LOAN NOTE AGREEMENT
Loan Note Agreement dated as of November 11, 1998 between Clean Diesel
Technologies, Inc., a Delaware corporation (the "Company") and the several
lenders set forth on Schedule A hereto and such other lenders as may from time
to time acquire Notes authorized hereunder (the "Lenders").
Whereas, the Company has heretofore issued Bridge Loan Notes in the
amount of $1.4 million under a Bridge Loan Agreement of May 8, 1998, as
supplemented, which Notes are convertible under certain circumstances into
shares of the Company's Series A Convertible Preferred Stock, par value $0.05
per share (the "Series A Stock"), and which Series A Stock is further
convertible under certain circumstances into shares of the Company's common
stock, par value $0.05 per share (the "Common Stock"); and
Whereas, under this Agreement the Company proposes to issue up to $2
million of Notes also convertible under certain circumstances into Series A
Stock; and
Whereas, the Bridge Loan Notes shall be converted into Series A Stock
upon the receipt by the Company of net proceeds of at least $1.75 million from a
financing of equity securities or securities convertible into equity securities
of the Company; and
Whereas, as more particularly provided herein, the Notes hereunder
shall be converted into and the Lenders shall receive, in lieu of Notes, shares
of Series A Stock, if the Company shall at the closing or completion of the
issue of the Notes derive or be reasonably anticipated to derive net proceeds of
at least $1.75 million from such issue;
Now therefore, the parties agree, as follows:
Article 1.0
The Loan
1.1 The Loan; Purpose. The Lenders agree on the terms of this Agreement,
severally to make a loan to the Company in an aggregate principal amount not
exceeding Two Million Dollars (U.S. $2,000,000.00) (the "Loan"). The obligation
of each Lender to make the loan in the principal amount set out on Schedule A is
hereafter referred to as its "Commitment." The Lenders shall advance their
Commitments to the Company upon the Closing. The Loan is for the general
corporate purposes of the Company.
1.2 The Notes; Maturities and Rate of Interest. The Loan shall be evidenced by
and repayable with interest in accordance with the terms of notes of the Company
each in the form as set forth on Schedule B hereto (the "Notes") dated the date
of the Closing, with appropriate insertions as to the names of the respective
Lenders and their Commitments and payable in lawful money of the United
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States of America in immediately available funds at the offices of the Lenders
or their designees, as set forth on Schedule A. The principal amount of the
Notes shall be payable on April 15, 2001 and each of the Notes shall bear
interest payable quarterly in arrears at the rate of ten percent (10%) per annum
calculated on the basis of actual days elapsed over a year of 360 days and
twelve 30 day months and the actual number of days elapsed in any period of less
than one month.
1.3 Prepayment at Company's Option. The Notes shall be subject to prepayment at
the option of the Company on and after April 1, 1999 in whole at any time or in
part from time to time (in aggregate principal amounts of $100,000 or any
multiple thereof), at 100% of the principal amount prepaid plus a premium equal
to the following applicable percentages of the principal amounts prepaid during
the quarterly periods commencing as indicated:
Quarterly Period
Commencing Percentage
April 1, 1999 10%
July 1, 1999 8 1/2%
October 1, 1999 7%
January 1, 2000 5 1/2%
April 1, 2000 4%
July 1, 2000 2 1/2%
October 1, 2000 1%
January 1, 2001 1/2%
1.4 Closing. The Closing of the Loan shall take place on November 11, 1998, at
10:00 a.m. local time at the offices of S G Associates, Ltd., 00 Xxxxx Xxxx
Xxxxxx, Xxxxxx X0XX 0XX, U.K., or at such other time and place as the Lenders
shall agree.
Article 2.0
Security Agreement
2.1 Security Agreement. The parties shall at the Closing execute and deliver a
Security Agreement substantially in the form of Schedule C attached hereto.
Article 3.0
Conversion of Loan
Series A Stock
3.1 Conversion. Each of the Lenders may from time to time by the surrender to
the Company in aggregate principal amounts outstanding of the Notes of not less
than $100,000 convert the Notes into not more than 4,000 shares of the Company's
Series A Convertible Preferred Stock, par value $0.05 per share (the "Series A
Stock"), at the ratio of one share of Series A Stock per each $500.00 of
outstanding principal amount of Notes, such Series A Stock to have the rights
and preferences and to be on the terms and conditions
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more particularly set out in the form of Certificate of Designation set out as
Schedule D hereto, including the right to convert the Series A Stock into shares
of common stock, par value $0.05 per share, of the Company (the "Common Stock"),
and to be evidenced by a stock certificate or certificates substantially in the
form of Schedule E hereto and registered in the name of the Lender or its
nominee or designee. Accrued interest on a Note which is converted shall be
calculated up to but not including the date of conversion and shall be payable
on the next interest payment date following conversion. No fractional shares of
Series A Stock shall be issued on conversion but such fractional amounts shall
be paid ratably to the converting Lender or Lenders in cash.
3.2 Mandatory Conversion. Conversion of all of the outstanding principal amount
of the Loan, however, shall be mandatory upon and shall be effected by the
Company without notice or demand or any action by any Lender (excepting
surrender of the Notes) in the event that (a) 60% in outstanding principal
amount of the Loan shall have been converted in whole at any time or in part
from time to time into Series A Stock voluntarily by the Lenders, or (b) upon
the completion or closing of a private or public sale of (1) equity securities,
(2) securities convertible into equity securities (including the issue of the
Notes provided for hereunder on the Closing thereof or at any time thereafter),
or (3) rights to acquire equity securities or of the Company, pursuant to which
the Company shall receive or be entitled to receive, net of the expenses and
fees, discounts and commissions of lenders or investors, underwriters, placement
agents and brokers or finders, proceeds of at least $1.75 million.
3.3 Registration Rights. The parties shall at the Closing execute and deliver a
Registration Rights Agreement, substantially in the form of Schedule F hereto.
Article 4.0
Conditions of Lending
4.1 Conditions of Lending. The obligation of the several Lenders to make the
Loan to be made by them hereunder is subject to the following conditions
precedent:
(a) The Company shall be in good standing in the jurisdiction of its
incorporation.
(b) The Loan, this Agreement, the Security Agreement and the Series A
Stock shall have been duly authorized by the Company and the Company shall have
reserved (1) sufficient shares of the Series A Stock into which all of the Loan
may be converted according to the terms of this Agreement and (2) sufficient
shares of the Common Stock for conversion of the Series A Stock which may be
acquired by the Lenders.
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(c) This Agreement, the Notes and the Security Agreement shall have
been duly executed and delivered and shall be legal, valid and binding
obligations of the Company. All legal matters relating to this Agreement, the
Notes, the Series A Stock and the Security Agreement shall be satisfactory to
the Lenders and their respective counsel.
(d) No event of default specified herein (and no event specified herein
which, with the lapse of time or the notice and lapse of time specified herein,
would be a default) shall have occurred and be continuing. The representations
of the Company herein shall be true on and as of the date of the Closing with
the same force and effect as if made on and as of such date and the Company
shall so certify to the Lenders.
(e) The consent of the Lenders under that certain Bridge Loan Agreement
of May 8, 1998, as supplemented (the "Bridge Loan Lenders") to (1) the
withdrawal of the Financing Statement perfecting the security interest under the
Bridge Loan Agreement and to the granting by the Company of a security interest
in the collateral described in the Security Agreement hereunder parri passu to
the Lenders and to the Bridge Loan Lenders, (2) to the amendment of the Bridge
Loan Agreement, as supplemented, so that the percentage of consent of 60%
provided in Sections 6.1 and 7.1 thereof shall be 60% in principal amount of the
Bridge Loan Noteholders and the Noteholders hereunder in the aggregate, (3) the
rescission of the registration rights provisions in Sections 3.2 through 3.4 of
the Bridge Loan Agreement and the execution and delivery by them of the
Registration Rights Agreement hereunder, and (4) that the Notes hereunder are
"equity securities" within the meaning of Section 3.1 of the Bridge Loan
Agreement.
(f) The Lenders or their representatives shall have received certified
copies of all corporate action taken by the Company to authorize the
transactions contemplated by this Agreement and such other documents as they may
reasonably require.
Article 5.0
Representations
5.1 Representations of the Company. The Company hereby represents to the Lenders
that:
(a) The Company is duly organized and in good standing under the laws
of Delaware and has the corporate power and authority to make this Agreement, to
borrow hereunder, to execute and deliver the Notes, the Security Agreement and
the Registration Rights Agreement and to provide for the conversion of the Loan
into the Series A Stock and the conversion of the Series A Stock into Common
Stock.
(b) The making and performance by the Company of this Agreement, the
Notes, the Security Agreement and the Registration Rights Agreement and the
authorization of and reservation for issuance of the Series A Stock and the
Common Stock have been duly authorized by all necessary corporate action and
will not violate
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any provision of law or of its Charter or by-laws, or, except as contemplated
herein, result in the breach of or constitute a default or require any consent
under or result in the creation of any lien, charge or encumbrance upon any
property or assets of the Company pursuant to any agreement, instrument or
indenture to which the Company is a party or by which the Company or its
property may be bound or affected.
(c) The balance sheet of the Company as at December 31, 1997 and the
statement of results of operations and of changes in stockholders equity
(deficiency) of the Company for the fiscal year ended on that date and the notes
thereto, certified by Ernst & Young LLP, fairly present the financial position
of the Company as at the date of said balance sheet and the results of its
operations for the period ending on such date. The Company has no contingent
obligations, liabilities for taxes, long-term leases or unusual forward or
long-term commitments not disclosed by, or reserved against, in said balance
sheet or the notes thereto; and at the present time there are no material
unrealized or anticipated losses from any unfavorable commitments of the
Company. Said financial statements were prepared in accordance with generally
accepted accounting principles consistently maintained throughout the periods
involved. Since December 31, 1997 there have been no material adverse changes in
the financial condition of the Company from that set forth in said balance sheet
as at that date; provided, however, that the cash position of the Company as at
September 30, 1998 was $456,500.
(d) There are no suits or proceedings pending, or to the knowledge of
the Company, threatened against or affecting the Company and there are no
proceedings by or before any governmental agency pending or to the knowledge of
the Company, threatened against the Company which, if adversely determined,
would have a material adverse effect on the financial condition or business of
the Company.
5.2 Representations of the Lenders. The Lenders severally represent to the
Company that:
(a) They have received a copy of the Company's Annual Report on Form
10-K for the year ending December 31, 1997 and Quarterly Report on Form 10-Q for
the period ending June 30, 1998 each as filed with the United States Securities
and Exchange Commission
(b) They are and will be acquiring the Notes, the Series A Stock and
the Common Stock for investment with no present intention to resell or
distribute them and that they acknowledge, subject to their rights to
registration under the Registration Rights Agreement with respect to the Common
Stock, that they may not sell or otherwise dispose of the Notes, the Series A
Stock or the Common Stock except pursuant to the securities laws of the United
States and the several states thereof or an applicable exemption therefrom and
that the certificates evidencing the Notes, the Series A Stock and the Common
Stock shall bear a legend to such effect, and that the holders of the Notes
shall be more particularly subject to the one year holding restrictions of
Regulation S under the Securities Act of 1933, as
5
amended applicable to the Notes, the Series A Stock or the Common Stock whenever
held on conversion with the holding period of each counted as the holding period
of any of such securities.
(c) There is no law, rule or regulation known to them which prohibits
their participation in the transactions contemplated by this Agreement.
Article 6.0
Covenants
6.1 Covenants of the Company. The Company covenants with the several Lenders so
long as the Loan shall be outstanding, unless the Holders of 60% of the
outstanding principal amount of the Bridge Loan Notes and the Notes issued
hereunder shall consent in writing, that:
(a) Financial Statements; Information. The Company shall furnish the
Lenders (1) within 90 days after the end of each fiscal year of the Company a
balance sheet as at the close of such fiscal year and statements of operations
and changes in stockholders equity (deficiency) of the Company for the fiscal
year ending on that date, certified by independent public accountants acceptable
to the Lenders and prepared on a consolidated basis, if appropriate; (2) within
45 days after the end of each quarter of each fiscal year of the Company, a
statement of operations of the Company for the period from the beginning of the
fiscal year to the end of such quarter, certified by an authorized financial or
accounting officer of the Company and prepared on a consolidated basis, if
appropriate; (3) promptly after the filing thereof, all reports and other
documents (except with respect to employee benefit plans) filed with the United
States Securities and Exchange Commission; and (4) from time to time, such
further information regarding the business, affairs and financial condition of
the Company as the Lenders may reasonably request.
(b) Senior Debt. So long as the Loan shall be outstanding and shall not
have been converted into the Series A Stock as provided in this Agreement, the
outstanding principal amount of the Loan shall constitute Senior Debt of the
Company, shall not be subordinate to any other indebtedness of the Company and
the Company may not issue (1) securities senior to the Loan or (2) securities
entitled upon the liquidation of the Company to a more preferential distribution
of assets of the Company than to the Holders of the Notes.
Article 7.0
Defaults
7.1 Defaults. If any of the following events of default shall occur and shall
not have been remedied:
(a) Any representation made by the Company herein or in any certificate
delivered to the Lenders at the Closing shall prove to have been incorrect in
any material respect; or
(b) The Company shall default in the payment of principal on
6
maturity or by acceleration or otherwise and interest on the Notes when due and
such default in payment of interest on the Notes shall continue for a period of
5 days; or
(c) The Company shall default in the performance of any other agreement
or covenant herein for 30 days after such default shall have become known to the
Company; or
(d) The Company shall (1) apply for or consent to the appointment of a
receiver, trustee or liquidator of itself or all or a substantial part of its
assets, (2) be unable, or admit in writing its inability, to pay its debts as
they mature, (3) make a general assignment for the benefit of creditors, (4) be
adjudicated a bankrupt or insolvent, or (5) file a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization or an arrangement
with creditors or to take advantage of any insolvency law or admitting the
material allegations of a petition filed against it in any bankruptcy,
reorganization or insolvency proceeding, or corporate action shall be taken by
it for the purpose of effecting any of the foregoing; or
(e) An order, judgement or decree shall be entered, without the
application, approval or consent of the Company, by any court of competent
jurisdiction, approving a petition seeking reorganization of the Company or
appointing a receiver, trustee, or liquidator of the Company or of all or a
substantial portion of its assets, and such order, judgment or decree shall
continue unstayed and in effect for any period of 60 consecutive days; or
(f) Any default or event of default shall occur in respect of any
indebtedness of the Company on any obligation (other than the Notes) for
borrowed money or under a lease of property or any other arrangement for the use
or possession of property where the Company has the obligation to make payments
for the same in any and all events (hereafter, "Indebtedness"), the effect of
which shall be to cause or permit the holders of such Indebtedness to cause the
acceleration or maturity thereof (whether or not such holders shall do so), or
any other Indebtedness shall become due by its terms and shall not be paid
within 15 days thereafter, provided, however, that if any such default or
failure to pay shall be remedied or cured by the Company or waived by the holder
of the Indebtedness, then the event of default under this Agreement shall be
deemed likewise to have been thereupon remedied, cured or waived, without
further action by the Lenders or the Company;
thereupon, Lenders hereunder and under the Bridge Loan Agreement may, by written
notice to the Company of 60% of the Holders of the outstanding principal amount
of the Notes hereunder and the Bridge Loan Notes in the aggregate, declare the
principal of and interest accrued on the Loan to be forthwith due and payable,
whereupon the same shall become so, and may immediately exercise any and all
rights hereunder or under the Security Agreement or as otherwise provided by
law; excepting, however, in the case of voluntary or involuntary bankruptcy or
insolvency as more particularly described in clauses (d) and (e) above of this
Section 7.1, whereupon the principal and interest on
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the Notes shall be automatically due and payable without notice or demand or any
action by the Holders of the Notes.
Article 8.0
Miscellaneous
8.1 Notices. All notices, requests, and demands hereunder shall be given to or
made to the respective parties at their respective addresses and to the
attention of the person specified on Schedule A hereto or at such other address
as may be specified by a Noteholder by notice hereunder. Any such notice shall
be effective when made, if made by facsimile transmission or by hand and
acknowledged; and, if given by mail, on the fourth day following deposit of the
same in the mail postage prepaid, first class or priority airmail; and, if sent
by courier service, when received and acknowledged.
8.2 No Waivers. Neither failure nor delay on the part of the Lenders to exercise
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right power or privilege.
8.3 Governing Law. This Agreement and the Notes shall be governed by the
internal substantive laws of the state of Connecticut without regard to its
rules regarding conflicts of laws and the Company and the Lenders hereby submit
to the non-exclusive jurisdiction of the Superior Courts of Connecticut or the
United States Federal District Court for the District of Connecticut as to all
matters arising under this Agreement or the Notes.
8.4 Costs. If default is made in the payment of the Notes, the Company agrees to
pay all costs of collection borne by the Lenders, including reasonable counsel
fees and disbursements and court costs.
8.5 Integration; Amendments. This Agreement constitutes the entire Agreement of
the parties and all matters relating to the transactions contemplated by this
Agreement are incorporated herein. This Agreement may only be amended in a
writing stating that it is an amendment of this Agreement and signed by the
party to be charged.
8.6 Counterparts. This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument.
8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their representatives thereunto duly authorized, all as of the date
first above written.
CLEAN DIESEL TECHNOLOGIES, INC.
By: /s/ X. X. Xxxxx-Xxxxxx
-------------------------------------
Xxxxxx X. Xxxxx-Xxxxxx
President
S G ASSOCIATES LIMITED
As Agent for the Lenders
By: /s/ X. X. Xxxx
-------------------------------------
Xxxxx X. Xxxx
Managing Director
SCHEDULE A
THE LENDERS
Name Commitment U.S. $
---- -----------------
Bystead Limited 165,000
X X Xxxxxxxx 82,500
Samantha and Xxxx Xxxxxx 16,500
Xxxx Xxxx Xxxxx 74,000
Xxxxxxxx Xxxx Xxxxx 16,500
Xxxxxxxx Austins Xxxxx 16,500
Xxxxxxxxx X Xxxxx 16,500
Xxxxxxx Xxxxxxxx 8,000
Waltham Forest Friendly Society 330,000
SGA Nominees Limited 1,000
Positive Securities Limited 900,000
-------
Subtotal US$ 1,626,500*
Cadogan Settled Estates
Shareholding Company Limited 250,000
Total $ 1,876,500
* Attn: X. X. Xxxx
S G Associates
00 Xxxxx Xxxx Xxxxxx
Xxxxxx X0XX 0XX X.X.
Schedule E to Loan Note Agreement of November 11, 1998
Form of Certificate for
Clean Diesel Technologies, Inc. Series A Convertible Preferred Stock
N0.______ Series A Convertible Preferred Stock ______ Shares
CLEAN DIESEL TECHNOLOGIES, INC.
Incorporated under the laws of the State of Delaware
THIS CERTIFIES THAT
is the owner of fully-paid and non-assessable shares of the Series A Convertible
Preferred Stock of Clean Diesel Technologies, Inc. (hereinafter called the
"Corporation"), transferable on the books of the Corporation by the holder
hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed.
This certificate and the shares represented hereby are issued and shall be
held subject to all of the provisions of the Certificate of Incorporation of the
Corporation and of any amendments thereto, including without limitation the
Certificate of Designation relating to the Series A Convertible Preferred Stock
which was filed with the Secretary of State of the State of Delaware on May
8, 1998 (copies of which are on file with the Secretary of the Corporation), to
all of which the holder by the acceptance hereof assents.
Witness the seal of the Corporation and the signatures of its duly authorized
officers this ____ day of _______ 199_.
DATED: [SEAL]
_____________________ ____________________________
(Secretary) (Vice) President
A full statement of the designations, preferences and relative,
participating, optional or other special rights of each class of stock of the
Corporation or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights will be furnished by the
Corporation without charge to any stockholder who so requests upon application
to the office of the Secretary of the Corporation.
No Holder of shares of this Series A Convertible Preferred Stock shall
directly or indirectly, sell, distribute, transfer, assign, pledge, hypothecate
or otherwise dispose of or encumber any of such shares or any shares of Common
Stock issuable upon the conversion of such shares, unless such transfer is made
pursuant to either (i) an effective registration statement under the Securities
Act of 1933, as amended, and any applicable state securities laws, or (ii) an
available exemption from the registration requirements of the Securities Act of
1933 and applicable state securities laws. This security has been issued in an
offshore transaction in compliance with Regulation S under the Securities Act of
1933 and may not, within the one year time period in Rule 903(b)(3)(iii) under
the Securities Act of 1933 as in effect with respect to a transfer, resell or
otherwise transfer this security and/or the Common Stock issuable on conversion
of such shares, collectively, except in conformity with such Regulation S.
Clean Diesel Technologies, Inc
For value received_________________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________
| |
|________________________________________|
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND
ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
_________________________________________________________________________Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint _______________________________________________________________Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated:__________________
(Notice: The signature to this assignment must correspond with the name as
written upon the face of the certificate in every particular with alteration or
enlargement or any change whatever)
Conversion Notice for Series A Convertible Preferred Stock
To: Clean Diesel Technologies, Inc.
Attention: Secretary
The undersigned, as Holder of shares of Series A Convertible Preferred
Stock (the "Series A Preferred Stock") of the Corporation hereby irrevocably
elects to convert ______ shares of the Series A Preferred Stock into Common
Shares, par value $0.05 per share (the "Common Shares"), of the Corporation
according to the conditions of the Certificate of Designation for the Series A
Preferred Stock. The undersigned requests that the share certificates for the
Common Shares to be issued to the undersigned pursuant to this notice of
conversion be issued in the name of, and delivered to, the undersigned or its
designee as indicated below. If shares are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto. No fee will be charged to the Holder for any conversion,
except for the above mentioned transfer taxes, if any.
Conversion information:
Name of Holder:_____________________ Date of Most Recent Conversion
by Holder of Shares of Series A
By:_________________________________ Preferred Stock:____________________
Name: Number of Shares of Series A
Title: Preferred Stock Held by Holder
After Conversion Pursuant to This
Address of Holder:__________________ Conversion Notice:__________________
____________________________________
Issue Common Shares to:_____________
____________________________________
at:_________________________________
Schedule F to Loan Note Agreement of November 11, 1998
Registration Rights Agreement and Consent
Schedule F
REGISTRATION RIGHTS AGREEMENT AND CONSENT
Registration Rights Agreement and Consent dated as of November 11, 1998 among
Clean Diesel Technologies, Inc. (the "Company") and the several lenders
designated under the Loan Note Agreement of such date (the "Loan Note
Agreement") among the Company and such lenders and also the lenders under that
Bridge Loan Agreement of May 8, 1998 among the company and the several lenders
therein (collectively, the "Lenders"), each of such lenders and its interest
being set forth on Schedule A hereto.
Whereas, the Lenders have under the Bridge Loan and Loan Note Agreements
acquired Notes of the Company (the "Notes") or have acquired, or may in the
future acquire, the Company's Series A Convertible Preferred Stock (the "Series
A Stock"), upon conversion of the Notes; and
Whereas, the holders of the Series A Stock may convert such stock to common
stock of the Company, par value $0.05 per share (the "Common Stock") on the
terms and conditions set forth in the Certificate of Designation for such Series
A Stock; and
Whereas, the holders of the Notes or the Series A Stock, as the case may be,
desire to be able to freely sell such Common Stock issuable upon conversion of
the Series A Stock;
Now Therefore, the parties agree as follows:
Article 1.0
Registration Rights
1. Registration Rights. In connection with any proposed sale by the Lenders (or
for purposes of these registration rights, their assigns) of the Common Stock
which they shall acquire on conversion of Series A Stock acquired by conversion
of the Notes, the Lenders shall have the following registration rights:
1. Three registrations on demand; and
2. An unlimited number of incidental or "piggy-back"
registrations.
Demand registrations shall be in the minimum aggregate amount in value of the
Common Stock of $500,000. and may not occur more often than once in any
successive 12 month period. A "registration" shall mean an effective
registration statement, with post-effective amendments as required) under the
United States securities laws and such other proceedings as may be required
under the securities or "blue sky" laws of the various states of the United
States so that selling stockholders may legally sell or offer to sell the
quantities of the Common Stock owned by them which they desire to sell or offer
to sell for at least a period of six months from the commencement of the
effectiveness of the registration statement. An
incidental or "piggy-back" registration shall mean a registration of securities
to be sold or offered for sale by the Company on its own behalf or on behalf of
sellers other than the Lenders or their assigns (other than for employee benefit
plans stock options or the like) in which the Lenders or their assigns shall
participate as a selling stockholder.
2. Costs of Registration. In the event of any registration pursuant to these
rights, the Company shall pay all costs involved in such registration including
legal, accounting, investment banking advice and the printing of reasonable
requirements for prospectuses. The Lenders or their assigns, however, shall pay
or absorb costs involved in any such registration which (a) may be voluntarily
assumed, such as legal fees for their own counsel or, (b) are associated with
the task of furnishing information concerning selling stockholders required to
be included in the registration statement or (c) relate to the fees,
commissions or discounts of underwriters ratably to the shares of the selling
stockholders.
3. Underwriting; Deferral; Participation. In any registration hereunder the
Company shall be entitled, subject to the approval of the Lenders or their
assigns who shall have exercised registration rights, to select the managing
underwriter and the Lenders or their assigns as selling stockholders shall (I)
indemnify and defend the Company for misstatements or omissions of fact
concerning themselves furnished or omitted by them and required to be included
in a registration statement and (ii) shall be guided as to the timing and
quantities of securities to be sold or offered for sale by the independent
advice of the managing underwriter of the proposed offering. The Company may
defer the effectiveness of any demand registration in order to obtain the
benefit in registration of audited annual financial statements of the Company to
be furnished to stockholders. In the event of a demand registration the Company
may itself participate and offer securities on its own behalf with the Lenders
or their assigns acting as a selling stockholders so long, however, as there
shall be reasonable assurance that such arrangement will not interfere with the
intended sale of the Common Stock for which registration was demanded.
4. Rescission. The Company and the several Lenders under the Bridge Loan
Agreement agree to rescind and revoke Sections 3.2 through 3.4 of that Agreement
relating to registration rights.
5. Consents. The Company and the several Lenders under the Bridge Loan Agreement
agree and consent to (1) the rescission of the Security Agreement of May 8, 1998
among them and to the withdrawal of the Financing Statement authorized by that
agreement to perfect the security interests in the collateral described in that
agreement; (2) the amendment of the Bridge Loan Agreement, as supplemented, so
that the percentage of consent of 60% provided in Sections 6.1 and 7.1 thereof
shall be 60% in principal amount of both the
2
Bridge Loan Noteholders and the Noteholders in the Loan Note Agreement in the
aggregate; and that the Notes under the Loan Note Agreement are "equity
securities" within the meaning of Section 3.1 of the Bridge Loan Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this registration Rights
Agreement to be duly executed by their duly authorized representatives, all as
of the date first above written.
CLEAN DIESEL TECHNOLOGIES, INC.
By: /s/ X. X. Xxxxx-Xxxxxx
-------------------------------------------
Xxxxxx X. Xxxxx-Xxxxxx
President
PLATINUM PLUS, INC.
By: /s/ X. X. Xxxxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxxxx
Vice President
S G ASSOCIATES LTD
as Agent for the several Lenders
under the Bridge Loan and
Loan Note Agreements
By: /s/ X. X. Xxxx
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X. X. Xxxx
Managing Director
SCHEDULE A REGISTRATION RIGHTS AGREEMENT AND CONSENT
Lenders Commitment
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Bridge Loan Noteholders
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Platinum Plus, Inc. $500,000
Addis International Limited 250,000
Xxxxxxxxx X X Xxxxx 100,000
Ram Limited 50,000
SG Associates Limited Retirement Benefits Scheme 50,000
The Shimpling Trust Limited 250,000
S G Associates Limited as nominee 50,000
Positive Securities Limited 150,000
Loan Note Lenders
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Bystead Limited 165,000
X X Xxxxxxxxx 82,500
Samantha and Xxxx Xxxxxx 16,500
Xxxx Xxxx Xxxxx 74,000
Xxxxxxxx Xxxx Xxxxx 16,500
Xxxxxxxx Xxxxxxx Xxxxx 16,500
Xxxxxxxxx X Xxxxx 16,500
Xxxxxxx Xxxxxxxx 8,000
Waltham Forest Friendly Society 330,000
SGA Nominees Limited 1,000
Positive Securities Limited 900,000
Cadogan Settled Estates Shareholding Company Limited 250,000
