Document:

ex102.htm

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (“Agreement”) is entered into as of October 16, 2009, between Clean Power Technologies, Inc., a Nevada corporation (the “Company”) and The Quercus Trust
(the “Purchaser”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to that certain Amendment No. 1 to the Amended and Restated Stock Purchase Agreement, dated on or about the date hereof, by and between the Company and The Quercus Trust (the “Purchase Agreement”),  the
Purchaser has agreed to acquire from the Company, (i)  3,580,247 shares of the Company’s Common Stock, par value $0.001 (the “Shares”) and (ii) Warrants (the “Warrants”) to purchase up to 4,481,308 shares of the Company’s Common Stock, par value $0.001 per share (the “Common Stock”) for an aggregate purchase price of $1,500,000,
subject to the terms and conditions set forth therein; and

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Registrable Securities” shall mean:  (i) the Shares or other securities issued or issuable to the Purchaser or its permitted transferee or designee (a) upon exercise of the Warrants, or (b) upon any distribution with respect to, any exchange for or any
replacement of, a Shares or Warrant, or (c) upon any exercise or exchange of any securities issued in connection with any such distribution, exchange or replacement; (ii) securities issued or issuable in respect

 

 

  

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of the foregoing upon any stock split, stockdividend, recapitalization or similar event; and (iii) any other security issued as a dividend or other distribution with respect to, in exchange for or in replacement of the securities referred to in the preceding clauses; provided that all such shares shall cease to be Registrable Securities
at such time as they have been sold under a Registration Statement or pursuant to Rule 144 under the Securities Act or otherwise or at such time as they are eligible to be sold without volume limitation pursuant to Rule 144.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(i) prepare and file a registration statement with the Commission pursuant to Rule 415 under the Securities Act (“Rule
415”) on Form S-1 under the Securities Act (or in the event that the Company is ineligible to use such form, such other form as the Company is eligible to use under the Securities Act covering resales by the Purchaser as selling stockholders (not underwriters) of the Registrable Securities (a “Registration Statement”), which Registration Statement, to the extent allowable under the Securities Act and the rules promulgated
thereunder (including Rule 416), shall state that such Registration Statement also covers such number of additional shares of Common Stock as may become issuable upon the exercise of the Warrants or pursuant to the applicable anti-dilution provisions or other adjustment provisions of the Warrants.  The number of shares of Common Stock initially included in such Registration Statement shall be no less than 120% of the maximum number of shares of Common Stock which may be

 

  

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 included in a Registration Statement without exceeding registration limitations imposed by the SEC pursuant to Rule 415 (the “Rule 415 Amount”) in a comment letter addressed to the Company; provided that
the Company shall use its commercially reasonable efforts to contest such limitation, but in any event not less than approximately 5,000,000 shares of Common Stock.  Thereafter, the Company shall use its best efforts to cause such Registration Statement and other filings to be declared effective, as soon as possible (the “Required Effective Date”).  The Company shall use its best efforts to ensure that each subsequent
Registration Statement is filed as soon as possible, but in no event sooner than six (6) months from the effectiveness of a previously filed Registration Statement. In the event that less than all of the Registrable Securities are included in a Registration Statement as a result of the limitations described in this paragraph, then the Company will (i) reduce on a proportionate basis the number of Registrable Securities of the Purchaser included in such Registration Statement and (ii) file additional Registration
Statements, each registering the Rule 415 Amount, seriatim, until all of the Registrable Securities have been registered. The Required Filing Date and the Required Effective Date of each such additional Registration Statement shall be within a reasonable time after the first day such Registration Statement may be filed without objection by the SEC based on Rule 415.  Without limiting the foregoing, the Company will promptly respond to
all SEC comments, inquiries and requests, and shall request acceleration of effectiveness at the earliest possible date.

 

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

 

  

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

 

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

 

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

 

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

 

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

 

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

 

  

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

 

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

 

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

 

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

 

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

 

  

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

 

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

 

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

 

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

 

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

 

  

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6. Indemnification.

 

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

 

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

 

  

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

 

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

 

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

 

 

  

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

 

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

 

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

 

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

 

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

 

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

 

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

 

  

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

 

14. Miscellaneous.

 

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

 

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

 

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

 

  

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to the Company:

 

Clean Power Technologies, Inc.

436-35th Avenue, N.W.

Calgary, Alberta

Canada T2K OC1

Facsimile: (403) 277-3117

Attention: Abdul Mitha

 

with a copy to:

 

Gersten Savage LLP

600 Lexington Avenue, 9th Floor

New York, New York 10022

Telephone:  (212) 752-9700

Facsimile:   (212) 813-9768

Attention: Peter J. Gennuso, Esq.

 

If to the Purchaser:

 

                The Quercus Trust

1835 Newport Blvd.

A109-PMB 467

Costa Mesa, CA  92627

Telephone:

Facsimile:

Attention: David Gelbaum

 

with a copy to:

 

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

                  1900
Avenue of the Stars, 19th Floor

                  Los
Angeles, CA 90067

                  Telephone:  (310)
201-7553

                  Facsimile:  (310)
388-1055

 

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

 

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

 

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

 

  

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

  

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

 

COMPANY:

 

CLEAN POWER TECHNOLOGIES, INC.

By:/s/ Abdul Mitha                                                                           

     Name:  Abdul Mitha

     Title:    Chief Executive Officer

PURCHASER:

THE QUERCUS TRUST

By:/s/ David Gelbaum                                                                

     Name:  David Gelbaum

     Title:    Trustee

  

13ex103.htm

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

 

COMMON STOCK PURCHASE WARRANTS

 

To Purchase 1,857,852 Shares of Common Stock of

 

CLEAN POWER TECHNOLOGIES, INC.

 

No. October 2009-$0.54                                                                                                                  October
16, 2009

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) CERTIFIES that, for value received, The Quercus Trust (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date of this Warrant and on or prior to the first
anniversary of the date of this Warrant (the “Termination Date”) but not thereafter, to subscribe for and purchase from Clean Power Technologies, Inc., a Nevada corporation (the “Company”), up to 1,857,852 shares (the “Warrant Shares”) of the Common Stock, par value $0.001 per share, of the Company (the “Common Stock”).  The purchase price per share of Common Stock is $0.54 (the “Exercise Price”).  The Exercise Price and the number
of Warrant Shares for which the Warrant is exercisable shall be subject to adjustment as provided herein.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Stock Purchase Agreement (the “Stock Purchase Agreement”), between the Company and the Purchaser thereto (the date of such Agreement, the “Closing Date”).  This Warrant is being issued to the Purchaser, as more fully described in the Stock Purchase Agreement.

 

1. Title to Warrant.  Prior to the Termination Date and subject to compliance with applicable laws, including transfer restrictions imposed
by applicable securities laws, and Section 7 of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed.  The transferee shall sign an investment letter in form and substance reasonably satisfactory to the Company.

 

2. Authorization of Shares.  Except as provided in the Stock Purchase Agreement, the Company covenants that all Warrant Shares which may be
issued from time to time upon the exercise of the purchase rights represented by this Warrant in accordance with the terms of this Warrant, including the payment of the exercise price for such Warrant Shares, will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

  

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3. Exercise of Warrant.

 

(a) Subject to Section 3(c), exercise of the purchase rights represented by this Warrant may be made within one (1) year from the its issuance, at any time on or before 5 p.m., New York City time, by delivery to the
Company of a duly executed Notice of Exercise Form annexed hereto (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company) and surrender of this Warrant, together with payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank in immediately available funds.

 

Certificates for Warrant Shares purchased hereunder shall be delivered to the Holder within three (3) Trading Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant and payment of the aggregate Exercise Price as set forth above (“Warrant Share Delivery Date”).  This Warrant
shall be deemed to have been exercised on the later of the date the Notice of Exercise is delivered to the Company and the date the Exercise Price is received by the Company.  The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid
by the Holder, if any, pursuant to Section 5 prior to the issuance of such shares, have been paid.  If the Company shall fail for any reason or for no reason to issue to the Holder within three (3) Trading Days of receipt of the Notice of Exercise, a certificate for the Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or to credit the Holder’s balance account with DTC for such number of Warrant Shares or other securities to which
the Holder is entitled upon the Holder’s exercise of this Warrant, and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares or other securities issuable upon such exercise that the Holder anticipated receiving from the Company (a “Buy-In” ), then the Company shall, within three (3) business days after the Holder’s request and in the Holder’s
discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the “Buy-In Price” ), at which point the Company’s obligation to deliver such certificate (and to issue such Warrant Shares) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Warrant Shares and pay cash to the Holder in an
amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Closing Bid Price on the date of exercise.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.

 

(b) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights
of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

(c) In no event shall the Holder be entitled to exercise such number of Warrants, which when added to the sum of the number of shares of Common Stock beneficially owned (as such term is defined under Section 13(d)
and Rule 13d-3 of the 1934 Act), by the Holder, would exceed 4.99% of the number of shares of Common Stock outstanding on the Warrant Share Delivery Date, as determined in accordance with Rule 13d-1(j) of the 1934 Act.

 

  

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4. No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this
Warrant.  As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price.

 

5. Charges, Taxes and Expenses.  Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer
tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by
the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

 

6. Closing of Books.  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.

 

7. Transfer, Division and Combination.

 

(a) Subject to compliance with any applicable securities laws and the conditions set forth in Sections 1 and 7(e) hereof and to the provisions of the Stock Purchase Agreement, this Warrant and all rights hereunder
are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.  Notwithstanding the foregoing, the Holder will not voluntarily and knowingly assign or transfer this Warrant or the Warrant Shares
to any direct competitor of the Company without the Company’s prior written consent.

 

(b) This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 7(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

 

(c) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 7.

 

(d) The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants.

 

(e) The Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel reasonably acceptable
to the Company (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee
be an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act or a qualified institutional buyer as defined in Rule 144A(a) under the Securities Act.

  

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8. No Rights as Shareholder until Exercise.  This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder
of the Company prior to the exercise hereof.  Upon the surrender of this Warrant and the payment of the aggregate Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment.

 

9. Loss, Theft, Destruction or Mutilation of Warrant.  The Company covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu
of such Warrant or stock certificate.

 

10. Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required
or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

 

11. Adjustments of Exercise Price and Number of Warrant Shares.  The number and kind of securities purchasable upon the exercise of this Warrant
and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following:

 

(a) In the event that of a merger, recapitalization and such other event affecting the capitalization of the Company;

 

(b)           In the event of a stock dividend, split or other similar transaction; or

 

(c)           In the event that the Company issues additional securities (other than (i) shares of Common Stock which are issued as a result of a conversion of the Debentures issued pursuant to the July 2008 Offering; (ii) shares of Common Stock which are issued as a result of
the exercise of the Class A Warrants and/or  Class B Warrants issued pursuant to the July 2008 Offering; or (iii) shares of Common Stock or options to purchase such shares issued to employees, consultants, officers or directors in accordance with stock plans or stock options plans approved by the Company’s board of directors and existing on the date hereof; and (iv) shares of Common Stock issuable under employment, consulting agreements or loan agreements that are outstanding as of the date hereof.)

 

in which case, the Exercise Price shall be adjusted (but only if such adjustment results in a lower exercise price) to an amount equal to the amount received or deemed to be received by the Company for one share of Common Stock, multiplied by a fraction, the numerator of which is $0.54 and the denominator of which is the purchase price
per share paid by the Purchaser for the Common Stock related to such Warrants; provided however, that the Exercise Price for the Warrants shall not be adjusted to less than $0.45 per share.

 

  

4

  

12. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets.  In case the Company shall reorganize its capital, reclassify
its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash,
shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation (“Other Property”), are to be received by or distributed to the holders of Common Stock of the Company, then, from and after the consummation of such transaction or event, the Holder shall have the right thereafter to receive, instead of the Warrant Shares, at the option of the Holder,
(a) upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event or (b) if the Company is acquired in an all cash transaction, cash equal to the value
of this Warrant as determined in accordance with the Black-Scholes option pricing formula.  For purposes of this Section 12, “common stock of the successor or acquiring corporation” shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock.  The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets.

 

13. Notice of Adjustment.  Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise
of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice thereof to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.

 

14. Other Adjustments.  If any event occurs of the type contemplated by the provisions of Sections 11 or 12 but not expressly provided for
by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s Board of Directors will make an appropriate adjustment in the Exercise Price and/or the number of shares of Common Stock and other securities or property to be issued to the Holder upon exercise of the Warrant so as to protect the rights of the Holder; provided that no such adjustment pursuant to Sections 11 or 12 will increase the Exercise
Price or decrease the number or amount of securities or other property issuable or deliverable to the Holder as otherwise determined pursuant to Sections 11 and/or 12.

 

15. Notice of Corporate Action.  If at any time:

 

(a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation or,

 

  

5

  

 

(b) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in any one or more of such cases, the Company shall give to Holder (i) prior written notice of the date on
which a record date shall be selected for such dividend or distribution or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, prior written notice of the date when the same shall take place.  Such notice in accordance with the foregoing
clause also shall specify (i) the date on which the holders of Common Stock shall be entitled to any such dividend or distribution, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up.  Each such written notice shall be sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 16(d).

 

16. Authorized Shares.  Except as provided in the Stock Purchase Agreement, the Company covenants that during the period the Warrant is outstanding,
it will take all reasonable action to ensure that the Company is authorized to issue a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company shall also reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance
of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed.

 

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or bylaws or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.  Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefore upon such exercise immediately
prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

 

  

6

  

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction
thereof.

 

17. Miscellaneous.

 

(a) Jurisdiction.  All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined
in accordance with the provisions of the Stock Purchase Agreement relating to the same.

 

(b) Restrictions.  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered for resale,
will have restrictions upon resale imposed by state and federal securities laws.

 

(c) Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate
as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding all rights hereunder terminate on the Termination Date.  If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings,
incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

(d) Notices.  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered
in accordance with the notice provisions of the Stock Purchase Agreement.

 

(e) Limitation of Liability.  No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant or purchase
Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

(f) Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure
to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

 

(g) Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

(h) Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

(i) Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.

 

  

7

  

(j) Disputes.  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the securities or other
property, the Company shall promptly issue and deliver to the Holder the securities or other property that are not disputed.

 

(k) Remedies.  The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled
to specific performance of its rights under Section 3 of this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of Section 3 of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

 

Dated: October 16, 2009

 

CLEAN POWER TECHNOLOGIES, INC.

 

BY: /s/    Abdul Mitha                                                                                    

Name: Abdul Mitha

Title:  Chief Executive Officer

 

  

8

  

NOTICE OF EXERCISE

 

To:           Clean Power Technologies, Inc.

 

	
(1)           The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

	
(2)           Payment shall be made by wire transfer or cashier’s check drawn on a United States bank in immediately available funds.

 

	
(3)           Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

	  	  	  	  
	  	  	  	  
	
The Warrant Shares shall be delivered to the following:

	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	
(4)           Accredited Investor.  The undersigned is an “accredited investor” as defined in Regulation D under the Securities Act of 1933, as amended.

 

THE QUERCUS TRUST

 

By: ___________________________

Name:

Title:

Dated: ________________________

  

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ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute this form and supply required information.  Do not use this form to exercise the warrant.)

 

	
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to _______________________________________________  whose address is _________________________________________________________.

	
 

Dated:
	  
	  
	
Holder’s Signature :
	  
	  
	
Holder’s Address:
	  
	  	  
	  	  
	  	  
	
Signature Guaranteed:
	  
	  

 

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company.  Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing

 

  

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