Document:

Exhibit 10.3

 

Debt Subordination Agreement

 

 

	
Borrower:
    	
Clean Diesel Technologies, Inc.
    
	
 
    	
 
    
	
Creditor:
    	
Kanis, S.A.
    
	
 
    	
 
    
	
Date:
    	
June 30, 2016
    

 

This Debt Subordination Agreement is executed by the above-named Creditor (“Creditor”) in favor of Haldor Topsøe A/S (“Lender”), with respect to the above-named borrower (“Borrower”).  In order to induce Lender to extend or continue to extend financing to the Borrower (but without obligation on Lender’s part to do so), Creditor hereby agrees as follows:

 

1.  Subordination of Debt.  Creditor hereby subordinates payment by the Borrower of any and all indebtedness, liabilities, guarantees and other obligations of the Borrower to such Creditor under that certain Promissory Note dated as of April 1, 2016 in the initial principal amount of US$2,000,000.00 (the “Subordinated Debt”), to the payment to Lender, in full in cash, of all indebtedness, liabilities, guarantees and other obligations of the Borrower to Lender under that certain Senior Convertible Promissory Note (the “Senior Note”) dated on or about June 2016 in the initial principal amount of US$750,000.00 (the “Senior Debt”). Unless and until all of the Senior Debt has been indefeasibly paid in full, in cash (after the passage of any relevant preference period) and all obligations of the Lender to make loans or extend other financial accommodations to the Borrower have terminated, Creditor agrees not to do any of the following, directly or indirectly:  ask for or accept payment of all or any part of the Subordinated Debt, in cash or other property or by set-off or in any other manner, demand, sue for, accelerate the maturity of, or otherwise enforce any of the Subordinated Debt, enforce any guaranty of any of the Subordinated Debt, take any security for any of the Subordinated Debt, exercise any rights or remedies with respect to the Subordinated Debt, judicially or non-judicially (including without limitation the commencement of any bankruptcy or insolvency proceeding against the Borrower), or attempt to do any of the foregoing.

 

Notwithstanding anything in this Section 1 to the contrary, the Creditor and Borrower may amend the documentation of the Subordinated Debt to (i) decrease the interest rate under the Subordinated Debt; or (ii) extend the maturity date applicable to the Subordinated Debt.

 

Creditor further agrees that upon any distribution of the assets or readjustment of the indebtedness of the Borrower, Lender shall be entitled to receive payment in full in cash of all of the Senior Debt prior to the payment of all or any part of the Subordinated Debt. Creditor shall endorse all notes and other written evidence of the Subordinated Debt with a statement that they are subordinated to the Senior Debt pursuant to the terms of this agreement, in such form as Lender shall require, and Creditor will exhibit copies of such notes and other written evidence of the Subordinated Debt to Lender so that Lender can confirm that such endorsement has been made, but this Subordination Agreement shall be fully effective, even if no such endorsement is made.  Any amounts received by any Creditor contrary to the provisions of this Section shall be held in trust by such Creditor for the benefit of Lender and shall forthwith be paid over to Lender to be applied to the Lender debt in such order as Lender in its sole discretion shall determine, without limiting any other right of Lender hereunder or otherwise and without otherwise affecting the liability of such Creditor.

 

2.   Modifications to Senior Debt; Waivers. Until Lender has received payment in full of all Senior Debt, Creditor agrees that, in addition to any other rights that Lender may have at law or in equity, Lender may at any time, and from time to time, without such Creditor’s consent and without notice to such Creditor, renew, extend or increase any of the Senior Debt or that of any other person at any time directly or indirectly liable for the payment of any Senior Debt, accept partial payments of the Senior Debt, settle, release (by operation of law or otherwise), compound, compromise, collect or liquidate any of the Senior Debt, convert the Senior Debt into equity securities of Borrower pursuant to the Senior Note, make loans or advances to the Borrower secured in whole or in part by collateral or unsecured or refrain from making any loans or advances to the Borrower, change, waive, alter or vary the interest charge on, or any other terms or provisions of the Senior Debt or any present or future instrument, document or agreement between Lender and the Borrower, release, exchange, fail to perfect, delay the perfection of, fail to resort to, or realize upon any collateral, and take any other action or omit to take any other action with respect to the Senior Debt or any collateral as Lender deems necessary or advisable in Lender’s sole discretion.  Creditor waives any right to require Lender to marshal any assets in favor of such Creditor or against or in payment of any or all of the Senior Debt.  Creditor 

 

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Debt Subordination   Agreement
    

 

further waives any defense arising by reason of any claim or defense based upon an election of remedies by Lender which in any manner impairs, affects, reduces, releases, destroys and/or extinguishes such Creditor’s subrogation rights, rights to proceed against the Borrower for reimbursement, and/or any other rights of such Creditor.

 

Notwithstanding anything in this Section 2 to the contrary, without Creditor’s consent, Lender may not increase the principal amount of the Senior Debt to be more than 110% of the original principal amount of the Senior Debt (i.e., $825,000) or increase the interest rate of the Senior Debt by more than 200 basis points.

 

3.  Notice of Default.  Creditor shall give Lender written notice of any default or event of default under any document, instrument or agreement evidencing, or relating to any of the Subordinated Debt at the same time such notice is given to the Borrower.

 

4.  No Commitment; Bankruptcy Financing. It is understood and agreed that this Agreement shall in no way be construed as a commitment or agreement by Lender to continue financing arrangements with the Borrower and that Lender may terminate such arrangements at any time, in accordance with Lender’s agreements with the Borrower.  In the event of any financing of the Borrower by Lender during a bankruptcy, arrangement, or reorganization of Borrower, Creditor agrees that the term “Senior Debt” shall include without limitation all indebtedness, liabilities and obligations incurred in any such proceeding, and Creditor agrees to take such actions and execute such documents in such proceedings as may be necessary in Lender’s good faith business judgment in order to effectuate the foregoing. In the event of any bankruptcy, arrangement, or reorganization of the Borrower, Creditor agrees to take all actions requested by Lender in good faith to protect Lender’s interests and not to take any action which may, in Lender’s judgment, adversely affect Lender’s rights or interests. Without limiting the foregoing, no Creditor shall oppose or interfere with any financing of Borrower by Lender in any bankruptcy or insolvency proceeding with respect to the Borrower.

 

5.  Modifications; Refinancing. Until Lender has received payment in full of all Senior Debt, Creditor agrees not to modify any of the material terms of the Subordinated Debt (including without limitation payment terms, interest rate, maturity date, fees, and financial covenants), without Lender’s prior written consent.  If Borrower wishes to refinance any of the Senior Debt with a new lender, upon Lender’s request of Creditor, Creditor will enter into a new subordination agreement with the new lender on substantially the terms of this Agreement.

 

6.  Financial Condition of Borrower. Creditor is presently informed of the financial condition of the Borrower and of all other circumstances which a diligent inquiry would reveal and which bear upon the risk of non-payment of the Senior Debt and the Subordinated Debt.  Creditor covenants that it will continue to keep itself informed as to the Borrower’s financial condition and all other circumstances which bear upon the risk of non-payment of the Senior Debt and the Subordinated Debt.  Creditor waives any right to require Lender to disclose to it any information which Lender may now or hereafter acquire concerning the Borrower.

 

7.  Representations. Creditor represents and warrants to Lender as follows:  (a) the execution, delivery, and performance by such Creditor of this Agreement and the consummation of the transactions contemplated hereby do not contravene any law or any contractual restriction binding on or affecting such Creditor; (b) no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by such Creditor of this Agreement; (c) such Creditor has duly executed and delivered this Agreement;  (d) this Agreement is the legal, valid, and binding obligation of such Creditor, enforceable against such Creditor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights or insolvent corporations, generally; (e) there is no pending or, to the best of its knowledge, threatened action or proceeding affecting such Creditor, or any basis therefor, which questions the validity, binding effect or enforceability hereof, any action taken or to be taken pursuant hereto, or any of the transactions contemplated hereby; (f) the Subordinated Debt is not secured by any collateral or assets of any kind and will not be so secured until all of the Senior Debt has been indefeasibly paid in full, in cash (after the passage of any relevant preference period) and all obligations of the Lender to make loans or extend other financial accommodations to the Borrower have terminated; and (g) such Creditor has not previously executed a subordination agreement with respect to any of the Subordinated Debt and will not do so without prior written notice to Lender and without making such subordination agreement expressly subject to this Agreement.

 

8.  Revivor.  If, after payment of the Senior Debt, the Borrower thereafter becomes liable to Lender on account of the Senior Debt, or any payment made on the Senior Debt shall for any reason be returned by Lender, this Agreement shall thereupon in all respects become effective with respect to such subsequent or reinstated Senior Debt, without the necessity of any further act or agreement among Lender and any of the Creditors.

 

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Debt Subordination   Agreement
    

 

9.  Notices.  All notices to be given under this Agreement shall be in writing and shall be given either personally or by reputable private delivery service or by regular first-class mail, or certified mail return receipt requested, or by fax (and if by fax, sent concurrently by one of the other methods provided herein), addressed to the parties at the addresses shown in the heading to this Agreement, or at any other address designated in writing by one party to the other party.  All notices shall be deemed to have been given upon delivery in the case of notices personally delivered, or at the expiration of one business day following delivery to the private delivery service, or two business days following the deposit thereof in the United States mail, with postage prepaid or on the first business day of receipt during business hours in the case of notices sent by fax.

 

10.  General.  Creditor agrees, upon Lender’s request, to execute all such documents and instruments and take all such actions as Lender shall deem reasonably necessary or advisable in order to carry out the purposes of this Agreement (but this Agreement shall remain fully effective notwithstanding any failure to execute any additional documents or instruments).  The word “indebtedness” is used in this agreement in its most comprehensive sense and includes without limitation any and all present and future loans, advances, credit, debts, obligations, liabilities, representations, warranties, and guarantees, of any kind and nature, absolute or contingent, liquidated or unliquidated, and individual or joint.  Creditor represents and warrants that it has not heretofore transferred or assigned the Subordinated Debt or given any other subordination agreement in respect of any Subordinated Debt, and that it will not do so without prior written notice to Lender and without making such transfer, assignment or subordination expressly subject to this Agreement.  This Agreement is solely for the benefit of Lender and Lender’s successors and assigns, and neither the Borrower nor any other person shall have any right, benefit, priority or interest under, or because of the existence of, this Agreement.  All of Lender’s rights and remedies hereunder and under applicable law are cumulative and not exclusive.  This Agreement sets forth in full the terms of agreement between the parties with respect to the subject matter hereof, and may not be modified or amended, nor may any rights hereunder be waived, except in a writing signed by Lender and Creditor. This Agreement may be executed in multiple counterparts, by different parties signing separate counterparts, and all of the same taken together shall constitute one and the same agreement.  Creditor agrees to reimburse Lender, upon demand, for all reasonable costs and expenses (including reasonable attorneys’ fees) incurred by Lender in enforcing this Agreement against Creditor, whether or not suit be brought.   In the event of any litigation between the parties based upon or arising out of this Agreement, the prevailing party shall be entitled to recover all of its reasonable costs and expenses (including without limitation reasonable attorneys fees) from the non-prevailing party. This Agreement shall be binding upon Creditor and its successors and assigns and shall inure to the benefit of Lender and Lender’s successors and assigns.

 

11.  Governing Law; Jurisdiction; Venue. This Agreement and all acts, transactions, disputes and controversies arising hereunder or relating hereto, and all rights and obligations of Lender and Creditor shall be governed by, and construed in accordance with the internal laws of the State of California without regard to conflict of laws principles, provided that Lender shall retain all rights arising under federal law. CREDITOR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR CALIFORNIA STATE COURT SITTING IN LOS ANGELES, CALIFORNIA IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER DOCUMENT RELATING HERETO OR ANY ACT, TRANSACTION, DISPUTE OR CONTROVERSY ARISING HEREUNDER OR THEREUNDER OR RELATING HERETO OR THERETO, AND CREDITOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST SUCH CREDITOR IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY CREDITOR AGAINST LENDER OR ANY AFFILIATE THEREOF INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN LOS ANGELES, CALIFORNIA.  Creditor consents to service of process in any action or proceeding brought against it by Lender, by personal delivery, or by mail addressed as set forth in this Agreement or by any other method permitted by law.

 

12.      Mutual Waiver of Jury Trial.  CREDITOR AND LENDER HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (I) THIS AGREEMENT; OR (II)  ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN SUCH CREDITOR AND LENDER; OR (III) ANY CONDUCT, ACTS OR OMISSIONS OF SUCH CREDITOR OR LENDER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,  ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SUCH CREDITOR OR LENDER; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

 

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Debt Subordination   Agreement
    

 

 

 

[SIGNATURE PAGES FOLLOW]

 

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Debt Subordination   Agreement
    

 

Creditor:

 

Kanis, S.A.

 

 

 

	
By:
    	
/s/ Derek   Gray
    	
 
    	
 
    
	
Name:
    	
D. R. Gray
    	
 
    
	
Title:
    	
CFO
    	
 
    
	
Address:
    	
Kanis S.A.
    	
 
    
	
 
    	
P.O. Box   986, Third Floor Geneva Place
    	
 
    
	
 
    	
Road Town
    	
 
    
	
 
    	
Tortola   VG1110
    	
 
    
	
 
    	
British   Virgin Islands
    	
 
    
						

 

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CONSENT AND AGREEMENT OF BORROWER

 

The undersigned Borrower hereby approves of, agrees to and consents to all of the terms and provisions of the foregoing Debt Subordination Agreement and agrees to be bound thereby.  Borrower further agrees that, at any time and from time to time, the foregoing Agreement may be altered, modified or amended by Lender and the Creditor without notice to or the consent of Borrower, provided, however, that any alteration, modification or amendment that affects the rights and/or obligations of Borrower thereunder shall require, solely as to Borrower, Borrower’s prior written consent.  No such alteration, modification or amendment, however, shall affect the enforceability thereof between Borrower and Creditor regardless of whether the consent of Borrower thereto is obtained.

 

 

	
Borrower:
    	
 
    
	
 
    	
 
    
	
 
    	
CLEAN DIESEL TECHNOLOGIES, INC.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
/s/ Matthew Beale
    	
 
    	
 
    
	
 
    	
Name
    	
Matthew Beale
    	
 
    
	
 
    	
Title
    	
 C.E.O.
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Accepted:
    	
 
    
	
 
    	
 
    
	
Lender:
    	
 
    
	
 
    	
 
    
	
 
    	
Haldor Topsøe A/S
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
/s/ Lars Storm Pedersen
    	
 
    	
 
    
	
 
    	
Name
    	
Lars Storm Pedersen
    	
 
    
	
 
    	
Title
    	
Vice PresidentExhibit 10.4

 

NOTE PURCHASE AGREEMENT

 

This Note Purchase Agreement (this “Agreement”) is made as of June 30, 2016, by and between Clean Diesel Technologies, Inc., a Delaware corporation (the “Company”), and Haldor Topsøe A/S, a company organized under the laws of Denmark (“Purchaser”).

 

WHEREAS, Purchaser desires to purchase and acquire from the Company and the Company desires to sell and issue to Purchaser (i) a Senior Convertible Promissory Note (the “Senior Note”) in the principal amount of Seven Hundred Fifty Thousand U.S. Dollars ($750,000), which Senior Note shall be in the form attached hereto as Exhibit A; and (ii) a Convertible Promissory Note (the “Note”) in the principal amount of Five Hundred Thousand U.S. Dollars ($500,000), which Note shall be in the form attached hereto as Exhibit B (collectively, the “Convertible Notes”), each of which is convertible into shares of the Company’s common stock, $0.01 par value per share (the “Common Stock”) or other equity securities of the Company. The shares of Common Stock or other equity securities of the Company issuable upon conversion of the Convertible Notes are referred to herein as the “Conversion Shares,” and the Convertible Notes and the Conversion Shares are collectively referred to herein as the “Securities.”

 

NOW, THEREFORE, for and in consideration of the mutual premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.                                    Purchase and Sale of the Securities.  Purchaser hereby purchases and acquires from the Company, and the Company hereby issues and sells to Purchaser, the Convertible Notes for an aggregate purchase price of One Million Two Hundred and Fifty Thousand U.S. Dollars ($1,250,000) (the “Purchase Price”).

 

2.                                    Deliveries.  Concurrently with the execution and delivery of this Agreement and scanned copies of the duly executed Convertible Notes being delivered to Purchaser by the Company through electronic mail, Purchaser shall deliver the Purchase Price to the Company by wire transfer of immediately available funds pursuant to wire transfer instructions given to Purchaser by the Company.  Immediately following receipt by the Company of the Purchase Price, the Company shall deliver originals of the duly executed Convertible Notes to Purchaser by overnight mail.

 

3.                                    Representations and Warranties of the Company.  The Company represents and warrants to Purchaser as follows:

 

3.1                            Authority.  The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, and has all requisite right, power, and authority to execute, deliver and perform this Agreement.

 

3.2                            Qualifications.  The Company is duly qualified to conduct business and is in good standing in all jurisdictions where such qualification is necessary and where failure so to qualify could have a material adverse effect on the business, properties, operations, condition (financial or otherwise), results of operations or prospects of the Company taken as a whole.

 

 

3.3                            Capitalization.  The capitalization of the Company as of June 24, 2016 is as described in Schedule 3.3 attached hereto.  The Company has not issued any capital stock since such date.  No person or entity has any right of first refusal, preemptive right, right or participation, or any similar right to participate in the transactions contemplated by this Agreement.  Except as a result of this Agreement or as disclosed in the SEC Reports (as hereafter defined), there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any person or entity any right to subscribe for or acquire any shares of the Company’s Common Stock.

 

3.4                            Enforceability.  The execution, delivery, and performance of this Agreement by the Company have been duly authorized by all requisite corporate action.  This Agreement has been duly executed and delivered by the Company, and, upon its execution by Purchaser, shall constitute the legal, valid, and binding obligation of the Company, enforceable in accordance with its terms, except to the extent that its enforceability is limited by bankruptcy, insolvency, reorganization, or other laws relating to or affecting the enforcement of creditors’ rights generally and by general principles of equity.

 

3.5                            No Violations.  The execution, delivery, and performance of this Agreement by the Company do not and will not violate or conflict with any provision of the Company’s Certificate of Incorporation or Bylaws (each as amended) and do not and will not, with or without the passage of time or the giving of notice, result in the breach of, or constitute a default, cause the acceleration of performance, or require any consent under (except such consents as have been obtained as of the date hereof), or result in the creation of any lien, charge or encumbrance upon any property or assets of the Company pursuant to, any material instrument or agreement to which the Company is a party or by which the Company or its properties are bound, except such consents as have been obtained as of the date hereof.

 

3.6                            Valid Issuance; Securities Exemption; Listing.  Upon issuance in accordance with the terms of the Convertible Notes, the Conversion Shares will be duly and validly issued, fully paid, and non-assessable with no personal liability attaching to the ownership thereof and free and clear of all liens imposed by or through the Company, and, assuming the accuracy of the representations and warranties of Purchaser made pursuant to this Agreement, will be issued in accordance with a valid exemption from the registration or qualification provisions of the Securities Act of 1933, as amended (the “Securities Act”), and any applicable state securities laws (the “State Acts”).  The Common Stock is listed for trading on The Nasdaq Stock Market, LLC (“NASDAQ”) and, except as disclosed in the SEC Reports, the Company and the Common Stock meet the criteria for continued listing and trading on NASDAQ. No suspension of trading in the Common Stock is in effect.

 

3.7                            Approvals, Filings.  No authorization, approval or consent of, or filing with, any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders of the Company is required to be obtained or made by the Company for (i) the execution, delivery and performance by the Company of the Agreement; (ii) the issuance and sale of the Securities as contemplated herein, and (iii) the performance by the Company of its other obligations under the Agreement, other than (a) approval by NASDAQ for the listing of the Conversion Shares on NASDAQ, (b) as may be required under applicable State Acts or “blue sky” 

 

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laws, and (c) filing of one or more Forms D with respect to the Securities as required under Regulation D.

 

3.8                            Information Provided. The written information provided by or on behalf of the Company to Purchaser, including the information described in Section 4.7 herein, in connection with the transactions contemplated by this Agreement, does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading.

 

3.9                            SEC Filings.  The Company has timely filed all reports required to be filed under the Securities Exchange Act of 1934 Act (the “Exchange Act”) and any other material reports or documents required to be filed with the SEC since December 31, 2015 (collectively the “SEC Reports).  All of the SEC Reports and documents complied, when filed, in all material respects, with all applicable requirements of the Securities Act and the Exchange Act.

 

3.10                    Absence of Certain Proceedings.  Except as disclosed in the SEC Reports, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body, or governmental agency pending or, to the knowledge of the Company, threatened against or affecting the Company in any such case wherein an unfavorable decision, ruling or finding would have a material adverse effect on the business, properties, operations, condition (financial or other), result of operations  or prospects of the Company, or the transactions contemplated by this Agreement or which could adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, this Agreement; and to the best of the Company’s knowledge there is not pending or contemplated any, and there has been no, investigation by the SEC involving the Company or any current or former director or officer of the Company.

 

3.11                    Use of Proceeds.  The Company will use the proceeds from the sale of the Convertible Notes for general working capital purposes including normal business operations, unless otherwise agreed by Purchaser. For the avoidance of doubt, proceeds from the sale of the Convertible Notes cannot be used to repay existing outstanding debt unless otherwise agreed by Purchaser.

 

3.12                    Bankruptcy. No attachments, execution proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other proceedings are pending or, to the Company’s knowledge, threatened against the Company, nor does the Company currently intend to commence any such proceedings. The Company has not made a general assignment for the benefit of creditors, filed any voluntary petition in bankruptcy or admitted in writing its inability to pay its debts as they come due, and the Company has received no written notice of and has no knowledge of the filing of any involuntary petition in bankruptcy by the Company’s creditors or the appointment of a receiver to take possession of all or substantially all of the Company’s assets.

 

4.                                    Representations and Warranties of Purchaser.  Purchaser represents and warrants to the Company as follows:

 

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4.1                            Authority.  Purchaser is a corporation duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization, and has all requisite right, power, and authority to execute, deliver and perform this Agreement.

 

4.2                            Enforceability.  The execution, delivery, and performance of this Agreement by Purchaser have been duly authorized by all requisite corporate action.  This Agreement has been duly executed and delivered by Purchaser, and, upon its execution by the Company, shall constitute the legal, valid, and binding obligation of Purchaser, enforceable in accordance with its terms, except to the extent that its enforceability is limited by bankruptcy, insolvency, reorganization, moratorium, or other laws relating to or affecting the enforcement of creditors’ rights generally and by general principles of equity.

 

4.3                            No Violations.  The execution, delivery, and performance of this Agreement by Purchaser do not and will not, with or without the passage of time or the giving of notice, result in the breach of, or constitute a default, cause the acceleration of performance, or require any consent under, or result in the creation of any lien, charge or encumbrance upon any property or assets of Purchaser pursuant to, any material instrument or agreement to which Purchaser is a party or by which Purchaser or its properties may be bound or affected, and, do not or will not violate or conflict with any provision of the articles of incorporation or bylaws, or similar organizational or governing document of Purchaser, as applicable.

 

4.4                            Knowledge of Investment and its Risks.  The Purchaser has knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of Purchaser’s investment in the Securities.  Purchaser understands that an investment in the Company represents a high degree of risk and there is no assurance that the Company’s business or operations will be successful.  Purchaser has considered carefully the risks attendant to an investment in the Company, and that, as a consequence of such risks, Purchaser could lose Purchaser’s entire investment in the Company.

 

4.5                            Investment Intent.  Purchaser hereby represents and warrants that (i) the Securities are being and will be acquired for investment for Purchaser’s own account, and not as a nominee or agent and not with a view to the resale or distribution of all or any part of the Securities, and Purchaser has no present intention of selling, granting any participation in, or otherwise distributing any of the Securities within the meaning of the Securities Act, and (ii) Purchaser does not have any contracts, understandings, agreements, or arrangements, directly or indirectly, with any person and/or entity to distribute, sell, transfer, or grant participations to such person and/or entity with respect to, any of the Securities.  The Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published 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.

 

4.6                            Purchaser Status.  Purchaser is an “accredited investor” as that term is defined by Rule 501 of Regulation D promulgated under the Securities Act.

 

4.7                            Disclosure.  The Purchaser has reviewed information provided by the Company in connection with the decision to purchase the Securities, consisting of the Company’s publicly available filings with the Securities and Exchange Commission (the “SEC”) and the 

 

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information contained therein.  The Company has provided Purchaser with all the information that Purchaser has requested in connection with the decision to purchase the Securities.  Purchaser further represents that Purchaser has had an opportunity to ask questions and receive answers from the Company regarding the business, properties, prospects, and financial condition of the Company. All such questions have been answered to the full satisfaction of Purchaser. Neither such inquiries nor any other investigation conducted by or on behalf of Purchaser or its representatives or counsel shall modify, amend, or affect Purchaser’s right to rely on the truth, accuracy, and completeness of the disclosure materials and the Company’s representations and warranties contained herein.

 

4.8                            No Registration.  Purchaser understands that Purchaser may be required to bear the economic risk of Purchaser’s investment in the Company for an indefinite period of time.  Purchaser further understands that (i) neither the offering nor the sale of the Securities has been registered under the Securities Act or any applicable State Acts in reliance upon exemptions from the registration requirements of such laws, (ii) the Securities must be held by Purchaser indefinitely unless the sale or transfer thereof is subsequently registered under the Securities Act and any applicable State Acts, or an exemption from such registration requirements is available, (iii) the Company is under no obligation to register any of the Securities on Purchaser’s behalf or to assist Purchaser in complying with any exemption from registration, and (iv) the Company will rely upon the representations and warranties made by Purchaser in this Agreement in order to establish such exemptions from the registration requirements of the Securities Act and any applicable State Acts.

 

4.9                            Transfer Restrictions.  Purchaser will not transfer any of the Securities unless such transfer is registered or exempt from registration under the Securities Act and such State Acts, and, if requested by the Company in the case of an exempt transaction, Purchaser has furnished an opinion of counsel reasonably satisfactory to the Company that such transfer is so exempt.  Purchaser understands and agrees that (i) the Convertible Notes and the certificates evidencing the Conversion Shares will bear appropriate legends indicating such transfer restrictions placed upon the Securities, (ii) the Company shall have no obligation to honor transfers of any of the Securities in violation of such transfer restrictions, and (iii) the Company shall be entitled to instruct any transfer agent or agents for the securities of the Company to refuse to honor such transfers.

 

5.                                    Certain Covenants and Acknowledgements

 

5.1                            Form D.  The Company agrees to file with the SEC on a timely basis a Form D with respect to the Securities as required to claim the exemption provided by Regulation D and to provide a copy thereof to Purchaser promptly after filing.

 

5.2                            NASDAQ Listing.  Prior to the XXXX, the Company shall file with the NASDAQ an application or such other document required by the NASDAQ for the listing of the Conversion Shares with the NASDAQ and shall provide evidence of such filing to the Purchaser.  The Company shall use its best efforts to obtain the listing, subject to the official notice of issuance, of the Conversion Shares on the NASDAQ prior to July 31, 2016.  So long as the Purchaser beneficially owns the Securities, the Company will use its best efforts to maintain the listing of the Common Stock on NASDAQ or a registered national securities exchange.

 

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5.3                            Rule 144.  With a view of making available to Purchaser the benefits of Rule 144, the Company agrees so long as Purchaser owns or has the right to acquire the Conversion Shares, promptly upon request of Purchaser, to furnish such information as may be necessary, and otherwise reasonably to cooperate with Purchaser to permit such Purchaser to sell its Conversion Shares pursuant to Rule 144.

 

5.4                            Loans, Advances and Investments.  So long as any indebtedness evidenced by the Convertible Notes is outstanding, the Company shall not (i) loan, advance or otherwise extend credit to, or contribute capital to invest in, any other person or company or (ii) purchase or commit to purchase any shares, stock, other securities or any other interests in any other person or company.

 

5.5                            Acquisitions, Mergers and Dissolutions.  So long as any indebtedness evidenced by the Convertible Notes is outstanding, the Company shall not (i) acquire any business, (ii) merge or consolidate with any company or (iii) liquidate, wind up or dissolve itself.

 

5.6                            Limitation on Indebtedness.  At any time while there remains outstanding at least $750,000 in principal amount of indebtedness under the Convertible Notes, the Company shall not, without the prior written consent of Purchaser, incur any additional indebtedness for borrowed money other than: (a) indebtedness of the Company to Faunus Group International, Inc. (“FGI”) under the Company’s $7.5 million secured demand facility, as such facility may be amended, restated, modified, renewed, refunded, replaced in any manner (whether upon or after termination or otherwise) or refinanced in whole or in part from time to time (provided that the principal amount of such indebtedness, including any indebtedness incurred to renewed, replace or refinance such indebtedness, does not exceed $7.5 million; and provided, further, that there is outstanding at any one time only a single secured credit facility); and (b) indebtedness that (i) has a final maturity date that is more than 90 days after the final maturity date of the Convertible Notes and (ii) is expressly subordinated in right of payment to the Convertible Notes.

 

5.7                            Subordination Agreement.  Concurrently with the execution and delivery of this Agreement, Purchaser, the Company and Kanis, S.A. are entering into that certain Debt Subordination Agreement, dated of even date herewith, in the form of Exhibit C attached hereto, pursuant to which Kanis, S.A. will agree to subordinate $2,000,000 in principal amount of indebtedness owed by the Company to Kanis, S.A. to the payment in full of the Senior Note.

 

6.                                    Board Representation.  Purchaser and the Company agree as follows:

 

6.1                            Following receipt by the Company of the Purchase Price and continuing until the later of (i) the date that the Convertible Notes have been paid in full or (ii) if 100% of the principal amount of the Convertible Notes have been converted into Common Stock and/or other equity securities of Purchaser, the date Purchaser no longer owns at least eighty percent (80%) of the shares of Common Stock and/or other securities acquired by Purchaser upon conversion thereof (the “Representation Period”), Purchaser shall be entitled, at its option, to the board representation rights set forth in in this Section 6.

 

6.2                            Immediately following receipt by the Company of the Purchase Price, the Company’s Board of Directors (the “Board”) shall take all action necessary to expand the size of 

 

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the Board by one (1) member and appoint one person designated by Purchaser who is reasonably acceptable to the Board to serve as a director of the Company, who shall serve as a director until the next meeting of stockholders of the Company where directors are to be elected and until his respective successor is duly elected and qualified.

 

6.3                            During the Representation Period, at each meeting of stockholders of the Company where directors are to be elected, the Board shall include in its slate of nominees to be submitted to stockholders for election, one person designated by Purchaser who is reasonably acceptable to the Board to serve as a director of the Company.  Each director designated by Purchaser to serve on the Company’s Board of Directors is referred to herein as the “Purchaser Designee”.

 

6.4                            Notwithstanding Sections 6.1, 6.2 or 6.3 to the contrary, if at any time after the date hereof the Convertible Notes have been paid in full or, if the Convertible Notes have been converted into Common Stock or other equity securities of the Company, Purchaser ceases to own at least eighty percent (80%) of the shares of Common Stock and/or other securities acquired by Purchaser upon conversion thereof, Purchaser shall cause the Purchaser Designee then serving on the Board to promptly tender his or her resignation from the Board and any committee of the Board on which he or she then sits.  In furtherance of this Section 6.4, each Purchaser Designee shall, as a condition to his or her appointment or election to the Board, execute and deliver to the Company an irrevocable resignation as director in the form attached hereto as Exhibit D.

 

6.5                            Each Purchaser Designee shall at all times while such Purchaser Designee is a director of the Company comply with the provisions of this Agreement and all policies and guidelines of the Board and its committees, and of the Company to the extent applicable to Board members, including the Company’s code of ethical conduct, corporate governance guidelines and insider trading policy.  Each Purchaser Designee shall, if requested by the Company and as a condition to being appointed or nominated for election to the Board, acknowledge that his obligations under this Agreement and such policies and guidelines are in addition to the fiduciary, statutory and common law duties of a director of a Delaware corporation and the NASDAQ rules.

 

6.6                            Each Purchase Designee shall, at the time of election or appointment to the Board, meet the qualification requirements to serve as a director under the Delaware General Corporation Law, applicable United States securities laws and the rules of NASDAQ or any other stock exchange on which the Common Stock is then listed.

 

6.7                            During the Representation Period, if a Purchaser Designee resigns from the Board or is rendered unable to serve on the Board by reason of death, disability or disqualification, Purchaser shall be entitled to designate a replacement for such Purchaser Designee reasonably acceptable to the Board, and the Company shall take all necessary action to implement the foregoing as promptly as practicable.  Any such designated replacement who becomes a Board member shall be deemed to be a Purchaser Designee for all purposes under this Agreement and, prior to his or her appointment to the Board, shall be required to execute and deliver to the Company an irrevocable resignation as director in the form attached hereto as Exhibit D.

 

7.                                    Subsequent Financing.  The Company agrees to use its best efforts to raise at least Five Million Dollars ($5,000,000) (including the principal amount of the Senior Note converted 

 

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into the equity securities issued in such financing, but excluding the conversion of any other indebtedness of the Company existing on the date of this Agreement) of additional capital through the sale of equity or equity linked securities as soon as practicable following the date hereof and in any event on or before December 31, 2016.

 

8.                                    Miscellaneous.

 

8.1                            Entire Agreement. This Agreement, together with any exhibits attached hereto, constitutes the sole and entire agreement of the parties with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter.

 

8.2                            Notices. All notices, requests, consents, claims, demands, waivers and other communications under this Agreement (each, a “Notice”) must be in writing and addressed to the other party at its address set forth below (or to such other address that the receiving party may designate from time to time in accordance with this section) and shall be deemed given: (a) on the date of delivery only if delivered by a commercial overnight courier service, with confirmation of receipt and costs prepaid; (b) on the date of receipt if sent by facsimile to the fax number set forth below with a confirmation copy sent by certified or registered mail, costs prepaid; or (c) on the earlier of the date of receipt or three (3) days after deposit in the U.S. mail if sent by certified or registered mail, return receipt requested and postage prepaid.

 

(a)                               Notice to Purchaser

 

Haldor Topsøe A/S
 Haldor Topsøes Alle 1
 2800 Kgs. Lyngby
 Denmark
 Fax: +45 4527 2999

 

(b)                              Notice to the Company:

 

Clean Diesel Technologies, Inc.
 1621 Fiske Place
 Oxnard, CA  93033
 USA
 Fax:  +1 805 205 1333

 

8.3                            Headings. The headings in this Agreement are for reference only and do not affect the interpretation of this Agreement.

 

8.4                            Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability does not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction.

 

8.5                            Amendment and Modification. No amendment to or rescission, termination or discharge of this Agreement is effective unless it is in writing and signed by each party.

 

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8.6                            Waiver.  No waiver under this Agreement is effective unless it is in writing and signed by the party waiving its right.  Any waiver authorized on one occasion is effective only in that instance and only for the purpose stated, and does not operate as a waiver on any future occasion.

 

8.7                            Assignment. Neither party may assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other party. Any purported assignment or delegation in violation of this Section is null and void. No assignment or delegation relieves the assigning or delegating party of any of its obligations under this Agreement.

 

8.8                            Successors and Assigns. This Agreement is binding on and inures to the benefit of the parties and their respective permitted successors and permitted assigns.

 

8.9                            No Third-party Beneficiaries. This Agreement benefits solely the parties to this Agreement and their respective permitted successors and permitted assigns and nothing in this Agreement, express or implied, confers on any other person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

8.10                    Governing Law. This Agreement, including all exhibits attached hereto, and all matters arising out of or relating to this Agreement, are governed by, and construed in accordance with, the Laws of the State of California, without regard to the conflict of laws provisions thereof.

 

8.11                    Choice of Forum.  Each party irrevocably and unconditionally agrees that it shall not commence any action, litigation or proceeding of any kind whatsoever against the other party in any way arising from or relating to this Agreement, including all exhibits, schedules, attachments and appendices attached hereto and thereto, and all contemplated transactions, including contract, equity, tort, fraud and statutory claims, in any forum other than the state and federal courts in the State of California.  Each party irrevocably and unconditionally submits to the exclusive jurisdiction of such courts and agrees to bring any such action, litigation or proceeding only in the state or federal courts in the State of California. Each party agrees that a final judgment in any such action, litigation or proceeding is conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.

 

8.12                    Counterparts. This Agreement may be executed in counterparts, each of which is deemed an original, but all of which together are deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission is deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

 

8.13                    Governing Language.  This Agreement has been executed in the English language which shall be the binding and controlling language for all matters, notwithstanding the translation of this Agreement into any other language.

 

(Signatures on Following Page)

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

 

	
 
    	
CLEAN DIESEL   TECHNOLOGIES, INC.,
    
	
 
    	
a Delaware corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Matthew   Beale
    
	
 
    	
Name:  Matthew Beale
    
	
 
    	
Its:         Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
HALDOR TOPSØE A/S
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Lars Storm Pedersen
    
	
 
    	
Name:  Lars Storm Pedersen
    
	
 
    	
Its:         Vice President
    
				

 

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EXHIBIT A

 

Senior Convertible Promissory Note

 

[See Exhibit 10.5]

 

 

EXHIBIT B

 

Convertible Promissory Note

 

[See Exhibit 10.6]

 

 

EXHIBIT C

 

Subordination Agreement

 

[See Exhibit 10.3]

 

2

 

EXHIBIT D

 

Irrevocable Resignation

 

[DATE]

 

Chairman of the Board of Directors
 of Clean Diesel Technologies, Inc.

 

Reference is made to the Note Purchase Agreement, dated June 30, 2016 (the “Agreement”), by and among Clean Diesel Technologies, Inc. (the “Company”) and Haldor Topsøe A/S (“Purchaser”).  Capitalized terms used but not defined herein shall have the meanings assigned to such terms in the Agreement.

 

In accordance with Section 6.4 or Section 6.6 of the Agreement, I hereby tender my conditional resignation as a director of the Board, provided that this resignation shall be effective upon the Board’s acceptance of this resignation, and only in the event of termination of the Representation Period (as defined in the Agreement).  I hereby acknowledge that this conditional resignation as a director of the Board is as a result of the terms and conditions of the Agreement.

 

This resignation may not be withdrawn by me at any time during which it is effective.

 

	
 
    	
Very truly yours,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

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