Document:

exv10w1

Exhibit 10.1

Clean Diesel Technologies, Inc.

10 Middle Street, Suite 1100

Bridgeport, CT 06604

Tel: (203) 416-5290

Fax: (203) 416-5188

www.cdti.com

June 30, 2010

Mr. Charles W. Grinnell

336 Stamford Ave.

Stamford, CT 06902

Re: Transition Service Agreement

Dear Charles:

     We are writing to confirm our agreement about the transition services you have agreed to
provide to Clean Diesel Technologies, Inc. (“CDT”) in connection with the merger of CDT and
Catalytic Solutions, Inc. (the “Acquisition”). We greatly appreciate your agreement to work with
us through this transition.

     We have agreed that you will receive a transition bonus in the amount of $86,730 (less
applicable tax withholdings) so long as you remain employed with the Company through the earlier of
(A) the six-month period following the closing of the Acquisition or (B) the date that the Company
closes its Bridgeport, Connecticut office. For the sake of clarification, the closing of the
Bridgeport office means when that office is no longer actively used as a company facility
regardless of whether the lease continues. Additionally, to the extent both parties are
interested, we will discuss a potential consulting arrangement that would become effective after
the Company closes its Bridgeport, Connecticut office, the terms of which (if any) shall be
mutually agreed upon by you and the Company. For clarification, “Company” means CDT or,
following the Acquisition, the merged entity or the subsidiary of the merged entity that employs
you. In the event that the Acquisition does not occur on or before September 6, 2010 (or such
later date as determined by the Company), this Agreement will be void and of no further force and
effect as of such date and no transition bonus will be paid.

     This letter agreement represents our entire agreement regarding your transition bonus and
cannot be altered except in a written document signed by the Company and you. Also, this
transition bonus is in full substitution for any and all retention and severance plans or policies
of the Company that may be in effect from time to time. For
clarification, this letter agreement does not impact your rights with respect to your stock
options or with respect to your accrued vacation. This letter agreement shall be governed by and
construed in accordance with the substantive laws of the State of Connecticut.

     Please sign below to confirm your agreement with the terms of this letter agreement. If you
have any questions about this letter agreement, please do not hesitate to contact me.

 

 

     Charles, on behalf of CDT, I would like to express our gratitude and appreciation for the
contributions you have made to CDT since its inception and to thank you again for working with us
through this transition.

Sincerely,

/s/ Michael L. Asmussen

Michael L. Asmussen

President & CEO

Acknowledged and Agreed:

	 	 	 

	/s/ C. W. Grinnell
 

Charles W. Grinnell

	 	 

Date: 6-30-10exv10w2

Exhibit 10.2

EMPLOYMENT AGREEMENT

Clean Diesel Technologies, Inc. — Michael L. Asmussen

     AGREEMENT made as of the date set forth below by and between Michael L. Asmussen, 293 Taunton
Road, Fairfield CT 06824 (“Executive”) and Clean Diesel Technologies, Inc., a Delaware corporation
(the “Company”), having a place of business at Suite 1100, 10 Middle Street, Bridgeport, CT 06604.

     WHEREAS, the Company desires certain services for itself and Executive desires to contract
with the Company to perform such services;

     NOW THEREFORE, in consideration of the mutual covenants hereinafter recited, the sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:

          1. Schedules; Definitions. Schedules A and B attached are integral parts of this
Agreement and the defined terms in this Agreement have the meanings set out in Schedule B.

          2. Commencement Date; Term: This Agreement, executed as of the date of the last to
sign below, shall, nevertheless, be effective on the Commencement Date and shall continue
thereafter until terminated by either party as provided below. Notwithstanding the forgoing,
however, Executive shall be entitled to reimbursement for those relocation expenses set out in
Section 5 of Schedule A and incurred after the date of execution but before the Commencement Date.

          3. Scope of Work; Title; Location: Effective on the Commencement Date, Executive
shall be Vice President and Chief Commercial Officer of the Company and of CSI and in such position
shall be elected a member of the Board. As Chief Commercial Officer, Executive shall on a Full
Time basis direct all of Executive’s efforts towards and be responsible for all sales, marketing
and strategic business planning on a Company-wide basis and all sales and marketing personnel of
the Company shall ultimately report to Executive. Executive shall also from time to time perform
such duties as shall be assigned to Executive by the Chief Executive Officer and the Board.
Executive’s place of employment after the Commencement Date shall be the Company’s relocated
corporate headquarters at the CSI corporate office facility, 4567 Telephone Rd., Suite 206, Ventura
CA 93003.

          4. Compensation: (a) Base Salary. As of the Commencement Date, the Company
agrees to cause Executive to be paid for Executive’s services hereunder a Base Salary at the
initial rate of Three Hundred Thirty Thousand Dollars ($330,000) per year. Executive shall be paid
such amount by the Company in a similar manner and frequency as its payments to its executives
generally, but not less often than monthly.

(b) Restricted Shares. The Company, effective upon the Commencement Date, and subject to
authorization by the Board, shall issue to Executive under the Company’s Incentive Plan, Forty
Thousand (40,000) Shares restricted, however, so that of such Restricted Shares, there may only be
sold, assigned, transferred or hypothecated by the Executive, or Executive’s heirs and assigns,
Thirteen Thousand Three Hundred Thirty Three (13,333) Shares after the first anniversary of the
Commencement Date; Twenty Six Thousand Six Hundred Sixty Six (26,666) Shares after the second
anniversary of the

 

 

Commencement Date; and Forty Thousand (40,000) Shares after the third anniversary of the
Commencement Date; and, provided further, that as a condition for any sale, assignment, transfer or
hypothecation of the Restricted Shares, that on each of the foregoing anniversary dates, Executive
shall continue to be employed by the Company or an affiliate or subsidiary thereof, unless such
employment terminated as a result of Disability or death or “At Will” and not “Just Cause” by the
Company. The Certificates evidencing the Restricted Shares shall bear a legend and shall be subject
to a stop order with respect to the foregoing restriction. The Executive shall be entitled to vote
the Restricted Shares and receive dividends thereon, if any, pending the anniversary dates;
provided, however, that such dividends, if any, shall be subject to forfeiture under the above
restrictions and shall be held in a suspense account and paid over to Executive within sixty (60)
days after the anniversary dates of the Restricted Shares as to which such dividends shall be
allocable.

     (c) Annual Cash Bonus. After the Commencement Date and thereafter annually, Executive
shall participate in the Company’s annual cash bonus plan with a Target Participation Percentage of
Forty Percent (40%) of Executive’s then Base Salary calculated on the basis of such metrics, goals
and standards as the Compensation Committee shall determine related to Company and personal
performance, subject to the limitation that no cash bonus may exceed Eighty Percent (80%) of the
Executive’s then Base Salary, all as approved by the Compensation Committee. Notwithstanding the
foregoing, for the first year of participation following the Commencement Date, Executive shall be
paid in 2011 when bonuses would customarily be paid, a minimum guaranteed bonus of at least Fifty
Percent (50%) of his then Base Salary regardless of performance so long as Executive is then
employed by the Company.

     (d) Stock Options. Executive from time to time shall be entitled to participate in
stock option or other equity awards under the Company’s Incentive Plan (or any successor equity
award or equity participation plan) in the discretion of the Compensation Committee and on terms
and conditions similar to those of other executives of the Company.

     (e) Relocation. Executive shall be entitled to the relocation benefits, services,
reimbursements and a tax “gross up” as set out on Schedule A to this Agreement in order to
facilitate Executive’s household move to the vicinity of the relocated Company headquarters
referred to above.

     (f) Corporate Benefits. Executive shall participate also in such other welfare and
benefit programs as the Company may customarily extend to its Employees or officers as a class and
as to which participation may lawfully be extended to Executive. This Agreement may not be
construed to prevent the Company from rescinding any welfare or benefit programs for Executive so
long as such rescission applies to Employees or officers, as the case may be, as a class.

     (g) Change of Control Cash Bonus. In the event of a Change of Control after the
Commencement Date and not pursuant to the Merger, Executive shall be paid by the Company promptly
upon the effectiveness of such Change of Control, a cash bonus equal to Executive’s then Base
Salary. For purposes of clarification, Executive shall not be entitled to the cash bonus described
above unless he remains employed with the Company through the date of a Change of Control.

 

 

          5. Expenses: Executive shall be reimbursed by the Company in accordance with Company
policies from time to time in effect for all ordinary and necessary out-of-pocket expenses incurred
by Executive in performing Executive’s services hereunder. Such expenses shall be reported from
time-to-time by Executive on the Company’s customary forms of expense report and submitted for
approval to the Company.

          6. Termination of Employment: (a) Just Cause. The Company may at any time
terminate Executive’s employment for Just Cause.

               (b) Disability; Death. The Company may terminate the Executive’s employment at any
time upon the Executive’s Disability. This agreement and the Executive’s employment shall
immediately terminate upon the Executive’s death.

               (c) At Will. Executive may resign voluntarily (without Good Reason) or the Company
may terminate the employment of the Executive (without Just Cause) at any time, At Will.

          7. Compensation After Termination of Employment: (a) If termination of the Executive’s
employment is by the Company At Will and without Just Cause, or for Disability or upon Executive’s
resignation for Good Reason, the Executive shall, upon execution of a Release, be entitled to
Salary and Benefit Continuation for a period of not more than one year ending on the first
anniversary of such termination or resignation.

               (b) Upon the Executive’s death, Executive’s estate shall be entitled to receive accrued Base
Salary, Corporate Benefits and vacation pay and a pro-rated bonus for the portion of the bonus year
that had expired as at the date of death.

               (c) If Executive shall resign At Will, Executive shall give three (3) months advance written
notice of the date of resignation. If Executive works through such notice period, Executive shall
be entitled to the Executive’s then usual compensation and benefits as an employee during such
notice period and after such notice period Executive’s employment shall terminate and Executive
shall not be entitled to any further compensation or benefits except accrued Corporate Benefits and
vacation pay and thereafter COBRA benefits. If, however, the Company expressly waives Executive’s
working through to the end of Executive’s notice period and terminates Executive’s employment prior
to the end of the notice period, Executive shall be furnished Salary and Benefit Continuation from
the date of termination to the end of the notice period, and thereafter accrued Corporate Benefits,
vacation pay and COBRA benefits. If Executive fails to give such notice, Executive’s employment
shall terminate and Executive shall be entitled only to accrued Salary, Corporate Benefits and
vacation pay as at the date of resignation and COBRA benefits thereafter.

          8. Developments: Developments are or shall become the Company’s property. Executive
agrees to disclose promptly to the Company each such Development and, upon the Company’s request
and at its expense, Executive will assist the Company, or its designee, in making application for
Letters Patent, Trade or Service Marks or Copyrights in any country in the world. Executive
further agrees, at no expense to Executive, to execute all papers and do all things which may be
necessary or advisable to prosecute such applications, and to transfer to and vest in the Company,
or its designee,

 

 

all the right, title and interest in and to such Developments, and all applications for patents and
Letters Patent, Trademarks and Service Marks and Copyrights issued thereon. If for any reason
Executive is unable to effectuate a full assignment of any such Development, Executive agrees to
transfer to the Company, or its designee, Executive’s transferable rights, whether they be
exclusive or non-exclusive, or as a joint inventor or partial owner of the Development. No action
or inaction by the Company shall in any event be construed as a waiver or abandonment of its rights
to any such Development except an instrument in writing assigned by an authorized official of the
Company by which it specifically states it intends to be bound in such respect.

          9. Proprietary Information: Executive will not at any time, either during the term of
this Agreement or thereafter, disclose to others, or use for Executive’s own benefit or the benefit
of others, any of the Developments or any Proprietary Information. Upon termination of this
Agreement or at any other time upon request, Executive will promptly deliver to the Company all
Media in Executive’s possession or under Executive’s control, whether prepared by him or others,
which contain or relate to Proprietary Information. Executive acknowledges that this material is
the sole property of the Company or a subsidiary or an affiliate of the Company.

          10. Subsequent Employment: Following the termination of Employment for any reason,
Executive agrees that for a two-year period thereafter, Executive will not recruit, entice, induce
or encourage any of the Company’s other Executives or consultants to (i) engage in any activities
which would be competitive to the business of the Company or (ii) to engage in any activity which,
were it done by Executive, would violate any provision of Executive’s Agreement. For a two-year
period after termination of employment and before performing any services for others, as employee
or consultant or otherwise, in the actual lines of business in which Executive has performed
services for the Company, its subsidiaries or affiliates, Executive will notify the Company of the
general nature of the services to be performed and the party for whom they will be performed and
Executive will, also, prior to undertaking such service or employment inform the other party of the
existence of the covenants in Sections 7, 8 and 9 of this Agreement. Executive admits that breach
of Executive’s covenants hereunder regarding the Company’s Proprietary Information is likely to
cause serious economic injury to the Company.

          11. Assignment: This Agreement is personal and may not be assigned by either party
without the prior written consent of the other party; provided, however, that (i) the acquisition
by any person or related group of all or substantially all of the assets or capital stock of the
Company or (ii) the transactions contemplated by the Merger, shall not be considered an assignment
of this Agreement by the Company.

          12. Continuing Obligations: Termination of Executive’s employment for any reason
shall constitute termination of (A) the Company’s obligations under Section 4 of this Agreement
(except with respect to compensation as provided above pertaining to the circumstances of
termination or as may apply pursuant to Section 4(g)) and (B) the Executive’s obligations under
Section 3 of this Agreement. For the avoidance of doubt, the Executive’s covenants set forth in
Sections 8, 9 and 10 above shall continue according to their terms following the termination of
the Executive’s employment under this Agreement.

 

 

          13. Governing Law; Equitable Remedies. This Agreement, the interpretation hereof and
the resolution of any and all disputes between the Company and Executive shall be governed by and
interpreted under the internal substantive and procedural laws of the State of California without
any reference to conflicts of laws rules. In the resolution of any disputes the parties agree to
submit to the exclusive jurisdiction of the State or Federal Courts in California and waive any
claims of inconvenient forum with respect to that jurisdiction. The parties further agree that any
violations of Executive’s covenants set forth in Sections 8, 9 and 10 above may cause irreparable
harm to the Company which harm is not capable of accurate determination and for which the remedy of
damages may be insufficient. Accordingly, in any proceeding to enforce the Company’s rights under
such Sections 8, 9 and 10, the Company may seek, in addition to damages, equitable remedies such as
injunctions, temporary injunctions and restraining orders and the parties hereby waive any
requirement of bond in any such proceeding or in any appeal from such proceeding.

          14. Entire Agreement. This Agreement expresses the entire agreement of the parties and
at the Commencement Date supersedes and revokes any prior memoranda, understandings and writings
relating to Executive’s employment by the Company whatsoever, including, after the Commencement
Date, the Employment Agreement by and between the Executive and the Company, dated March 20, 2009.

          15. Notices. All notices hereunder shall be in writing and shall be deemed effective
upon receipt, if hand delivered, or if sent by facsimile and acknowledged electronically, or by
courier and receipted on delivery. Notices by mail shall be deemed received on receipt, if sent
first class or priority mail postage prepaid return receipt requested and the sender shall have the
signed receipt. Otherwise notices shall be deemed effective five (5) days after transmission. In
each case notices shall be transmitted to the address first given above or such other address as
may be given by notice as provided herein.

          16. Compliance With Code Section 409A. Notwithstanding anything herein to the
contrary, this Agreement is intended to be interpreted and administered so that the payments and
benefits set forth herein shall either be exempt from the requirements of Code Section 409A or
shall comply with the requirements of such provision; provided, however, that in no event shall the
Company be liable to the Executive for or with respect to any taxes, penalties or interest which
may be imposed upon the Executive pursuant to Section 409A. The Executive hereby acknowledges that
he has been advised to seek and has sought the advice of a tax advisor with respect to the tax
consequences to the Executive of all payments pursuant to this Agreement, including any adverse tax
consequences or penalty taxes under Code Section 409A and applicable state tax law. The Executive
hereby acknowledges and agrees that no representations have been made to the Executive relating to
the tax treatment of any payment pursuant to this Agreement under Code Section 409A and the
corresponding provisions of any applicable state income tax laws. Specifically, the parties agree
as follows:

          (a) No payment of Salary and Benefit Continuation shall be paid later than the last day of the
second taxable year of the Executive following the taxable year of the Executive’s “separation from
service” as defined in Treasury Regulation 1.409A-1(h) (“Separation From Service”). To the extent
that any payment of Salary and Benefit Continuation constitutes a “deferral

 

 

of compensation” subject to Code Section 409A (a “409A Payment”), then, (i) in the event that a
termination of Executive’s employment does not constitute a Separation From Service, such 409A
Payment shall begin at such time as the Executive has otherwise experienced such a Separation from
Service, and the date of such Separation from Service shall be deemed to be the date of Executive’s
termination of employment for purposes of Section 4(g) hereof, (ii) Salary and Benefit Continuation
shall be treated as a right to a series of separate payments as set forth in Treasury Regulation
1.409A-2(b)(2)(iii), and (iii) if on the date of the Executive’s Separation from Service, the
Executive is a “specified employee,” as such term is defined in Treas. Reg. Section 1.409A-1(i), as
determined from time to time by the Company, then such 409A Payment shall not be made to the
Executive earlier than the earlier of (x) six (6) months after the Executive’s Separation from
Service; or (y) the date of his death. The 409A Payments under this Agreement that would otherwise
be made during such period shall be aggregated and paid in one lump sum, without interest, on the
first business day following the end of the six (6) month period or following the date of the
Executive’s death, whichever is earlier, and the balance of the 409A Payments, if any, shall be
paid in accordance with the applicable payment schedule provided in this Section 4(g).

          (b) With respect to reimbursements (whether such reimbursements are for business expenses or,
to the extent permitted under the Company’s policies, other expenses) and/or in-kind benefits, in
each case, that constitute deferred compensation subject to Code Section 409A (as determined by the
Company in its sole discretion), each of the following shall apply: (1) no reimbursement of
expenses incurred by Executive during any taxable year shall be made after the last day of the
following taxable year of Executive, (2) the amount of expenses eligible for reimbursement, or
in-kind benefits provided, during a taxable year of Executive shall not affect the expenses
eligible for reimbursement, or in-kind benefits to be provided, to Executive in any other taxable
year, and (3) the right to reimbursement of such expenses or in-kind benefits shall not be subject
to liquidation or exchange for another benefit.

          (c) No tax gross-up payment shall be made later than the end of the calendar year following
the calendar year in which the Executive remits the related taxes to the applicable governmental
authority.

 

 

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

	 	 	 

	EXECUTIVE

	 	CLEAN DIESEL TECHNOLOGIES, INC.
	 
	 	 
	/s/ Michael L. Asmussen

	 	/s/ John B. Wynne
	Name: Michael L. Asmussen

	 	Name: John B. Wynne
	Executive

	 	Title: Vice President
	Date: 7/15/10

	 	Date: 7/15/10
	 
	 	 
	 

	 	/s/ Charles W. Grinnell
	 

	 	Name: Charles W. Grinnell
	 

	 	Title: Vice President
	 

	 	Date: 7/15/10

 

 

Schedule A to Employment Agreement between

Michael L. Asmussen and Clean Diesel Technologies, Inc. of July 15, 2010

Relocation:

1. Management. The Company will engage AIReS, a relocation company, to assist in the
coordination of the sale of Executive’s Connecticut home (the “CT Home”), relocation to the general
Ventura CA area, and the Executive’s purchase of a new home in the general Ventura CA area.

2. Sale of CT Home. The Company agrees to a directed buyout offer, via AIReS, of $1,313,658 on the
CT Home. AIReS will commission two written appraisals on that home to determine the appraised value
by averaging those appraisals. The portion of the $1,313,658 buyout offer, if any, in excess of the
appraised value shall be taxable income to you. AIReS will purchase and resell the CT Home. The
Company’s obligation to hold AIReS harmless for any loss or expense in facilitating the sale of the
CT Home shall be limited to $75,000. Further price adjustment shall be subject to CFO approval.

3. Incidental Expenses. The Company shall pay the Executive consequent on Executive’s
signing a binder or written commitment for the purchase of a specific property to be Executive’s
California Home (the “CA Home”), the amount of $20,000 on account of incidental expenses for which
the Executive need not account.

4. Closing Costs. The following costs incidental to the closing of the sale of the CT and
CA Homes, as indicated, shall be reimbursed by the Company to the Executive: a) attorney’s fees and
disbursements for both Homes, b) brokerage commissions for the CT Home, c) title insurance
premiums for the CA Home, if required, and d) loan origination, appraisal and other incidental
mortgage costs, but not mortgage points, for the CA Home.

5. House Hunting Trips. The Executive shall be reimbursed for the costs incurred for up to
three (3) house hunting trips for Executive and Executive’s spouse, including airfare, lodging, car
rentals and meals.

6. Moving Costs. The Company shall reimburse Executive for the costs of packing and
shipping all Executive’s household goods to the CA Home, including 90 days of storage if necessary
and also the incidental costs of large or specially packed items such as a pool table, audio-visual
equipment and automobiles, and also the travel costs, including air fare, for Executive and all
members of Executive’s family incidental to the move to the CA Home.

7. Temporary Housing. The Company shall reimburse Executive for up to sixty (60) days of
temporary housing for Executive and Executive’s family required for this relocation.

8. Tax Gross Up. The Company shall reimburse Executive for the amount of additional Federal
and applicable state income taxes (allocable to one state only) that Executive shall incur on
account of the payments to Executive as described in this Schedule A over the amount, at
Executive’s marginal rates, that Executive would have had to pay absent such payments, as evidenced
by signed copies of Executive’s relevant Federal and State income tax returns that Executive agrees
to furnish to our independent accountant for verification.

 

 

9. Repayment of Relocation Expenses. All of the above relocation expenses actually paid by
the Company shall be totaled and prorated and amortized over a twenty four (24) month period
commencing on the Commencement Date and, if Executive should resign from the Company At Will and
for reasons other than Disability or Good Reason or shall be terminated by the Company for Just
Cause prior to the end of such twenty four (24) month period, Executive shall repay to the Company
any unamortized amount of such relocation expenses.

10. Expenses and Expense Reports. For reimbursement Executive shall submit to the Company
expense reports claiming reimbursement, stating the nature and amounts of the expenses claimed
together with supporting documentation.

11. No Loans. The Company shall on no account loan, advance or extend credit to Executive
for purposes of relocation or for any other purpose.

 

 

Schedule B to Employment Agreement between

Michael L. Asmussen and Clean Diesel Technologies, Inc. of July 15, 2010

Definitions:

          “At Will” shall mean termination of the Executive’s employment whether affirmatively by the
Company or by the Executive’s resignation but for reasons other than Just Cause, Good Reason,
Disability or Death.

          “Board” shall mean the persons from time to time duly elected and acting as directors of the
Company.

          “Change of Control” shall mean the first to occur of any of the following:

          (A) an acquisition by any individual, entity or group (a “Person)

(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership
(within the meaning of Securities and Exchange Commission Rule 13d-3 under the Exchange Act) of
Fifty One Percent (51%) or more of the Shares and other voting securities, if any, of the Company,
including any acquisition or merger, but excluding, (i) any acquisition directly from the Company,
other than an acquisition by virtue of the exercise of a conversion privilege unless the security
being so converted was itself acquired directly from the Company, (ii) any acquisition by the
Company or a subsidiary of the Company unless such acquisition is of an entity by the Company or a
subsidiary of the Company wherein securities of the Company are distributed to the stockholders of
such entity, (iii) any acquisition by any employee benefit plan or related trust sponsored or
maintained by the Company or any entity controlled by the Company, or (iv) any acquisition pursuant
to a transaction which complies with clauses (i), (ii) and (ii) of subsection (C) below);

          (B) a change in the composition of the Board during any twelve-month period, such that the
individuals who were Continuing Directors as of the beginning of such twelve-month period do not
constitute a majority of the Board;

          (C) Consummation of a reorganization, merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Company (a “Corporate Transaction”), excluding,
however, any Corporate Transaction pursuant to which (i) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of the outstanding Shares and
other voting securities, if any, of the Company immediately prior to a Corporate Transaction will
beneficially own, directly or indirectly, more than Fifty One Percent (51%), of, respectively, the
outstanding shares of common stock, and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case may be, of the
corporation resulting from a Corporate Transaction (including, without limitation, a corporation
which as a result of a Corporate Transaction owns the Company or all or substantially all of the
Company’s assets either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership immediately prior to such Corporate Transaction, of the outstanding
Shares or other voting securities, if any, of the Company, as the case may be, (ii) no Person
(other than the Company, any employee benefit Plan or related trust of the Company

 

 

or such corporation resulting from any such Corporate Transaction) will beneficially own, directly
or indirectly, Twenty Percent (20%) or more of, respectively, the outstanding shares of common
stock of the corporation resulting from such Corporate Transaction or the combined voting power of
the outstanding voting securities of such corporation entitled to vote generally in the election of
directors except to the extent that such ownership existed prior to any such transaction; and (iii)
individuals who were Continuing Directors prior to such transaction will constitute at least a
majority of the members of the board of directors of the corporation resulting from such Corporate
Transaction; and

          (D) the approval by the stockholders of the Company of a complete liquidation or dissolution
of the Company.

          “Commencement Date” shall mean the effective time of the Merger.

          “Compensation Committee” shall mean the Compensation and Nominating Committee of the Board.

          “Continuing Directors” shall mean (i) individuals who are as of the first Board meeting after
the Commencement Date directors of the Company; (ii) individuals elected as directors of the
Company subsequent to the first Board meeting after the Commencement Date for whose election
proxies shall have been solicited by the Board; and (iii) any individuals elected or appointed by
the Board to fill vacancies on the Board caused by death or resignation (but not by removal) or to
fill newly-created directorships.

          “Good Reason” shall mean:

     (A) any of (1) Executive shall have had his responsibilities and authority as described
herein materially diminished except in the event of a termination for Just Cause or due to
Death, Disability or resignation At Will and not for Good Reason, (2) Executive shall have had
his Base Salary or Annual Cash Bonus Participation Percentage involuntarily reduced, (3) the
Executive shall no longer report directly to the Chief Executive Officer of the Company, (4)
the Executive shall no longer be an officer of the Company (or of a successor to the Company),
(5) the Executive shall not with respect to any annual meeting of the Company be included as a
nominee for election as a director of the Company in proxy materials solicited by the Board
and (6) there shall be a material change in the geographic location where the Executive must
perform services which for this purpose shall mean a location beyond a twenty-five mile radius
of the Executive’s then principal place of employment.

     (B) Notwithstanding the foregoing, a termination of Employment by the Executive for Good
Reason shall not occur unless (1) the Executive provides written notice to the Company of the
existence of the condition(s) described in sub-sections (A) (1) to (6) above within sixty (60)
days following the initial occurrence of a condition described in sub-sections (A) (1) to (6)
above (the “Cure Notice”) and within thirty (30) days of the Cure Notice the Company shall
have the opportunity to cure such condition(s), (2) the Executive provides thirty (30) days
prior notice of his termination of employment by resignation (which notice may be included in
the Cure Notice) and (3) the Executive’s termination of employment consequent upon the
Executive’s resignation occurs within six

 

 

(6) months following the initial occurrence of the condition(s) described in sub-sections (A)
(1) to (6) above.

“Disability” shall mean a determination by the Board in its sole
discretion that, as a result of physical or mental disability or impairment Executive has for
a period of six months been substantially absent from Executive’s customary place of work or
unable to perform Executive’s customary duties.

          “Discoveries” shall mean all patentable and unpatentable inventions, discoveries and ideas
that are made or conceived or reduced to practice by Executive during the term of Executive’s
employment, and which are based upon or arise out of Executive’s services hereunder.

          “Exchange Act” shall mean the Securities and Exchange Act of 1934, as amended.

          “Full time” shall mean no outside business activities without the Company’s prior consent.

          “Just Cause” shall mean, as determined by the Board in its sole discretion, conviction of
Executive under, or a plea of guilty or no contest by the Executive to, any charge which would
constitute a felony under the laws of California, regardless of jurisdiction; any instance of
fraud, embezzlement, self-dealing, insider trading or similar malfeasance with respect to the
Company regardless of the amount involved; any instance of material disloyalty, or disparagement of
the Company to an outside party; any instance of material insubordination to the Chief Executive
Officer or the Board, failure or refusal to follow the reasonable instructions of the Chief
Executive Officer or the Board or reasonable policies, standards and regulations of the Company;
inadequate or unsatisfactory performance of Executive’s duties and responsibilities evidenced by
Executive’s failure or refusal to faithfully and diligently perform the usual, customary duties of
Executive’s employment with the Company; any instance of substance abuse of a controlled substance
or, otherwise, a pattern of substance abuse which limits Executive’s performance of Executive’s
duties; Executive’s material breach of this Agreement.

          “Media” shall mean all keys, notes, memoranda, notebooks, computers, computer disks or drives,
drawings, designs, three dimensional figures, photographs, layouts, diagrams, records, reports,
files and other documents and all copies or reproductions of such materials incorporating or
relating to Proprietary Information.

          “Merger” shall mean the transactions contemplated by the merger of Catalytic Solutions, Inc.
(“CSI”) into CDTI Merger Sub, Inc., as provided in Section 1.1 of that certain Agreement and Plan
of Merger, dated as of May 13, 2010 among CSI, Merger Sub and the Company.

          “Proprietary Information” shall mean confidential, proprietary or secret information owned,
possessed or used by the Company or any of its subsidiaries or affiliates, which, by way of
illustration, but not limitation, includes inventions, invention disclosures, patent applications,
devices, structures, machines, data, know-how, business opportunities, marketing plans, forecasts,
unpublished financial statements, budgets, licenses and information concerning prices, costs,
personnel, customers and

 

 

suppliers, excluding, however, any Proprietary Information which: (a) is or becomes generally known
to the public through no action on the part of the Executive or (b) is generally disclosed to third
parties by the Company or any of its subsidiaries or affiliates without restriction on such third
parties.

          “Release” shall mean a general mutual release between Executive and the Company containing a
mutual non-disparagement clause and mutually agreed to by both parties.

          “Salary and Benefit Continuation” shall mean the Company shall continue the Executive’s Base
Salary then in effect (in accordance with its standard payroll policies and practices), Corporate
Benefits, except participation in the Company’s 401k Plan or any other plan in which participation
is limited to active employees, and in the amount and form then enjoyed by the Executive and other
employees and officers as a class, and a pro-rated bonus for the portion of the bonus year that had
expired as at the date Executive’s employment terminated, offset, nevertheless, by any income from
personal services earned by the Executive, if any, from sources other than the Company for a period
of time as otherwise specifically stated herein, and shall include, if necessary, COBRA
reimbursement to Executive where continued participation in the Company health plan is not
permitted.

          “Shares” shall mean shares of the Company’s Common Stock, par $0.01.

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