Exhibit 10.1





Exhibit 10.1




FORM OF SALE OF ACCOUNTS AND SECURITY AGREEMENT




Date: February 14, 2011




Clean Diesel Technologies, Inc., a Delaware corporation, having a principal place of business
of 4567 Telephone Road, Suite 206, Ventura, California 93003 (“Seller”) and Faunus Group
International, Inc., a Delaware corporation (“FGI”), hereby agree, intending to be legally bound,
to the terms and conditions set forth in this Sale of Accounts and Security Agreement.



Section 1.1 Definitions. For the purposes of this Agreement and unless defined otherwise
herein, all terms used shall have the meanings assigned to them in this Section 1.1:



“Account” has the definition contained in the UCC and which shall include a right to payment
of a monetary obligation, whether or not earned by performance, (i) for property that has been or
is to be sold, leased, licensed, assigned, or otherwise disposed of or (ii) for services rendered
or to be rendered.



“Account Debtor” has the definition contained in the UCC and which includes any Person who is
obligated on an Account.




“Advance” means an amount advanced by FGI to the Seller pursuant to Section 3(d).



“Affiliate” of any Person shall mean (a) any Person which, directly or indirectly, is in
control of, is controlled by, or is under common control with such Person, or (b) any Person who is
a director or officer (i) of such Person, (ii) of any subsidiary of such Person or (iii) of any
Person described in clause (a) above. For purposes of this definition, control of a Person shall
mean the power, direct or indirect, (x) to vote 5% or more of the securities having ordinary voting
power for the election of directors of such Person, or (y) to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.



“Agreement” means this Agreement, including the Exhibits and any Schedules hereto, and all
amendments, modifications and supplements hereto and thereto and restatements hereof and thereof.



“Applicable Interest Rate” means the greater of (i) 7.50% per annum and (ii) 2.50% per annum
above the prime rate which shall be an annual rate equal to (x) the prime rate for U.S. banks as
published in the “Money Rates” section of The Wall Street Journal or (y) if The Wall Street Journal
ceases to publish a prime rate, the average of the prime rates announced by the three largest U.S.
money center commercial banks as determined by FGI (the “Prime Rate”).




“Application” means each application made by Seller in connection with this Agreement.



“Avoidance Claim” means any claim that any payment received by FGI from or for the account of
an Account Debtor is avoidable or subject to challenge under the Bankruptcy Code or any other
debtor relief statute.



“Bankruptcy Code” means the Bankruptcy Reform Act of 1978, as amended, and codified as 11
U.S.C. § 101 et seq.



“Chattel Paper” has the definition contained in the UCC and which includes a record or records
that evidence both a monetary obligation and a security interest in specific goods, a security
interest in specific goods and software used in the goods, a security interest in specific goods
and license of software used in the goods, a lease of specific goods, or a lease of specific goods
and license of software used in the goods.



“Collateral” means and includes all of the Seller’s right, title and interest in and to all of
the Seller’s personal property, wherever located and whether now or hereafter existing or now owned
or hereafter acquired or arising, including the following: (a) all Accounts, (b) all Chattel Paper,
(c) all Commercial Tort Claims, (d) all Deposit Accounts, (e) all Documents, (f) all Equipment, (g)
all General Intangibles, (h) all Goods (including all files, correspondence, computer programs,
tapes, disks and related data processing software which contain
information identifying or pertaining to any of the Collateral or any Account Debtor or
showing the amounts thereof or payments thereon or otherwise necessary or helpful in the
realization thereon or the collection thereof), (i) all Instruments, (j) all Inventory, (k) all
Investment Property, (l) all letters of credit and Letter-of-Credit Rights, (m) all Supporting
Obligations and (n) all cash and non-cash proceeds of the foregoing, including insurance proceeds.


 


 









 





“Commercial Tort Claim” has the definition contained in the UCC.



“Covered Affiliate Agreements” means all Sale and Security Agreements and similar agreements
between FGI and any of the following Affiliates of Seller: Catalytic Solutions, Inc., Engine
Control Systems Ltd, Engine Control Systems Limited, Engine Control Systems Europe AB, Clean Diesel
Technologies, Limited, and Clean Diesel International, LLC.



“Date of Collection” means the date a check, draft or other item representing payment on an
invoice is posted by FGI plus two (2) business days.



“Deficiency Assessment” means charges as set forth in Section 3(j) of this Agreement applied
to the difference between the minimum monthly net funds employed and the net funds employed for the
month and shall be chargeable to the Reserve Account, or at FGI’s option, payable by Seller on
FGI’s demand.



“Default” means any of the events or circumstances specified in Section 10 of this Agreement
that, with the passage of time or giving of notice or both, would constitute an Event of Default.



“Deposit Account” has the definition contained in the UCC and which includes any demand, time,
savings, passbook or like account maintained with a bank, trust company, savings and loan
association, credit union, other financial institution or like organization, other than an account
evidenced by a certificate of deposit that is an instrument under the UCC.



“Dispute” means any claim, whether or not provable or bona fide, and whether with or without
support, made by an Account Debtor as a basis for refusing to pay a Purchased Account, either in
whole or in part, including, but not limited to, any contract dispute, charge back, credit, right
to return Goods, or other matter which diminishes or may diminish the dollar amount or timely
collection of such Account.




“Document” means a document of title or a receipt of the type described in UCC 7-201(2).



“Eligible Inventory” shall mean the aggregate gross amount of Seller’s Inventory (other than
work-in-process), valued at the lower of cost (determined on a first-in, first out basis) or
market, which (i) is owned solely by Seller and with respect to which Seller has good, valid and
marketable title, (ii) is stored at 1620 Emerson Avenue, Oxnard, California 93033 and Seller shall
have delivered in favor of the FGI an Acknowledgment and Waiver Agreement from the landlord of such
leased location; (iii) is subject to a valid, enforceable and first priority Lien in favor of FGI
and is otherwise free and clear of any other Liens; (iv) is located in the continental United
States of America; (v) is not obsolete or slow moving and for which a markdown reserve has not been
made, and which otherwise conforms to the warranties contained herein; (vi) is subject to insurance
for the benefit of FGI and Seller; (vii) meets all standards imposed by any Governmental Authority;
(viii) is not Inventory consisting of manufacturing supplies (other than raw materials), expense
supplies or shipping supplies, (ix) is not goods returned or rejected by Seller’s customers for
which a credit has not yet been issued, (x) is not goods in transit to third parties, (xi) is not
damaged Inventory, (xii) is not Inventory that FGI determines in its sole discretion to be
packaging, a no charge or sample item; (xiii) is not Inventory which is held by Seller pursuant to
consignment, sale or return, sale on approval or similar arrangement; (xiii) is not Inventory
subject to a license agreement unless the licensor with respect thereto has executed a licensor
consent acceptable to FGI in its sole discretion and (xiv) is not Inventory that FGI determines in
its sole discretion to be ineligible.




“Equipment” has the definition contained in the UCC.



“Event of Default” means any of the events or circumstances specified as Events of Defaults in
Section 10 of this Agreement.


 


 









 





“Extended Term” means a three year extension of the term of this Agreement effected in
accordance with Section 13.



“Facility Amount” means the amount determined by FGI from time to time to be the Facility
Amount and, until so determined, means $7,500,000, less (i) outstanding amounts advanced against
Inventory hereunder and under (and as defined in) all Covered Affiliate Agreements, and (ii) other
outstanding amounts under all Covered Affiliate Agreements.




“FGI’s Security” has the meaning assigned thereto in Section 6(a).



“Financing Statement” means each Uniform Commercial Code financing statement, including any
continuations thereof or amendments thereto, naming FGI as purchaser/secured party and the Seller
as seller/debtor, in connection with this Agreement.




“Foreign Currency” has the meaning assigned thereto in Section 25(a).




“Foreign Exchange Loss” has the meaning assigned thereto in Section 25(b).



“GAAP” means generally accepted accounting principles in the United States as in effect from
time to time.




“General Intangible” has the definition contained in the UCC.




“Goods” has the definition contained in the UCC.



“Instrument” has the definition contained in the UCC and which includes a negotiable
instrument or any other writing that evidences a right to the payment of a monetary obligation, is
not itself a security agreement or lease, and is of a type that in ordinary course of business is
transferred by delivery with any necessary endorsement or assignment.




“Inventory” has the definition contained in the UCC.




“Inventory Advance Rate” means the rate identified in Section 3(e).



“Inventory Sublimit” means the amount determined by FGI from time to time to be the Inventory
Sublimit and, until so determined, means $1,000,000, less outstanding advances against Inventory
under (and as defined in) all Covered Affiliate Agreements.




“Investment Property” has the definition contained in the UCC.




“Letter-of-Credit Right” has the definition contained in the UCC.



“Misdirected Payment Fee” means 15% of the amount of any payment on account of a Purchased
Account or, after the occurrence and during the continuance of a Default any other Account, which
has been received by Seller and not delivered in kind to FGI on the second business day following
the date of receipt by Seller.



“Net Invoice Amount” means the invoice amount of a Purchased Account, less returns (whenever
made), all selling discounts (at FGI’s sole option, calculated on shortest terms), and credit or
deductions of any kind allowed or granted to or taken by the Account Debtor at any time.



“Obligations” means all present and future obligations owing by Seller to FGI whether or not
for the payment of money, whether or not evidenced by any note or other instrument, whether direct
or indirect, absolute or contingent, due or to become due, joint or several, primary or secondary,
liquidated or unliquidated, secured or unsecured, original or renewed or extended, whether arising
before, during or after the commencement of any
bankruptcy case in which Seller is a debtor, specifically including interest accruing after
the commencement of any bankruptcy, insolvency or similar proceeding with respect to Seller
(whether or not a claim for such post-commencement interest is allowed), including but not limited
to any obligations arising pursuant to letters of credit or acceptance transactions or any other
financial accommodations.


 


 









 





“Original Term” means the initial two year term of this Agreement as reflected in Section 13.



“Person” means an individual, corporation, partnership, limited liability company, unlimited
liability company, association, trust, joint venture, unincorporated organization, government or
any agency or political subdivision thereof, or any other entity.



“Prime Rate” has the meaning assigned thereto in the definition herein of “Applicable Interest
Rate”




“Purchased Account” means an Account which FGI purchases pursuant to this Agreement.




“Purchase Date” has the meaning assigned thereto in Section 25(b).




“Purchase Price” has the meaning assigned thereto in Section 3(a).




“Rate of Exchange” has the meaning assigned thereto in Section 25(b).



“Related Rights” means, with respect to an Account, all rights (but not obligations) of Seller
with respect thereto, including all right, title and interest of Seller in, to, under and with
respect to (i) all contract rights, guarantees, letters of credit, liens, security interests,
instruments, chattel paper and other documents, rights or interests arising out of or evidencing
such Account, (ii) all insurance and other agreements and arrangements of whatever character from
time to time supporting or securing payment of such Account, (iii) all Goods the sale of which gave
rise to such Account, including Seller’s rights and remedies with respect thereto under any present
or future personal property security legislation, or under any other applicable law, and all rights
of stoppage in transit, replevin and reclamation and (iv) all cash and non-cash proceeds of any of
the foregoing, including insurance proceeds.



“Required Reserve Amount” means the amount determined by FGI from time to time in accordance
with Section 3(c) to be the Required Reserve Amount and, until so determined, means an amount equal
to the Reserve Percentage multiplied by the unpaid balance of all Purchased Accounts.



“Reserve Account” means (a) a bookkeeping account on the books of FGI and/or (b) an account of
FGI in which FGI deposits funds from time to time as contemplated by this Agreement.



“Reserve Percentage” means the percentage determined by FGI from time to time in accordance
with Section 3(c) to be the Reserve Percentage and, until so determined, means 20%.



“Reserve Shortfall” means the amount by which the balance in the Reserve Account is less than
the Required Reserve Amount, provided that, if the Reserve Account has a negative balance, the
Reserve Shortfall shall be the sum of such balance and the Required Reserve Amount.



“Schedule of Accounts” means a schedule of Accounts in the form attached hereto as Schedule 1
or in such other form as required by FGI or otherwise acceptable to FGI (including in an excel
spreadsheet format acceptable to FGI) wherein Seller lists Accounts that Seller offers to sell to
FGI.




“Supporting Obligation” has the definition contained in the UCC.




“Term” means the term of this Agreement, as determined in accordance Section 13.



“Termination Fee” means a fee payable to FGI pursuant to Section 13 in the event Seller
terminates this Agreement prior to maturity of the Original Term or of an Extended Term.


 


 









 






“UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York.



“U.S. Dollars” means the lawful currency of the United States of America.



Section 1.2 Other Referential Provisions.



(a) Except as otherwise expressly provided herein, all accounting terms not specifically
defined or specified herein shall have the meanings generally attributed to such terms under GAAP.



(b) All personal pronouns used in this Agreement, whether used in the masculine, feminine or
neuter gender, shall include all other genders; the singular shall include the plural, and the
plural shall include the singular.



(c) The words “hereof”, “herein” and “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular provisions of this
Agreement.



(d) Titles of Articles and Sections in this Agreement are for convenience only, do not
constitute part of this Agreement and neither limit nor amplify the provisions of this Agreement,
and all references in this Agreement to Articles, Sections, Subsections, paragraphs, clauses, sub
clauses, Schedules or Exhibits shall refer to the corresponding Article, Section, Subsection,
paragraph, clause or sub clause of, or Schedule or Exhibit attached to, this Agreement, unless
specific reference is made to the articles, sections or other divisions or subdivisions of, or to
schedules or exhibits to, another document or instrument.



(e) Unless the context requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such agreement, instrument
or other document as from time to time amended, supplemented, restated or otherwise modified
(subject to any restrictions on such amendments, supplements, restatements or modifications set out
herein), (b) any reference herein to any statute or any section thereof shall, unless otherwise
expressly stated, be deemed to be a reference to such statute or section as amended, replaced or
re-enacted from time to time and (c) any reference herein to any Person shall be construed to
include such Person’s successors and permitted assigns.



(f) When used in this Agreement, the words “include”, “includes” and “including” shall be
deemed to be followed by the phrase “without limitation”.



(g) Except as otherwise expressly provided in this Agreement, all dollar amounts referred to
herein are stated in the lawful currency of the United States of America. In addition, all
calculations hereunder in respect of any amount that is denominated in a Foreign Currency (such as
the amount of an Account) shall for all purposes hereof be made in respect of the U.S. Dollar
equivalent of such amount determined by converting such amount that is denominated in a Foreign
Currency to U.S. Dollars using the rate of exchange at which FGI is able, on the date of
determination, to purchase U.S. Dollars with such Foreign Currency in accordance with its normal
practice at its office in New York, New York.



Section 1.3 Exhibits and Schedules. All Exhibits and Schedules attached hereto are by
reference made a part hereof.



Section 2. Purchase & Sale of Accounts.



(a) Seller hereby offers to sell, assign, transfer, convey and deliver to FGI, as absolute
owner, in accordance with the procedure detailed herein, all of Seller’s right, title and interest
in and to Seller’s Accounts and their Related Rights; provided that the parties acknowledge their
intention that, without affecting the validity of any sale, assignment, transfer, conveyance or
delivery of any Purchased Account, the aggregate outstanding amount of Purchased Accounts Advanced
on FGI’s books will not at any time exceed the Facility Amount.



(b) All Accounts shall be submitted to FGI on a Schedule of Accounts listing each Account
separately. The Schedule of Accounts shall, at the request of FGI, be signed by a person acting or
purporting to act on behalf of Seller. At the time a Schedule of Accounts is presented, Seller
shall also deliver to FGI one copy of the
sales contract, purchase order and invoice for each Account listed on the schedule together
with evidence of shipment, furnishing and/or delivery of the applicable Goods or rendition of the
applicable service(s).


 


 









 







(c) Any and all Purchased Accounts shall be purchased by FGI with full recourse to Seller, and
Seller agrees to pay to FGI on demand the unpaid amount of each Purchased Account specified by FGI.
Seller agrees that any payments or credits applying to any Account owing by an Account Debtor will
be applied: first, to any Purchased Account of such Account Debtor; and, second, to
any other Accounts of such Account Debtor. This order of payment applies regardless of the
respective dates the sales occurred and regardless of any notations on payment items.



(d) In the event that FGI determines to purchase an Account submitted by Seller to it and such
Account’s Related Rights, FGI shall post such Account on its receivables processing system and
shall mark such Account as having been purchased and/or accepted. Such posting and marking shall
constitute FGI’s acceptance of Seller’s offer to sell, assign, transfer, convey and deliver such
Account and its Related Rights to FGI and shall effect a purchase of such Account and its Related
Rights by FGI and the sale, assignment, transfer, conveyance and delivery thereof to FGI whether or
not Seller has complied with any notice or other requirements set forth in this Agreement in
respect thereof. Seller may, and at FGI’s request from time to time with respect to any Purchased
Account specified by FGI will, deliver to FGI a specific assignment of an Account submitted by
Seller to it (including a Purchased Account) in a form specified by FGI. The delivery by or of
behalf of Seller to FGI of any assignment of an Account shall effect (or confirm) the sale,
assignment, transfer, conveyance and delivery of such Account and its Related Rights to FGI,
provided the delivery of any such assignment shall not be necessary to effect a sale, assignment,
transfer, conveyance and delivery of any Account and its Related Rights if FGI shall post and mark
such Account on its factoring processing system as contemplated by this Section 2(d).



Section 3. Purchase Price and Fees.



(a) The purchase price for each Purchased Account and its Related Rights shall equal the Net
Invoice Amount of such Purchased Account less (i) any portion thereof that represents an obligation
to pay PST and (ii) FGI’s fees, as determined in accordance with Section 3(h). No discount,
credit, allowance or deduction with respect to any Purchased Account, unless shown on the face of
the invoice delivered to FGI prior to FGI’s purchase of such Account, shall be granted or approved
by Seller to any Account Debtor without FGI’s prior written consent.



(b) The Purchase Price for a Purchased Account and its Related Rights less (i) any Required
Reserve Amount or credit balance that FGI, in FGI’s sole and absolute discretion, determines to
hold, (ii) the outstanding balance of all Advances in respect of such Account and of any other
moneys remitted, paid, or otherwise advanced by FGI to or on behalf of Seller (including any
amounts which FGI reasonably determines that FGI may be obligated to pay in the future), and (iii)
any charge, fee, and other amount that Seller is required to pay to FGI pursuant to this Agreement,
shall be payable by FGI to Seller on the Date of Collection of such Account.



(c) FGI shall be entitled, in its sole and absolute discretion, to withhold the Required
Reserve Amount, and may increase or decrease the Required Reserve Amount or Reserve Percentage at
any time and from time to time if FGI deems it necessary to do so in order to protect FGI’s
interests. In no event shall Seller permit a Reserve Shortfall to occur, and shall pay to FGI the
amount thereof on demand. FGI may charge against the Reserve Account any amount for which Seller
may be obligated to FGI at any time, whether under the terms of this Agreement, or otherwise,
including but not limited to the repayment of any Advance, the amount of any Purchased Account aged
ninety (90) days or more past invoice date, any damages suffered by FGI as a result of Seller’s
breach of any representation or warranty herein or of any other provision hereof (whether
intentional or unintentional), any adjustments due and any attorneys’ fees, costs and disbursements
due. Seller recognizes that the Reserve Account may, in FGI’s sole discretion, represent
bookkeeping entries only and not cash funds. It is further agreed that, with respect to the
balance in the Reserve Account, FGI is authorized to withhold, without giving prior notice to
Seller, any payments and credits otherwise due to Seller under the terms of this Agreement to
protect FGI for reasonably anticipated claims or to adequately satisfy reasonably anticipated
obligations Seller may owe FGI. Upon the occurrence of an Event of Default, or in the event Seller
shall cease selling Accounts to FGI, FGI shall be under no obligation to pay the amount maintained
in the Reserve Account until all Purchased Accounts have been collected or
FGI has determined, in its sole and absolute discretion, that it will make no further efforts
to collect any Purchased Accounts and all sums due FGI hereunder have been paid. Notwithstanding
anything set forth herein to the contrary, upon an Event of Default, Seller understands and agrees
that the Termination Fee described Section 13 hereof shall be due and payable by Seller in the
event that FGI terminates this Agreement following an Event of Default.


 


 









 






(d) Advances. In FGI’s sole and absolute discretion, FGI may from time to time advance to
Seller against the Purchase Price of a Purchased Account, sums up to 80% of the aggregate Purchase
Price thereof outstanding at the time any such Advance is made, less: (i) the amount of any such
Purchased Account that is in Dispute; (ii) the amount of any Purchased Account aged ninety (90)
days or more past invoice date; and (iii) any fees, actual or estimated, that are payable to FGI
hereunder. Each Advance shall be payable by Seller to FGI on demand until the Date of Collection
of the related Purchased Account and shall bear interest at the Applicable Interest Rate, before
and after default and judgement, with interest on overdue interest at the same rate, from the date
such Advance is made until the earlier of (i) the date the Advance is repaid in full or (ii) the
date FGI would otherwise be obligated hereunder to pay the Purchase Price of the Purchased Account
against which such Advance was made.



(e) Inventory Sublimit. If requested by Seller, in accordance with the terms of this
Agreement, FGI may in its sole and absolute discretion advance to Seller against Eligible
Inventory, submitted to FGI on an Inventory Borrowing Base Certificate, sums not to exceed 75% of
the net orderly liquidation value of up to 30% of the Eligible Inventory outstanding at the time
any such advance is made. Notwithstanding the foregoing, the outstanding advances against Eligible
Inventory may not at any time exceed the lesser of (i) the Inventory Sublimit and (ii) an amount
equal to 30% of the aggregate Purchase Price of all outstanding Purchased Accounts hereunder and
under all other such Sale and Security Agreements and all similar agreements between FGI and any
Affiliate of the Seller. Any resulting overadvance shall be immediately repaid to FGI. The
Inventory Borrowing Base Certificate shall be in the form attached hereto as Schedule 3(e)
or in such other form as required by FGI, and shall be signed by a duly authorized
representative of Seller. At the time the Inventory Borrowing Base Certificate is presented, Seller
shall also deliver to FGI its inventory report. Any advance made pursuant to this subsection shall
be payable on demand and shall bear interest at the Applicable Interest Rate from the date such
advance is made until the date such advance is paid in full.



(f) Interest at the Applicable Interest Rate upon the daily total outstanding balance of each
Advance shall be payable by Seller to FGI on the last day of each month and may be charged by FGI
to the Reserve Account. Any adjustment in the Applicable Interest Rate, whether downward or
upward, will become effective on the day on which the Applicable Interest Rate decreases or
increases, as the case may be. If, on any day in a month, the balance in the Reserve Account
exceeds the unpaid balance of all Purchased Accounts, then Seller agrees to credit the Reserve
Account as of the last day of such month with interest on such excess at an annual rate equal to
4.25% above the Prime Rate. All interest and fees payable hereunder shall be computed for the
actual number of days elapsed on the basis of a year consisting of three hundred sixty (360) days.
The rates of interest under this Agreement are nominal rates, and not effective rates or yields.
The principle of deemed reinvestment of interest does not apply to any interest calculation under
this Agreement.



(g) Seller shall pay to FGI a onetime non-refundable facility fee of $75,000, less any
payments made to FGI constituting “facility fees” under any Covered Affiliate Agreements.



(h) Seller shall, both before and after the termination of this Agreement, pay a
non-refundable collateral management fee of 0.44% per month of the original face amount of each
Purchased Account upon which an Advance has been made for the period such Purchased Account is open
on FGI’s books. For the purpose of this section 3(h), a Purchased Account shall be considered to
be open on FGI’s books for the number of days, or any part thereof, elapsed (including the first
day but excluding the last day) in the period that commences on the day that the Account became a
Purchased Account and that ends on the first to occur of (x) the day on which such Purchased
Account has been collected in full and (y) the day on which FGI has determined, in its sole and
absolute discretion, that it will make no further efforts to collect such Purchased Account. FGI
will charge each collateral management fee to the Reserve Account; provided that, if the Reserve
Account would, following any such charge, not have a credit balance, or would have a credit balance
that is less than the Required Reserve Amount, Seller will pay the fee in question to FGI on
demand.


 


 









 






(i) Seller shall unconditionally pay and FGI shall be entitled to receive a non-refundable
monthly inventory management service fee equal to 0.55% on the net daily balance of all outstanding
advances in subsection (e) charged monthly to Seller’s Reserve Account or if funds are not
available therein, payable by Seller on demand.



(j) All collateral management fees shall be computed on the basis of a year of 365 or 366
days, as the case may be, and shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).



(k) Seller shall pay to FGI a non-refundable standby fee in respect of (x) each month during
the Term and (y) the period that commences on the day following the last full month of the Term and
that ends on the last day of the Term. Each standby fee shall be equal to the sum of (i) a fee
calculated at the Applicable Interest Rate on the difference, during the period for which the
calculation is made, between $2,400,000 and the average unpaid principal amount of the aggregate
Advances that are outstanding hereunder and under all Covered Affiliate Agreements during such
period (such difference, the “Unadvanced Amount” for such period) plus (ii) a fee equal to 0.44%
per month of the amount determined by dividing the Unadvanced Amount during the period for which
the calculation is made by 80%. FGI shall charge the standby fee for a particular period to the
Reserve Account and/or to any Reserve Accounts under (and as defined in) any Covered Affiliate
Agreements on the last day of such period; provided that, if the Reserve Account and all Reserve
Accounts under (and as defined in) all Covered Affiliate Agreements would, following any such
charge, not have a credit balance, or would have a credit balance that is less than the Required
Reserve Amount (as defined hereunder and under the respective Covered Affiliate Agreements), Seller
shall pay the fee in question to FGI on demand. All standby fees shall be computed on the basis of
a year of 365 or 366 days, as the case may be, and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).



(l) IT IS THE INTENTION OF THE PARTIES HERETO THAT, AS TO ALL PURCHASED ACCOUNTS, THE
TRANSACTIONS CONTEMPLATED HEREBY SHALL CONSTITUTE A TRUE PURCHASE AND SALE OF SUCH ACCOUNTS
INCLUDING, WITHOUT LIMITATION, UNDER § 9-318 OF THE UCC, AND AS SUCH THE SELLER SHALL THEREFORE
HAVE NO LEGAL OR EQUITABLE INTEREST IN ANY PURCHASED ACCOUNTS. NEVERTHELESS, THE PARTIES HERETO
INTEND TO CONTRACT IN STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT. IN
FURTHERANCE THEREOF SUCH PARTIES STIPULATE AND AGREE THAT NONE OF THE TERMS AND PROVISIONS
CONTAINED IN THIS AGREEMENT SHALL EVER BE CONSTRUED TO CREATE A CONTRACT TO PAY, FOR THE USE,
FORBEARANCE OR DETENTION OF MONEY, INTEREST IN EXCESS OF THE MAXIMUM RATE (AS HEREINAFTER DEFINED)
FROM TIME TO TIME IN EFFECT. NEITHER SELLER, ANY PRESENT OR FUTURE GUARANTOR NOR ANY OTHER PERSON
HEREAFTER BECOMING LIABLE FOR THE PAYMENT OF THE ADVANCES, OR ANY OTHER AMOUNTS PAYABLE HEREUNDER,
SHALL EVER BE LIABLE FOR ANY OBLIGATION THAT MAY BE CHARACTERIZED AS UNEARNED INTEREST THEREON, OR
SHALL EVER BE REQUIRED TO PAY ANY OBLIGATION THAT MAY BE CHARACTERIZED AS INTEREST THEREON, IN
EITHER CASE THAT IS IN EXCESS OF THE MAXIMUM AMOUNT THAT MAY BE LAWFULLY CHARGED UNDER APPLICABLE
LAW FROM TIME TO TIME IN EFFECT, AND THE PROVISIONS OF THIS SECTION SHALL CONTROL OVER ALL OTHER
PROVISIONS OF THIS AGREEMENT WHICH MAY BE IN CONFLICT THEREWITH. IF ANY INDEBTEDNESS OR OBLIGATION
OWED BY SELLER HEREUNDER IS DETERMINED TO BE IN EXCESS OF THE LEGAL MAXIMUM, OR FGI SHALL OTHERWISE
COLLECT MONEYS WHICH ARE DETERMINED TO CONSTITUTE INTEREST WHICH WOULD OTHERWISE INCREASE THE
INTEREST ON ALL OR ANY PART OF ANY INDEBTEDNESS OR OBLIGATIONS HEREUNDER TO AN AMOUNT IN EXCESS OF
THAT PERMITTED TO BE CHARGED BY APPLICABLE LAW THEN IN EFFECT, THEN ALL SUCH SUMS DETERMINED TO
CONSTITUTE INTEREST IN EXCESS OF SUCH LEGAL LIMIT SHALL, WITHOUT PENALTY, BE PROMPTLY APPLIED TO
REDUCE THE THEN OUTSTANDING INDEBTEDNESS OR OBLIGATIONS OF SELLER HEREUNDER OR, AT FGI’S OPTION,
RETURNED TO SELLER OR THE OTHER PAYOR THEREOF UPON SUCH DETERMINATION. IF AT ANY TIME THE RATE AT
WHICH INTEREST IS PAYABLE HEREUNDER EXCEEDS THE MAXIMUM RATE, THE AMOUNT OUTSTANDING HEREUNDER
SHALL CEASE BEARING INTEREST UNTIL SUCH TIME AS THE TOTAL AMOUNT OF INTEREST ACCRUED HEREUNDER
EQUALS (BUT DOES NOT EXCEED) INTEREST CALCULATED AT THE MAXIMUM RATE. AS USED IN THIS
SECTION, THE TERM “APPLICABLE LAW” MEANS THE LAWS OF THE STATE OF NEW YORK OR, IF DIFFERENT,
THE LAWS OF THE STATE, TERRITORY OR OTHER JURISDICTION IN WHICH SELLER RESIDES, WHICHEVER LAW
ALLOWS THE GREATER RATE OF INTEREST, AS SUCH LAWS NOW EXIST OR MAY BE CHANGED OR AMENDED OR COME
INTO EFFECT IN THE FUTURE AND THE TERM “MAXIMUM RATE” MEANS THE MAXIMUM NONUSURIOUS RATE OF
INTEREST THAT FGI IS PERMITTED UNDER APPLICABLE LAW TO CONTRACT FOR, TAKE, CHARGE OR RECEIVE WITH
RESPECT TO THE ADVANCES OR ANY OTHER INDEBTEDNESS OR OBLIGATIONS HEREUNDER.


 


 









 





(m) FGI shall provide Seller online access via a secured website to information on the
Purchased Accounts and a reconciliation of the relationship relating to billing, collection and
account maintenance such as aging, posting, error resolution, interest and fees payable hereunder,
and mailing of statements in the ordinary course of FGI’s business. All of the foregoing shall be
in a format, and in such detail, as FGI, in its sole and absolute discretion, deems appropriate.
Furthermore, FGI’s books and records shall be admissible in evidence without objection as prima
facie evidence of the status of the Purchased and non-purchased Accounts and the Reserve Account.
Each statement, report, or accounting rendered or issued by FGI to Seller, if any, and all online
information shall be deemed conclusively accurate and binding on Seller unless within twenty-one
(21) days after the date of issuance or posting Seller notifies FGI to the contrary by registered
or certified mail, setting forth with specificity the reasons why Seller believes such statement,
report, or accounting is inaccurate, as well as what Seller believes to be correct amount(s)
therefor. FGI’s failure to provide or Seller’s failure to receive such online access shall not
relieve Seller of Seller’s obligations under this Agreement or the responsibility of Seller to
request such statement and Seller’s failure to do so shall nonetheless bind Seller to whatever
FGI’s records would have reported.



Section 4. Seller’s Representations, Warranties and Covenants. Seller, as well as each of Seller’s
principals, represent, warrant and covenant, jointly and severally, to FGI that:



(a) Seller is a corporation, is duly organized, validly existing and in good standing under
the laws of Delaware and is qualified and authorized to do business and is in good standing in all
states in which such qualification and good standing are necessary or desirable.



(b) The execution, delivery and performance by Seller of this Agreement does not and will not
constitute a violation of any applicable law, or a violation of Seller’s [articles of
incorporation/articles of organization], [bylaws/operating agreement], or other organizational
documents and does not and will not constitute any material breach of any other material document,
agreement or instrument to which Seller is a party or by which Seller is bound.



(c) Seller has all requisite power and authority to enter into and perform this Agreement, and
has taken all necessary action to authorize the execution, delivery and performance of this
Agreement and all other documents, instruments and agreements executed in connection herewith.
This Agreement is a legal, valid and binding obligation of Seller enforceable against it in
accordance with its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’
rights generally and by general equitable principles.



(d) Immediately prior to the execution and at the time of delivery of each Schedule of
Accounts, Seller will be the sole owner and holder of each of the Accounts described thereon and
its Related Rights. Upon FGI’s purchase of an Account and its Related Rights in accordance with
Section 2(d) hereof, FGI shall become the sole owner and holder of such Purchased Account and
Related Rights.



(e) At the time of sale to FGI hereunder, no Purchased Account or Related Rights shall have
been previously sold or transferred or be subject to any lien, encumbrance, security interest or
other claim of any kind of nature. Seller will not factor, sell, transfer, pledge or give a
security interest in any of its Accounts or Related Rights to anyone other than FGI. There are and
will be no Financing Statements on file in any public office covering any Collateral, any Purchased
Accounts or their Related Rights except in favor of FGI or those statements now on file
specifically listed on Schedule 4(e) attached hereto. Seller will not execute any security
agreement or authorize the filing of any Financing Statement in respect of any Collateral, any
Purchased Accounts or their Related Rights in favor of any Person, except FGI, during the Term of
this Agreement.


 


 









 





(f) The amount of each Purchased Account will, immediately prior to its sale to FGI pursuant
hereto, be due and owing to Seller and represent a bona fide sale, delivery and acceptance of Goods
or performance of services by Seller to or for an Account Debtor. The information regarding an
Account on each Schedule of Accounts will be accurate. The terms for payment of each Purchased
Account will be no greater than sixty (60) days from date of invoice and the payment of such
Purchased Account will not be contingent upon the fulfillment by Seller of any further performance
of any nature whatsoever. Each Account Debtor which is the obligor in respect of an Account that
is listed on a Schedule of Accounts will, to the best of Seller’s knowledge, be solvent at the time
Seller provides such Schedule to FGI.



(g) There are and shall be no set-offs, allowances, discounts, deductions, counterclaims, or
disputes with respect to any Purchased Account, without notice and prior written consent of FGI.
Seller shall inform FGI, in writing, immediately upon learning that there exists any Purchased
Account which is subject to a Dispute. Seller shall accept no returns and shall grant no allowance
or credit to any Account Debtor with respect to a Purchased Account without the prior written
consent of FGI. On the second business day of each calendar week, Seller shall provide to FGI, for
each Account Debtor who is indebted on a Purchased Account, a weekly report in a form and substance
satisfactory to FGI itemizing all such returns and allowances made during the previous week with
respect such Purchased Account and at FGI’s option a check (or wire transfer) payable to FGI for
the amount thereof or, in FGI’s sole and exclusive discretion, FGI may accept the issuance of a
credit memo and charge same to the Reserve Account.



(h) Seller’s address, as set forth in any Application submitted to FGI, is and will be
Seller’s mailing address, chief executive office, principal place of business and the office where
all of the books and records concerning the Purchased Accounts are and will be maintained, and
which shall not be changed without giving thirty (30) days prior written notice to FGI. Seller
will not change its name without giving thirty (30) days prior written notice to FGI.



(i) Seller shall maintain its books and records in accordance with GAAP and shall reflect on
its books the absolute sale of the Purchased Accounts and their Related Rights to FGI. Seller
shall furnish FGI, upon request, such information and statements as FGI shall request from time to
time and at any time regarding Seller’s business affairs, financial condition and results of its
operations. Without limiting the generality of the foregoing, Seller shall provide FGI, on or
prior to the thirtieth (30th) day of each month, unaudited financial statements with
respect to the prior month and, within one hundred and twenty (120) days after the end of each of
Seller’s fiscal years, annual consolidated financial statements for it and its Affiliates that are
consolidated with it, and such certificates relating to the foregoing as FGI may request including,
a monthly certificate from the president and chief financial officer of Seller stating that no
Event of Default exists or if any Event of Default exists stating in detail the nature of each
Event of Default. Seller will furnish to FGI upon request a current listing of all open and unpaid
accounts payable and Accounts, and such other items of information that FGI may deem necessary or
appropriate from time to time. Unless otherwise expressly provided herein or unless FGI otherwise
consents, all financial statements and reports furnished to FGI hereunder shall be prepared and all
financial computations and determinations pursuant hereto shall be made in accordance with GAAP,
consistently applied.



(j) Seller has filed and will file all tax returns required to be filed in any jurisdiction
where Seller conducts business and Seller has paid and will pay all taxes and governmental charges
(including taxes and charges imposed with respect to any sale of Goods or provision of services)
and furnish to FGI upon request satisfactory proof of payment and compliance with all federal,
state and local tax requirements.



(k) There are, and at any time that Seller provides a Schedule of Accounts to FGI pursuant
hereto there will be, no lawsuits against Seller involving amounts greater than $50,000 (or the
equivalent thereof in any currency) except as disclosed in writing to FGI before the date hereof or
the date of providing such Schedule, and Seller will promptly notify FGI of (i) the filing of any
lawsuit against Seller involving amounts greater than $50,000 (or the equivalent thereof in any
currency), and (ii) any attachment or any other legal process levied against Seller.



(l) The Application made or delivered by or on behalf of Seller in connection with this
Agreement, and the statements made therein, are true and correct at the time that this Agreement is
executed. There is no fact which Seller has not disclosed to FGI in writing which could reasonably
be expected to materially adversely affect
the properties, business, financial condition or prospects of Seller, or any of the Accounts
or other Collateral, or which is necessary to disclose in order to keep the foregoing
representations and warranties from being misleading.


 


 









 





(m) In no event shall the funds paid to Seller hereunder be used directly or indirectly for
personal, family, household or agricultural purposes.



(n) Seller does, and will do, business under no trade or assumed names other than specifically
listed on Schedule 4(n) attached hereto.



(o) Any invoice or written communication that Seller will send to FGI by facsimile
transmission or email will be a duplicate of the original.



(p) Any electronic communication of data, whether by e-mail, tape, disk, or otherwise, that
Seller remits or causes to be remitted to FGI shall be authentic and genuine.



(q) Seller has obtained and will obtain all licenses, permits, franchises or other
governmental authorizations necessary for the ownership of its property and for the conduct of its
business.



(r) After giving effect to the transactions contemplated under this Agreement, Seller is and
will be solvent, is and will be able to pay its debts as they become due, and has and will have
capital sufficient to carry on its business and all businesses in which it is or will be about to
engage, and now owns and will own property having a value both at fair valuation and at fair
salable value greater than the amount required to pay Seller’s debts. Seller will not be rendered
insolvent by the execution and delivery of this Agreement or by the transactions contemplated
hereunder.



(s) Seller shall continue in the business presently operated by it using its best efforts to
maintain its customers and goodwill.



(t) Seller shall deliver written notice to FGI promptly upon becoming aware of the existence
of (i) any condition or event which constitutes a Default or Event of Default, specifying the
nature and period of existence thereof and what action Seller is taking (and proposes to take) with
respect thereto or (ii) any notice of default, oral or written, given to Seller by any creditor for
indebtedness for borrowed money in excess of $50,000 (or the equivalent thereof in any currency).



(u) Seller shall permit any of FGI’s officers or other representatives to visit and inspect
upon reasonable notice during business hours any of the locations of Seller, to examine and audit
all of Seller’s books of account, records, reports and other papers, to make copies and extracts
therefrom and to discuss its affairs, finances and accounts with its officers, employees and
independent accountants all at Seller’s expense at the standard rates charged by FGI for such
activities, plus FGI’s reasonable out-of-pocket expenses. Such expenses incurred shall be limited
to $30,000 in the course of a year (unless an Event of Default then exists and is continuing in
which case Seller shall reimburse FGI for reasonable out-of-pocket expenses for all visits).



(v) Seller agrees that, immediately upon becoming aware of any development or other
information outside the ordinary course of business, excluding matters of a general economic,
financial or political nature, which would reasonably be expected to have a material adverse effect
on the properties, business, financial condition or prospects of Seller, it shall give to FGI
telephonic notice specifying the nature of such development or information and such anticipated
effect. In addition, such verbal communication shall be confirmed by written notice thereof to FGI
on the same day such verbal communication is made or the next business day thereafter.



(w) Seller will immediately notify FGI in writing in the event that Seller becomes a party to
or obtains any rights with respect to any Commercial Tort Claim. Such notification shall include
information sufficient to describe such Commercial Tort Claim, including, but not limited to, the
parties to the claim, the court in which the claim was commenced, the docket number assigned to
such claim, if any, and a detailed explanation of the events that gave rise to the claim. All
Commercial Tort Claims to which Seller has any rights as of the date hereof are listed on
Schedule 4(w) attached hereto. Seller shall execute and deliver to FGI all documents
and/or agreements
necessary to grant FGI a security interest in such Commercial Tort Claim to secure the
Obligations. Seller authorizes FGI to file (without Seller’s signature) Financing Statements as
FGI deems necessary to perfect its security interest in any Commercial Tort Claim.


 


 









 




(x) Seller shall provide FGI with written notice of any letters of credit for which Seller is
the beneficiary. Seller shall execute and deliver (or cause to be executed or delivered) to FGI
all documents and agreements as FGI may require in order to obtain and perfect its security
interest in the related Letter-of-Credit Rights.



(y) Seller shall not engage in any transaction or series of related transactions pursuant to
which (A) a Person or group of Persons acquires (i) voting securities of Seller constituting
greater than 50% of the issued and outstanding voting securities of Seller and/or entitling such
Person or group to elect a majority of Seller’s board of directors (whether by merger,
amalgamation, consolidation, recapitalization, division, conversion or otherwise) without the
consent of FGI and which consent shall not be unreasonably withheld or delayed or (ii) all or
substantially all of Seller’s assets determined on a consolidated basis, or (B) Seller is wound
up, dissolved or liquidated or otherwise ceases to be in existence in the form as of the date
hereof.



(z) Excepting the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection, Seller shall not become or be liable, directly or indirectly, primary or
secondary, matured or contingent, in any manner, whether as guarantor, surety, accommodation maker,
or otherwise, for the existing or future indebtedness of any kind of any Person without the consent
of FGI and which consent shall not be unreasonably withheld or delayed.



(aa) Seller shall not without FGI’s prior written consent: (i) declare or pay or make any
forms of distribution or dividend to holders of Seller’s capital stock, membership interest or
other equity interest; (ii) declare or pay any bonus compensation to its officers if a Default or
Event of Default exists or would result from the payment thereof; or (iii) hereafter incur or
become liable for any indebtedness.



(bb) Seller shall not make or have outstanding loans, advances, extensions of credit or
capital contributions to, or investments in, any Person other than with Affiliates with which it is
consolidated for accounting purposes and other than those in existence as of the date hereof.



(cc) Seller shall not use FGI’s name in connection with any of its business operations other
than in connection with references to this agreement. Nothing herein contained is intended to
permit or authorize Seller to make any contract on behalf of FGI.



(dd) Seller shall not become or be a party to any contract or agreement which at the time of
becoming a party to such contract or agreement materially impairs Seller’s ability to perform under
this Agreement, or under any other instrument, agreement or document to which Seller is a party or
by which it is or may be bound.



(ee) Seller shall not amend any license agreements with respect to Inventory without the prior
written consent of FGI and which consent shall not be unreasonably withheld or delayed.



Section 5. Notice of Purchase. Seller authorizes FGI to file, and Seller shall execute and deliver
to FGI and/or file at such times and places as FGI may designate, such Financing Statements as are
necessary or desirable to give notice of, and to perfect and maintain the perfection of, FGI’s
purchase of the Purchased Accounts and their Related Rights and FGI’s security interest in the
Collateral as provided herein.


 


 









 







Section 6. Collateral.



(a) In order to secure the payment of all indebtedness and obligations of Seller to FGI
(including the Obligations), Seller hereby grants to FGI a mortgage, charge, assignment, pledge,
security interest and lien (collectively, “FGI’s Security”) in and upon all of Seller’s right,
title and interest in and to all of the Collateral. Seller agrees to comply with all appropriate
laws in order to perfect FGI’s security interest in and to the Collateral
and to execute such documents as FGI may, from time to time, require and to deliver to FGI a list
of all locations of its Inventory, Equipment and Goods. Seller shall provide written notice to FGI
of any change in the locations at which it keeps its material Inventory, Equipment and Goods at
least thirty (30) days prior to any such change. The occurrence of any Event of Default shall
entitle FGI to all of the default rights and remedies (without limiting the other rights and
remedies exercisable by FGI either prior or subsequent to an Event of Default) as are available to
a secured party under the UCC in effect in any applicable jurisdiction. FGI shall consider, in its
reasonable discretion, the subordination of its security interest in certain collateral to other
financial institutions upon terms and conditions reasonably acceptable to FGI.



Section 7. Collection.



(a) Seller shall notify all its Account Debtors, in the form of Schedule 7(a) attached hereto
or in such other form as FGI shall require, and take other necessary or appropriate means to insure
that all of Seller’s Accounts, whether or not purchased by FGI, shall be paid directly to FGI at
the remittance address or by the wire instructions set forth below. FGI shall have the right at
any time, either before or after the occurrence of an Event of Default and without notice to
Seller, to direct any or all Account Debtors of Seller to make payment of all amounts due or to
become due to Seller directly to FGI. As to any Account proceeds that do not represent Purchased
Accounts, and so long as no Event of Default has occurred, FGI shall be deemed to have received any
such proceeds of Accounts as a pure pass-through for and on account of Seller; provided, however,
that FGI may retain, in its sole and absolute discretion, any such amounts as additional reserves
in the Reserve Account.



	 	 	 
	Wire Instructions (USD):

	 	Mailing Address:
	Bank Name: 

	 	
	ABA/Routing #: 

	 	
	Swift:

	 	
	Beneficiary: 
	 	 
	Account #: 
	 	 






(b) FGI, as the sole and absolute owner of the Purchased Accounts and their Related Rights,
shall have the sole and exclusive power and authority to collect such Purchased Accounts and
Related Rights, through legal action or otherwise, and FGI may, in its sole discretion, settle,
compromise, or assign (in whole or in part) any of such Purchased Accounts and Related Rights, or
otherwise exercise, to the maximum extent permitted by applicable law, any other right now existing
or hereafter arising with respect to any of such Purchased Accounts and Related Rights.



Section 8. Payments Received by Seller. Should Seller receive payment of all or any portion of any
Purchased Account or, after the occurrence and during the continuation of a Default, of any other
Account, Seller shall immediately notify FGI in writing of the receipt of the payment, hold said
payment in trust for FGI separate and apart from Seller’s own property and funds, and shall deliver
said payment to FGI without delay in the identical form in which received with all necessary
endorsements. Should Seller receive any check or other payment instrument with respect to a
Purchased Account or, after the occurrence and during the continuation of a Default, with respect
to any other Account, and fail to surrender and deliver to FGI said check or payment instrument on
the second business day following the date of receipt by Seller, FGI shall be entitled to charge
Seller a Misdirected Payment Fee to compensate FGI for the additional administrative expenses that
the parties acknowledge is likely to be incurred as a result of such breach. In the event any
Goods, the sale of which gave rise to a Purchased Account, are returned to or repossessed by
Seller, such Goods shall be held by Seller in trust for FGI, separate and apart from Seller’s own
property and subject to FGI’s sole direction and control.


 


 









 





Section 9. Power of Attorney. Seller grants to FGI an irrevocable power of attorney authorizing
and permitting FGI, at its option, with or without notice to Seller to do any or all of the
following: (a) endorse the name of Seller on any checks or other evidences of payment whatsoever
that may come into the possession of FGI regarding Purchased Accounts, their Related Rights or
Collateral, including checks or other payment instruments received by FGI pursuant to Section 8
hereof; (b) upon the occurrence and during the continuance of an Event of
Default, receive, open and dispose of any mail addressed to Seller and put FGI’s address on any
statements mailed to Account Debtors; (c) upon providing prior written notice to Seller, pay,
settle, compromise, prosecute or defend any action, claim, conditional waiver and release, or
proceeding relating to Purchased Accounts, their Related Rights or Collateral; (d) upon the
occurrence of an Event of Default, notify in the name of the Seller, the U.S. Post Office to change
the address for delivery of mail addressed to Seller to such address as FGI may designate;
provided, however, that FGI shall turn over to Seller all such mail not relating to Purchased
Accounts, their Related Rights or Collateral; (e) file any Financing Statements deemed necessary or
appropriate by FGI to protect FGI’s interest in and to the Purchased Accounts, their Related Rights
or Collateral, or under any provision of this Agreement; (f) upon the occurrence and during the
continuance of an Event of Default, effect debits to any demand deposit or other deposit account
that Seller maintains at any bank, trust company, savings and loan association, credit union, other
financial institution or like organization for any sums due to or from the Seller under this
Agreement; and (g) and upon the occurrence and during the continuance of an Event of Default, to do
all other things necessary and proper in order to carry out this Agreement. The powers and
authority granted to FGI herein are coupled with an interest and are irrevocable until this
Agreement is terminated and all Obligations are fully satisfied.



Section 10. Default and Remedies. An Event of Default shall be deemed to have occurred hereunder
and FGI may immediately exercise its rights and remedies with respect to the Collateral under this
Agreement, at law, in equity, under statute and otherwise, upon the happening of one or more of the
following: (a) Seller shall fail to pay as and when due any amount owed to FGI; (b) (i) the
commencement of any action for the dissolution, winding up or liquidation of Seller, or the
commencement of any proceeding to avoid any transaction entered into by Seller, or the commencement
of any case or proceeding for reorganization or liquidation of Seller or Seller’s debts under the
Bankruptcy Code or any other state or federal law now or hereafter enacted, for the relief of
debtors, whether instituted by or against Seller; provided, however, that Seller shall have thirty
(30) days to obtain the dismissal or discharge of involuntary proceedings filed against it,
provided further that such grace period will cease to apply if (x) an order, decree or judgment is
granted or entered thereunder (whether or not entered or subject to appeal) against or with respect
to Seller in the interim or (y) Seller files an answer admitting the material allegations of a
petition or other material filed against it in any such proceeding, (ii) Seller makes or proposes
in writing an assignment for the benefit of creditors generally, offers a composition or extension
to creditors, or makes or sends notice of an intended bulk sale of any business or assets now or
hereafter owned or conducted by Seller or (iii) the appointment of a receiver, receiver and
manager, liquidator, custodian, trustee or similar official or fiduciary for Seller or for Seller’s
property; provided, however, that Seller shall have thirty (30) days to obtain the dismissal or
discharge of involuntary proceedings filed against it, provided further that such grace period will
cease to apply if (x) an order, decree or judgment is granted or entered thereunder (whether or not
entered or subject to appeal) against or with respect to Seller in the interim or (y) Seller files
an answer admitting the material allegations of a petition or other material filed against it in
any such proceeding; (c) Seller shall become insolvent in that its debts are greater than the fair
value of its assets, or Seller is generally not paying its debts as they become due; (d) any lien,
garnishment, attachment or the like shall be issued against or shall attach to the Purchased
Accounts, their Related Rights, the Collateral or any portion thereof and the same is not released
within ten (10) days; (e) Seller suffers the entry against it for a final judgment for the payment
of money in excess of $50,000 (or the equivalent thereof in any currency), unless the same is
discharged within thirty (30) days after the date of entry thereof or an appeal or appropriate
proceeding for review thereof is taken within such period and a stay of execution pending such
appeal is obtained; (f) Seller shall breach any covenant, warranty or representation set forth
herein and such breach continues for ten (10) days or the same shall be untrue when made; (g) any
report, certificate, schedule, financial statement, profit and loss statement or other statement
furnished by Seller, or by any other Person on behalf of Seller, to FGI is not true and correct in
any material respect when so furnished; (h) Seller shall have a federal or state tax lien filed
against any of its properties, or shall fail to pay any federal or state tax when due, or shall
fail to file any federal or state tax form as and when due; or (i) a material adverse change shall
have occurred in Seller’s financial condition, business, operations or prospects. Upon the
occurrence of an Event of Default, all obligations owing to FGI (including the Obligations) shall
become immediately due and payable at the option of FGI (provided, that, upon the occurrence of an
Event of Default under clause (b) above, all such amounts shall become immediately due and payable
without further notice or demand) and FGI shall be entitled to all rights it has by law as a
secured creditor, including as to any form of equitable relief that may be appropriately obtained
through legal process without having to establish any inadequate remedy at law or other grounds
other than to establish that its Collateral is subject to being improperly used, moved dissipated
or withheld from FGI. All post-judgment interest shall bear interest at the greater of the
contract rate and 18% per annum.


 


 









 





Section 11. Cumulative Rights; Waivers. All rights, remedies and powers granted to FGI in this
Agreement, or in any other instrument or agreement given by Seller to FGI or otherwise available to
FGI in equity, at law, by statute or otherwise, are cumulative and may be exercised singularly or
concurrently with such other rights as FGI may have. These rights may be exercised from time to
time as to all or any part of the Purchased Accounts and their Related Rights or the Collateral as
FGI in its sole and absolute discretion may determine. In the event that any part of this
transaction between Seller and FGI is construed to be a loan from FGI to Seller, Seller’s
obligation to repay any Advances or other Obligations shall be secured by any interest Seller may
have in such Account and its Related Rights as well as by the other Collateral and FGI shall have
all rights and remedies available to FGI with respect thereto in addition to its rights and
remedies referred to herein. FGI will not be held to have waived its rights and remedies unless
the waiver is in writing and signed by FGI. A waiver by FGI of a right, remedy or default under
this Agreement on one occasion is not a waiver of any right, remedy or default on any subsequent
occasion. Any failure by FGI to exercise, or any delay by FGI in exercising, any right shall not
in any manner impair the subsequent exercise by FGI of any of its rights.



Section 12. Notices. Any notice or communication with respect to this Agreement shall be given in
writing, sent by (i) personal delivery, or (ii) expedited delivery service with proof of delivery,
or (iii) United States mail, postage prepaid, registered or certified mail, or (iv) facsimile or
email, addressed to each party hereto at its address set forth below or to such other address or to
the attention of such other person as hereafter shall be designated in writing by the applicable
party sent in accordance herewith. Any such notice or communication shall be deemed to have been
given either at the time of personal delivery or, in the case of delivery service or mail, as of
the date of first attempted delivery at the address and in the manner provided herein, or in the
case of facsimile, upon receipt.



	 	 	 
	FGI Finance

	 	Clean Diesel Technologies Inc.
	80 Broad Street

	 	4567 Telephone Road, Suite 206
	22nd Floor

	 	Ventura, CA. 93003
	New York, NY 10004

	 	Fax:
	Fax:
	 	 
	Email:

	 	Email:






Section 13. Term. Subject to the last sentence of this Section 13, the Original Term of this
Agreement shall be twenty four (24) months from the date of this Agreement, which shall thereafter
be extended automatically for additional one (1) year term after the termination of the Original
Term and each automatic extension unless written notice of termination is given by one party hereto
to the other party hereto at least forty-five (45) days, but not more than ninety (90) days, prior
to the end of the Original Term or any extension thereof. Any such notice of termination, however,
and notwithstanding payment in full of all Obligations by Seller, is conditioned on Seller’s
delivery, to FGI, of a general release in a form reasonably satisfactory to FGI. Seller understands
that this provision constitutes a waiver of its rights under § 9-513 of the UCC. FGI shall not be
required to record any terminations or satisfactions of any of FGI’s liens on the Collateral unless
and until Seller has executed and delivered to FGI said general release and Seller shall have no
authority to do so without FGI’s express written consent. Upon (i) the termination of this
Agreement, (ii) the payment in full of all Obligations by Seller and (iii) Seller’s delivery to FGI
of said general release, FGI shall cause any Purchased Accounts to be assigned back to Seller
without representation or warranty pursuant to documentation acceptable to FGI within a
commercially reasonable period after a written request for reassignment of such Purchased Accounts
has been delivered to FGI. In the event Seller terminates this Agreement within the first 360
days following the commencement of this Agreement, Seller shall also pay to FGI an early
Termination Fee in the amount of one hundred and fifty thousand dollars ($150,000.00), less any
early Termination Fees paid to FGI under (and as defined in) any Covered Affiliate Agreements. In
the event that Seller terminates this Agreement after the first 360 days, but prior to the end of
the Original Term of this Agreement, Seller shall pay to FGI an early Termination Fee in the amount
of seventy six thousand dollars ($76,000.00), less any early Termination Fees paid to FGI under
(and as defined in) any Covered Affiliate Agreements. Any termination of this Agreement shall not
affect FGI’s security interest in the Collateral and FGI’s ownership of the Purchased Accounts, and
this Agreement shall continue to be effective, until all transactions entered into and obligations
incurred hereunder have been completed and satisfied in full. Notwithstanding anything to the
contrary, and assuming no default by Seller in which event FGI may terminate without notice, FGI
may terminate this
Agreement at any time by giving not less than sixty (60) days notice in which event, Seller shall
not be obligated to pay any Termination Fee.


 


 









 







No Termination Fee will be due if FGI, within its rights under this Agreement, increases the
Reserve Percentage to an amount greater than forty percent (40%) for a period of more than 30
consecutive days and Seller notifies FGI of its intent to terminate this Agreement no later than 10
days after the end of such 30 day period.



Section 14. Expenses. Upon execution of this Agreement, and from time to time thereafter, Seller
will pay upon demand of FGI all costs, fees and expenses of FGI in connection with (i) the
analysis, negotiation, preparation, execution, administration, delivery and termination of this
Agreement and the documents and instruments referred to herein, and any amendment, amendment and
restatement, supplement, waiver or consent relating hereto or thereto, whether or not any such
amendment, amendment and restatement, supplement, waiver or consent is executed or becomes
effective, including search and registration costs, the reasonable fees, expenses and disbursements
of counsel for FGI, reasonable charges of any expert or consultant to FGI and reimbursement for
premiums incurred by FGI to insure against nonpayment of the Accounts or other insurable losses to
the Collateral, (ii) the enforcement of FGI’s rights hereunder, or the collection of any payments
owing from Seller under this Agreement or the protection, preservation or defense of the rights of
FGI hereunder or with respect to the Collateral, (iii) the enforcement of FGI’s rights with respect
to any of the Collateral, any Purchased Accounts or any of their Related Rights, including the
collection of any payments owing from any Account Debtors with respect to any Accounts (including
the reasonable fees, expenses and disbursements of counsel for FGI), and (iv) any refinancing or
restructuring of the arrangements provided under this Agreement in the nature of a “work-out” or of
any insolvency or bankruptcy proceedings, or otherwise (including the reasonable fees and
disbursements of counsel for FGI). Seller hereby authorizes FGI, at FGI’s sole discretion, to
charge such fees, costs and expenses, and all other Obligations, to the Reserve Account or Seller
may make demand therefor.



Section 15. Indemnity. Seller releases and shall indemnify, defend and hold harmless FGI and its
respective officers, shareholders, employees and agents, of and from any claims, demands,
liabilities, obligations, judgments, injuries, losses, damages and costs and expenses (including,
without limitation, reasonable legal fees) resulting from (i) acts or conduct of Seller under,
pursuant to or related to this Agreement, (ii) Seller’s breach or violation of any representation,
warranty, covenant or undertaking contained in this Agreement, (iii) Seller’s failure to comply
with any or all laws, statutes, ordinances, governmental rules, regulations or standards, whether
federal, state or local, or court or administrative orders or decrees, (iv) any claim by any third
party, including any other creditor of Seller, against FGI arising out of any transaction whether
hereunder or in any way related to this Agreement and (v) all costs, expenses, fines, penalties or
other damages resulting from any of the foregoing, except to the extent resulting solely from acts
or conduct of FGI constituting willful misconduct or gross negligence.



Section 16. Severability. Each and every provision, condition, covenant and representation
contained in this Agreement is, and shall be construed to be, a separate and independent covenant
and agreement. If any term or provision of this Agreement shall to any extent be invalid or
unenforceable, the remainder of the Agreement shall not be affected thereby.



Section 17. Parties in Interest. All grants, covenants and agreements contained in this Agreement
shall bind and inure to the benefit of the parties hereto and their respective successors and
permitted assigns; provided, however, that Seller may not delegate or assign any of its rights,
duties or obligations under this Agreement without the prior written consent of FGI. FGI reserves
the right to assign its rights and obligations under this Agreement in whole or in part to any
Person.



Section 18. Governing Law: Submission to Process and Venue. This agreement shall be deemed a
contract made under the laws of the State of New York and shall be construed and enforced, along
with all matters arising hereunder or related hereto, in accordance with and governed by the
internal laws of the State of New York, without reference to the rules thereof relating to
conflicts of law. Seller hereby irrevocably submits itself to the non-exclusive jurisdiction of
the state and federal courts located in New York, and agrees and consents that service of process
may be made upon it in any legal proceeding relating to this Agreement, the purchase of Accounts or
any other relationship between FGI and Seller by any means allowed under state or federal law. Any
legal proceeding arising out of or in any way related to this agreement, the purchase of Accounts
or any other relationship between
FGI and Seller may be brought and litigated in any of the state or federal courts located in the
State of New York in any county in which FGI has a business location, the selection of which shall
be in the exclusive discretion of FGI. Seller hereby waives and agrees not to assert, by way of
motion, as a defense or otherwise, that any such proceeding is brought in any inconvenient forum or
that the venue thereof is improper.


 


 









 





Section 19. Complete Agreement. This Agreement, the written documents executed pursuant to this
Agreement, if any, and any acknowledgment delivered in connection herewith set forth the entire
understanding and agreement of the parties hereto with respect to the transactions contemplated
herein and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. No modification or amendment of or supplement to this Agreement shall
be valid or effective unless the same is in writing and signed by the party against whom it is
sought to be enforced.



Section 20. Miscellaneous.



(a) Seller acknowledges that there is no fiduciary relationship between FGI and Seller created
by this Agreement, and Seller waives any right to assert, now or in the future, the existence or
creation of any fiduciary relationship between FGI and Seller with respect to this Agreement in any
action or proceeding (whether by way of claim, counterclaim, crossclaim or otherwise) for damages.



(b) This Agreement shall be deemed to be one of financial accommodation and not assumable by
any debtor, trustee or debtor-in-possession in any bankruptcy proceeding without FGI’s express
written consent and may be suspended in the event a petition in bankruptcy is filed by or against
Seller.



(c) In the event Seller’s principals, officers or directors form a new entity, whether a
corporation, partnership, limited liability company or otherwise, similar to that of Seller during
the Term of this Agreement and in connection with such action transfer assets constituting
Collateral from Seller to such entity, such entity shall be deemed to have expressly assumed the
obligations due FGI by Seller under this Agreement. Upon the formation of any such entity and the
transfer of such assets constituting Collateral, FGI shall be deemed to have been granted an
irrevocable power of attorney with authority to execute, on behalf of the newly formed successor
business, a new Financing Statement and have it filed with the appropriate governmental office.
FGI shall be held harmless and be relieved of any liability as a result of the resulting perfection
of a lien or security interest in any of the successor entity’s assets. In addition, FGI shall
have the right to notify the successor entity’s Account Debtors of FGI’s lien and other rights, to
collect all Accounts, and to notify any lender or other secured party who has sought to procure a
competing lien or security interest of FGI’s rights in such successor entity’s assets.



(d) Seller expressly authorizes FGI to access the systems of and/or communicate with any third
party with respect to the status of any Goods relating to a Purchased Account, including
warehousemen, bailees, and shipping or trucking companies, in order to obtain or verify tracking,
shipment or delivery status of any Goods relating to a Purchased Account.



(e) Seller acknowledges that the duty to accurately complete each Schedule of Accounts is
critical to this Agreement and as such all obligations with respect thereto must be fulfilled by an
authorized representative of Seller.



(f) Seller shall indemnify and save FGI harmless from any loss arising out of the assertion of
any Avoidance Claim. Seller shall notify FGI within two business days of it becoming aware of the
assertion of an Avoidance Claim.



(g) Seller agrees to execute any and all forms (including, without limitation, Forms 8821
and/or 2848) that FGI may require in order to enable FGI to obtain and receive tax information
issued by the Department of the Treasury, Internal Revenue Service, or receive refund checks.



(h) Seller will cooperate with FGI in obtaining a control agreement in form and substance
satisfactory to FGI with respect to Collateral consisting of Deposit Accounts, Investment Property,
Letter-of-Credit Rights and /or electronic Chattel Paper.


 


 









 





(i) Whenever Seller shall be required to make any payment, or perform any act, on a day which
is not a business day, such payment may be made, or such act may be performed, on the next
succeeding business day. Time is of the essence as to Seller’s performance under all provisions of
this Agreement and all related agreements and documents.



(j) All warranties, representations, and covenants made by Seller herein, or in any agreement
referred to herein or on any certificate, document or other instrument delivered by it or on its
behalf under this Agreement, shall be considered to have been relied upon by FGI regardless of any
investigation made by FGI or on its behalf. All statements in any such certificate or other
instrument prepared and/or delivered for the benefit of FGI shall constitute warranties and
representations by Seller hereunder. Except as otherwise expressly provided herein, all covenants
made by Seller hereunder or under any other agreement or instrument shall be deemed continuing
until all Obligations are satisfied in full. All indemnification obligations under this Agreement
shall survive the termination of this Agreement and payment of the Obligations.



(k) FGI, in its sole discretion, shall have the right to announce and publicize the
arrangement established hereunder, as it deems appropriate, by means and media selected by FGI.
Such publication may include all pertinent information relating to such arrangement. The form and
content of the published information shall be in the sole discretion of FGI and shall be considered
the sole and exclusive property of FGI. All expenses related to publicizing such arrangement shall
be the sole responsibility of FGI.



Section 21. Waiver of Jury Trial, Punitive and Consequential Damages, Etc. Seller and FGI hereby
irrevocably waive any right either may have to a trial by jury in respect of any litigation
directly or indirectly at any time arising out of, under or in connection with this Agreement or
any transaction contemplated hereby or associated herewith. Seller and FGI each irrevocably waives,
to the maximum extent not prohibited by law, any right it may have to claim or recover in any such
litigation any special, exemplary, punitive or consequential damages, or damages other than, or in
addition to, actual damages and Seller hereby releases and exculpates FGI, its officers, employees
and designees, from any liability arising from any acts under this Agreement or in furtherance
thereof whether of omission or commission, and whether based upon any error of judgment or mistake
of law or fact, except for gross negligence or willful misconduct. Seller certifies that no party
hereto nor any representative or agent or counsel for any party hereto has represented, expressly
or otherwise, or implied that such party would not, in the event of litigation, seek to enforce the
foregoing waivers. Seller acknowledges that FGI has been induced to enter into this Agreement and
the transactions contemplated hereby, in part, as a result of the waivers and certifications
contained in this Section.



Section 22. Successors and Assigns. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns. Seller may not
transfer, assign or delegate any of its rights, duties or obligations hereunder. Seller
acknowledges and agrees that FGI may at any time, and from time to time, (a) sell participating
interests in FGI’s rights hereunder, and (b) otherwise sell, transfer, or assign FGI’s rights and
obligations hereunder. No rights are intended to be created hereunder, or under any related
agreements or documents, for the benefit of any third party donee, creditor or incidental
beneficiary of Seller. Nothing contained in this Agreement shall be construed as a delegation to
FGI of Seller’s duty of performance, including, without limitation, Seller’s duties under any
Account or contract with any other Person.



Section 23. Delivery by Electronic Means. This Agreement, the agreements referred to herein, and
each other agreement or instrument entered into in connection herewith or therewith or contemplated
hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by
electronic means, including by means of unalterable files attached to e-mail communications or by
facsimile, shall be treated in all manner and respects as an original agreement or instrument and
shall be considered to have the same binding legal effect as if it were the original signed version
thereof delivered in person. At the request of any party hereto or to any such agreement or
instrument, each other party hereto or thereto shall reexecute original forms thereof and deliver
them to all other parties. No party hereto or to any such agreement or instrument shall raise the
use of electronic means to deliver a signature or the fact that any signature or agreement or
instrument was transmitted or communicated through the use of electronic means as a defense to the
formation or enforceability of a contract and each such party forever waives any such defence.


 


 









 





Section 24. Taxes and Set-off. All payments to be made by Seller hereunder shall be made without
set-off, compensation, deduction or counterclaim and without deduction for any taxes, levies,
duties, fees, deductions, withholdings, restrictions or conditions of any nature whatsoever. If at
any time any applicable law requires Seller to make any such deduction or withholding from any such
payment, the sum due from Seller with respect to such payment shall be increased to the extent
necessary to ensure that, after the making of such deduction or withholding, FGI receives a net sum
equal to the sum which FGI would have received had no deduction or withholding been required.



Section 25. Foreign Currency. If, for the purposes of obtaining judgment in any court in any
jurisdiction with respect to this Agreement or any other agreement between Seller and FGI, it
becomes necessary to convert into a particular currency (the “Judgment Currency”) any amount due
under this Agreement or such other agreement in any currency other than the Judgment Currency (the
“Currency Due”), then conversion shall be made at the rate of exchange prevailing on the business
day (in New York, New York) before the day on which judgment is given. In this Section 24, “rate
of exchange” means the rate at which FGI is able, on the relevant date, to purchase the Currency
Due with the Judgment Currency in accordance with its normal practice at its office in New York,
New York. In the event that there is a change in the rate of exchange prevailing between such
business day and the date of receipt by FGI of the amount due, Seller will, on the date of receipt
by FGI, pay FGI such additional amount, if any, or be entitled to receive reimbursement of such
amount, if any, as may be necessary to ensure that the amount received by FGI on such date is the
amount in the Judgment Currency which when converted at the rate of exchange prevailing on the date
of receipt by it is the amount then due under this Agreement or such other agreement in the
Currency Due. If the amount of the Currency Due which FGI is so able to purchase is less than the
amount of the Currency Due originally due to it, Seller shall indemnify and save FGI harmless from
and against all loss or damage arising as a result of such deficiency. This indemnity shall
constitute an obligation separate and independent from the other obligations contained in this
Agreement and any such other agreement, shall give rise to a separate and independent cause of
action, shall apply irrespective of any indulgence granted by FGI from time to time and shall
continue in full force and effect notwithstanding any judgment or order for a liquidated sum in
respect of an amount due under this Agreement or any such other agreement or under any judgment or
order.



Section 26. Currency Risk




(a) Seller acknowledges that, at Seller’s request, FGI may make Advances and other payments to
Seller hereunder or in connection herewith in one or more currencies other than U.S. Dollars (each
such other currency, a “Foreign Currency”). If Seller requests such Foreign Currency Advances,
Seller hereby agrees to reimburse FGI, on demand, for all reasonable fees, charges and other
expenses, including currency exchange fees and charges, that FGI may pay or otherwise incur in
connection with (i) the purchase of any such Foreign Currency with U.S. Dollars or (ii) the
purchase of U.S. Dollars with any amount FGI receives in a Foreign Currency from Seller or any
other Person under, pursuant to or in respect of this Agreement, any related agreement, any
Purchased Account, any Related Rights or any Collateral.



(b) Seller agrees that it will, on demand, indemnify and save FGI harmless in respect of any
loss (a “Foreign Exchange Loss”) that FGI may incur or suffer as a result of (i) FGI purchasing any
amount in a Foreign Currency with U.S. Dollars in connection with enabling FGI to advance or pay
such amount to or for the credit of Seller as contemplated by this Agreement, (ii) FGI purchasing
any amount in U.S. Dollars with any Foreign Currency that FGI may receive in connection with this
Agreement and (iii) there having occurred any change in applicable rates of exchange in relation to
U.S. Dollars and any Foreign Currency on or after the date hereof (and whether before or after the
end of the Term). In particular, but without in any way limiting the generality of the preceding
sentence, Seller agrees that, if (x) on any day (the “Purchase Date”) FGI purchases with U.S.
Dollars an amount in a Foreign Currency for the purpose of paying such amount in such Foreign
Currency to or for the benefit of Seller pursuant hereto, (y) FGI thereafter receives an amount in
any Foreign Currency from Seller or any other Person under, pursuant to or in respect of this
Agreement, any related agreement, any Purchased Account, any Related Rights or any Collateral, and
(z) there has occurred a change in any applicable rate of exchange following the Purchase Date,
Seller will, on demand, pay FGI such additional amount (whether in U.S. Dollars or a Foreign
Currency) as FGI, in its discretion, believes is desirable to help ensure that the amounts so
received by and paid to FGI, assuming that any such amount received or paid in a Foreign Currency
is converted into U.S. Dollars at the rate of exchange prevailing on the date so received by or
paid to FGI, will be sufficient to ensure that FGI will not suffer
a Foreign Exchange Loss as a result of such matters or transactions. For the purpose of this
Section 25, “rate of exchange” means the rate at which FGI is able, on any particular relevant
date, to purchase U.S. Dollars with a particular Foreign Currency in accordance with its normal
practice at its office in New York, New York.


 


 









 





(c) A certificate of FGI setting forth the amount or amounts to be paid to or by FGI pursuant
to this Section 25, together with a brief calculation thereof, shall be sent to Seller and shall be
conclusive absent manifest error. In preparing any such certificate, FGI shall be entitled to use
averages and make reasonable estimates, and shall not be required to match or isolate particular
transactions or payments. Seller shall pay FGI, or FGI shall pay Seller (or credit to the Reserve
Account), the amount shown as due by Seller or FGI, respectively, on any such certificate within 10
days after receipt thereof by Seller.



Section 27. Interpretation of Agreement. The parties hereto acknowledge and agree that this
Agreement and the agreements or instruments entered into in connection herewith have been
negotiated at arm’s-length and among parties equally sophisticated and knowledgeable in the matters
dealt with in this Agreement or in such agreements or instruments. Accordingly, any rule of law or
legal decision that would require interpretation of any ambiguities in this Agreement or the
agreements or instruments entered into in connection herewith against the party that has drafted it
is not applicable and is waived. The provisions of this Agreement and the agreements and
instruments entered into in connection herewith shall be interpreted in a reasonable manner to
effect the intent of the parties as set forth herein or therein.



SIGNATURES ON FOLLOWING PAGE



 


 









 







IN WITNESS WHEREOF, the parties have set their hands and seals on the day and year first
hereinabove written.



	 	 	 	 	 	 	 	 	 	 	 
	FGI:
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Witness:	 	/s/ Ben Brachot	 	 	 	FAUNUS GROUP INTERNATIONAL, INC.	 	 
	 

	 	 

Name: Ben Brachot
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ David M. DiPiero
 

	 	 
	 

	 	 	 	 	 	 	 	Name: David M. DiPiero	 	 
	 

	 	 	 	 	 	 	 	Title:   President	 	 
	SELLER:
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Witness:	 	/s/ Casey Owen	 	 	 	CLEAN DIESEL TECHNOLOGIES, INC.	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	Name: Casey Owen	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Nikhil A. Mehta	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Name: Nikhil A. Mehta	 	 
	 

	 	 	 	 	 	 	 	Title:   CFO