Document:

ex101.htm

These Securities Have Not Been Registered For Offer or Sale Under The Securities Act Of 1933, As Amended, Or Any State securities laws.  They May Not Be Sold Or Offered For Sale Except Pursuant To An Effective Registration Statement Under Said Act And Any Applicable State Securities Law Or An Applicable
Exemption From Such Registration Requirements.

 

                      AMENDED AND RESTATED STOCK PURCHASE AGREEMENT (this “Agreement”)
is dated as of October 2, 2009, by and between Clean Power Technologies, Inc., a Nevada corporation (the “Company”), and The Quercus Trust, a California Trust (the “Purchaser” and together with the Company, the “Parties”).

 

W I T N E S S E T H:

 

Whereas, the Company and the Purchaser entered into that certain Securities Purchase Agreement on July 10, 2008 providing for the purchase and sale of the Company’s 8% Senior Secured Convertible Promissory Note in the principal fare amount of $2,000,000
(“Debenture”) Class A Warrants and Class B Warrants (the “July 2008 Offering”);

Whereas, subsequent to the July 2008 Offering, the Company and the Purchaser entered into that certain Stock Purchase Agreement on February 10, 2009 (the “February 2009 Offering”) providing for the purchase and sale of the Company’s Common
Stock and warrants;

Whereas, the Parties had agreed at the time of the February 2009 Offering that the sale and purchase of the Securities shall take place in two tranches as follows: (i) an initial purchase
of such shares of the Company’s Common Stock in the aggregate amount of $1,000,000 at a price of $0.45 per share; and (ii) an additional secondary purchase, subject to certain conditions, of such shares of the Company’s Common Stock in the aggregate amount of  $2,000,000 at a purchase price of $0.45 per share (the “Secondary Purchase”);

 

Whereas, the Parties have agreed that the terms of the Secondary Purchase be modified restated in their entirety to consist of the following:  (i) an initial purchase and sale of 2,500,000
shares of the Company’s Common Stock at a purchase price of $0.20 per share, and warrants to purchase an aggregate of 3,125,000 shares of the Company’s common stock at exercise prices of (x) $0.27 per share for the initial 1,875,000 warrants; and (y) $0.38 per share for the remaining 1,250,000 warrants, to take place upon the execution of this Agreement (“Initial Closing”); (ii) the purchase and sale of an additional 1,111,111 shares of the Company’s Common Stock, at the same terms
provided in the February 2009 Offering, to take place on or about October 12, 2009 upon confirmation of the attainment of the Second Closing Milestone, as set forth in the February 2009 Offering (“Milestone Closing”); and thereafter, (iii) the purchase and sale of an additional 2,469,136 shares of the Company’s Common Stock at a purchase price of $0.405 per share, plus the issuance of warrants to purchase an aggregate of 3,086,420 shares
of the Company’s common stock at exercise prices of (x) $0.54 per share for the initial 1,857,852 warrants; and (y) $0.77 per share for the remaining 1,234,568 warrants, to take place immediately upon the appointment of a mutually acceptable 5th member of the Company’s Board of Directors (“Final Closing”); and

 

Whereas, pursuant to the terms hereof, the Purchaser will have registration rights with respect to the Common Stock issued herein and such Common Stock issuable upon the exercise of the Warrants
pursuant to the terms of that certain Registration Rights Agreement to be entered into between the Company and the Purchaser substantially in the form of Exhibit A hereto (“Registration Rights Agreement” and, together with the Agreement and the Warrants (the “Transaction Documents”)

 

 

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Now, Therefore, in consideration of the foregoing premises and the covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

 

Article I.

 

Purchase and Sale of Shares and Warrants

 

Section 1.1 Issuance of Common Stock.  Upon the following terms and conditions, the Company shall issue and sell to the Purchaser, and the
Purchaser shall purchase from the Company, 2,500,000 shares of the Company’s Common Stock (the “Shares”).

 

Section 1.2 Purchase Price.  The purchase price for the Shares to be acquired by the
Purchaser shall be $500,000 (the “Purchase Price”).

 

Section 1.3 The Closing.  The purchase and sale of the Shares shall take place on or about the date hereof or such other date as the Purchaser
and the Company may agree upon (the “Closing Date”); provided that the Closing Date shall be no later than October 31, 2009. Within five (5) business days of the Closing Date, the Company shall deliver to the Purchaser one or more certificates representing the Shares registered in the name of the Purchaser or its nominee.  On or prior to the Closing Date, the
Purchaser shall deliver the Purchase Price by certified check or by wire transfer of immediately available funds:

 

Bank: CIBC

address: 5609-4th street N.W.,

Calgary, Alberta   T2K 1B3

Tel: 403-974-6320

  

Swift: Code:  CIBCCATT

Account #: 02-11516

Transit #: 03029

Account Holder:

Clean Power Technologies Inc

436-35 Avenue N.W.

Calgary, Alberta T2K 0C1

Tel: 403-277-2944

In addition, each party shall deliver all documents, instruments and writings required to be delivered by such party pursuant to this Agreement at or prior to the Closing.  The Securities will be fully owned and paid for by the Purchaser as of the Closing Date.  The account with Gersten Savage LLP shall be referred
to herein as the “Escrow Account”.

 

Section 1.4   Warrants.  In addition to the Shares, at the Closing, the Company will execute and deliver to the Purchaser warrants
to purchase shares of the Company’s Common stock, substantially in the forms attached hereto as Exhibit B (the “Warrants”).  The Warrant shall entitle the holder thereof to purchase shares of the Company’s Common Stock equal to one hundred twenty five percent (125%) of the Shares issued to the Purchaser pursuant hereto at an exercise price of $0.27 per share for the initial 75% of such Warrants (the “$0.27
Warrants”) and at an exercise price of $0.38 per share for the remaining 50% of such Warrants (the “$0.38 Warrants”).  On the Closing Date, the 

 

 

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Company shall issue to the Purchaser $0.27 Warrants to purchase 1,875,000 shares of Common Stock and $0.38 Warrants to purchase 1,250,000 shares of common stock. The Warrants shall have a one (1) year term from the date of issuance.  The shares of Common Stock that are issuable pursuant to the Warrants are hereafter referred to as the “Warrant
Shares.” Additionally, the Company shall issue warrants to the Purchaser as follows: (i) upon the Milestone Closing, the Company shall issue (y) warrants to purchase 833,333 shares of common stock at $0.60 per share; and (z) warrants to purchase 555,555 shares of common stock at $0.85 per share; and (ii) upon the Final Closing,  the Company shall issue (y) warrants to purchase 1,851,852 shares of common stock at $0.54 per share; and (z) warrants to purchase 1,234,568 shares of common stock
at $0.77 per share.

 

 

Article II.

 

Representations and Warranties

 

Section 2.1 Representations and Warranties of the Company.  The Company hereby makes the following representations and warranties to the Purchaser
as of the date hereof and the Closing Date:

 

(a) Organization and Qualification; Material Adverse Effect.  The Company is a corporation duly incorporated and existing in good standing under the
laws of the State of Nevada and has the requisite corporate power to own its properties and to carry on its business as now being conducted.  The Company does not have any subsidiaries other than the subsidiaries listed on Schedule 2.1(a) attached hereto (“Subsidiaries”).  Except where specifically indicated to the contrary, all references in this Agreement
to subsidiaries shall be deemed to refer to all direct and indirect subsidiaries of the Company.  Each Subsidiary has been duly incorporated and is in good standing under the laws of its jurisdiction of incorporation.  The Company and each Subsidiary is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary other than those in which the failure
so to qualify would not have a Material Adverse Effect.  “Material Adverse Effect” means any adverse effect on the business, operations, properties, prospects or financial condition of the Company and its subsidiaries, and which is (either alone or together with all other adverse effects) material to the Company and its Subsidiaries, if any, taken as a whole, and any material adverse effect on the transactions contemplated
under the Transaction Documents.

 

(b) Authorization; Enforcement.  (i)  The Company has all requisite corporate power and authority to enter into and perform its obligations
under the Transaction Documents and to issue the Shares and Warrants in accordance with the terms hereof, (ii) the execution and delivery of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby, including the issuance of the Shares and Warrants, have been duly authorized by all necessary corporate action, and no further consent or authorization of the Company or its Board of Directors (or any committee or subcommittee thereof) or stockholders
is required, (iii) the Transaction Documents have been duly executed and delivered by the Company, (iv) the Transaction Documents constitute valid and binding obligations of the Company enforceable against the Company, except (A) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of creditors' rights and remedies or by other equitable principles of general application, and (B) to
the extent the indemnification provisions contained in this Agreement and the Registration Rights Agreement may be limited by applicable federal or state securities laws and (v) the Shares, the Warrants and the Warrant Shares issuable upon the exercise of the Warrants, have been duly authorized and, upon issuance thereof and payment therefor in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, free and clear of any and all liens, claims and encumbrances.

 

 

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(c) Capitalization.  As of September 28, 2009, the authorized capital stock of the Company consists of 350,000,000 shares of Common Stock, of which
as of August 5, 2009, 72,220,695 shares are issued and outstanding, 200,000,000 shares of preferred stock consisting of 100,000,000 shares of Class A Preferred Stock and 100,000,000 shares of Class B Preferred Stock, of which as of the date hereof, no shares of preferred stock are issued and outstanding and 2,500,000 shares are issuable and reserved for issuance pursuant to the Company’s stock option plans and certain outstanding contracts, or securities exercisable or exchangeable for, or convertible into,
shares of Common Stock.  All of such outstanding shares have been, or upon issuance will be, validly issued, fully paid and nonassessable.  As of the date hereof, except as disclosed in Schedule 2.1(c), (i) no shares of the Company’s capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company, (ii) there are no outstanding debt securities,
and (iii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company.

 

(d) Issuance and Ownership of Securities.  Upon issuance in accordance with this Agreement, the Shares, the Warrants and the Warrant Shares will be
validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof.   The Company owns all outstanding shares of the Subsidiaries, free and clear of any liens and other encumbrances

 

(e) No Conflicts.  Except as disclosed in Schedule 2.1(e), the execution, delivery
and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby and issuance of the Shares and Warrant, and Warrant Shares underlying the Warrant (i) result in a violation of its Certificate of Incorporation, any certificate of designations, preferences and rights of any outstanding series of preferred stock of the Company or its By-laws; (ii) conflict with, or constitute a default (or an event which with notice or lapse of time
or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) to the Company’s knowledge result in a violation of any law, rule, regulation, order, judgment or decree (including United States federal and state securities laws and regulations and the rules and regulations of the OTC Bulletin Board (“Principal
Market”) or other principal securities exchange or trading market on which the Common Stock is traded or listed) applicable to the Company or any of its Subsidiaries, or by which any property or asset of the Company or any of its Subsidiaries is bound or affected, except in the case of clause (ii), such conflicts that would not have a Material Adverse Effect.

 

(f) SEC Documents.  Since the filing of its Annual Report on Form 10-K for the fiscal year ended August 31, 2008, the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “SEC
Documents”).  To the Company’s knowledge, as of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents. Since the date of the respective filings, the Company has not incurred any liabilities except in the ordinary course of business or as reflected in the SEC Documents.

 

 

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(g) Absence of Litigation.  There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company, the Shares or any officers or directors of the Company or any of its Subsidiaries in their capacities as such, except as set forth in SEC Documents which were filed at least 10 days before the date hereof.

 

(h) No Integrated Offering.  Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly,
made any offers or sales of any security or solicited any offers to buy any security, aside for the July 2008 Offering and the February 2009 Offering, under circumstances that would cause this offering of the Securities to the Purchaser to be integrated with prior offerings by the Company for purposes of the Securities Act of 1933, as amended (“1933 Act” or “Securities Act”) or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations
of the Principal Market or other Approved Market, nor will the Company take any action or steps that would cause the offering of the Securities to be integrated with other offerings.

 

(i)  Employee Relations.  Neither the Company nor any of its Subsidiaries is not involved in any labor dispute nor, to the knowledge of the Company,
is any such dispute threatened, the effect of which would be reasonably likely to result in a Material Adverse Effect.

 

(j) Intellectual Property Rights.  The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted.  Neither the Company nor any of its Subsidiaries have any knowledge of any infringement by the Company or any of its Subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service
mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others and there is no claim, action or proceeding being made or brought against, or to the Company’s knowledge, being threatened against, the Company or any of its Subsidiaries regarding trademarks, trade name rights, patents, patent rights, inventions, copyrights, licenses, service names, service marks, service mark registrations, trade secrets
or other infringement.  The Company has no knowledge of any pending or threatened infringement of its intellectual property rights.

 

(k)  Compliance with Law.  The business of the Company has been and is presently being conducted so as to comply with all applicable material
federal, state and local governmental laws, rules, regulations and ordinances.

 

(l) Environmental Laws.  The Company and its Subsidiaries (i) are, to the Company’s knowledge, in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) has received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) is in com­pliance with all terms and conditions of any such
permit, license or approval where such noncompliance or failure to receive permits, licenses or approvals referred to in clauses (i), (ii) or (iii) above could have, individually or in the aggregate, a Material Adverse Effect.

 

(m) Disclosure. No representation or warranty by the Company in this Agreement, nor in any certificate, schedule, document, exhibit or other instrument delivered
or to be delivered pursuant to this Agreement or otherwise in connection with the transactions contemplated by the Transaction Documents, contains or will contain any untrue statement of material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading or necessary to in order fully and fairly to provide the information required to be provided in any such certificate, schedule, document, exhibit or other instrument.  To the knowledge
of the Company at the time of the execution of this Agreement, there is no information concerning the Company or any of its Subsidiaries or its respective businesses which has not heretofore been disclosed to the Purchaser (or disclosed in the Company's filings made with the SEC under the 1934 Act) that would have a Material Adverse Effect.

 

 

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(n) Title.  The Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned
by it which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects or such as do not materially and adversely affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its Subsidiaries.  Any real property and facilities held under lease by the Company or any of its Subsidiaries are held by it under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries.

 

(o) Insurance.  The Company is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the businesses in which the Company is engaged.

 

(p)  Permits.  The Company and its Subsidiaries own, hold, possess, or lawfully use in its business all material approvals, authorizations, certifications,
franchises, licenses, permits, and similar authorities (“Permits”) that are necessary for the conduct of their business as currently conducted or the ownership and use of their assets or properties, in compliance with all Laws.  All of such material Permits are listed on Schedule 2.1(p), and true, complete and correct copies of each Permit listed on Schedule 2.1(p)
have been provided to the Purchaser.  Neither the Company or any of its Subsidiaries is in default under, or has received any notice of any claim of default in respect of, any such Permits.  To the Company’s knowledge, after due inquiry, all such Permits are renewable by their respective terms in the ordinary course of business without the need to comply with any special qualification procedures or to pay any amounts other than routine filing fees.

 

(q) Foreign Corrupt Practices Act.  To the Company’s knowledge, neither the Company, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any Subsidiary has, in the course of acting for, or on behalf of, the Company, directly or indirectly used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; directly or indirectly made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended, or any similar treaties of the United States; or directly or indirectly made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government or party official or employee.

 

(r) Tax Status.  The Company and its Subsidiaries have made or filed all United States federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject and all such returns, reports and declarations are true, correct and accurate in all material respects.  The Company has paid all taxes and other governmental assessments and charges, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith, for which adequate reserves have been established, in accordance with generally accepted accounting principles (“GAAP”).

 

 

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(s) Issuance of Shares and/or Warrant Shares.  The Warrant Shares are duly authorized and reserved for issuance and, upon exercise
of the Warrants in accordance with the terms thereof, the Warrant Shares will be validly issued, fully paid and non-assessable, free and clear of any and all liens, claims and encumbrances, and entitled to be traded on the Principal Market or the New York Stock Exchange, or the American Stock Exchange or the Alternative Investment Market (AIM) of the London Stock Exchange (collectively with the Principal Market, the “Approved
Markets”), and the holders of such Warrant Shares shall be entitled to all rights and preferences accorded to a holder of Common Stock.  As of the date of this Agreement, the outstanding shares of Common Stock are currently listed on the Principal Market.

 

(t) Financial Statements.  Except as set forth in Schedule 2.1(t), the financial
statements of the Company included in the Forms 10-K and the Forms 10-Q of the Company duly filed with the Securities and Exchange Commission have been prepared from the books and records of the Company, in accordance with GAAP, and fairly present in all material respects the financial condition of the Company, as at their respective dates, and the results of its operations and cash flows for the periods covered thereby.

 

(u) Internal Accounting and Disclosure Controls.  The Company maintains a system of internal accounting controls and procedures that are sufficient
to provide reasonable assurance (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The Company has established disclosure controls and procedures (as defined in 1934 Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company is made known to the certifying officers by others within those entities, particularly during the period in which the Company’s Form 10-K or 10-Q, as the case may be, is being prepared. The Company’s
certifying officers have evaluated the effectiveness of the Company’s controls and procedures in accordance with the 1934 Act for the Company’s most recently ended fiscal quarter or fiscal year-end (such date, the “ Evaluation Date ”). The Company presented in its most recently filed Form 10-K or Form 10-Q the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on
their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no significant changes in the Company’s internal controls over financial reporting (as defined in 34 Act Rules 13a-15(f) and 15(d)-15(f)).

 

(v)  Off-Balance Sheet Arrangements.  There is no transaction, arrangement, or other relationship between the Company and an unconsolidated or
other off balance sheet entity that is required to be disclosed by the Company in its 1934 Act filings and is not so disclosed or that otherwise would be reasonably likely to have a material adverse effect.

 

(w) No Stabilization.  The Company has not taken, directly or indirectly, any action designed to or that could reasonably be expected to cause or
result in any stabilization or manipulation of the price of the shares of Common Stock.

 

(x) Investment Company Status.  The Company is not and, after giving effect to the offering and the application of the proceeds as described in the
Transaction Documents, will not be, an “investment company” or an entity “controlled” by an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended, and the rules and regulations thereunder.

 

(y) Subsidiary Rights.  The Company has the unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive dividends
and distributions on, all capital securities of its subsidiaries as owned by the Company or such subsidiary.

 

 

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(z) Sarbanes-Oxley Act.  There has been no failure of the Company or any of its directors or officers, in their capacities as such, to comply with
any applicable provisions of the Sarbanes Oxley Act of 2002 and the rules and regulations thereunder (the “Sarbanes Oxley Act”).

 

(aa) Application of Takeover Protections. The Company has taken all necessary action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Certificate of Incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Purchaser as a result of the Purchaser and the Company fulfilling their obligations or exercising their rights under the Transaction Documents.

 

(bb) General Solicitation.  The Company has not undertaken any advertisement, article, notice or other communication regarding the sale of the Securities
and has not published such sale in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

(cc) Brokers or Finders. Except for vFinance Investments, Inc. (the "Placement Agent"), the
Company has not dealt with any broker or finder in connection with the transactions contemplated by this Agreement, and, except for certain fees and expenses payable to the Placement Agent, the Company has not incurred, and shall not incur, directly or indirectly, any liability for any brokerage or finders' fees or agents commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby.

 

(dd) Non-Public Information. The Company covenants and agrees that neither it nor any other person acting on its behalf will provide the Purchaser or his agents
or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Purchaser shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that the Purchaser shall be relying on the foregoing representations in effecting transactions in securities of the Company.

 

(ee) No Additional Agreements. The Company does not have any agreement or understanding with any Purchaser with respect to the transactions contemplated by
this Agreement, other than as specified in this Agreement, the Registration Rights Agreement and the Warrants.

 

(ff) Public Utility Holding Company Act and Investment Company Act Status. The Company is not a “holding company” or a “public utility company”
as such terms are defined in the Public Utility Holding Company Act of 1935, as amended. The Company is not, and as a result of and immediately upon the Closing will not be, an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

 

Section 2.2 Representations and Warranties of the Purchaser.  The Purchaser hereby makes the following representations and warranties to the
Company as of the date hereof and the Closing Date:

 

(a) Accredited Investor Status; Sophisticated Purchaser.  The Purchaser is an “accredited investor” as that term is defined in Rule 501(a)
of Regulation D under the 1933 Act.  The Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Shares, the Warrant and the Warrant Shares.  The Purchaser is not registered as a broker or dealer under Section 15(a) of the 1934 Act, affiliated with any broker or dealer registered under Section 15(a) of the 1934 Act, or a member of the Financial Industry Regulatory Authority.

 

 

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(b) Information.  The Purchaser and its advisors, if any, have been furnished with all materials relating to the business, finances and operations
of the Company which have been requested and materials relating to the offer and sale of the Shares, the Warrant and the Warrant Shares which have been requested by the Purchaser.  The Purchaser and its advisors, if any, have been afforded the opportunity to ask questions of the Company.  In determining whether to enter into this Agreement and purchase the Securities, the Purchaser has relied solely on the written information supplied by Company employees in response to the written due diligence
information request provided by Purchaser to the Company, and the Purchaser has not received nor relied upon any oral representation or warranty relating to the Company, this Agreement, the Securities, or any of the transactions or relationships contemplated thereby.  The Purchaser understands that its purchase of the Securities, and if applicable, the Warrant Shares involves a high degree of risk.  The Purchaser has sought such accounting, legal and tax advice as it has considered necessary
to make an informed investment decision with respect to its acquisition of the Shares, the Warrants and if applicable, the Warrant Shares.

 

(c) No Governmental Review.  The Purchaser understands that no United States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Shares, the Warrant, and Warrant Shares or the fairness or suitability of the investment in the Shares, the Warrant and Warrant Shares nor have such authorities passed upon or endorsed the merits thereof.

 

(d) Legends. The Company shall issue the certificates for the Shares, and if applicable, the Warrant Shares, to the Purchaser without any legend except as described
in Article VI below.  The Purchaser covenants that, in connection with any transfer of the Warrant Shares by the Purchaser pursuant to the registration statement contemplated by the Registration Rights Agreement, it will comply with the applicable prospectus delivery requirements of the 1933 Act, provided that copies of a current prospectus relating to such effective registration statement are or have been supplied to the Purchaser.

 

(e) Authorization; Enforcement.  Each of this Agreement and the Registration Rights Agreement have been duly and validly authorized, executed and
delivered on behalf of the Purchaser and is a valid and binding agreement of the Purchaser enforceable against the Purchaser in accordance with their terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.  The Purchaser has the requisite corporate power and authority to enter into
and perform its obligations under this Agreement and the Registration Rights Agreement and each other agreement entered into by the parties hereto in connection with the transactions contemplated by this Agreement.

 

(f) No Conflicts.  The execution, delivery and performance of this Agreement and the Registration Rights Agreement by the Purchaser and the consummation
by the Purchaser of the transactions contemplated hereby and thereby will not (i) result in a violation of the certificate of incorporation, by-laws or other documents of organization of the Purchaser, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Purchaser is bound, or (iii) result in a violation
of any law, rule, regulation or decree applicable to the Purchaser.

 

(g) Investment Representation.  The Purchaser is purchasing the Securities for its own account for investment and not with a view to distribution
or sale  in violation of the 1933 Act or any state securities laws or rules and regulations promulgated thereunder.  The Purchaser has been advised and understands that neither the Shares, the Warrant, nor Warrant Shares issuable upon exercise thereof have been registered under the 1933 Act or under the “blue sky” laws of any jurisdiction and may be resold only if registered pursuant to the provisions of the 1933 Act or if an exemption from registration is available, except under
circumstances where neither such registration nor such an exemption is required by law.  The Purchaser has been advised and understands that the Company, in issuing the Shares and the Warrant, is relying upon, among other things, the representations and warranties of the Purchaser contained in this Section 2.2 in concluding that such issuance is a “private offering” and is exempt from the registration provisions of the 1933 Act.

 

 

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(h) Rule 144.  The Purchaser understands that there is no public trading market for the Shares or Warrant, that none is expected
to develop, and that the Shares and Warrant must be held indefinitely unless and until such Shares and the Warrant, or if applicable, the Warrant Shares received upon exercise thereof are registered under the 1933 Act or an exemption from registration is available.  The Purchaser has been advised or is aware of the provisions of Rule 144 promulgated under the 1933 Act.

 

(i) Brokers.  Except with respect to any fees owed to vFinance, the Purchaser has taken no action which would give rise to any claim by any person
for brokerage commissions, finder's fees or similar payments by the Company or the Purchaser relating to this Agreement or the transactions contemplated hereby.

 

(j) Reliance by the Company.  The Purchaser understands that the Shares and the Warrant are being offered and sold in reliance on a transactional
exemption from the registration requirements of Federal and state securities laws and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Purchaser set forth herein in order to determine the applicability of such exemptions and the suitability of the Purchaser to acquire the Shares and the Warrant, and the Warrant Shares issuable upon exercise thereof.

 

Article III.

 

Covenants

 

Section 3.1 Registration and Listing; Effective Registration.  Until such time as six months following the date on which all of the Warrants
have either have been exercised or have expired, the Company will cause the Shares to continue at all times to be registered under Sections 12(b) or (g) of the 1934 Act or listed on AIM, will comply in all material respects with its reporting and filing obligations under the 1934 Act or under the bylaws or rules of AIM, and will not take any action or file any document (whether or not permitted by the 1934 Act or the rules thereunder) to terminate or suspend such reporting and filing obligations.  Until
such time as the Warrants are no longer outstanding, the Company shall use its best efforts to continue the listing or trading of the Shares and the Warrant Shares, if applicable, on the Principal Market or one of the other Approved Markets and shall comply in all material respects with the Company's reporting, filing and other obligations under the bylaws or rules of the Approved Market on which the Common Stock is listed.  The Company shall use its best efforts to cause the Warrant Shares to be listed
on the Principal Market or one of the other Approved Markets no later than the date of issuance of the Warrant, and shall use its best efforts to continue such listing(s) on one of the Approved Markets, for so long as the Warrants are outstanding.

 

Section 3.2 Constitution of Board of Directors.  Upon the Final Closing, the Company shall immediately seek the resignation of two of its current
board members, other than such member of the board previously appointed by the Purchaser pursuant to the February 2009 Offering (the “First Quercus Member”). The two vacancies shall be filled by (i) a second designee of the Purchaser (the “Second Quercus Member”, together with the First Quercus Member, the “Quercus Members”); and (ii) an independent fifth board member, as approved by the Purchase and the Company (the “Independent Member”).  The Company
shall use reasonable efforts to assist the Quercus Members in maintaining their respective board positions through the Company’s 2010 Annual General Meeting.

 

 

10

 

Section 3.3 Replacement of Shares.  The Shares held by the Purchaser (or then holder) may be exchanged by the Purchaser (or such holder) at
any time and from time to time for Shares with different denominations representing an equal aggregate principal amount of Shares, as requested by the Purchaser (or such holder) upon surrendering the same.  No service charge will be made for such registration or transfer or exchange.

 

Section 3.4 Securities Compliance. The Company shall notify the SEC and the Principal Market, in accordance with their requirements, of the transactions
contemplated by this Agreement, the Shares, the Warrants, and the Registration Rights Agreement, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Shares and Warrant hereunder and the Warrant Shares issuable upon exercise thereof.

 

Section 3.5 Reservation of Shares; Stock Issuable Upon Exercise.  Subject to Section 2.1(c) of this Agreement, the Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the exercise of the Warrant, such number of its shares of Common Stock as shall from time to time be sufficient to effect the exercise of the Warrants issued to the Purchaser and the payment for any damages that may become due to the Purchaser due to the Company’s failure to register the Securities.

 

Section 3.6 Form D; Blue Sky Laws.  The Company agrees to file a Form D with respect to Shares and the Warrants in accordance with Regulation
D and to provide a copy thereof to the Purchaser promptly after such filing.  The Company shall, on or before the Closing Date, take such action as the Company shall have reasonably determined is necessary to qualify the Shares, the Warrants and Warrant Shares for sale to the Purchaser under applicable securities or “blue sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken to the Purchaser
on or prior to the Closing Date; provided, however, that the Company shall not be required in connection therewith to register or qualify as a foreign corporation in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits or taxation, in each case, in any jurisdiction where it is not now so subject.

 

Section 3.7 Prohibition on Short Sales.  From and including the date of this Agreement and for so long as the Purchaser holds any outstanding
Shares, the Purchaser agrees that it will neither sell the Company’s stock short nor direct, instruct or otherwise influence any of its affiliates, principals or advisors to sell the Company’s stock short.  Further, the Purchaser agrees not to pledge, hypothecate, loan or enter into other hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Company’s Common Stock; provided, however, that the Purchaser shall have the
right to pledge the Company’s Shares pursuant to a bona fide margin account or lending arrangement entered into in compliance with law, including applicable securities laws, in such a manner that will not result, or be equivalent to, a short sale of the Company’s Common Stock.

 

Section 3.8 Material Changes.  On or before the Closing Date, the Company shall forthwith notify the Purchaser of any material change affecting
any of its representations, warranties, undertakings and indemnity at any time prior to payment being made to the Company on the Closing Date.

 

 

11

 

Section 3.9 Prohibition on Certain Actions.   The Company shall not file any additional registration statements unless and until the registration
statement contemplated by the Registration Rights Agreement has become effective.

 

Section 3.10 Use of Proceeds.  The Company shall use the net proceeds from the sale of the Securities hereunder for general corporate purposed
including working capital and other growth initiatives consistent with the current business of the Company.

 

Section 3.11 Funding Commitment.  For any debt, equity or equity linked private financing in the amount of Five Million Dollars ($5,000,000)
or more consummated by the Company within six (6) months from February 1, 2010, or in the event that the Company enters into a binding term sheet within nine (9) months from February 1, 2010 relating to any debt, equity or equity linked private financing to be granted to the Company in the amount of Five Million Dollars ($5,000,000) (a “Qualified Financing”), the Purchaser shall make an additional investment in the Company in the amount of One Million Dollars ($1,000,000) on same terms and conditions
hitherto offered to the Company.  This funding commitment shall apply only in the event that the Qualified Financing is negotiated at arm’s-length with one or more unaffiliated third parties (except to the extent otherwise agreed upon by the Purchaser in writing).

 

Section 3.12 Press Release.   As soon as practicable upon the execution of this Agreement, the Company shall issue a press release disclosing
the transaction contemplated herein.  The Company shall also file a Form 8-K with the Securities and Exchange Commission (the “SEC”) within the time prescribed under current SEC rules and regulations.

 

Article IV.

 

Conditions to Closings

 

Section 4.1 Conditions Precedent to the Obligation of the Company to Sell.  The obligation hereunder of the Company to issue and/or sell the
Securities to the Purchaser at the applicable Closing is subject to the satisfaction, at or before the applicable Closing, of each of the applicable conditions set forth below.  These conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion.

 

(a) Accuracy of the Purchaser’ Representations and Warranties.  The representations and warranties of the Purchaser will be true and correct
in all material respects as of the date when made and as of the Closing Date, as though made at that time.

 

(b) Performance by the Purchaser.  The Purchaser shall have performed all agreements and satisfied all conditions required to be performed or satisfied
by the Purchaser at or prior to the Closing, including full payment of the Purchase Price to the Company as provided herein.

 

(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by
any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by the Transaction Documents.

 

Section 4.2 Conditions Precedent to the Obligation of the Purchaser to Purchase.  The obligation hereunder of the Purchaser to acquire and
pay for the Securities at the applicable Closing is subject to the satisfaction, at or before the applicable Closing, of each of the applicable conditions set forth below.  These conditions are for the Purchaser’ benefit and may be waived by the Purchaser at any time.

 

 

12

 

(a) Accuracy of the Company's Representations and Warranties.  The representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties as of an earlier date, which shall be true and correct in all material respects as of such date).

 

(b) No Injunction.  No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by the Transaction Documents.  The Principal Market shall not have objected or indicated that it may object to the consummation of any of the transactions contemplated by this Agreement.

 

(c) Legal Opinions.  At the Closing, the Purchaser shall have received an opinion of U.S. counsel to the Company substantially in the form attached
hereto as Exhibit C.

 

(d) Registration Rights Agreement.  The Company and the Purchaser shall have executed and delivered the Registration Rights Agreement in the form
and substance of Exhibit A attached hereto.

 

(e) Officer's Certificates.  The Company shall have delivered to the Purchaser a certificate in form and substance satisfactory to the Purchaser and
the Purchaser’ counsel, executed by an officer of the Company, certifying as to satisfaction of closing conditions, incumbency of signing officers, and the true, correct and complete nature of the Certificate of Incorporation, By-Laws, good standing and authorizing resolutions of the Company.

 

(f) Warrants.  The Company shall have executed and delivered the Warrants to the Purchaser in substantially the form attached hereto as Exhibit
B.

 

(g) No Material Adverse Change.  There shall not have occurred any event prior to the Closing which, singly or taken together with any other event,
could reasonably be expected to have a Material Adverse Effect.

 

(h) Presentation of Use of Proceeds.  The Company shall have presented a summary of the use of financing proceeds satisfactory to the Purchaser.

 

(i) Transfer Agent Instructions.  The Company shall issue irrevocable instructions to its transfer agent requesting the transfer agent to issue one
or more share certificates to the Purchaser representing the Shares as soon as practicable after receiving notice of the exercise of the Warrants.

 

Article V.

 

Legend and Stock

 

Upon payment therefor as provided in this Agreement, the Company will issue the Shares in the name the Purchaser or its designees and in such denominations to be specified by such Purchaser prior to (or from time to time subsequent to) Closing.  The Securities and any certificate representing the Warrant Shares issued upon exercise
thereof, prior to such Warrant Shares being registered under the 1933 Act for resale or available for resale under Rule 144 under the 1933 Act, shall be stamped or otherwise imprinted with a legend in substantially the following form:

 

These Securities Have Not Been Registered For Offer or Sale Under The Securities Act Of 1933, As Amended, Or Any State securities laws.  They May Not Be Sold Or Offered For Sale Except Pursuant To An Effective Registration Statement Under Said Act And Any Applicable State Securities Law Or An Applicable
Exemption From Such Registration Requirements.

 

 

13

 

The Company agrees to reissue the Shares and Warrant Shares issuable upon exercise of the foregoing, without the legend set forth above, at such time as (i) the holder thereof is permitted to dispose of such Shares and Warrant Shares issuable upon exercise of the foregoing pursuant to Rule 144 under the 1933 Act, or (ii) such securities
are sold to a purchaser or Purchaser who (in the opinion of counsel to the seller or such purchaser(s), in form and substance reasonably satisfactory to the Company and its counsel) are able to dispose of such shares publicly without registration under the 1933 Act, or (iii) such securities have been registered under the 1933 Act.  If a Purchaser shall make a sale or transfer of Shares or Warrant Shares either (x) pursuant to Rule 144 or (y) pursuant to a registration statement under the 1933 Act and
in each case shall have delivered to the Company or the Company’s transfer agent the certificate representing Shares or Warrant Shares containing a restrictive legend which are the subject of such sale or transfer (the date of such sale or transfer and Share or Warrant Share, as the case may be, delivery being the “ Share Delivery Date ”) and (1) the Company shall fail to deliver or cause to be delivered (any such delivery shall
include crediting the Purchaser’s balance account with DTC) to such Purchaser a certificate representing such Shares or Warrant Shares that is free from all restrictive or other legends by the third Trading Day following the Share Delivery Date and (2) following such third Trading Day after the Share Delivery Date and prior to the time such Shares or Warrant Shares are received free from restrictive legends, the Purchaser, or any third party on behalf of such Purchaser, purchases (in an open market transaction
or otherwise) shares of Shares to deliver in satisfaction of a sale by the Purchaser of such Shares or Warrant Shares (a " Buy-In "), then the Company shall pay in cash to the Purchaser (for costs incurred either directly by such Purchaser or on behalf of a third party) the amount by which the total purchase price paid for Shares as a result of the Buy-In (including brokerage commissions, if any) exceed the proceeds received by such Purchaser as
a result of the sale to which such Buy-In relates. The Purchaser shall provide the Company written notice indicating the amounts payable to the Purchaser in respect of the Buy-In. The Company may not make any notation on its records or give instructions to any transfer agent of the Company that enlarge the restrictions on transfer set forth in this Section.

 

Prior to the Registration Statement (as defined in the Registration Rights Agreement) being declared effective, any Warrant Shares issued pursuant to the exercise of the Warrant shall bear a legend in the same form as the legend indicated above; provided that such legend shall be removed from such shares and the Company shall issue new
certificates without such legend if (i) the holder has sold or disposed of such shares pursuant to Rule 144 under the 1933 Act, or the holder is permitted to dispose of such shares pursuant to Rule 144 under the 1933 Act, (ii) such shares are registered for resale under the 1933 Act, or (iii) such shares are sold to a purchaser or Purchaser who (in the opinion of counsel to the seller or such purchaser(s), in form and substance reasonably satisfactory to the Company and its counsel) are able to dispose of such
shares publicly without registration under the 1933 Act.  Upon such Registration Statement becoming effective, the Company agrees to promptly issue new certificates representing such shares without such legend.  Any Warrant Shares issued after the Registration Statement has become effective shall be free and clear of any legends, transfer restrictions and stop orders.  Notwithstanding the removal of such legend, the Purchaser agree to sell the Warrant Shares represented by the new
certificates in accordance with the applicable prospectus delivery requirements (if copies of a current prospectus are provided to such Purchaser by the Company) or in accordance with an exemption from the registration requirements of the 1933 Act.

 

Nothing herein shall limit the right of any holder to pledge these securities pursuant to a bona fide margin account or lending arrangement entered into in compliance with law, including applicable securities laws.

 

 

14

 

Article VI.

 

Termination

 

Section 6.1 Termination by Mutual Consent.  This Agreement may be terminated at any time prior to the Closing by the mutual written consent of the Company and the Purchaser.

 

Section 6.2 Other Termination.  This Agreement may be terminated by action of the Board of Directors of the Company or by the Purchaser at any time if the Closing shall not have been consummated on the Closing Date; provided,
however, that the party (or parties) prepared to close shall retain its (or their) right to sue for any breach by the other party (or parties).

 

Article VII.

 

Indemnification

 

Section 7.                      In consideration of the Purchaser’ execution and delivery of the this Agreement and the Registration Rights Agreement and acquiring the Shares hereunder and in addition to all of the Company’s
other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless the Purchaser and all of its partners, officers, directors, employees, members and direct or indirect investors and any of the foregoing person’s agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Purchaser Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Purchaser Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Purchaser Indemnified Liabilities”), incurred by any Purchaser Indemnitee
as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or any other certificate or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or any other certificate or document contemplated hereby or thereby.  Notwithstanding the foregoing, Purchaser Indemnified Liabilities shall not include any
liability of any Purchaser Indemnitee arising out of such Purchaser Indemnitee’s gross negligence or willful misconduct.  To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Purchaser Indemnified Liabilities which is permissible under applicable law.  Except as otherwise set forth herein, the mechanics and procedures with respect to the rights and
obligations under this Article VII shall be the same as those set forth in Section 6 (other than Section 6(b)) of the Registration Rights Agreement, including, without limitation, those procedures with respect to the settlement of claims and Company’s right to assume the defense of claims.

 

Article VIII.

 

Governing Law; Miscellaneous

 

Section 8.1 Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable
to contracts to be wholly performed within such state and without regard to conflicts of laws provisions.  Any legal action or proceeding arising out of or relating to this Agreement and/or the Transaction Documents may be instituted in the courts of the State of California sitting in Los Angeles County, and the parties hereto irrevocably submit to the jurisdiction of each such court in any action or proceeding.  Subscriber hereby irrevocably waives and agrees not to assert, by way of motion,
as a defense, or otherwise, in every suit, action or other proceeding arising out of or based on this Agreement and/or the Transaction Documents and brought in any such court, any claim that Subscriber is not subject personally to the jurisdiction of the above named courts, that Subscriber’s property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper.

 

 

15

 

Section 8.2 Counterparts.  This Agreement may be executed by facsimile and in any number of counterparts, and each such counterpart hereof
shall be deemed to be an original instrument, but all such counterparts together shall constitute one agreement.  Execution and delivery of this Agreement by facsimile transmission (including delivery of documents in Adobe PDF format) shall constitute execution and delivery of this Agreement for all purposes, with the same force and effect as execution and delivery of an original manually signed copy hereof.

 

Section 8.3 Headings.  The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation
of, this Agreement.

 

Section 8.4 Severability.  If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.

 

Section 8.5 Costs and Expenses.  All reasonable out-of-pocket costs and expenses incurred by the Company with respect to this Agreement and
the transactions contemplated by this Agreement shall be paid by the Purchaser at the Closing.  The Purchaser shall also be responsible for the payment of vFinance’s and the Company’s reasonable post Closing expenses incurred in connection with the transactions contemplated by this Agreement.  Such post Closing expenses shall be paid promptly after the Company issues a request in writing but in no event later than five (5) business days following such request. Nevertheless, in
the event that any dispute between the parties should result in litigation or arbitration, the prevailing party in such dispute shall be entitled to recover from the non-prevailing party in such dispute all reasonable fees, costs and expenses of enforcing any right of the prevailing party, including without limitation, reasonable attorney’s fees and expenses, all of which shall be deemed to have accrued upon the commencement of such action and shall be paid whether or not such action is prosecuted to judgment.

 

Section 8.6 Entire Agreement; Amendments; Waivers.

 

(a) This Agreement supersedes all other prior oral or written agreements between the Purchaser, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, including
without limitation the February 2009 Offering, and this Agreement and the instruments referenced herein (including the other Transaction Documents) contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor any Purchaser makes any representation, warranty, covenant or undertaking with respect to such matters.  No provision of this Agreement may be amended other than by an instrument
in writing signed by the Company and the Purchaser, and no provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought.

 

(b) The Purchaser may at any time elect, by notice to the Company, to waive (whether permanently or temporarily, and subject to such conditions, if any, as the Purchaser may specify in such
notice) any of Purchaser’ rights under any of the Transaction Documents to acquire the Shares from the Company, in which event such waiver shall be binding against the Purchaser in accordance with its terms; provided, however, that the voluntary waiver contemplated by this sentence may not reduce the Purchaser’ obligations to the Company under the Transaction Documents.

 

 

16

 

Section 8.7 Notices.  Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement
must be in writing, must be delivered by (i) courier, mail or hand delivery or (ii) facsimile, and will be deemed to have been delivered upon receipt. The addresses and facsimile numbers for such communications shall be:

 

If to the Company:

 

Clean Power Technologies, Inc.

436-35th Avenue, N.W.

Calgary, Alberta

Canada T2K OC1

Attention: Abdul Mitha

Facsimile: (403) 277-3117

 

With a copy to:

 

Gersten Savage, LLP

600 Lexington Avenue, 9th Floor

New York, New York 10022

Telephone:  (212) 752-9700

Facsimile:   (212)  813-9768

Attention: Peter J. Gennuso, Esq.

 

If to the Purchaser:

 

The Quercus Trust

1835 Newport Blvd.

A109-PMB 467

Costa Mesa, CA  92627

Telephone:

Facsimile:

Attention: David Gelbaum

 

With a copy to:

 

The Law Offices of Joseph P. Bartlett, P.C.

1900 Avenue of the Stars, 19th Floor

Los Angeles, CA 90067

Telephone: (310) 201-7553

Facsimile: (310) 388-1055

Attention: Joseph Bartlett, Esq.

 

Each party shall provide five (5) days prior written notice to the other party of any change in address, telephone number or facsimile number.  Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile
machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

 

 

17

 

Section 8.8 Successors and Assigns.  Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns, including any Permitted Assignee (as defined below).  The Purchaser may assign some or all of its rights hereunder to any assignee of the Shares or Warrant Shares (in each case, a “Permitted Assignee”); provided,
however, that any such assignment shall not release the Purchaser from its obligations hereunder unless such obligations are assumed by such assignee and the Company has consented to such assignment and assumption.

 

Section 8.9 No Third Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

 

Section 8.10 Survival.  The representations, warranties, rights to indemnification and agreements of the Company and the Purchaser contained
in the Agreement shall survive the delivery of the Shares.

 

Section 8.11 Further Assurances.  Each party shall do and perform, or cause to be done and performed, all such further acts and things, and
shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

Section 8.12 No Strict Construction.  The language used in this Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against any party.

 

Section 8.13 Days.  Unless the context refers to “business days” or “Trading Days”, all references herein to “days”
shall mean calendar days.

 

Section 8.14 Placement Agent.  Other than the engagement of vFinance by the Company, the Purchaser and the Company each acknowledges and warrants
that it has not engaged any placement agent in connection with the sale of the Securities, and the Company and Purchaser shall indemnify and hold the other harmless against any liability, loss, or expense (including without limitation, reasonable attorneys’ fees and out-of-pocket expenses) arising from any breach of said warranty.

 

 

18

 

IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed as of the date and year first above written.

 

	
COMPANY:
	
PURCHASER(S):

 

	
CLEAN POWER TECHNOLOGIES, INC.

 

By: /s/Abdul Mitha

Name:  Abdul Mitha

Title: Chief Executive Officer

 

 
	
THE QUERCUS TRUST

 

By: /s/David Gelbaum

Name:  David Gelbaum

Title:  Trustee

 

  

19

  

EXHIBIT A

 

 

[Form of Registration Rights Agreement]

 

 

  

20

  

EXHIBIT B

 

 

Form of Warrants

 

 

  

21

  

EXHIBIT C

 

 

Form of Legal Opinion

 

  

22ex102.htm

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (“Agreement”) is entered into as of October 2, 2009, between Clean Power Technologies, Inc., a Nevada corporation (the “Company”) and The Quercus Trust
(the “Purchaser”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to that certain Stock Purchase Agreement, dated on or about the date hereof, by and between the Company and The Quercus Trust (the “Purchase Agreement”),  the Purchaser has
agreed to acquire from the Company, (i) 2,500,000 shares of the Company’s Common Stock, par value $0.001 (the “Shares”) and (ii) Warrants (the “Warrants”) to purchase shares of the Company’s Common Stock, par value $0.001 per share (the “Common Stock”) for an aggregate purchase price of $500,000, subject to the terms and conditions set
forth therein; and

 

WHEREAS, the Warrants will be exercisable for shares of Common Stock (the “Warrant Shares”) pursuant to the terms and conditions set forth therein.

 

NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants and conditions set forth in the Purchase Agreement, the Warrants and this Agreement, the Company and the Purchaser agree as follows:

 

1. Certain Definitions.  Capitalized terms used herein and not otherwise defined shall have the meaning ascribed thereto in the Purchase Agreement
or the Note.  As used in this Agreement, the following terms shall have the following respective meanings:

 

“Closing” and “Closing Date” shall have the meanings ascribed to such terms in the Purchase Agreement.

 

“Commission” or “SEC” shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

 

“Purchaser” and “Purchasers” shall refer to the Purchaser and any permitted transferee or transferees of Registrable Securities (as defined below), the Shares and/or Warrant which have not been sold
to the public to whom the registration rights conferred by this Agreement have been transferred in compliance with this Agreement and/or the Purchase Agreement.

 

“Permitted Free Writing Prospectus” means a free writing prospectus authorized for use by the Company in connection with any offering of Registrable Securities that has been filed with the SEC in accordance with Rule 433 under the Act.

 

“Register,” “Registered” and “Registration” shall refer to a registration effected by preparing and filing a registration statement
in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness of such registration statement.

 

“Registrable Securities” shall mean:  (i) the Shares or other securities issued or issuable to the Purchaser or its permitted transferee or designee (a) upon exercise of the Warrants, or (b) upon any distribution with respect to, any exchange for or any
replacement of, a Shares or Warrant, or (c) upon any exercise or exchange of any securities issued in connection with any such distribution, exchange or replacement; (ii) securities issued or issuable in respect of the foregoing upon any stock split, stock dividend, recapitalization or similar event; and (iii) any other security issued as a dividend or other distribution with respect to, in exchange for or in replacement of the securities referred to in the preceding clauses; provided that all such shares
shall cease to be Registrable Securities at such time as they have been sold under a Registration Statement or pursuant to Rule 144 under the Securities Act or otherwise or at such time as they are eligible to be sold without volume limitation pursuant to Rule 144.

 

  

1

  

 

“Registration Expenses” shall mean all expenses to be incurred in connection with the Purchaser’s registration rights under this Agreement not included in Selling Expenses, including, without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company and one counsel for the Purchaser, blue sky fees and expenses, and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the Company, which shall be paid in any event by the Company).

 

“Registration Statement” shall have the meaning set forth in Section 2(a) herein.

 

“Regulation D” shall mean Regulation D as promulgated pursuant to the Securities Act, and as subsequently amended.

 

“Securities Act” or “Act” shall mean the Securities Act of 1933, as amended.

 

“Selling Expenses” shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities or Demand Registration Securities, as the case may be.

 

“Time of Sale Information” means any preliminary prospectus together with each Permitted Free Writing Prospectus, if any, used in connection with any offering of Registrable Securities.

 

2. Registration Requirements.  The Company shall use its best efforts to effect the registration of the Registrable Securities (including,
without limitation, the execution of an undertaking to file post-effective amendments, appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act) as would permit or facilitate the sale or distribution of all the Registrable Securities in the manner (including manner of sale) and in all states reasonably requested by the Purchaser.  Such best efforts by the Company shall include, without limitation,
the following:

 

(a) As soon as practicable, but in no event later than six months from the Closing Date (the “Required Filing Date”) (provided, however, that in the event that the Company is informed by the Commission
that the Registration Statement is deemed to be part of a serial registration covering the Company’s securities, the Purchaser agrees to extend the Required Filing Date to such period so that the Company may comply with the Commission) the Company shall:

 

(i) prepare and file a registration statement with the Commission pursuant to Rule 415 under the Securities Act (“Rule
415”) on Form S-1 under the Securities Act (or in the event that the Company is ineligible to use such form, such other form as the Company is eligible to use under the Securities Act covering resales by the Purchaser as selling stockholders (not underwriters) of the Registrable Securities (a “Registration Statement”), which Registration Statement, to the extent allowable under the Securities Act and the rules promulgated
thereunder (including Rule 416), shall state that such Registration Statement also covers such number of additional shares of Common Stock as may become issuable upon the exercise of the Warrants or pursuant to the applicable anti-dilution provisions or other adjustment provisions of the Warrants.  The number of shares of Common Stock initially included in such Registration Statement shall be no less than 120% of the maximum number of shares of Common Stock which may be included in a Registration Statement
without exceeding registration limitations imposed by the SEC pursuant to Rule 415 (the “Rule 415 Amount”) in a comment letter addressed to the Company; provided that the Company shall use its commercially reasonable efforts to contest such limitation, but in any event not less than approximately 5,000,000 shares of Common Stock.  

 

  

2

  

Thereafter, the Company shall use its best efforts to cause such Registration Statement and other filings to be declared effective, as soon as possible (the “Required Effective Date”).  The Company shall use its best efforts to ensure that each
subsequent Registration Statement is filed as soon as possible, but in no event sooner than six (6) months from the effectiveness of a previously filed Registration Statement. In the event that less than all of the Registrable Securities are included in a Registration Statement as a result of the limitations described in this paragraph, then the Company will (i) reduce on a proportionate basis the number of Registrable Securities of the Purchaser included in such Registration Statement and (ii) file additional
Registration Statements, each registering the Rule 415 Amount, seriatim, until all of the Registrable Securities have been registered. The Required Filing Date and the Required Effective Date of each such additional Registration Statement shall be within a reasonable time after the first day such Registration Statement may be filed without objection by the SEC based on Rule 415.  Without limiting the foregoing, the Company will promptly
respond to all SEC comments, inquiries and requests, and shall request acceleration of effectiveness at the earliest possible date.

 

(ii) If at any time the staff of the Commission takes the position that the offering of some or all of the Registrable Securities in a Registration Statement
is not eligible to be made on a delayed or continuous basis under the provisions of Rule 415 under the Securities Act or requires any Investor to be named as an “underwriter” (an “SEC Objection”), the Company shall promptly notify the Purchaser of such SEC Objection and if the Investor shall request, the Company shall use its commercially reasonable efforts to persuade the staff of the Commission that the offering contemplated by the Registration Statement is a valid secondary offering
and not an offering “by or on behalf of the issuer” as defined in Rule 415 and that the Investor is not an “underwriter” (a “Rule 415 Response Effort”).  The Investor shall have the right to participate or have its counsel participate in any meetings or discussions with the staff of the Commission regarding the Rule 415 Response Effort and to comment or have its counsel comment on any written submission made to the staff of the Commission with respect to the Rule
415 Response Effort, and to have such comments relayed to the staff of the Commission with the consent of the Company, not to be unreasonably withheld.  No such Rule 415 Response Effort shall be made to the staff of the Commission to which the Investor’s counsel reasonably objects.  In the event that, despite the Company’s commercially reasonable efforts and compliance with the terms of this Section 2(a)(ii), the staff of the Commission refuses to alter its position, the Company
shall (i) remove from the Registration Statement such portion of the Registrable Securities (the “Cut Back Shares”) and/or (ii) agree to such restrictions and limitations on the registration and resale of the Registrable Securities as the staff of the Commission may require to assure the Company’s compliance with the requirements of Rule 415; provided, however, that the Company shall not agree to name any Investor as an “underwriter” in such Registration Statement without the prior
written consent of such Investor (collectively, the “SEC Restrictions”).  To eliminate any ambiguity, delay caused by a refusal by an Investor to be named as an underwriter shall be deemed to be part of a Rule 415 Response Effort.  Notwithstanding any other provision of this Agreement to the contrary, no liquidated damages shall accrue pursuant to Section 2(c) during the period of any Rule 415 Response Effort or (ii) on or as to any Cut Back Shares until such time as the Company
is able, using commercially reasonable efforts, to cause such additional Registration Statement or Registration Statements to become effective  with respect to the Cut Back Shares in accordance with any SEC Restrictions (such date, the “Restriction Termination Date”).   If the Company fails to cause any such Registration Statement to be declared effective within 90 days following the applicable Restriction Termination Date, liquidated damages shall accrue on the same basis
provided above.

 

  

3

  

 

(iii) Prepare and file with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection with such Registration Statement as may be necessary to comply with the provisions
of the Securities Act with respect to the disposition of all securities covered by such Registration Statement and notify the Purchaser of the filing and effectiveness of such Registration Statement and any amendments or supplements.

 

(iv) Furnish to each Purchaser that has Registrable Securities included in a Registration Statement such numbers of copies of a current prospectus conforming with the requirements of the Securities Act, copies of
such Registration Statement, any amendment or supplement thereto and any documents incorporated by reference therein and such other documents as such Purchaser may reasonably require in order to facilitate the disposition of Registrable Securities owned by such Purchaser.

 

(v) Register and qualify the securities covered by such Registration Statement under the securities or “Blue Sky” laws of all domestic jurisdictions; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

 

(vi) Notify promptly each Purchaser that has Registrable Securities  included in a Registration Statement of the happening of any event (but not the substance or details of any such event) of which the
Company has knowledge as a result of which the prospectus (including any supplements thereto or thereof) included in such Registration Statement, as then in effect, includes an untrue statement of material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing (each an “Event”), and use its best efforts to promptly update
and/or correct such prospectus. Each Purchaser will hold in confidence and will not make any disclosure of any such Event and any related information disclosed by the Company.

 

(vii) Notify the Purchaser of the issuance by the Commission or any state securities commission or agency of any stop order suspending the effectiveness of any Registration Statement or the threat or initiation
of any proceedings for that purpose.  The Company shall use its best efforts to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible time.

 

(viii) List the Registrable Securities covered by such Registration Statement with all securities exchange(s) and/or markets on which the Common Stock is then listed and prepare and file any required filings with
any exchange or market where the Common Shares are traded.

 

(ix) Take all steps reasonably necessary to enable Purchaser to avail itself of the prospectus delivery mechanism set forth in Rule 153 (or successor thereto)
under the Act.

 

  

4

  

 

(x) Take all steps reasonably necessary to keep public information available as those terms are understood and defined in Rule 144 under the Securities Act.

 

(b) Notwithstanding the obligations under Section 2(a)(vii) or any provision of this Agreement, if (i) in the good faith judgment of the Company, following consultation with legal counsel, it would be detrimental
to the Company and its stockholderss for resales of Registrable Securities to be made pursuant to a Registration Statement due to the existence of a material development or potential material development involving the Company that the Company would be obligated to disclose in the Registration Statement, which disclosure would be premature or otherwise inadvisable at such time or would have a material adverse effect upon the Company and its stockholderss, or (ii) in the good faith judgment of the Company, it would
adversely affect or require premature disclosure of the filing of a Company-initiated registration of any class of its equity securities, then the Company will have the right to suspend the use of the Registration Statement for one period of not more than 10 calendar days in any 12 month period, but only if the Company reasonably concludes, after consultation with outside legal counsel, that the failure to suspend the use of the Registration Statement as such would create a material liability or violation under
applicable securities laws or regulations.

 

(c) Effect of Late Filing. In the event that (i) any Registration Statement has not been filed by the Required Filing Date, the Company fails to cause
to be declared effective a Registration Statement within ten (10) days following receipt of a “no review” letter from the SEC, or the Company fails to respond to any SEC comment letter within thirty (30) days of receipt other than by reason of the operation of Section 2(b); or (ii) the Company fails to maintain the effectiveness of the Registration Statement during the registration period and the Purchaser cannot otherwise effectuate a resale of the Registrable Securities under Rule 144, then the
Company will make a payment to the Purchaser as liquidated damages for such delay (each a “Late Registration Payment”). Each Late Registration Payment will be paid in cash and shall be equal to 1% of the dollar amount invested by the Purchaser in the Initial Purchase for every (30) day period, or portion thereof that the Registration Statement is not filed or the Company fails to respond to SEC comments.  The Late Registration
Payments will be prorated on a daily basis during the 30-day period and will be paid to the Purchaser within ten business days following the end of each 30-day period as to which payment is due hereunder.  The Purchaser may make a claim for additional damages as a remedy for the Company’s failure to comply with the timelines set forth in this Section, but acknowledgement of such right in this Agreement shall not constitute an admission by the Company that any such damages exist or may exist.  Nothing
contained in the preceding sentence shall be read to limit the ability of the Purchaser to seek specific performance of this Agreement.

 

(d) During the registration period, the Company will make available, upon reasonable advance notice during normal business hours, for inspection by any Purchaser whose Registrable Securities are being sold pursuant
to a Registration Statement, all pertinent financial and other records, pertinent corporate documents and properties of the Company (collectively, the “Records”) as reasonably necessary to enable each such Purchaser to exercise its due diligence responsibility in connection with or related to the contemplated offering. The Company will cause its officers, directors and employees to supply all information that any Purchaser may reasonably
request for purposes of performing such due diligence.

 

(e) Purchaser will hold in confidence, use only in connection with the contemplated offering and not make any disclosure of all Records and other information that the Company determines in good faith to be confidential,
and of which determination the Purchaser is so notified, unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court or government body of competent jurisdiction,(iii) the information in such Records has been made generally available to the public other than by disclosure in violation of 

 

  

5

  

this or any other agreement (to the knowledge of the relevant Purchaser), (iv) the Records or other information were developed independently by the Purchaser without breach of this Agreement, (v) the information was known to the Purchaser before receipt of such information from the Company, or (vi) the information was disclosed to
the Purchaser by a third party not under an obligation of confidentiality. However, a Purchaser may make disclosure of such Records and other information to any attorney, adviser, or other third party retained by it that needs to know the information as determined in good faith by the Purchaser (the “Purchaser Representative”), if the Purchaser advises the Purchaser Representative of the confidentiality provisions of this Section 2(e),
but the Purchaser will be liable for any act or omission of any of its Purchaser Representatives relative to such information as if the act or omission was that of the Purchaser. The Company is not required to disclose any confidential information in the Records to any Purchaser unless and until such Purchaser has entered into a confidentiality agreement (in form and substance satisfactory to the Company) with the Company with respect thereto, substantially to the effect of this Section 2(e). Unless legally prohibited
from so doing, the Purchaser will, upon learning that disclosure of Records containing confidential information is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at the Company’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. Nothing herein will be deemed to limit the Purchaser’s ability to sell Registrable
Securities in a manner that is otherwise consistent with applicable laws and regulations.

 

(f) The Company shall file a Registration Statement with respect to any newly authorized and/or reserved Registrable Securities consisting of Shares described in clause (i) of the definition of Registrable Securities
within ten (10) business days of any stockholderss’ meeting authorizing same and shall use its best efforts to cause such Registration Statement to become effective within ninety (90) days of the second Closing Date.  If the Purchaser become entitled, pursuant to an event described in clause (ii) and (iii) of the definition of Registrable Securities, to receive any securities in respect of Registrable Securities that were already included in a Registration Statement, subsequent to the date such
Registration Statement is declared effective, and the Company is unable under the securities laws to add such securities to the then effective Registration Statement, the Company shall promptly file, in accordance with the procedures set forth herein, an additional Registration Statement with respect to such newly Registrable Securities.  The Company shall use its best efforts to (i) cause any such additional Registration Statement, when filed, to become effective within 30 days of that date that the
need to file the Registration Statement arose.  All of the registration rights and remedies under this Agreement shall apply to the registration of such newly reserved shares and such new Registrable Securities.

 

3. Expenses of Registration.  All Registration Expenses in connection with any registration, qualification or compliance with registration
pursuant to this Agreement, and all Selling Expenses shall be borne by the Purchaser.

 

4. No Senior Registration Rights.  Without the prior written consent of all Purchasers who hold Registrable Securities under the Purchase
Agreement, the Company will not grant any registration rights which are senior to the registration rights granted hereby.

 

5. Registration Period.  In the case of the registration effected by the Company pursuant to this Agreement, the Company shall keep such registration
effective and current until the earlier of (a) the date on which the Purchaser has completed the sales or distribution described in the Registration Statement relating thereto or, if earlier until such Registrable Securities may be sold by the Purchaser under Rule 144 (provided that the Company’s transfer agent has accepted an instruction from the Company to such effect) and (b) the second (2nd) anniversary of the Closing Date.

 

  

6

  

 

6. Indemnification.

 

(a) Company Indemnity.  The Company will indemnify the Purchaser, its officers, directors, agents and partners, and each person controlling
each of the foregoing, within the meaning of Section 15 of the Securities Act and the rules and regulations thereunder with respect to which registration, qualification or compliance has been effected pursuant to this Agreement, and each underwriter, if any, and each person who controls, within the meaning of Section 15 of the Securities Act and the rules and regulations thereunder, any underwriter, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact contained in any Time of Sale Information, final prospectus (as amended or supplemented if the Company files any amendment or supplement thereto with the SEC), Registration Statement filed pursuant to this Agreement or any post-effective amendment thereof or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances
under which they were made, or any violation by the Company of the Securities Act or any state securities law or in either case, any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse the Purchaser, its officers, directors, agents and partners, and each person controlling each of the foregoing, for any reasonable legal fees of a single counsel and any other
expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to a Purchaser to the extent that any such claim, loss, damage, liability or expense arises out of or is based on (i) any untrue statement or omission based upon written information furnished to the Company by such Purchaser or underwriter (if any) therefor and stated to be specifically for use therein, (ii) any failure by
any Purchaser to comply with prospectus delivery requirements of the Securities Act (other than a failure resulting from an act or omission on the part of the Company) or any other law or legal requirement applicable to them or any covenant or agreement contained in the Purchase Agreement or this Agreement or (iii) an offer or sale of Registrable Securities or Demand Registrable Securities occurring during a period in which sales under a Registration Statement are suspended as permitted by this Agreement; provided that
notice has been properly provided to the Purchaser.  The indemnity agreement contained in this Section 6(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent will not be unreasonably withheld).

 

(b) Purchaser Indemnity.  The Purchaser will, if Registrable Securities or Demand Registrable Securities held by it are included in the securities
as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors, officers, agents and partners, and any other stockholders selling securities pursuant to the Registration Statement and any of its directors, officers, agents, partners, and any person who controls such stockholders within the meaning of the Securities Act or Exchange Act and each underwriter, if any, of the Company’s securities covered by such a Registration Statement, each person
who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act and the rules and regulations thereunder, each other Purchaser (if any), and each of their officers, directors and partners, and each person controlling such other Purchaser(s) against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on (i) any untrue statement (or alleged untrue statement) of a material fact contained in any such, Time of Sale Information, final
prospectus (as amended or supplemented if the Company files any amendment or supplement thereto with the SEC), Registration Statement filed pursuant to this Agreement or any post-effective amendment thereof or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statement therein not misleading in light of the circumstances under which they were made or (ii) failure by such Purchaser to comply with prospectus delivery requirements
of the Securities Act (other than a failure resulting from an act or omission on the part of the Company or any other law or legal requirement applicable to 

  

7

  

them  or any covenant or agreement contained in the Purchase Agreement or this Agreement, and will reimburse the Company and such other Purchaser(s) and their directors, officers and partners, underwriters or control persons for any reasonable legal fees or any other expenses reasonably incurred in connection with investigating
and defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such Time of Sale Information, final prospectus (as amended or supplemented if the Company files any amendment or supplement thereto with the SEC), Registration Statement filed pursuant to this Agreement or any post-effective amendment thereof  in reliance upon and in conformity with
written information furnished to the Company by such Purchaser and stated to be specifically for use therein, and provided that the maximum amount for which such Purchaser shall be liable under this indemnity shall not exceed the net proceeds received by such Purchaser from the sale of the Registrable Securities or Demand Registrable Securities, as the case may be, pursuant to the registration statement in question.  The indemnity agreement contained in this Section 6(b) shall not apply to amounts paid
in settlement of any such claims, losses, damages or liabilities if such settlement is effected without the consent of such Purchaser (which consent shall not be unreasonably withheld).

 

(c) Procedure.  Each party entitled to indemnification under this Section 6 (the “Indemnified
Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim in any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim
or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at its own expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 6 except to the extent that the Indemnifying Party is materially and adversely affected by such failure to provide notice.  No
Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.  Each Indemnified Party shall furnish such non-privileged information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom.

 

7. Contribution.  If the indemnification provided for in Section 6 herein
is unavailable to the Indemnified Parties in respect of any losses, claims, damages or liabilities referred to herein (other than by reason of the exceptions provided therein), then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities as between the Company on the one hand and any Purchaser(s) on the other, in such proportion as is appropriate to reflect
the relative fault of the Company and of such Purchaser(s) in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations.  The relative fault of the Company on the one hand and of any Purchaser(s) on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to
information supplied by the Company or by such Purchaser(s).

 

  

8

  

In no event shall the obligation of any Indemnifying Party to contribute under this Section 7 exceed the amount that such Indemnifying Party would have been obligated to pay by way of indemnification if the indemnification provided for under Section 6(a) or 6(b) hereof had been available under the circumstances.

 

The Company and the Purchaser agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraphs.  The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraphs shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this Section, no Purchaser shall be
required to contribute any amount in excess of the amount by which in the case of any Purchaser, the net proceeds received by such Purchaser from the sale of Registrable Securities pursuant to the registration statement in question.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

 

8. Survival.  The indemnity and contribution agreements contained in Sections 6 and 7 shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement or the Purchase Agreement and (ii) the consummation of the sale or successive resales of the Registrable Securities.

 

9. Information by Purchaser.  As a condition to the obligations of the Company to complete any registration pursuant to this Agreement with
respect to the Registrable Securities of the Purchaser, such Purchaser will furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended methods of disposition of the Registrable Securities held by it as is reasonably required by the Company to effect the registration of the Registrable Securities. At least five business days prior to the first anticipated filing date of a Registration Statement for any registration under this Agreement, the Company will notify
the Purchaser of the information the Company requires from that Purchaser whether or not such Purchaser has elected to have any of its Registrable Securities included in the Registration Statement. If the Company has not received the requested information from a Purchaser by the business day prior to the anticipated filing date, then the Company may file the Registration Statement without including Registrable Securities of that Purchaser.

 

10. Further Assurances. The Purchaser will cooperate with the Company, as reasonably requested by the Company, in connection with the preparation and
filing of any Registration Statement hereunder, unless such Purchaser has notified the Company in writing of such Purchaser’s irrevocable election to exclude all of such Purchaser’s Registrable Securities from such Registration Statement.

 

11. Suspension of Sales. Upon receipt of any notice from the Company under Section 2(a)(v) or 2(b), the Purchaser will immediately discontinue disposition
of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until (i) it receives copies of a supplemented or amended prospectus contemplated by Sections 2(a)(v) or (ii) the Company advises the Purchaser that a suspension of sales under Section 2(b) has terminated. If so directed by the Company, the Purchaser will deliver to the Company (at the expense of the Company) or destroy all copies in the Purchaser’ s possession (other than a limited number of file copies)
of the prospectus covering such Registrable Securities that is current at the time of receipt of such notice.

 

  

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12. Replacement Certificates.  The certificate(s) representing the Registrable Securities held by the Purchaser may be exchanged by the Purchaser
at any time and from time to time for certificates with different denominations representing an equal aggregate number of Registrable Securities of the same tenor, as reasonably requested by such Purchaser upon surrendering the same.  No service charge will be made for such registration or transfer or exchange.  Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of certificates evidencing any Registrable Securities, and, in the
case of loss, theft or destruction, of indemnity reasonably satisfactory to it, or upon surrender and cancellation of such certificate if mutilated, the Company will make and deliver a new certificate of like tenor and dated as of such cancellation at no charge to the Purchaser.

 

13. Transfer or Assignment.  Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties
and their successors and permitted assigns.  The rights granted to the Purchaser by the Company under this Agreement to cause the Company to register Registrable Securities may be transferred or assigned (in whole or in part) to a transferee or assignee of the Shares, Warrant or Registrable Securities, and all other rights granted to the Purchaser by the Company hereunder may be transferred or assigned to any transferee or assignee of the Shares, Warrant or Registrable Securities; provided in each case
that (i) the Company is given written notice by the Purchaser at the time of or within a reasonable time after such transfer or assignment, stating the name and address of said transferee or assignee and identifying the securities with respect to which such registration rights are being transferred or assigned; and provided further that the transferee or assignee of such rights agrees in writing to be bound by the registration provisions of this Agreement, (ii) such transfer or assignment is not made under the
Registration Statement or Rule 144, (iii) such transfer is made according to the applicable requirements of the Purchase Agreement, and (iv) the transferee has provided to the Company an investor questionnaire (or equivalent document) evidencing that the transferee is a “qualified institutional buyer” as defined in Rule 144A under the Securities Act or an “accredited investor” as defined in Rule 501(a)(1),(2),(3), or (7) of Regulation D.

 

14. Miscellaneous.

 

(a) Remedies.  The Company and the Purchaser acknowledge and agree that irreparable damage would occur in the event that any of the provisions
of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.

 

(b) Jurisdiction.  The Company and the Purchaser (i) hereby irrevocably submit to the exclusive jurisdiction of the United States District
Court, the California state courts and other courts of the United States sitting in Los Angeles County, California for the purposes of any suit, action or proceeding arising out of or relating to this Agreement and (ii) hereby waive, and agree not to assert in any such suit action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper.  The
Company and the Purchaser consent to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing in this paragraph shall affect or limit any right to serve process in any other manner permitted by law.

 

(c) Notices.  Any notice or other communication required or permitted to be given hereunder shall be in writing by facsimile, mail or personal
delivery and shall be effective upon actual receipt of such notice.  The addresses for such communications shall be:

 

  

10

  

to the Company:

 

Clean Power Technologies, Inc.

436-35th Avenue, N.W.

Calgary, Alberta

Canada T2K OC1

Facsimile: (403) 277-3117

Attention: Abdul Mitha

 

with a copy to:

 

Gersten Savage LLP

600 Lexington Avenue, 9th Floor

New York, New York 10022

Telephone:  (212) 752-9700

Facsimile:   (212) 813-9768

Attention: Peter J. Gennuso, Esq.

 

If to the Purchaser:

 

                The Quercus Trust

1835 Newport Blvd.

A109-PMB 467

Costa Mesa, CA  92627

Telephone:

Facsimile:

Attention: David Gelbaum

 

with a copy to:

 

  The Law Offices of Joseph P. Bartlett, P.C.

                     1900
Avenue of the Stars, 19th Floor

                     Los
Angeles, CA 90067

                                                                                  
Telephone:  (310) 201-7553

                                                                                  
Facsimile:  (310) 388-1055

 

Any party hereto may from time to time change its address for notices by giving at least five days’ written notice of such changed address to the other parties hereto.

 

(d) Waivers.  No waiver by any party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed
to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.  The representations and warranties and the agreements and covenants of the Company and the Purchaser contained herein shall survive the Closing.

 

(e) Execution in Counterpart.  This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same
agreement, it being understood that all parties need not sign the same counterpart.

 

  

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(f) Signatures.  Facsimile signatures shall be valid and binding on each party submitting the same.

 

(g) Entire Agreement; Amendment.  This Agreement, together with the Purchase Agreement, the Shares, the Warrants, and the agreements and documents
contemplated hereby and thereby, contains the entire understanding and agreement of the parties, and may not be amended, modified or terminated except by a written agreement signed by the Company and the Purchaser.

 

(h) Governing Law.  This Agreement and the validity and performance of the terms hereof shall be governed by and construed in accordance with
the laws of the State of California applicable to contracts executed and to be performed entirely within such state, except to the extent that the law of the State of Nevada regulates the Company’s issuance of securities.

 

(i) Jury Trial.  EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY.

 

(j) Titles.  The titles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this
Agreement.

 

(k) No Strict Construction.  The language used in this Agreement will be deemed to be the language chosen by the parties to express their
mutual intent, and no rule of strict construction will be applied against any party.

 

(l) Attorneys’ Fees.  In the event any dispute arises out of this Agreement, the prevailing party shall be entitled to receive from
the other party all costs, including attorneys’ fees, incurred in connection with such dispute.

 

(m) Severability.  If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not contained herein.

 

  

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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first written above.

COMPANY:

 

CLEAN POWER TECHNOLOGIES, INC.

By:  /s/ Abdul Mitha                                                                           

     Name:  Abdul Mitha

     Title:    Chief Executive Officer

PURCHASER:

THE QUERCUS TRUST

By: /s/ David Gelbaum                                                                           

     Name:  David Gelbaum

     Title:    Trustee

  

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