Exhibit 10.1
Exhibit 10.1
Execution Copy
FORM OF PURCHASE AGREEMENT
PURCHASE AGREEMENT (the “Agreement”), dated as of October 7, 2011, by and between
CLEAN DIESEL TECHNOLOGIES, INC., a Delaware corporation (the “Company”), and LINCOLN PARK
CAPITAL FUND, LLC, an Illinois limited liability company (the “Investor”).
WHEREAS:
Subject to the terms and conditions set forth in this Agreement, the Company has the right to sell
to the Investor, and the Investor has the obligation to buy from the Company, up to Ten Million
Dollars ($10,000,000) of the Company’s common stock, $.01 par value per share (the “Common
Stock”). The shares of Common Stock to be purchased hereunder are referred to herein as the
“Purchase Shares.”
NOW THEREFORE, the Company and the Investor hereby agree as follows:
1. CERTAIN DEFINITIONS.
For purposes of this Agreement, the following terms shall have the following meanings:
(a) “Available Amount” means initially Ten Million Dollars ($10,000,000) in the
aggregate, which amount shall be reduced by the Purchase Amount each time the Investor purchases
shares of Common Stock pursuant to Section 2 hereof.
(b) “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law
for the relief of debtors.
(c) “Business Day” means any day on which the Principal Market is open for trading
including any day on which the Principal Market is open for trading for a period of time less than
the customary time.
(d) “Closing Sale Price” means, for any security as of any date, the last closing sale
price for such security on the Principal Market as reported by the Principal Market, or, if the
Principal Market is not the principal securities exchange or trading market for such security, the
last closing sale price of such security on the principal securities exchange or trading market
where such security is listed or traded as reported by the Principal Market.
(e) “Confidential Information” means any information disclosed by either party to the
other party, either directly or indirectly, in writing, orally or by inspection of tangible objects
(including, without limitation, documents, prototypes, samples, plant and equipment), which is
designated as “Confidential,” “Proprietary” or some similar designation. Information communicated
orally shall be considered Confidential Information if such information is confirmed in writing as
being Confidential Information within ten (10) Business Days after the initial disclosure.
Confidential Information may also include information disclosed to a disclosing party by third
parties. Confidential Information shall not, however, include any information which (i) was
publicly known and made generally available in the public domain prior to the time of disclosure by
the disclosing party; (ii) becomes publicly known and made generally available after disclosure by
the disclosing party to the receiving party through no action or inaction of the receiving party;
(iii) is already in the possession of the receiving party at the time of disclosure by the
disclosing party as shown by the receiving party’s files and records immediately prior to
the time of disclosure; (iv) is obtained by the receiving party from a third party without a breach
of such third party’s obligations of confidentiality; (v) is independently developed by the
receiving party without use of or reference to the disclosing party’s Confidential Information, as
shown by documents and other competent evidence in the receiving party’s possession; or (vi) is
required by law to be disclosed by the receiving party, provided that the receiving party gives the
disclosing party prompt written notice of such requirement prior to such disclosure and assistance
in obtaining an order protecting the information from public disclosure.
(f) “Custodian” means any receiver, trustee, assignee, liquidator or similar official
under any Bankruptcy Law.
(g) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(h) “Maturity Date” means the date that is 600 Business Days (30 Monthly Periods) from
the Commencement Date.
(i) “Monthly Period” means each successive 20 Business Day period commencing with the
Commencement Date.
(j) “Person” means an individual or entity including but not limited to any limited
liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
(k) “Principal Market” means the Nasdaq Capital Market; provided however, that in the
event the Company’s Common Stock is ever listed or traded on the Nasdaq Global Market, the Nasdaq
Global Select Market, the New York Stock Exchange, the NYSE Amex, or the OTC Bulletin Board (it
being understood that as used herein “OTC Bulletin Board” shall also mean any successor or
comparable market quotation system or exchange to the OTC Bulletin Board such as the OTCQB operated
by the OTC Markets Group, Inc.), then the “Principal Market” shall mean such other market or
exchange on which the Company’s Common Stock is then listed or traded.
(l) “Purchase Amount” means, with respect to any particular purchase made hereunder,
the Purchase to be purchased by the Investor pursuant to Section 2 hereof.
(m) “Purchase Date” means with respect to any particular purchase made hereunder, the
Business Day on which the Investor receives by 10:00 a.m. eastern time of such Business Day a valid
Purchase Notice that the Investor is to buy Purchase Shares pursuant to Section 2 hereof.
(n) “Purchase Price” means the lower of the (A) the lowest Sale Price of the Common
Stock on the Purchase Date and (B) the arithmetic average of the three (3) lowest Closing Sale
Prices for the Common Stock during the twelve (12) consecutive Business Days ending on the Business
Day immediately preceding such Purchase Date (to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction).
(o) “Purchase Notice” shall mean a written notice from the Company to the Investor
directing the Investor to buy such Purchase Amount in Purchase Shares as specified by the Company
therein on the Purchase Date.
(p) “Sale Price” means any sale price for the shares of Common Stock on the Principal
Market as reported by the Principal Market.
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(q) “SEC” means the United States Securities and Exchange Commission.
(r) “SEC Documents” means all reports, schedules, forms, statements and other
documents filed by the Company under the Securities Act and the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the year preceding the date hereof, including the exhibits
thereto and documents incorporated by reference therein.
(s) “Securities Act” means the Securities Act of 1933, as amended.
(t) “Signing Price” means $2.76, representing the book value per share of Common Stock
as of June 30, 2011, calculated in accordance with the rules of the Nasdaq Stock Market.
(u) “Transfer Agent” means the transfer agent of the Company as set forth in
Section 11(f) hereof or such other person who is then serving as the transfer agent for the Company
in respect of the Common Stock.
2. PURCHASE OF COMMON STOCK.
Subject to the terms and conditions set forth in this Agreement, the Company has the right to
sell to the Investor, and the Investor has the obligation to purchase from the Company, Purchase
Shares as follows:
(a) Purchases. Within one (1) Business Day following the satisfaction of the
conditions (the “Commencement”) as set forth in Sections 7 and 8 below (the date of
satisfaction of such conditions, the “Commencement Date”), the Company shall have the right
but not the obligation on each Business Day during the term of this Agreement to direct the
Investor by its delivery to the Investor of a Purchase Notice from time to time to buy up to Five
Hundred Thousand Dollars ($500,000.00) worth of purchase shares (each such purchase a
“Purchase” and such shares “Purchase Shares”) at the Purchase Price on the Purchase
Date. The Purchase Amount may be increased to up to Seven Hundred Thousand Fifty Thousand Dollars
($750,000.00) per Purchase Notice if the Closing Sale Price of the Common Stock is not below $5.00
(subject to equitable adjustment for any reorganization, recapitalization, non-cash dividend, stock
split or other similar transaction) on the Purchase Date. The Purchase Amount may be increased to
up to One Million Dollars ($1,000,000.00) per Purchase Notice if the Closing Sale Price of the
Common Stock is not below $7.50 (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction) on the Purchase
Date. The Purchase Amount may be increased to up to One Million Two Hundred Fifty Thousand Dollars
($1,250,000.00) per Purchase Notice if the Closing Sale Price of the Common Stock is not below
$10.00 (subject to equitable adjustment for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction) on the Purchase Date. The Purchase Amount may
be increased to up to One Million Five Hundred Thousand Dollars ($1,500,000.00) per Purchase Notice
if the Closing Sale Price of the Common Stock is not below $12.50 (subject to equitable adjustment
for any reorganization, recapitalization, non-cash dividend, stock split or other similar
transaction) on the Purchase Date. With respect to each such Purchase, the Company must deliver
the Purchase Shares on the Business Day following the Purchase Date. If on any Purchase Date the
Closing Sale Price of the Common Stock is below the Purchase threshold price, such Purchase shall
automatically be reduced to the next lowest applicable Purchase Amount. The Company may deliver a
Purchase Notice to the Investor each Business day during the term of this Agreement.
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(b) Payment for Purchase Shares. The Investor shall pay to the Company an amount
equal to the Purchase Amount with respect to such Purchase Shares as full payment for such Purchase
Shares via wire transfer of immediately available funds on the same Business Day that the Investor
receives such Purchase Shares if they are received by the Investor before 1:00 p.m. eastern time or
if received by the Investor after 1:00 p.m. eastern time, the next Business Day. The Company shall
not issue any fraction of a share of Common Stock upon any purchase. If the issuance would result
in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of
a share of Common Stock up or down to the nearest whole share. All payments made under this
Agreement shall be made in lawful money of the United States of America or wire transfer of
immediately available funds to such account as the Company may from time to time designate by
written notice in accordance with the provisions of this Agreement. Whenever any amount expressed
to be due by the terms of this Agreement is due on any day that is not a Business Day, the same
shall instead be due on the next succeeding day that is a Business Day.
(c) Compliance with Rules of Principal Market.
(i) Exchange Cap. Subject to Section 2(c)(ii) below, the Company shall not
issue or sell any Purchase Shares or Commitment Shares pursuant to this Agreement, and the Investor
shall not purchase or acquire any Purchase Shares or Commitment Shares pursuant to this Agreement,
to the extent that after giving effect thereto, the aggregate number of Purchase Shares and
Commitment Shares issued pursuant to this Agreement would exceed 1,434,994 shares of Common Stock
(19.99% of the 7,178,560 outstanding shares of Common Stock on the date of this Agreement) (the
“Exchange Cap”), unless and until the Company elects to solicit shareholder approval of the
transactions contemplated by this Agreement and the shareholders of the Company have in-fact
approved the transactions contemplated by this Agreement in accordance with the applicable rules
and regulations of the Principal Market, the Nasdaq Stock Market and the Certificate of
Incorporation and By-laws of the Company. For the avoidance of doubt, the Company may, but shall
be under no obligation to, request its shareholders to approve the transactions contemplated by
this Agreement; provided, that if shareholder approval is not obtained in accordance with this
Section 2(c)(i), the Exchange Cap shall be applicable for all purposes of this Agreement
and the transactions contemplated hereby at all times during the term of this Agreement (except as
set forth in Section 2(c)(ii) below).
(ii) At-Market Transaction. Notwithstanding Section 2(c)(i) above, the
Exchange Cap shall not be applicable for any purposes of this Agreement and the transactions
contemplated hereby solely to the extent that (and only for so long as) the Average Price shall
equal or exceed the Base Price (it being hereby acknowledged and agreed that the Exchange Cap shall
be applicable for all purposes of this Agreement and the transactions contemplated hereby at all
other times during the term of this Agreement unless the shareholder approval referred to in
Section 2(c)(i) is obtained). “Average Price” means a price per Purchase Share
(rounded to the nearest tenth of a cent) equal to the quotient obtained by dividing (i) the
aggregate gross Purchase Price paid by the Investor for all Purchase Shares purchased pursuant to
this Agreement by (ii) the aggregate number of Purchase Shares issued pursuant to this Agreement.
“Base Price” means a price per Purchase Share equal to the sum of (i) the Signing Price and
(ii) $0.254, (subject to adjustment for any reorganization, recapitalization, non-cash dividend,
stock split, reverse stock split or other similar transaction that occurs on or after the date of
this Agreement). The Company hereby represents and warrants to the Investor that the Signing Price
is greater than the consolidated closing bid price of the Common Stock as reported on the Nasdaq
Stock Market immediately preceding the execution of this Agreement. The Company further represents
and warrants that its Quarterly Report on Form 10-Q for its fiscal quarter ended June 30, 2011,
from which the Signing Price was derived, is the most recent SEC Document filed with the SEC
disclosing information from which the book value of the Common Stock may be calculated in
accordance with the rules of the Nasdaq Stock Market.
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(iii) General. The Company shall not issue any Purchase Shares or Commitment
Shares pursuant to this Agreement if such issuance would reasonably be expected to result in a
breach of the Company’s obligations under the rules and regulations of the Principal Market. The
provisions of this Section 2(c) shall be implemented in a manner otherwise than in strict
conformity with the terms hereof only if necessary to ensure compliance with the rules and
regulations of the Principal Market.
(d) Beneficial Ownership Limitation. Notwithstanding anything to the contrary
contained in this Agreement, the Company shall not issue or sell, and the Investor shall not
purchase or acquire, any shares of Common Stock under this Agreement which, when aggregated with
all other shares of Common Stock then beneficially owned by the Investor and its affiliates (as
calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder),
would result in the beneficial ownership by the Investor and its affiliates of more than 9.99% of
the then issued and outstanding shares of Common Stock (the “Beneficial Ownership
Limitation”). Upon the written or oral request of the Investor, the Company shall confirm
orally or in writing to the Investor within two (2) Business Days of such request the number of
shares of Common Stock then outstanding. The Investor and the Company shall each cooperate in good
faith in the determinations required hereby and the application hereof.
3. INVESTOR’S REPRESENTATIONS AND WARRANTIES.
The Investor represents and warrants to the Company that as of the date hereof and as of the
Commencement Date:
(a) Investment Purpose. The Investor is acquiring the Purchase Shares and the
Commitment Shares (“Securities”) as principal for its own account and not with a view to or
for distributing or reselling such Securities or any part thereof in violation of the Securities
Act or any applicable state securities law, has no present intention of distributing any of such
Securities in violation of the Securities Act or any applicable state securities law and has no
direct or indirect arrangement or understandings with any other persons to distribute or regarding
the distribution of such Securities in violation of the Securities Act or any applicable state
securities law (this representation and warranty not limiting the Investor’s right to sell the
Securities at any time pursuant to the registration statement described herein or otherwise in
compliance with applicable federal and state securities laws and with respect to the Commitment
Shares, subject to Section 5(e) hereof). The Investor is acquiring the Securities
hereunder in the ordinary course of its business.
(b) Accredited Investor Status. The Investor is an “accredited investor” as that term
is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance on Exemptions. The Investor understands that the Securities may be
offered and sold to it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying in part upon the
truth and accuracy of, and the Investor’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of the Investor to acquire the
Securities.
(d) Information. The Investor understands that its investment in the Securities
involves a high degree of risk. The Investor (i) is able to bear the economic risk of an
investment in the Securities including a total loss, (ii) has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and risks of the
proposed investment in the Securities and (iii) has had an opportunity to ask questions of and
receive answers from the officers of the Company concerning the financial condition and business of
the Company and others matters related to an investment in the Securities. Neither such inquiries
nor any other due diligence investigations conducted by the Investor or its representatives shall modify, amend or affect the Investor’s right to rely on the
Company’s representations and warranties contained in Section 4 below. The Investor has sought
such accounting, legal and tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.
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(e) No Governmental Review. The Investor understands that no United States federal or
state agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability of the investment in
the Securities nor have such authorities passed upon or endorsed the merits of the offering of the
Securities.
(f) Transfer or Sale. The Investor understands that except as contemplated by the
Registration Rights Agreement (as hereinafter defined) (i) the Securities have not been and are not
being registered under the Securities Act or any state securities laws; (ii) the Securities may not
be offered for sale, sold, assigned or transferred unless (A) registered pursuant to the Securities
Act or (B) an exemption exists permitting such Securities to be sold, assigned or transferred
without such registration; (iii) any sale of the Securities made in reliance on Rule 144 under the
Securities Act (or any successor thereto, “Rule 144”) may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities
under circumstances in which the seller (or the person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the Securities Act) may require compliance with
some other exemption under the Securities Act or the rules and regulations of the SEC thereunder;
and (iv) neither the Company nor any other person is under any obligation to register the
Securities under the Securities Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
(g) Validity; Enforcement. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Investor and is a valid and binding agreement of the
Investor enforceable against the Investor in accordance with its terms, subject as to
enforceability to general principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally,
the enforcement of applicable creditors’ rights and remedies.
(h) Residency. The Investor is a resident of the State of Illinois.
(i) No Prior Short Selling. The Investor represents and warrants to the Company that
at no time prior to the date of this Agreement has any of the Investor, its agents, representatives
or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly, any (i)
“short sale” (as such term is defined in Section 242.200 of Regulation SHO of the Exchange Act) of
the Common Stock or (ii) hedging transaction, which establishes a net short position with respect
to the Common Stock.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Investor that except as set forth in the SEC
Documents and the Registration Statement (as hereinafter defined), as of the date hereof and as of
the Commencement Date:
(a) Organization and Qualification. Each of the Company and its Significant
Subsidiaries (which has the meaning set forth in Rule 1-02 of Regulation S-X) has been duly
organized and is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation. Each of the Company and its Significant Subsidiaries has the
corporate power and authority to own its properties and conduct its business as currently being
carried on and as described in the SEC Documents, and is duly qualified to do business as a foreign
corporation in good standing in each jurisdiction in which it owns or leases real property or in
which the conduct of its business makes such qualification necessary and in which the failure to so qualify would have or is reasonably likely to result in a material
adverse effect upon the business, prospects, properties, operations, condition (financial or
otherwise) or results of operations of the Company and its subsidiaries, taken as a whole, or in
its ability to perform its obligations under this Agreement (“Material Adverse Effect”).
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(b) Authorization. The Company has the power and authority to enter into this
Agreement and to authorize, issue and sell the Securities as contemplated by this Agreement. This
Agreement has been duly authorized, executed and delivered by the Company, and constitutes a valid,
legal and binding obligation of the Company, enforceable against the Company in accordance with its
terms, except as rights to indemnity hereunder may be limited by federal or state securities laws
and except as such enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting the rights of creditors generally and subject to general principles of
equity.
(c) No Conflict. The execution, delivery and performance of this Agreement and the
consummation of the transactions herein contemplated will not (i) result in a breach or violation
of any of the terms and provisions of, or constitute a default under, any law, rule or regulation
to which the Company or any Significant Subsidiary is subject, or by which any property or asset of
the Company or any Significant Subsidiary is bound or affected, (ii) conflict with, result in any
violation or breach of, or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any right of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement,
lease, credit facility, debt, note, bond, mortgage, indenture or other instrument (the
“Contracts”) or obligation or other understanding to which the Company or any Significant
Subsidiary is a party of by which any property or asset of the Company or any Significant
Subsidiary is bound or affected, except to the extent that such conflict, default, termination,
amendment, acceleration or cancellation right is not reasonably likely to result in a Material
Adverse Effect, or (iii) result in a breach or violation of any of the terms and provisions of, or
constitute a default under, the Company’s charter or by laws.
(d) No Organization Document Violation. Neither the Company nor any of its Significant
Subsidiaries is in violation, breach or default under its certificate of incorporation, by-laws or
other equivalent organizational or governing documents, except where the violation, breach or
default in the case of a Significant Subsidiary of the Company is not reasonably likely to result
in a Material Adverse Effect.
(e) Consents. All consents, approvals, orders, authorizations and filings required on
the part of the Company and its subsidiaries in connection with the execution, delivery or
performance of this Agreement have been obtained or made, other than such consents, approvals,
orders and authorizations the failure of which to make or obtain is not reasonably likely to result
in a Material Adverse Effect.
(f) No Delisting. The Common Stock is registered pursuant to Section 12(b) of the
Exchange Act and is included or approved for inclusion on the Principal Market. There is no action
pending by the Company or, to the Company’s knowledge, the Principal Market, to delist the Common
Stock from the Principal Market, nor has the Company received any notification that the Principal
Market is contemplating terminating such listing. When issued, the Securities will be listed on
the Principal Market. The Company has not taken, directly or indirectly, any action that is
designed to or that has constituted or that would reasonably be expected to cause or result in the
stabilization or manipulation of the price of any security of the Company to facilitate the sale or
resale of the Securities.
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(g) Validity of Shares. All of the issued and outstanding shares of capital stock of
the Company are duly authorized and validly issued, fully paid and nonassessable, and have been
issued in compliance with all applicable securities laws, and conform to the description thereof in
the SEC Documents. Except for the issuances of options or restricted stock or restricted stock units
in the ordinary course of business, since the respective dates as of which information is provided
in the SEC Documents, the Company has not entered into or granted any convertible or exchangeable
securities, options, warrants, agreements, contracts or other rights in existence to purchase or
acquire from the Company any shares of the capital stock of the Company. The Securities, when
issued, will be duly authorized and validly issued, fully paid and nonassessable, will be issued in
compliance with all applicable securities laws, and will be free of preemptive, registration or
similar rights.
(h) Taxes. Each of the Company and its Significant Subsidiaries has filed all returns
(as hereinafter defined) required to be filed with taxing authorities prior to the date hereof or
has duly obtained extensions of time for the filing thereof. Each of the Company and its
Significant Subsidiaries has paid all taxes (as hereinafter defined) shown as due on such returns
that were filed and has paid all taxes imposed on or assessed against the Company or such
respective Significant Subsidiary. The provisions for taxes payable, if any, shown on the
consolidated financial statements filed with or as part of the SEC Documents are sufficient for all
accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates
of such consolidated financial statements. Except as disclosed in the SEC Documents (i) no issues
have been raised (and are currently pending) by any taxing authority in connection with any of the
returns or taxes asserted as due from the Company or its Significant Subsidiaries, and (ii) no
waivers of statutes of limitation with respect to the returns or collection of taxes have been
given by or requested from the Company or its Significant Subsidiaries. The term “taxes” mean all
federal, state, local, foreign, and other net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs,
duties or other taxes, fees, assessments, or charges of any kind whatever, together with any
interest and any penalties, additions to tax, or additional amounts with respect thereto. The term
“returns” means all returns, declarations, reports, statements, and other documents required to be
filed in respect to taxes.
(i) No Material Liabilities. Since the respective dates as of which information is
given in the SEC Documents and the Registration Statement, (i) neither the Company nor any of its
Significant Subsidiaries has incurred any material liabilities or obligations, direct or
contingent, or entered into any material transactions other than in the ordinary course of
business, (ii) the Company has not declared or paid any dividends or made any distribution of any
kind with respect to its capital stock, (iii) there has not been any change in the capital stock of
the Company or any of its Significant Subsidiaries (other than a change in the number of
outstanding shares of Common Stock due to the issuance of shares upon the exercise of outstanding
convertible notes, options or warrants or the issuance of restricted stock awards or restricted
stock units under the Company’s existing stock awards plan, or any new grants thereof in the
ordinary course of business), (iv) other than the possible sale of additional accounts receivable
pursuant to its $7.5 million demand credit facility there has not been any material change in the
Company’s long-term or short-term debt, and (v) there has not been the occurrence of any Material
Adverse Effect.
(j) SEC Documents. The SEC Documents represent all reports, schedules, forms,
statements and other documents required to be filed by the Company under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the one year preceding the
date hereof, and the Company has filed all SEC Documents on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Documents prior to the expiration of
any such extension.
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(k) Financial Statements. The consolidated financial statements of the Company,
together with the related notes, included in the SEC Documents comply in all material respects with
the applicable requirements of the Securities Act and the Exchange Act and fairly present the
financial condition of the Company as of the dates indicated and the results of operations and
changes in cash flows for the periods therein specified in conformity with generally accepted
accounting principles consistently applied throughout the periods involved present fairly the information required to be stated therein.
No other financial statements, pro forma financial information or schedules are required under the
Securities Act to be included in the SEC Documents. To the Company’s knowledge, KPMG LLP, which
has expressed its opinion with respect to the consolidated financial statements filed as a part of
the SEC Documents, is an independent public accounting firm with respect to the Company within the
meaning of the Securities Act and the Rules and Regulations.
(l) No Material Misstatement. At the date hereof and at the Commencement Date, each
SEC Document, the Registration Statement and any post-effective amendment thereto complied or will
comply in all material respects with the requirements of the Securities Act and the Rules and
Regulations and did not and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the statements therein not
misleading. The Company had a reasonable basis for, and made in good faith, each “forward-looking
statement” (within the meaning of Section 27A of the Securities Act or Section 21E of the Exchange
Act) contained or incorporated by reference in the SEC Documents. All statistical or
market-related data included or incorporated by reference in the SEC Documents are based on or
derived from sources that the Company reasonably believes to be reliable and accurate, and the
Company has obtained the written consent to the use of such data from such sources, to the extent
required.
(m) Books and Records. The Company makes and keeps accurate books and records and
maintains a system of internal accounting controls sufficient to provide reasonable assurance that
(a) transactions are executed in accordance with management’s general or specific authorization,
(b) transactions are recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles, consistently applied and to maintain
accountability for assets, (c) access to assets is permitted only in accordance with management’s
general or specific authorization and (d) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with respect to any
differences. Except as disclosed in the SEC Documents, there has not been a material weakness in
the Company’s internal control over financial reporting (whether or not remediated) and since
January 1, 2011, and there has been no change in the Company’s internal control over financial
reporting that has materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.
(n) Disclosure Controls and Procedures. The Company has established and maintains
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)),
which (i) are designed to ensure that material information relating to the Company, including its
consolidated subsidiaries, is made known to the Company’s principal executive officer and its
principal financial officer by others within those entities, particularly during the periods in
which the periodic reports required under the Exchange Act are being prepared and (ii) are
effective in all material respects to perform the functions for which they were established. The
Company is not aware of any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company’s internal control over financial reporting
with respect to the Company’s internal control over financial reporting.
(o) Acknowledgment Regarding Investor’s Status. The Company acknowledges and agrees
that the Investor is acting solely in the capacity of arm’s length purchaser with respect to this
Agreement and the Registration Rights Agreement (as hereinafter defined, together, the
“Transaction Documents”) and the transactions contemplated hereby and thereby. The Company
further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and any advice given by the Investor or any of its representatives
or agents in connection with the Transaction Documents and the transactions contemplated hereby and
thereby is merely incidental to the Investor’s purchase of the Securities. The Company further represents to the Investor that the Company’s
decision to enter into the Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives and advisors.
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(p) No General Solicitation. Neither the Company, nor any of its affiliates, nor any
person acting on its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in connection with the
offer or sale of the Securities.
(q) Absence of Litigation. There is no pending or, to the knowledge of the Company,
any threatened, action, suit or proceeding to which the Company or any of its Significant
Subsidiaries is a party or of which any property or assets of the Company or its subsidiaries is
the subject of before or by any court or governmental agency, authority or body, or any arbitrator
or mediator, which is reasonably likely to result in a Material Adverse Effect.
(r) Permits. The Company and each of its Significant Subsidiaries holds, and is in
compliance with, all franchises, grants, authorizations, licenses, permits, easements, consents,
certificates and orders (“Permits”) of any governmental or self regulatory agency,
authority or body required for the conduct of its business, and all such Permits are in full force
and effect, in each case except where the failure to hold, or comply with, any of them is not
reasonably likely to result in a Material Adverse Effect.
(s) Environmental Laws. The Company and each of its Significant Subsidiaries is in
material compliance with all Environmental Laws. As used herein, “Environmental Law(s)”
means any and all applicable international, federal, state, or local laws, statutes, ordinances,
regulations, policies, guidance, rules, judgments, orders, court decisions or rule of common law,
permits, restrictions and licenses, that (i) regulate or relate to the protection or clean up of
the environment; the use, treatment, storage, transportation, handling, disposal or release of
Hazardous Substances, the preservation or protection of waterways, groundwater, drinking water,
air, wildlife, plants or other natural resources; or the health and safety of persons or property,
including without limitation protection of the health and safety of employees; or (ii) impose
liability or responsibility with respect to any of the foregoing, including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.), or
any other law of similar effect. As used herein, “Hazardous Substances” means any pollutant,
chemical, substance and any toxic, infectious, carcinogenic, reactive, corrosive, ignitable or
flammable chemical, or chemical compound, or hazardous substance, material or waste, whether solid,
liquid or gas, that is subject to regulation, control or remediation under any Environmental Laws,
including without limitation, any quantity of asbestos in any form, urea formaldehyde, PCBs, radon
gas, crude oil or any fraction thereof, all forms of natural gas, petroleum products or by-products
or derivatives.
(t) Hazardous Substances. There has not been any Hazardous Substances used,
generated, treated, stored, disposed of, released, handled or otherwise existing on any property
that has been owned, leased or operated by the Company or its Significant Subsidiaries except in
compliance with all Environmental Laws, other than such noncompliance that is not reasonably likely
to result in a Material Adverse Effect.
(u) Notice of Non-Compliance with Environmental Laws. Neither the Company nor any of
its Significant Subsidiaries has received any communication, whether from a governmental authority,
citizens group, employee or otherwise, that alleges that the Company or any of its Significant
Subsidiaries is not in material compliance with any Environmental Laws, and, to the Company’s
knowledge, there are no circumstances that could reasonably be expected to prevent or interfere
with such compliance in the future. There are no material environmental claims pending or
threatened against the Company or any of its Significant Subsidiaries, nor is the Company aware of any information which might form the
basis of any such claims.
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(v) Title. The Company and its Significant Subsidiaries have good and marketable
title to all property (whether real or personal) described in the SEC Documents as being owned by
them that are material to the business of the Company, in each case free and clear of all liens,
claims, security interests, other encumbrances or defects, except those that are not reasonably
likely to result in a Material Adverse Effect. The property held under lease by the Company and
its Significant Subsidiaries is held by them under valid, subsisting and enforceable leases with
only such exceptions with respect to any particular lease as are not material or do not interfere
in any material respect with the conduct of the business of the Company and its subsidiaries.
(w) Intellectual Property Rights. The Company and each of its Significant
Subsidiaries owns or possesses or has valid right to use all patents, patent applications,
trademarks, service marks, trade names, trademark registrations, service mark registrations,
copyrights, licenses, inventions, trade secrets and similar rights (“Intellectual
Property”) necessary for the conduct of the business of the Company and its subsidiaries as
currently carried on and as described in the SEC Documents. To the knowledge of the Company, no
action or use by the Company or any of its Significant Subsidiaries involves or gives rise to any
infringement of, or license or similar fees for, any Intellectual Property of others, except where
such action, use, license or fee is not reasonably likely to result in a Material Adverse Effect.
Neither the Company nor any of its Significant Subsidiaries has received any notice alleging any
such infringement or fee.
(x) Sarbanes-Oxley Act Compliance. The Company and each of its subsidiaries has
complied with, is not in violation of, and has not received any notice of violation relating to any
law, rule or regulation relating to the conduct of its business, or the ownership or operation of
its property and assets, including, without limitation, (A) the Currency and Foreign Transactions
Reporting Act of 1970, as amended, or any money laundering laws, rules or regulations, (B) the
Sarbanes-Oxley Act and the rules and regulations of the Commission thereunder, (C) the Foreign
Corrupt Practices Act of 1977 and the rules and regulations thereunder, and (D) the Employment
Retirement Income Security Act of 1974 and the rules and regulations thereunder, in each case
except where the failure to be in compliance is not reasonably likely to result in a Material
Adverse Effect.
(y) OFAC. Neither the Company nor any of its subsidiaries nor, to the knowledge of
the Company, any director, officer, employee, representative, agent or affiliate of the Company or
any of its subsidiaries is currently subject to any U.S. sanctions administered by the Office of
Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not
directly or indirectly use the proceeds of the offering of the Shares contemplated hereby, or lend,
contribute or otherwise make available such proceeds to any person or entity, for the purpose of
financing the activities of any person currently subject to any U.S. sanctions administered by
OFAC.
(z) Insurance. The Company and each of its Significant Subsidiaries carries, or is
covered by, insurance in such amounts and covering such risks as the Company reasonably believes is
adequate for the conduct of its business and the value of its properties.
(aa) Labor Matters. No labor dispute with the employees of the Company or any of its
Significant Subsidiaries exists or, to the knowledge of the Company, is imminent that is reasonably
likely to result in a Material Adverse Effect.
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(bb) Customers and Suppliers. No supplier or customer of the Company has notified the
Company that it intends to discontinue or decrease the rate of business done with the Company in
such a way that such discontinuation or decrease is reasonably likely to result in a Material Adverse
Effect. In addition, neither the Company nor its Significant Subsidiaries have experienced and, to
the Company’s knowledge, there does not exist, any material quality control or similar problems
with any of the products and/or services currently being supplied to the Company or any of its
Significant Subsidiaries by any of its suppliers such that such material quality control or similar
problem is reasonably likely to result in a Material Adverse Effect.
(cc) Investment Company. The Company is not and, after giving effect to the offering
and sale of the Securities and the application of the net proceeds thereof, will not be an
“investment company,” as such term is defined in the Investment Company Act of 1940, as amended.
(dd) Registration Rights. No person has the right to require the Company or any of
its subsidiaries to register any securities for sale under the Securities Act by reason of the
filing of the Registration Statement with the SEC or the issuance and sale of the Securities,
except as otherwise have been waived in connection with the issuance and sale of the Securities
contemplated hereby.
(ee) Application of Takeover Protections. The Company and its board of directors have
taken or will take prior to the Commencement Date all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision under the
Certificate of Incorporation or the laws of the state of its incorporation which is or could become
applicable to the Investor as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company’s issuance of the Securities and the Investor’s
ownership of the Securities.
(ff) Disclosure. Except with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, the Company confirms that neither it nor
any other Person acting on its behalf has provided the Investor or its agents or counsel with any
information that it believes constitutes or might constitute material, non-public information that
is not otherwise disclosed in (or incorporated by reference in) the SEC Documents, the Registration
Statement or prospectus supplements thereto or otherwise made publicly available. The Company
understands and confirms that the Investor will rely on the foregoing representation in effecting
purchases and sales of securities of the Company. All of the disclosure furnished by or on behalf
of the Company to the Investor regarding the Company, its business and the transactions
contemplated hereby, is true and correct and does not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. The press releases
disseminated by the Company during the twelve months preceding the date of this Agreement taken as
a whole do not contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made and when made, not misleading. The Company acknowledges
and agrees that the Investor neither makes nor has made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically set forth in Section
3 hereof.
(gg) Transactions With Affiliates. Except as set forth in the SEC Documents, none of
the officers or directors of the Company and, to the knowledge of the Company, none of the
employees of the Company is presently a party to any transaction with the Company or any Subsidiary
(other than for services as employees, officers and directors), including any contract, agreement
or other arrangement providing for the furnishing of services to or by, providing for rental of
real or personal property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement
for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock
option agreements under any stock option plan of the Company.
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5. COVENANTS.
(a) Filing of Form 8-K and Registration Statement. The Company agrees that it shall,
within the time required under the Exchange Act file a Report on Form 8-K disclosing this Agreement
and the transaction contemplated hereby. The Company shall also file within twenty (20) Business
Days from the date hereof a new registration statement (“Registration Statement”) covering
only the resale of the Purchase Shares and the Commitment Shares, in accordance with the terms of
the Registration Rights Agreement between the Company and the Investor, dated as of the date hereof
(“Registration Rights Agreement”). Any securities issuable under this Agreement that have
not been registered under the Securities Act shall bear the following restrictive legend (the
“Restrictive Legend”):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER’S COUNSEL, IN A
CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS.
(b) Blue Sky. The Company shall use its commercially reasonable efforts to take such
action, if any, as is reasonably necessary in order to obtain an exemption for or to qualify (x)
the initial issuance or sale of any Commitment Shares and any Purchase Shares to the Investor under
this Agreement and (y) any subsequent resale of any Commitment Shares and any Purchase Shares by
the Investor, in each case, under applicable securities or “Blue Sky” laws of the states of the
United States in such states as is reasonably requested by the Investor from time to time, and
shall provide evidence of any such action so taken to the Investor, and the Company shall continue
to use its commercially reasonable efforts to maintain in effect such exemption or qualification,
as applicable.
(c) Listing. The Company shall promptly secure the listing of all of the Purchase
Shares and Commitment Shares upon each national securities exchange and automated quotation system,
if any, upon which shares of Common Stock are then listed (subject to official notice of issuance)
and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of
all such securities from time to time issuable under the terms of the Transaction Documents. The
Company shall maintain the Common Stock’s authorization for quotation on the Principal Market.
The Company shall promptly, and in no event later than the following Business Day, provide to the
Investor copies of any notices it receives from the Principal Market regarding the continued
eligibility of the Common Stock for listing on such automated quotation system or securities
exchange. The Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section.
(d) Limitation on Short Sales and Hedging Transactions. The Investor agrees that
beginning on the date of this Agreement and ending on the date of termination of this Agreement as
provided in Section 11, the Investor and its agents, representatives and affiliates shall not in
any manner whatsoever enter into or effect, directly or indirectly, any (i) “short sale” (as such term is defined in
Section 242.200 of Regulation SHO of the Exchange Act) of the Common Stock or (ii) hedging
transaction, which establishes a net short position with respect to the Common Stock.
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(e) Issuance of Commitment Shares. Upon the execution of this Agreement, the Company
shall issue to the Investor as consideration for the Investor entering into this Agreement 40,247
shares of Common Stock (the “Initial Commitment Shares”) and shall deliver to the Transfer
Agent a letter in the form agreed with respect to the issuance of the Initial Commitment Shares.
In connection with each purchase of Purchase Shares hereunder, the Company agrees to issue to the
Investor a number of shares of Common Stock (the “Additional Commitment Shares” and
together with the Initial Commitment Shares, the “Commitment Shares”) equal to the product
of (x) 80,494 and (y) the Purchase Amount Fraction. The “Purchase Amount Fraction” shall
mean a fraction, the numerator of which is the Purchase Amount purchased by the Investor with
respect to such purchase of Purchase Shares and the denominator of which is Ten Million Dollars
($10,000,000). The Additional Commitment Shares shall be equitably adjusted for any
reorganization, recapitalization, non-cash dividend, stock split or other similar transaction. The
Initial Commitment Shares shall be issued in certificated form and shall bear the Restrictive
Legend. The Investor agrees that the Investor shall not pledge, transfer or sell the Commitment
Shares until the earlier of (a) 600 Business Days (30 Monthly Periods) from the date hereof or (b)
the date on which this Agreement has been terminated, provided, however, that such restrictions
shall not apply: (i) in connection with any transfers to or among affiliates (as defined in the
Exchange Act), (ii) if an Event of Default has occurred, including any failure by the Company to
timely issue Purchase Shares under this Agreement, or (iii) in the event that the Registration
Statement is not declared effective by the SEC within 180 days from the date hereof.
Notwithstanding the forgoing, the Investor may transfer Commitment Shares to a third party in order
to settle a sale made by the Investor where the Investor reasonably expects the Company to deliver
additional Purchase Shares to the Investor under this Agreement so long as the Investor maintains
ownership of the amount of Commitment Shares received up to that point by “replacing” such
Commitment Shares so transferred with new Purchase Shares when the new Purchase Shares are actually
issued by the Company to the Investor.
(f) Due Diligence. The Investor shall have the right, from time to time as the
Investor may reasonably deem appropriate, to perform reasonable due diligence on the Company during
normal business hours. The Company and its officers and employees shall provide information and
reasonably cooperate with the Investor in connection with any reasonable request by the Investor
related to the Investor’s due diligence of the Company. Each party hereto agrees not to disclose
any Confidential Information of the other party to any third party and shall not use the
Confidential Information for any purpose other than in connection with, or in furtherance of, the
transactions contemplated hereby. Each party hereto acknowledges that the Confidential Information
shall remain the property of the disclosing party and agrees that it shall take all reasonable
measures to protect the secrecy of any Confidential Information disclosed by the other party. The
Company confirms that neither it nor any other Person acting on its behalf shall provide the
Investor or its agents or counsel with any information that it believes constitutes or might
constitute material, non-public information which is not otherwise disclosed in the Registration
Statement or prospectus supplements thereto or otherwise publicly disclosed.
(g) Purchase Records. The Investor and the Company shall each maintain records showing
the remaining Available Amount at any given time and the dates and Purchase Amounts for each
purchase or shall use such other method, reasonably satisfactory to the Investor and the Company.
(h) Taxes. The Company shall pay any and all transfer, stamp or similar taxes that
may be payable with respect to the issuance and delivery of any shares of Common Stock to the
Investor made under this Agreement.
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(i) No Variable Rate Transactions. From the date hereof until the Maturity Date the
Company shall be prohibited from effecting or entering into an agreement to effect any issuance by
the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents for cash
consideration (or a combination of units thereof) involving a Variable Rate Transaction other than
in connection with an Exempt Issuance. “Variable Rate Transaction” means a transaction in
which the Company (i) issues or sells any debt or equity securities that are convertible into,
exchangeable or exercisable for, or include the right to receive additional shares of Common Stock
either (A) at a conversion price, exercise price or exchange rate or other price that is based upon
and/or varies with the trading prices of or quotations for the shares of Common Stock at any time
after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or
exchange price that is subject to being reset at some future date after the initial issuance of
such debt or equity security or upon the occurrence of specified or contingent events directly or
indirectly related to the business of the Company or the market for the Common Stock (including,
without limitation any “full ratchet” or “weighted average” anti-dilution provisions) or (ii)
enters into any agreement, including, but not limited to, an equity line of credit or at-the-market
offering, during the period commencing on the date of this Agreement and ending on the first
anniversary thereof, whereby the Company may sell securities at a future determined price.
“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees,
officers, directors or vendors of the Company pursuant to any stock or option plan duly adopted for
such purpose, by the Board of Directors or a majority of the members of a committee of directors
established for such purpose, (b) securities upon the exercise or exchange of or conversion of any
Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible
into shares of Common Stock issued and outstanding on the date of this Agreement, provided that
such securities have not been amended since the date of this Agreement to increase the number of
such securities or to decrease the exercise price, exchange price or conversion price of such
securities, and (c) securities issued pursuant to acquisitions or strategic transactions approved
by the Board of Directors or a majority of the members of a committee of directors established for
such purpose, which acquisitions or strategic transactions can have a Variable Rate Transaction
component, provided that any such issuance shall only be to a Person (or to the equity holders of a
Person) which is, itself or through its subsidiaries, an operating company or an asset in a
business synergistic with the business of the Company and shall provide to the Company additional
benefits in addition to the investment of funds, but shall not include a transaction in which the
Company is issuing securities primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities. For six (6) Monthly Periods beginning from the date
hereof, the Company agrees that, prior to entering into each and any definitive agreement for the
sale directly or indirectly of any debt, Common Stock or Common Stock Equivalents primarily for the
purpose of raising capital or to an entity whose primary business is investing in securities, to
which definitive agreement, or series of related definitive agreements taken together, there are
two (2) or more counterparties (not including the Company) (a “Subsequent Transaction”),
the Company shall provide reasonable, good faith notice to the Investor (“Offering Notice”)
consistent with the notice given to all other potential investors in such Subsequent Transaction,
including the relevant terms and conditions of such Subsequent Transaction as are delivered to all
other potential investors, and the Investor shall have the right to participate on equivalent terms
and conditions in up to 10% of such Subsequent Transaction by delivering notice to the Company by
such deadline (the “Participation Deadline”) as shall be determined by the underwriter or
the investment banker involved in the transaction, or in the absence of either an underwriter or an
investment banker, the Company, and applicable to all potential investors in such Subsequent
Transaction, which notice from Investor shall indicate Investor’s intention to participate in the
Subsequent Transaction and the amount of its participation. In the event that the Investor does
not provide notice prior to the Participation Deadline and the Company does not enter into such
Subsequent Transaction within five (5) Business Days from the Offering Notice, the Company shall
again be required to provide an Offering Notice as set forth herein. The Company shall deliver an
Offering Notice for each and any Subsequent Transaction and agrees that it shall not execute any
definitive documentation for any Subsequent Transaction whatsoever, unless it has first complied
with this Section 5(i). Notwithstanding anything to
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the contrary in this Section 5(i) and unless otherwise agreed to by Investor, the Company
shall either confirm in writing to Investor that the transaction with respect to the Subsequent
Transaction has been abandoned or shall publicly disclose its intention to enter into the
Subsequent Transaction, in either case in such a manner such that Investor will not be in
possession of any material, non-public information, by the fifth (5th) Business Day
following delivery of the Offering Notice. If by such fifth (5th) Business Day, no
public disclosure regarding a transaction with respect to the Subsequent Transaction has been made,
and no notice regarding the abandonment of such transaction has been received by Investor, such
transaction shall be deemed to have been abandoned and Investor shall no longer be in possession of
any material, non-public information with respect to the Company or any of its Subsidiaries. If the
Investor is in possession of any information that is reasonably deemed to be material, non-public
information concerning the Company or any of its Subsidiaries during such five (5) Business Day
period, the Investor agrees to keep such information confidential and shall not engage in
transactions with respect to the Company’s securities, and the Company agrees not to deliver any
Purchase Notice to the Investor, in each case during such five (5) Business Day (or shorter) period
that the Investor may be reasonably deemed to be in possession of material, non-public information
concerning the Company or any of its Subsidiaries. Should the Company decide to pursue such
transaction with respect to the Subsequent Transaction, the Company shall provide Investor with
another Offering Notice in accordance with, and subject to, the terms of this Section 5(i) and
Investor will again have the right of participation set forth in this Section 5(i).
6. TRANSFER AGENT INSTRUCTIONS.
On the Commencement Date, the Company shall cause any restrictive legend on the Initial
Commitment Shares to be removed and all of the Purchase Shares and Additional Commitment Shares, to
be issued under this Agreement shall be issued without any restrictive legend unless the Investor
expressly consents otherwise. The Company shall issue irrevocable instructions to the Transfer
Agent, and any subsequent transfer agent, to issue Additional Commitment Shares and Purchase Shares
in the name of the Investor in the form agreed to by the parties prior to the Commencement Date
(the “Irrevocable Transfer Agent Instructions”). The Company warrants to the Investor that
no instruction other than the Irrevocable Transfer Agent Instructions referred to in this
Section 6, will be given by the Company to the Transfer Agent with respect to the Purchase
Shares and the Additional Commitment Shares, and that the Commitment Shares and the Purchase Shares
shall otherwise be freely transferable on the books and records of the Company as and to the extent
provided in this Agreement.
7. CONDITIONS TO THE COMPANY’S RIGHT TO COMMENCE SALES OF SHARES OF COMMON STOCK.
The right of the Company hereunder to commence sales of the Purchase Shares is subject to the
satisfaction of each of the following conditions:
(a) The Investor shall have executed each of the Transaction Documents and delivered the same
to the Company;
(b) A registration statement covering the sale of all of the Commitment Shares and Purchase
Shares shall have been declared effective under the Securities Act by the SEC and no stop order
with respect to the registration statement shall be pending or threatened by the SEC; and
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(c) The representations and warranties of the Investor shall be true and correct in all
material respects (except to the extent that any of such representations and warranties is already
qualified as to materiality in Section 3 above, in which case, such representations and warranties shall be
true and correct without further qualification) as of the date when made and as of the Commencement
Date as though made at that time (except for representations and warranties that speak as of a
specific date) and the Investor shall have performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents to be performed, satisfied or
complied with by the Investor at or prior to the Commencement Date.
8. CONDITIONS TO THE INVESTOR’S OBLIGATION TO PURCHASE SHARES OF COMMON STOCK.
The obligation of the Investor to buy Purchase Shares under this Agreement is subject to the
satisfaction of each of the following conditions and once such conditions have been initially
satisfied, there shall not be any ongoing obligation to satisfy such conditions after the
Commencement has occurred:
(a) The Company shall have executed each of the Transaction Documents and delivered the same
to the Investor;
(b) The Company shall have issued to the Investor the Initial Commitment Shares without
restrictive legend;
(c) The Common Stock shall be authorized for quotation on the Principal Market, trading in the
Common Stock shall not have been within the last 365 days suspended by the SEC or the Principal
Market and the Purchase Shares and the Commitment Shares shall be approved for listing upon the
Principal Market;
(d) The Investor shall have received the opinions of the Company’s legal counsel dated as of
the Commencement Date substantially in the form agreed;
(e) The representations and warranties of the Company shall be true and correct in all
material respects (except to the extent that any of such representations and warranties is already
qualified as to materiality in Section 4 above, in which case, such representations and warranties
shall be true and correct without further qualification) as of the date when made and as of the
Commencement Date as though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Commencement Date. The Investor shall
have received a certificate, executed by the CEO, President or CFO of the Company, dated as of the
Commencement Date, to the foregoing effect in the form agreed;
(f) The Board of Directors of the Company shall have adopted resolutions in the form agreed,
which shall be in full force and effect without any amendment or supplement thereto as of the
Commencement Date;
(g) As of the Commencement Date, the Company shall have reserved out of its authorized and
unissued Common Stock, (A) solely for the purpose of effecting purchases of Purchase Shares
hereunder, 3,623,188 shares of Common Stock and (B) as Additional Commitment Shares in accordance
with Section 5(e) hereof, 80,494 shares of Common Stock;
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(h) The Irrevocable Transfer Agent Instructions, in form acceptable to the parties shall have
been delivered to and acknowledged in writing by the Company and the Company’s Transfer Agent;
(i) The Company shall have delivered to the Investor a certificate evidencing the
incorporation and good standing of the Company in the State of Delaware issued by the Secretary of
State of the State of Delaware as of a date within ten (10) Business Days of the Commencement Date;
(j) The Company shall have delivered to the Investor a certified copy of the Certificate of
Incorporation as certified by the Secretary of State of the State of Delaware within ten (10)
Business Days of the Commencement Date;
(k) The Company shall have delivered to the Investor a secretary’s certificate executed by the
Secretary of the Company, dated as of the Commencement Date, in the form agreed;
(l) A registration statement covering the sale of all of the Purchase Shares and the
Commitment Shares shall have been declared effective under the Securities Act by the SEC and no
stop order with respect to the registration statement shall be pending or threatened by the SEC.
The Company shall have prepared and delivered to the Investor a final and complete form of
prospectus, dated and current as of the Commencement Date, to be used by the Investor in connection
with any sales of the Commitment Shares and any Purchase Shares, and to be filed by the Company one
(1) Business Day after the Commencement Date. The Company shall have made all filings under all
applicable federal and state securities laws necessary to consummate the issuance of the Commitment
Shares and Purchase Shares pursuant to this Agreement in compliance with such laws;
(m) No Event of Default has occurred, or any event which, after notice and/or lapse of time,
would become an Event of Default has occurred;
(n) On or prior to the Commencement Date, the Company shall take all necessary action, if any,
and such actions as reasonably requested by the Investor, in order to render inapplicable any
control share acquisition, business combination, shareholder rights plan or poison pill (including
any distribution under a rights agreement) or other similar anti-takeover provision under the
Certificate of Incorporation or the laws of the state of its incorporation which is or could become
applicable to the Investor as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company’s issuance of the Securities and the Investor’s
ownership of the Securities; and
(o) The Company shall have provided the Investor with the information requested by the
Investor in connection with its due diligence requests made prior to, or in connection with, the
Commencement, in accordance with the terms of Section 5(f) hereof.
9. INDEMNIFICATION.
In consideration of the Investor’s execution and delivery of the Transaction Documents and
acquiring the Securities hereunder and in addition to all of the Company’s other obligations under
the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless the
Investor and all of its affiliates, shareholders, officers, directors, employees and direct or
indirect investors and any of the foregoing person’s agents or other representatives (including,
without limitation, those retained in connection with the transactions contemplated by this
Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to the action for
which indemnification hereunder is sought), and including reasonable attorneys’ fees and
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disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result
of, or arising out of, or relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of
the Company contained in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim brought or made against
such Indemnitee and arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, other than with respect to Indemnified Liabilities which directly
and primarily result from the gross negligence or willful misconduct of the Indemnitee. To the
extent that the foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law. Payment under this
indemnification shall be made within thirty (30) days from the date Investor makes written request
for it. A certificate containing reasonable detail as to the amount of such indemnification
submitted to the Company by Investor shall be conclusive evidence, absent manifest error, of the
amount due from the Company to Investor.
10. EVENTS OF DEFAULT.
An “Event of Default” shall be deemed to have occurred at any time as any of the
following events occurs:
(a) while any registration statement is required to be maintained effective pursuant to the
terms of the Registration Rights Agreement, the effectiveness of a registration statement
registering the Purchase Shares or Commitment Shares lapses for any reason (including, without
limitation, the issuance of a stop order) or is unavailable to the Investor for the resale of any
or all of the Purchase Shares or Commitment Shares, and such lapse or unavailability continues for
a period of ten (10) consecutive Business Days or for more than an aggregate of thirty (30)
Business Days in any 365-day period;
(b) the suspension from trading or failure of the Common Stock to be listed on the Principal
Market for a period of three (3) consecutive Business Days;
(c) the delisting of the Company’s Common Stock from the Principal Market, provided, however,
that the Common Stock is not immediately thereafter trading on the New York Stock Exchange, the
Nasdaq Global Market, the Nasdaq Global Select Market, the OTC Bulletin Board (or nationally
recognized successor thereto), or the NYSE Amex;
(d) the failure for any reason by the Transfer Agent to issue Purchase Shares or Additional
Commitment Shares to the Investor within five (5) Business Days after the applicable Purchase Date
which the Investor is entitled to receive;
(e) the Company breaches any representation, warranty, covenant or other term or condition
under any Transaction Document if such breach could have a Material Adverse Effect and except, in
the case of a breach of a covenant which is reasonably curable, only if such breach continues for a
period of at least five (5) Business Days;
(f) if any Person commences a proceeding against the Company pursuant to or within the meaning
of any Bankruptcy Law;
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(g) if the Company pursuant to or within the meaning of any Bankruptcy Law; (A) commences a
voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case,
(C) consents to the appointment of a Custodian of it or for all or substantially all of its
property, (D) makes a general assignment for the benefit of its creditors or is generally unable to
pay its debts as the same become due;
(h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that
(A) is for relief against the Company in an involuntary case, (B) appoints a Custodian of the
Company or for all or substantially all of its property, or (C) orders the liquidation of the
Company or any Subsidiary; or
(i) if at any time after the Commencement Date, the Exchange Cap is reached (to the extent
such Exchange Cap is applicable pursuant to Section 2(c) hereof).
In addition to any other rights and remedies under applicable law and this Agreement, including the
Investor termination rights under Section 11 hereof, so long as an Event of Default has occurred
and is continuing, or if any event which, after notice and/or lapse of time, would become an Event
of Default, has occurred and is continuing, the Investor shall not be permitted or obligated to
purchase any shares of Common Stock under this Agreement.
11. TERMINATION
This Agreement may be terminated only as follows:
(a) If pursuant to or within the meaning of any Bankruptcy Law, the Company commences a
voluntary case or any Person commences a proceeding against the Company, a Custodian is appointed
for the Company or for all or substantially all of its property, or the Company makes a general
assignment for the benefit of its creditors, (any of which would be an Event of Default as
described in Sections 10(f), 10(g) and 10(h) hereof) this Agreement shall automatically terminate
without any liability or payment to the Company without further action or notice by any Person. No
such termination of this Agreement under this Section 11(a) shall affect the Company’s or the
Investor’s obligations under this Agreement with respect to pending purchases and the Company and
the Investor shall complete their respective obligations with respect to any pending purchases
under this Agreement.
(b) In the event that the Commencement shall not have occurred, the Company shall have the
option to terminate this Agreement for any reason or for no reason without any liability whatsoever
of any party to any other party under this Agreement.
(c) In the event that the Commencement shall not have occurred on or before December 31, 2011,
due to the failure to satisfy the conditions set forth in Sections 7 and 8 above with respect to
the Commencement, the non-breaching party shall have the option to terminate this Agreement at the
close of business on such date or thereafter without liability of any party to any other party.
(d) At any time after the Commencement Date, the Company shall have the option to terminate
this Agreement for any reason or for no reason by delivering notice (a “Company Termination
Notice”) to the Investor electing to terminate this Agreement without any liability whatsoever
of any party to any other party under this Agreement. The Company Termination Notice shall not be
effective until one (1) Business Day after it has been received by the Investor. No such
termination of this Agreement under this Section 11(d) shall affect the Company’s or the Investor’s
obligations under this Agreement with respect to pending purchases and the Company and the Investor
shall complete their respective obligations with respect to any pending purchases under this
Agreement.
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(e) This Agreement shall automatically terminate on the date that the Company sells and the
Investor purchases the full Available Amount as provided herein, without any action or notice on
the part of any party and without any liability whatsoever of any party to any other party under
this Agreement.
(f) If by the Maturity Date for any reason or for no reason the full Available Amount under
this Agreement has not been purchased as provided for in Section 2 of this Agreement, this
Agreement shall automatically terminate on the Maturity Date, without any action or notice on the
part of any party and without any liability whatsoever of any party to any other party under this
Agreement.
Except as set forth in Sections 11(a) (in respect of an Event of Default under Sections 10(f),
10(g) and 10(h)), 11(c) and 11(f), any termination of this Agreement pursuant to this Section 11
shall be effected by written notice from the Company to the Investor, or the Investor to the
Company, as the case may be, setting forth the basis for the termination hereof. The
representations and warranties and covenants of the Company and the Investor contained in Sections
3, 4, 5, and 6 hereof, the indemnification provisions set forth in Section 9 hereof and the
agreements and covenants set forth in Sections 10, 11 and 12 shall survive the Commencement and any
termination of this Agreement. No termination of this Agreement shall affect the Company’s or the
Investor’s rights or obligations (i) under the Registration Rights Agreement which shall survive
any such termination or (ii) under this Agreement with respect to pending purchases and the Company
and the Investor shall complete their respective obligations with respect to any pending purchases
under this Agreement.
12. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. The corporate laws of the State of
Delaware shall govern all issues concerning the relative rights of the Company and its
shareholders. All other questions concerning the construction, validity, enforcement and
interpretation of this Agreement and the other Transaction Documents shall be governed by the
internal laws of the State of Illinois, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of Illinois or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of Illinois. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts
sitting in the City of Chicago, for the adjudication of any dispute hereunder or under the other
Transaction Documents or in connection herewith or therewith, or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue
of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under this Agreement and
agrees that such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature or signature delivered by e-mail in a “.pdf” format data file shall be considered due execution
and shall be binding upon the signatory thereto with the same force and effect as if the signature
were an original, not a facsimile signature or a signature in a “.pdf” format data file.
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(c) Headings. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity
or enforceability of any provision of this Agreement in any other jurisdiction.
(e) Entire Agreement. This Agreement supersedes all other prior oral or written
agreements between the Investor, the Company, their affiliates and persons acting on their behalf
with respect to the matters discussed herein, and this Agreement, the other Transaction Documents
and the instruments referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth herein or therein,
neither the Company nor the Investor makes any representation, warranty, covenant or undertaking
with respect to such matters. The Company acknowledges and agrees that is has not relied on, in
any manner whatsoever, any representations or statements, written or oral, other than as expressly
set forth in this Agreement.
(f) Notices. Any notices, consents or other communications required or permitted to
be given under the terms of this Agreement must be in writing and will be deemed to have been
delivered: (i) upon receipt when delivered personally; (ii) upon receipt when sent by facsimile or
email (provided confirmation of transmission is mechanically or electronically generated and kept
on file by the sending party); or (iii) one Business Day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers and email addresses for such communications shall be:
If to the Company:
Clean Diesel Technologies, Inc.
4567 Telephone Road, Suite 206
Ventura, CA 93003
Telephone:
Facsimile:
Attention:
Email:
With a copy to:
Reed Smith LLP
101 Second Street, Suite 1800
San Francisco, CA 94105
Telephone:
Facsimile:
Attention:
Email:
If to the Investor:
Lincoln Park Capital Fund, LLC
440 North Wells, Suite 620
Chicago, IL 60654
Telephone:
Facsimile:
Attention:
Email:
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With a copy to:
Greenberg Traurig, LLP
The MetLife Building
200 Park Avenue
New York, NY 10166
Telephone:
Facsimile:
Attention:
Email:
If to the Transfer Agent:
American Stock Transfer & Trust Co.
6201 15th Avenue, 2nd
Brooklyn, NY 11219
Telephone:
Facsimile:
Attention:
or at such other address and/or facsimile number and/or to the attention of such other person as
the recipient party has specified by written notice given to each other party three (3) Business
Days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent or other communication, (B) mechanically or electronically
generated by the sender’s facsimile machine containing the time, date, and recipient facsimile
number or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from a nationally recognized
overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns. The Company shall not assign
this Agreement or any rights or obligations hereunder without the prior written consent of the
Investor, including by merger or consolidation. The Investor may not assign its rights or
obligations under this Agreement.
(h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other person.
(i) Publicity. The Investor shall have the right to approve before issuance any press
release, SEC filing or any other public disclosure made by or on behalf of the Company whatsoever
with respect to, in any manner, the Investor, its purchases hereunder or any aspect of this
Agreement or the transactions contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of the Investor, to make any press release or other public
disclosure (including any filings with the SEC) with respect to such transactions as is required by
applicable law and regulations so long as the Company and its counsel consult with the Investor in
connection with any such press release or other public disclosure at least two (2) Business Days
prior to its release. The Investor must be provided with a copy thereof at least two (2) Business
Days prior to any release or use by the Company thereof. The Company agrees and acknowledges that its failure to fully comply with this provision
constitutes a material adverse effect on its ability to perform its obligations under this
Agreement.
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(j) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
(k) No Financial Advisor, Placement Agent, Broker or Finder. The Company represents
and warrants to the Investor that it has not engaged any financial advisor, placement agent, broker
or finder in connection with the transactions contemplated hereby. The Investor represents and
warrants to the Company that it has not engaged any financial advisor, placement agent, broker or
finder in connection with the transactions contemplated hereby. Each party shall be responsible
for the payment of any fees or commissions, if any, of any financial advisor, placement agent,
broker or finder engaged by it relating to or arising out of the transactions contemplated hereby.
(l) No Strict Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
(m) Remedies, Other Obligations, Breaches and Injunctive Relief. The remedies
provided in this Agreement shall be cumulative and in addition to all other remedies available to a
party under this Agreement, at law or in equity (including a decree of specific performance and/or
other injunctive relief), no remedy of a party contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein shall limit such
party’s right to pursue actual damages for any failure by the other party to comply with the terms
of this Agreement. Each party acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the other party and that the remedy at law for any such breach may be
inadequate. Each party therefore agrees that, in the event of any such breach or threatened
breach, the other party shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach, without the necessity of showing economic loss and without any
bond or other security being required.
(n) Failure or Indulgence Not Waiver. No failure or delay in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further exercise thereof
or of any other right, power or privilege.
* * * * *
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IN WITNESS WHEREOF, the Investor and the Company have caused this Purchase Agreement to be
duly executed as of the date first written above.
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THE COMPANY:
CLEAN DIESEL TECHNOLOGIES, INC.
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By: |
/s/ Nikhil A. Mehta
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Name: Nikhil A. Mehta |
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Title: Chief Financial Officer |
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INVESTOR:
LINCOLN PARK CAPITAL FUND, LLC
BY: LINCOLN PARK CAPITAL, LLC
BY: ROCKLEDGE CAPITAL CORPORATION
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By: |
/s/ Josh Scheinfeld
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Name: Josh Scheinfeld |
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Title: President |
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