a condition for any sale, assignment, transfer or
hypothecation of the Restricted Shares, that on each of the foregoing vesting
dates Executive shall  continue to be employed by Company as President
and Chief Executive Officer unless such employment terminated as a result of
disability or death or “at will” by the Company. The Certificates evidencing the
Restricted Shares shall bear a legend and shall be subject to a stop order with
respect to the foregoing restriction. The Executive shall be entitled to vote
the Restricted Shares and receive dividends thereon, if any, pending the vesting
dates; provided, however, that any such dividends shall be subject to forfeiture
under the above restrictions and shall be held in a suspense account and paid
over to Executive within sixty (60) days after the vesting dates of the
Restricted Shares as to which such dividends shall be
allocable.
  1
  (c) Annual Cash Bonus.
During the term of this Agreement, Executive shall participate in the Company’s
annual cash bonus plan with a Target Participation Percentage of Fifty Percent
(50%) of Executive’s then Base Salary calculated on a combination of the
Company’s operational results and Executive’s completed goals and objectives but
subject to the limitations that no cash bonus is payable if the combined
operational results and the Executive’s goals and objectives shall not have been
at least Seventy Five Percent (75%) attained, as determined in the judgment of
the Compensation & Nominating Committee of the Board of Directors of the
Company, and no cash bonus may exceed in any event One Hundred Twenty Five
Percent (125%) of the Executive’s Target Participation Percentage, all as
annually approved in advance by the Compensation Committee of the
Board.
 
 (d) Stock
Options.  Executive from time to time shall be entitled to
participate in stock option or other equity Awards under the Company’s Incentive
Plan in the discretion of the Board of Directors and on terms and conditions
similar to those of other officers of the Company.
 
 (e) Relocation. Executive
shall be entitled to the relocation benefits and services as set out on Schedule
A (“Relocation”) to this Agreement.
 
 (f) Change in Control
Bonus.
If a change in control of the Company shall occur during the term of this
Agreement and such change in control shall have been approved or authorized in
advance by a majority of the Board of Directors of the Company, then the Company
shall pay to Executive within sixty (60) days of such change in control, a cash
bonus equal to the Executive’s then Base Salary. “Change in control” has the
same meaning as set out in the Company’s Incentive Plan.
 
 (g) Profit Enhancement to Bonus
Plan. If, during the term of this Agreement, a fiscal year of the Company
shall, as evidenced by the audited financial statements of the Company for that
year, show a pre-tax profit of not less than $2 million, then the annual bonus
pool for all employees in that year on a one time basis for that year only shall
be increased by an amount equal to thirty percent (30%) of the bonus pool as
otherwise calculated.
 
 (h) Corporate Benefits.
Executive shall participate also in such other benefit programs as the Company
may customarily extend to its Employees as a class.  This Agreement
may not be construed to prevent the Company from rescinding any benefit programs
for Executive so long as such rescission applies to Employees as a
class.
 
 4.           
  Expenses:  Executive
shall be reimbursed by the Company in accordance with Company policies for all
ordinary and necessary out-of-pocket expenses incurred by Executive in
performing Executive’s services hereunder.  Such expenses shall be
reported from time-to-time by Executive on the Company’s customary forms of
expense report and submitted for approval to the Company pursuant to its
policies from time to time in effect.
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  5.             
Termination of
Employment:  (a) Just
Cause.  The Company may at any time terminate this Agreement
for Just Cause.  “Just Cause” shall mean, as determined by the Board
of Directors in its sole discretion, conviction of Executive under, or a plea of
guilty by the Executive to, any charge which would constitute a felony under the
laws of Connecticut, regardless of jurisdiction; any instance of fraud,
embezzlement, self-dealing, insider trading or similar malfeasance with respect
to the Company regardless of the amount involved; any instance of material
disloyalty, insubordination, or disparagement of the Company to an outside
party; or any instance of substance abuse of a controlled substance or,
otherwise, a pattern of substance abuse which limits Executive’s performance of
Executive’s duties.
 
 (b) Disability.  The
Company may terminate this Agreement at any time upon the physical disability of
Executive, if the Directors in their sole discretion shall determine that, as a
result of physical disability Executive has for a period of six months been
substantially absent from Executive’s customary place of work and unable to
perform Executive’s customary duties.
 
 (c) At
Will.  Either of Executive or Company may terminate this
Agreement at any time on three (3) month’s written notice one to the
other.  Where Company shall terminate this Agreement for other than
just cause or physical disability, the Company shall continue the Executive’s
Basic Salary and Corporate Benefits as defined above and in the amount and form
then enjoyed by the Executive. Such salary and benefit continuation shall be
offset by any income from personal services earned by the Executive, if any,
from sources other than the Company for a period which ends on the first
anniversary of the Executive’s termination at will by the Company. Any period of
salary continuation shall not be extended by any notice period, but shall
include a notice period. If this employment is terminated by the Employee, he
will, at any time, give three (3) months advance notice and shall not be
entitled to any further compensation after such notice period. Executive shall
be paid his Base Salary and be furnished with Corporate Benefits during the
notice period, if (i) Executive works for Company through to the end of the
notice period, or, (ii) Company shall expressly waive Executive’s working
through to the end of the notice period and terminates Executive’s employment
prior to the end of the notice period.
 
 (d) Termination After Change in
Control. If after a change in control during the term of this Agreement,
the Company or any control person or entity or group (“Control Person”) shall
terminate Executive’s employment for any reason other than just cause or
disability during a period ending with the first anniversary of the change in
control, then Executive shall first look to such Control Person to furnish to
Executive the Base Salary and Corporate Benefits continuation as provided under
Section 5 (c) above; provided, however, that the Company shall, if practicable,
use its best efforts on a commercially reasonable basis to negotiate with the
Control Person so that such control person shall assume the obligation to make
such Base Salary and Corporate Benefit continuation. In the event, however,
Company is unable to negotiate with the Control Person to assume the obligation
set forth in Section 5(c) above, then, if Executive’s employment terminates for
any reason other than just cause or disability during a period ending with the
first anniversary of the change in control, the Company shall (i) pay Executive
in a lump sum within sixty (60) days, an amount equal to six (6) months of
Executive’s Basic Salary and (ii) continue Executive’s Corporate Benefits
(including, if required, payment to Executive to enable Executive to obtain
substantially equivalent health benefits, for a period of not more than six (6)
months commencing with the date of termination
  3
  6.        
    Discoveries and
Inventions:   All patentable and unpatentable inventions,
discoveries and ideas which are made or conceived or reduced to practice by
Executive during the term of Executive’s employment, and which are based upon or
arise out of Executive’s services hereunder (“Developments”) are or shall become
the Company’s property.  Executive agrees to disclose promptly to the
Company each such Development and, upon the Company’s request and at its
expense, Executive will assist the Company, or its designee, in making
application for Letters Patent, Trade or Service Marks or Copyrights in any
country in the world.  Executive further agrees, at no expense to
Executive, to execute all papers and do all things which may be necessary or
advisable to prosecute such applications, and to transfer to and vest in the
Company, or its designee, all the right, title and interest in and to such
Developments, and all applications for patents and Letters Patent, Trademarks
and Service Marks and Copyrights issued thereon.  If for any reason
Executive is unable to effectuate a full assignment of any such Development,
Executive agrees to transfer to the Company, or its designee, Executive’s
transferable rights, whether they be exclusive or non-exclusive, or as a joint
inventor or partial owner of the Development.  No action or inaction
by the Company shall in any event be construed as a waiver or abandonment of its
rights to any such Development except an instrument in writing assigned by an
authorized official of the Company by which it specifically states it intends to
be bound in such respect.
 
 7.        
     Proprietary
Information:  Executive will not at any time, either during the
term of this Agreement or thereafter, disclose to others, or use for Executive’s
own benefit or the benefit of others, any of the Developments or any
confidential, proprietary or secret information owned, possessed or used by the
Company or any of its subsidiaries or affiliates (collectively, “Proprietary
Information”), which, by way of illustration, but not limitation, includes
devices, structures, machines, data, know-how, business opportunities, marketing
plans, forecasts, unpublished financial statements, budgets, licenses and
information concerning prices, costs, Executives, customers and
suppliers.  Executive’s undertakings and obligations under this
Paragraph 7 will not apply to any Proprietary Information which: (a) is or
becomes generally known to the public through no action on the part of the
Executive or (b) is generally disclosed to third parties by the Company or any
of its subsidiaries or affiliates without restriction on such third
parties.  Upon termination of this Agreement or at any other time upon
request, Executive will promptly deliver to the Company all keys, notes,
memoranda, notebooks, computers, computer disks or drives, drawings, designs,
three dimensional figures, photographs, layouts, diagrams, records, reports,
files and other documents (and all copies or reproductions of such materials) in
Executive’s possession or under Executive’s control, whether prepared by him or
others, which contain Proprietary Information.  Executive acknowledges
that this material is the sole property of the Company or a subsidiary or an
affiliate of the Company.
 
 8.      
       Subsequent
Employment:  Following the termination of Employment for any
reason, Executive agrees that for a two-year period thereafter, Executive will
not recruit, entice, induce or encourage any of the Company’s other Executives
or consultants to (i) engage in any activities which would be competitive to the
business of the Company or (ii) to engage in any activity which, were it done by
Executive, would violate any provision of Executive’s Agreement. For a two-year
period after termination of employment and before performing any services for
others, as Executive or consultant or otherwise, in the actual lines of business
in which Executive has performed services for the Company, its subsidiaries or
affiliates, Executive will notify the Company of the general nature of the
services to be performed and the party for whom they will be performed and
Executive will, also, prior to undertaking such service or employment inform the
other party of the existence of the covenants in Sections 6, 7 and 8 of this
Agreement. Executive admits that breach of Executive’s covenants hereunder
regarding the Company’s Proprietary information is likely to cause serious
economic injury to the Company.
  4
  9.           
  Assignment:  This
Agreement may not be assigned by either party without the prior written consent
of the other party; provided, however,  that the acquisition by any
person of all or substantially all of the assets or capital stock of the Company
shall not be considered an assignment of this Agreement by the
Company.
 
 10.     
      Continuing
Obligations:  The Executive’s covenants set forth in Sections
6, 7, and 8 above shall continue according to their terms following the
termination of this Agreement. Termination of Executive’s employment for any
reason shall constitute termination of this Agreement.
 
 11.     
      Governing Law; Waiver of
Trial by Jury; Equitable Remedies. This Agreement, the interpretation
hereof and the resolution of any and all disputes between the Company and
Executive shall be governed by and interpreted under the internal substantive
and procedural laws of the State of Connecticut without any reference to
conflicts of laws rules. In the resolution of any disputes the parties agree to
submit to the exclusive jurisdiction of the Superior Court of Connecticut,
Bridgeport District and waive any claims of forum non conveniens with respect to
that jurisdiction and also waive any claim to trial by jury in any proceeding.
The parties further agree that any violations of Executive’s covenants set forth
in Sections 6, 7 and 8 above may cause irreparable harm to the Company which
harm is not capable of accurate determination and for which the remedy of
damages may be insufficient. Accordingly, in any proceeding to enforce the
Company’s rights under such Sections 6, 7 and 8, the Company may seek, in
addition to damages, equitable remedies such as injunctions, temporary
injunctions and restraining orders and the parties hereby waive any requirement
of bond in any such proceeding or in any appeal therefrom.
 
 12.     
      Legal Advice;
Rescission. Executive agrees that this Agreement involves Executive’s
waiver of certain legal rights. Executive may, if Executive so chooses, consult
with an attorney about the terms of this Agreement before signing it. Executive
further acknowledges that (a) the Company has given Executive a twenty one (21)
day period in which to consider the terms and binding effect of this Agreement,
which twenty one (21) day period Executive may waive, and (b) that, if Executive
does sign this Agreement, Executive shall have seven (7) days thereafter to
change Executive’s mind and revoke it. Executive agrees that if Executive
decides to revoke this Agreement, Executive will inform the Company within that
seven (7) day period and obtain a written acknowledgment of the revocation which
the Company agrees to provide. Executive understands that revocation of this
Agreement will affect Executive’s employment status. Executive states that
Executive has carefully read this Agreement; that Executive understands its
final and binding effect and agrees to be bound by its terms; and that Executive
has signed this Agreement voluntarily.
  5
  13.      
     Notices.  All
notices hereunder shall be in writing and shall be deemed effective upon
receipt, if hand delivered, or if sent by facsimile and acknowledged
electronically, or by courier and receipted on delivery.  Notices by
mail shall be deemed received on receipt, if sent first class or priority mail
postage prepaid return receipt requested and the sender shall have the signed
receipt. Otherwise notices shall be deemed effective five (5) days after
transmission.  In each case notices shall be transmitted to the
address first given above or such other address as may be given by notice as
provided herein.
 
 
 IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.
 
 
 
 EXECUTIVE
                
                CLEAN
      DIESEL TECHNOLOGIES, INC./s/ Michael L. Asmussen
                
                /s/ Ann B. RupleName:  Michael
      L. Asmussen
                
                Name:
      Ann B. RupleVice
      President and CFODate:
      March 20, 2009
                
                Date:
      March 20, 2009/s/ C. W. GrinnellName:
      Charles W. GrinnellVice
      President and SecretaryDate:
      March 20, 2009
 6
  Clean
Diesel Technologies, Inc. - - Michael L. Asmussen
 Employment
Agreement of March 20, 2009
 Schedule
A
 Relocation
 
 In this
Schedule “the Company” means Clean Diesel Technologies, Inc and “you,” and
“your” refer to Executive, Michael L. Asmussen.
 
 1. The
Company will engage AIReS, a relocation company, to assist in the coordination
of the sale of your Michigan home, your relocation to the Bridgeport area and
the purchase of your new home here.
 
 2. The
Company agrees to a directed buyout offer, via AIReS, of $517,000 on the
Michigan home. AIReS will commission two written appraisals on that home to
determine the appraised value by averaging those appraisals. The portion of the
$517,000 buyout offer, if any, in excess of the appraised value shall be taxable
income to you. AIReS will purchase and resell the Michigan home and the Company
shall not loan funds to you or otherwise extend any credit to you in the process
of selling and purchasing the homes. The Company’s obligation to hold AIReS
harmless for any loss or expense in facilitating the sale of the Michigan home
shall be limited to $90,000. Further price adjustment shall be subject to CFO
approval.
 
 3. The
Company shall pay to you a one-time lump sum of $20,000 for your incidental
expenses consequent upon your signing a binder or written commitment for the
purchase of a specific property in the Bridgeport area. This payment shall be
taxable income to you.
 
 4. The
Company shall gross up and hold you harmless from the Federal and Connecticut
income taxes attributable to the items of taxable income described in Nos. 2 and
3 above. The payment shall be based on your effective marginal Federal and
Connecticut income tax rates as per the March 1, 2009 pay period. The gross up
payment itself shall not be grossed up.
 
 5. The
Company will reimburse you for your ordinary and necessary expenses of two house
hunting trips to the Bridgeport area for both you and your spouse.
 
 6. The
Company shall reimburse you for your ordinary and customary expenses of moving
to the Bridgeport area, which shall include:
 
 a) travel
expense.
 
 b) the
expense of packing and shipping your family household articles, including up to
90 days storage, if necessary and also including specialty moving costs such as
for a pool table and audio/visual equipment as necessary.
 
 c) the
sale and purchase costs of both homes, including attorney’s fees, brokerage
commissions and title insurance for the Michigan home, mortgage closing costs
for the Connecticut home, including loan origination and other fees such as
appraisals, but not mortgage points.
  
  d) such
temporary housing for you and your family, if necessary, for a period of not in
excess of 60 days or as otherwise approved by the Chief Financial Officer of the
Company.
 
 e) in
order to ensure that the foregoing costs are ordinary and customary and entitled
to reimbursement, you shall pre-clear in advance with the Chief Financial
Officer of the Company by fax or e-mail any of such expenses that individually
exceed the amount of $2,500.
 
 7. You
agree that the total relocation costs as described above shall be prorated and
amortized over a 24 month period commencing with the sale of the Michigan home
and, should you resign from the Company for reasons other than physical
disability prior to the end of such 24 month period, any unamortized amount then
remaining shall be repaid by you to the Company.