-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QcIZTvFsR2ElQQknF79uu0dcY/lugo83dtGbsrrtDlStRzNyHJNHVlIEpntTakMD DSumrMcGczl3THHf0UvANA== 0001015402-04-003396.txt : 20040816 0001015402-04-003396.hdr.sgml : 20040816 20040813175637 ACCESSION NUMBER: 0001015402-04-003396 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLEAN DIESEL TECHNOLOGIES INC CENTRAL INDEX KEY: 0000949428 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INORGANIC CHEMICALS [2810] IRS NUMBER: 061393453 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27432 FILM NUMBER: 04975637 BUSINESS ADDRESS: STREET 1: 300 ATLANTIC ST STREET 2: STE 702 CITY: STAMFORD STATE: CT ZIP: 06901 BUSINESS PHONE: 2033277050 MAIL ADDRESS: STREET 1: 300 ATLANTIC ST STREET 2: STE 702 CITY: STAMFORD STATE: CT ZIP: 06901 10-Q 1 doc1.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2004 or [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission file number: 0-27432 ------- CLEAN DIESEL TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) Delaware 06-1393453 -------- ---------- (State of Incorporation) (I.R.S. Employer Identification No.) Clean Diesel Technologies, Inc. 300 Atlantic Street - Suite 702 Stamford, CT 06901-3522 (Address of principal executive offices) (Zip Code) (203) 327-7050 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes No X --- --- As of August 12, 2004, there were outstanding 15,705,368 shares of Common Stock, par value $0.05 per share, of the registrant. ========================================================================= 1 CLEAN DIESEL TECHNOLOGIES, INC. Form 10-Q for the Quarter Ended June 30, 2004 INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets as of June 30, 2004 (Unaudited), 3 and December 31, 2003 Statements of Operations for the three and Six Months 4 Ended June 30, 2004 and 2003 (Unaudited) Statements of Cash Flows for the Six Months 5 Ended June 30, 2004 and 2003 (Unaudited) Note to Financial Statements 6 Item 2 Management's Discussion and Analysis of 10 Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings 13 Item 2. Changes in Securities 13 Item 3. Defaults upon Senior Securities 13 Item 4 Submission of Matters to a Vote of Security Holders 13 Item 5 Other Information 13 Item 6 Exhibits and Reports on Form 8-K 13 SIGNATURES & CERTIFICATIONS 16 2
PART I. FINANCIAL INFORMATION Item 1. Financial Statements CLEAN DIESEL TECHNOLOGIES, INC. BALANCE SHEETS (in thousands) JUNE 30, December 31, ---------- -------------- 2004 2003 (Unaudited) - ------------------------------------------------------------ ---------- -------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 4,629 $ 6,515 Accounts receivable, net of allowance of $7 and $3 in 2004 and 2003, respectively 80 115 Inventories 375 320 Other current assets 93 73 ---------- -------------- TOTAL CURRENT ASSETS 5,177 7,023 Patents, net 298 274 Fixed assets, net of accumulated depreciation of $137 in 2004 and $123 in 2003, respectively 194 126 Other assets 20 18 ---------- -------------- TOTAL ASSETS $ 5,689 $ 7,441 ========== ============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Deferred compensation and pension benefits $ 441 $ 441 Accounts payable and accrued expenses 365 427 ---------- -------------- TOTAL CURRENT LIABILITIES 806 868 STOCKHOLDERS' EQUITY: Preferred Stock, par value $0.05 per share, authorized 100,000 and 80,000 respectively, no shares issued and outstanding -- -- Series A Convertible Preferred Stock, par value $0.05 per share, $500 per share liquidation preference, authorized 0 and 20,000 shares respectively, no shares issued -- -- and outstanding Common Stock, par value $0.05 per share, authorized 30,000,000 shares, issued and outstanding 15,679,337 shares 784 784 Additional paid-in capital 35,816 35,813 Accumulated deficit (31,717) (30,024) ---------- -------------- TOTAL STOCKHOLDERS' EQUITY 4,883 6,573 ---------- -------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,689 $ 7,441 ========== ==============
See notes to financial statements. 3
CLEAN DIESEL TECHNOLOGIES, INC. STATEMENTS OF OPERATIONS (Unaudited) (in thousands except per share data) Three Months Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003 -------------------- ----------- ---------- ---------- Revenue: Product revenue $ 81 $ 123 $ 257 $ 210 License and royalty revenue 12 160 30 169 -------------------- ----------- ---------- ---------- Total revenue 93 283 287 379 Costs and expenses: Cost of product sales 53 64 185 120 General and administrative 821 636 1,611 1,338 Research and development 90 170 170 419 Patent amortization and other expense. . 27 -- 39 -- -------------------- ----------- ---------- ---------- Loss from operations (898) (587) (1,718) (1,498) Interest income 13 2 25 6 -------------------- ----------- ---------- ---------- Net loss $ (885) $ (585) $ (1,693) $ (1,492) ==================== =========== ========== ========== Basic and diluted loss per common share $ (0.06) $ (0.05) $ (0.11) $ (0.12) ==================== =========== ========== ========== Weighted average number of common shares outstanding - basic and diluted 15,679 11,976 15,679 11,972 ==================== =========== ========== ==========
See notes to financial statements. 4
STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Six Months Ended June 30, 2004 2003 ----------- ---------- OPERATING ACTIVITIES Net loss $ (1,693) $ (1,492) Adjustments to reconcile net loss to cash used in operating activities: Depreciation and amortization 61 33 Changes in operating assets and liabilities: Accounts receivable 35 51 Inventories (55) 29 Other current assets and security deposit (22) (36) Accounts payable and accrued expenses (62) 49 ----------- ---------- Net cash used in operating activities (1,736) (1,366) ----------- ---------- INVESTING ACTIVITIES Patent costs (48) (137) Purchase of fixed assets (105) (28) ----------- ---------- Net cash used in investing activities (153) (165) ----------- ---------- FINANCING ACTIVITIES Proceeds from broker fee credit (2003 fundraising) 3 -- ----------- ---------- Net cash provided by financing activities 3 -- ----------- ---------- NET DECREASE IN CASH AND CASH EQUIVALENTS (1,886) (1,531) ----------- ---------- Cash and cash equivalents at beginning of period 6,515 2,083 ----------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,629 $ 552 =========== ==========
See notes to financial statements. 5 CLEAN DIESEL TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 (Unaudited) BASIS OF PRESENTATION The accompanying unaudited, condensed, consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. Operating results for the six-month period ended June 30, 2004, are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. For further information, refer to the Financial Statements and footnotes thereto included in the Company's Form 10-K for the year ended December 31, 2003. Clean Diesel Technologies, Inc. (the "Company") was incorporated in the State of Delaware on January 19, 1994, as a wholly owned subsidiary of Fuel-Tech N.V. ("Fuel Tech"). Effective December 12, 1995, Fuel Tech completed a Rights Offering of the Company's Common Stock that reduced its ownership in the Company to 27.6%. Fuel Tech currently holds an 11.6% interest in the Company as of June 30, 2004. The Company is a specialty chemical and energy technology company supplying fuel additives and proprietary systems that reduce harmful emissions from internal combustion engines while improving fuel economy. The Company's Platinum Plus FBC fuel additive is registered with the EPA for on-highway use. The Platinum Plus FBC in combination with a diesel oxidation catalyst or a catalyzed wire mesh filter have both been verified by the EPA for retrofit emission reduction. The success of the Company's technologies will depend upon the market acceptance of the technologies and governmental regulations including corresponding foreign and state agencies. SIGNIFICANT ACCOUNTING POLICIES INVENTORIES Inventories including raw materials and finished product are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. REVENUE RECOGNITION CDT recognizes revenue from the sale of Platinum Plus FBC, Purifier, CWMF and ARIS 2000 systems upon shipment. The Company sells to end user fleets, resellers, and additive distribution companies primarily in the U.S. One-time license revenue fees are recorded in the period the license agreement is completed and if there are no significant ongoing services required to be performed in the future. Royalty revenue is recognized when earned. In December 2002, Clean Diesel Technologies completed an additional exclusive license agreement with Mitsui for the mobile ARIS technology for Japan. Under terms of the agreement Mitsui agreed to pay CDT a $250,000 license fee and Mitsui committed to spend an additional $200,000 in developing, testing and demonstrating ARIS mobile prototypes. CDT recognized the $250,000 license revenue in the fourth quarter of 2002, as there were no significant ongoing services required to be performed by CDT at that time. The Company will also receive ongoing royalty payments on a per unit basis. 6 In April 2003, Clean Diesel Technologies completed a non-exclusive license agreement with Combustion Component Associates Inc. (CCA) of Monroe, Connecticut, for the mobile ARIS technology in the US. Under terms of the agreement CCA agreed to pay CDT a $150,000 license fee and committed to spend an additional $100,000 in developing, testing and demonstrating ARIS mobile prototypes. CDT will also receive ongoing royalty payments on a per unit basis. CDT recognized the $150,000 license revenue in the second quarter of 2003, as there were no significant ongoing services required to be performed by CDT at that time. RESEARCH AND DEVELOPMENT COSTS Costs relating to the research, development and testing of products including verification expenses for testing programs with the California Air Resources Board (CARB) and the Environmental Protection Agency (EPA), are charged to operations as they are incurred. These costs include test programs, salary and benefits, consultancy fees, materials and certain testing equipment. PATENT EXPENSE Effective January 1, 2002, CDT began capitalizing all direct incremental costs associated with initial patent filing costs and amortized such cost over the remaining life of each patent. Patents are reviewed regularly and any patents deemed not commercially feasible or cost effective are removed and the cumulative capitalized cost is written off at that time. Prior to this all patent related costs were expensed as incurred. The expiration of CDT's U.S. patents range from 2007 to 2021 while several of the initial international patents expire in 2005. STOCKHOLDERS' EQUITY Pursuant to a Regulation S exemption with respect to an offshore placement, Clean Diesel Technologies sold, effective December 1, 2003, 1,282,600 shares of its Common Stock. The price of the Common Stock was 1.70 sterling (GBP) per share (approximately $2.92 per share). The proceeds of the Common Stock issuance was $3.583 million (net of $170,000 in expenses). Pursuant to a Regulation S exemption with respect to an offshore placement, Clean Diesel Technologies sold, effective September 26, 2003, 2,395,597 shares of its Common Stock. The price of the Common Stock was $1.63 per share. The proceeds of the Common Stock issuance was $3.866 million (net of $39,000 in expenses). STOCK-BASED COMPENSATION Clean Diesel Technologies accounts for stock option grants in accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. Under CDT's current plan, options may be granted at not less than the fair market value on the date of grant and therefore no compensation expense is recognized for the stock options granted to employees. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, the Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company adopted the disclosure requirements of SFAS 123 on December 31, 2002. If compensation expense for CDT's plan had been determined based on the fair value at the grant dates for awards under its plan, consistent with the method described in SFAS No. 123, CDT's net loss and basic and diluted loss per common share would have been increased to the pro forma amounts indicated below for the six months ended June 30: 7
Second Quarter 6 months YTD 2004 2003 2004 2003 -------- --------- -------- --------- Net loss attributable to common stockholders as reported (885) (585) $(1,693) $ (1,492) Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (119) (133) (323) (251) -------- --------- -------- --------- Pro forma net loss (1,004) (718) $(2,016) $ (1,743) Net loss per share: Basic and diluted loss per common share-as reported $ (0.06) $ (0.05) $ (0.11) $ (0.12) Basic and diluted per common share-pro forma $ (0.06) $ (0.06) $ (0.13) $ (0.15)
In accordance with the provisions of SFAS No. 123, for purposes of the pro forma disclosures the estimated fair value of the options is amortized over the option vesting period. The application of the pro forma disclosures presented above are not representative of the effects SFAS No. 123 may have on operating results and earnings (loss) per share in future periods due to the timing of stock option grants and considering that options vest over a period of three years. The fair value of each option grant, for pro forma disclosure purposes, was estimated on the date of grant using the modified Black-Scholes option-pricing model with the following weighted-average assumptions for the 2004 grants, expected dividend yield 0%, risk free interest rate 5.05%, expected volatility 99.41% and expected life of the option 4 years. 35,000 options were granted in the first quarter of 2004 at an estimated value of $69,700. LOSS PER SHARE Employee stock options and stock purchase warrants were not included in the computation of diluted loss per share for 2004 or 2003, because the Company reported a loss for the period and the effect would be anti-dilutive. Total potential dilutive employee stock options and warrants outstanding at the end of the second quarter were 2,235,000 and 532,000 respectively. RELATED PARTY TRANSACTIONS The Company has a Management and Services Agreement with Fuel Tech. The agreement requires CDT to reimburse Fuel Tech for management, services and administrative expenses incurred on our behalf. The Company has agreed to pay Fuel Tech a fee equal to an additional 3% of the costs paid on behalf of administration (approximately $500 and $1,000 for the quarter and six months year to date. Currently, and for the last three years CDT has reimbursed Fuel Tech for the expenses associated with one Fuel Tech officer/director who also serves as an officer/director of CDT. The Company believes the charges under the Management and Services Agreement are reasonable and fair. The Management and Services Agreement may be cancelled by either party by notifying the other in writing of the cancellation on or before May 15 in any year. The Company had a deferred salary plan with its Chief Executive Officer in which he deferred $62,500 of his annual salary until the Company reaches $5 million in revenue. This agreement was terminated in March 2001 and the executive's salary was returned to full pay. At June 30, 2004 total obligations were $135,400 pertaining to this plan. This expense has been classified as a current liability on the balance sheet as of June 30, 2004. 8 The company has made annual pension payments or accruals pursuant to a deferred compensation plan. Until June 15, 2003, CDT made annual accruals in amounts of up to $50,000 for Chief Executive Officer for his post-retirement benefit upon his retirement or when the Company reaches $5 million in sales. At June 30, 2004, total obligations were $305,616 pertaining to this plan. This expense has been classified as a current liability on the balance sheet as of June 30, 2004. COMMITMENTS Clean Diesel Technologies has signed a lease at 300 Atlantic Street, Stamford, Connecticut for 3,925 square feet of administrative space. The 5 year lease through March 2009, will have annual cost of approximately $116,000, including rent, utilities and parking. Effective October 28, 1994, Fuel Tech granted two licenses to the Company for all patents and rights associated with its platinum fuel catalyst technology. Effective November 24, 1997, the licenses were canceled and Fuel Tech assigned to the Company all such patents and rights on terms substantially similar to the licenses. In exchange for the assignment, the Company will pay Fuel Tech a royalty of 2.5% of its annual gross revenue from sales of the platinum fuel catalysts commencing in 1998. The royalty obligation expires in 2008. The Company may terminate the royalty obligation to Fuel Tech by payment of $5,454,546 in 2004 and declining annually to $1,090,910 in 2008. The Company as assignee and owner will maintain the technology at its own expense. Minimum royalties were paid to Fuel Tech in 2003 and royalties payable to Fuel Tech at June 30, 2004 are $2,750. CONCENTRATION For the quarter and six months ended June 30, 2004, one customer accounted for 41% and 57% respectively of the Company's revenue. For the comparable 2003 periods, a different single customer accounted for 53% and 40% of the Company's revenue. SUBSEQUENT EVENTS In July 2004, the Company signed a four year lease for 2,750 square feet of warehouse space in Milford CT. Annual rent including utilities will be approximately $21,000. 9 CLEAN DIESEL TECHNOLOGIES, INC. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations FORWARD-LOOKING STATEMENTS Statements in this Form 10-Q that are not historical facts, so-called "forward-looking statements," are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including those detailed in the Company's filings with the Securities and Exchange Commission. See "Risk Factors of the Business" in Item 1, "Business," and also Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Form 10-K for the year ended December 31, 2003. RESULTS OF OPERATIONS 2004 VERSUS 2003 Product sales and cost of sales were $81,000 and $53,000 respectively for the second quarter of 2004 versus $123,000 and $64,000 for 2003. Platinum Plus fuel catalyst sales of $55,000 and $39,000 were recorded in the second quarter of 2004 and 2003, respectively. ARIS product sales of $26,000 and $53,000, primarily to Mitsui & Co., Ltd., were recorded in the second quarter of 2004 and 2003, respectively. Included in the 2004 and 2003 second quarter revenue is $12,000 and $160,000, respectively, of license and royalty income. The 2004 license and royalty income is from continuing ARIS system royalties from Mitsui & Co., Ltd and the 2003 license income is from CCA. For the six months ended June 30, product sales and cost of sales were $257,000 and $185,000 respectively for 2004 versus $210,000 and $120,000 for 2003. Platinum Plus fuel catalyst sales of $111,000 and $80,000 were recorded in the first half of 2004 and 2003, respectively. ARIS product sales of $134,000 and $75,000, were recorded year-to-date in 2004 and 2003 respectively. The remainder of product revenue in 2004 consists of CDT Purifier Systems. Included in first six months of total revenue is $30,000 and $169,000 of license and royalty income for 2004 and 2003, respectively. General and administrative expenses increased $185,000 to $821,000 in the second quarter 2004 versus $636,000 in the same period of 2003. For the first 6 months of 2004, general and administrative expenses increased $273,000 to $1,611,000 from $1,338,000 in the same 2003 period. The year-to-date 2004 increase in general and administrative expenses is related to increases in marketing and sales activities primarily personnel costs, in both the US and Europe and higher professional fees including financial advisory services. Research and development expenses decreased $80,000 to $90,000 in the second quarter 2004 versus $170,000 in the comparable 2003 period. For the six months to date research and development expenses have decreased $249,000 to $170,000 from $419,000 in 2003. The decrease is attributable to the verification and certification program expenses for the Platinum Plus FBC in 2003 not being incurred in 2004 Patent amortization and other costs were $27,000 in the second quarter of 2004 versus $0 in the comparable 2003 period. The year-to-date increase in 2004 is $39,000. The increase is related to the change in capitalization policy and the write-off of several patents in 2004. Second quarter interest income increased $11,000 in 2004 to $13,000 versus $2,000 in the comparable period in 2003. Year-to-date interest has increased $19,000 to $25,000 versus $6,000 for the 2003 period. This was a result of an increase in the amount of cash and cash equivalents on hand in 2004. 10 LIQUIDITY AND SOURCES OF CAPITAL Prior to 2000, the Company was primarily engaged in research and development and has incurred losses since inception aggregating $26,965,000 (excluding the effect of the non-cash preferred stock dividends). The Company expects to incur losses through the foreseeable future as it further pursues its commercialization efforts. Although the Company started selling limited quantities of Platinum Plus additive and the verified Purifier system and generating some ARIS licensing fees and royalties, operating revenue to date has been insufficient to cover operating expenses, and the Company continues to be dependent upon proceeds from fund raising to finance its working capital requirements. For the six months ended June 30, 2004 and 2003, the Company used cash of $1,736,000 and $1,366,000 respectively, in operating activities. At June 30, 2004 and December 31, 2003, the Company had cash and cash equivalents of $4,629,000 and $6,515,000, respectively. The decrease in cash and cash equivalents in 2004 was the result of the building of inventories, capital expenditures for equipment and new administrative offices and on-going marketing and operation costs. The Company anticipates incurring additional losses through at least 2004 as it further pursues its commercialization efforts. In December 2003, Clean Diesel Technologies received $3.583 million (net of $170,000 in expenses) through a private placement of 1,282,600 shares of its Common Stock. The price of the Common Stock was 1.70 GBP per share (approximately $2.92 per share). The proceeds of the Common Stock issuance are being used for the general corporate purposes of Clean Diesel Technologies. In September 2003, Clean Diesel Technologies received $3.866 million (net of $39,000 in expenses) through a private placement of 2,395,597 shares of its Common Stock. In conjunction with the private placement, 230,240 ten year warrants with an exercise price of $1.63 per share were issued. At the present time, the Company cannot estimate when, or if, its operations will generate positive cash flows from operations. The Company does not have any credit facilities available with financial institutions or other third parties if the Company cannot generate cash flow from operations, CDT will be dependent upon external sources of best-efforts financing, of which there are no firm commitments or arrangements. Based on the current operating plan, management believes that the cash balance as of June 30, 2004 of $4.6 million will be sufficient to meet the cash needs into the second half of 2005. In the future, unless the operating revenues are sufficient to meet operating expenses, the Company may need to access capital markets to fund operations by incurring indebtedness or issuing equity securities. The Company can provide no assurance that it will be successful in any future financing effort to obtain the necessary working capital to support operations. If Management is unable to obtain the necessary financing from external sources, the Company may need to manage any cash shortfalls by taking measures which may include deferring or reducing the scope of commercialization efforts, reducing costs and overhead expenses, or otherwise curtailing operations, or obtaining funds by a disposition of assets or through arrangements with others that may require CDT to relinquish rights to certain of our technologies, or to license the rights to such technologies on terms that are less favorable to than might otherwise be available. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In the opinion of management, with the exception of exposure to fluctuations in the cost of platinum, the Company is not subject to any significant market risk exposure. The Company generally receives all income in United States dollars. The Company typically makes several payments monthly in various foreign currencies for patent expenses, product tests and registration, local marketing and promotion, consultants and one employee. 11 ITEM 4. CONTROLS AND PROCEDURES The Company maintains disclosure controls and procedures and internal controls designed to ensure that information required to be disclosed in the Company's filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. The Company's management, with the participation of its principal executive and financial officers, has evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this Quarterly Report on form 10Q. The Company's principal executive and financial officers have concluded, based on such evaluation, that such disclosure controls and procedures were effective for the purpose for which they were designed as of the end of such period. There was no change in the Company's internal control over financial reporting that was identified in connection with such evaluation that occurred during the period covered by this Quarterly Report on form 10Q that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders At the June 10, 2004 Annual Meeting of CDT, the holders of 10,564,497 shares of CDT's common stock were present in person or by proxy. This attendance was, according to the records of CDT's Transfer Agent, 67.4% of the total of 15,666,336 issued and outstanding shares as of the record date of April 5, 2004. At the meeting: (i) The proposal to elect the five nominees as directors was approved by a vote with respect to each individual nominee, as follows:
Shares Shares Name For Withheld - ---------------------- --------- -------- John A. de Havilland 9,250,644 2,000 Derek R. Gray 9,250,644 2,000 Charles W. Grinnell 9,218,944 33,700 Jeremy D. Peter-Hoblyn 9,218,944 33,700 James M. Valentine 9,224,444 28,200
(ii) The proposal to approve the appointment of Eisner LLP as independent auditors of CDT for the year 2004 was approved by a vote of shares 9,251,766 for, 700 against and 178 abstaining. Item 5. Other Information The Company has been advised by Mr. Jeremy Peter-Hoblyn, CEO, that he intends to retire in September 2004 or shortly thereafter when his successor is identified. The Nominating Committee of the Board of Directors has identified a candidate and is in the final stages of discussion with an announcement expected shortly. Mr. Farad Azima, formerly CEO and subsequently Chairman of UK based Verity Group plc which developed into technology licensing company NXT plc, was retained to provide the Company business development and advisory services. Mr. Azima is also assisting the CDT Nominating Committee in identifying potential CEO candidates. Effective June 18, 2004, the Company filed a certificate of elimination to terminate the authorization of the Company's Series A preferred Stock. Item 6. Exhibits and Reports on Form 8-K a. Exhibits Confidential treatment requested for Exhibits 10.1 and 10.2 10.1 License Agreement of July 13, 2001 between Registrant and Mitsui Co., Ltd as amended by Amendment No. 1 of December 18, 2002. 13 10.2 License Agreement of March 31, 2003 between Registrant and Combustion Components Associates, Inc. 10.3 Lease of January 29, 2004 of Premises at 300 Atlantic Street, Stamford Connecticut, USA, between Registrant as Tenant and CT-Stamford Atlantic Forum, LLC as Landlord. 10.4 Amendment No. 1 of September 30, 2002 to Employment Agreement of December 2, 1996 between Registrant and J. D. Peter-Hoblyn. 10.5 Employment Agreement of March 1, 2001 between Registrant and D.W. Whitwell. 10.6 Employment Agreement of April 1, 2002 between Registrant and G.R. Reid. 10.7 Consultancy Agreement of May 25, 2004 as amended by Agreement of June 18, 2004 between Registrant and F. Azima. 31.1 Section 302 Certification of Chief Executive Officer. 31.2 Section 302 Certification of Chief Financial Officer. 32.0 Section 906 Certifications of Chief Executive and Chief Financial Officers. b. Reports on Form 8-K None 14 CLEAN DIESEL TECHNOLOGIES, INC. SIGNATURES & CERTIFICATIONS Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: August 13, 2004 By: /s/Jeremy D. Peter-Hoblyn ------------------------- Jeremy D. Peter-Hoblyn Director and Chief Executive Officer Date: August 13, 2004 By: /s/David W. Whitwell ------------------------- David W. Whitwell Chief Financial Officer, Vice President and Treasurer 15 EX-10.1 2 doc2.txt EXHIBIT 10.1 Exhibit 10.1 LICENSE AGREEMENT(1) -------------------- THIS AGREEMENT made and entered into of this 13th day of July, 2001, by and between Clean Diesel Technologies, Inc., a corporation organized and existing under the laws of the State of Delaware, having its principal office at 300 Atlantic Street, Stanford, Connecticut, U.S.A. (hereinafter referred to as "Licensor") and Mitsui & Co., Ltd., a corporation organized and existing under the laws of Japan, having its principal office at 2-1, Ohtemachi 1-chome, Chiyoda-ku, Tokyo, Japan (hereinafter referred to as "Licensee"), - ------------ 1. Portions of this exhibit denoted with three asterisks (***) have been omitted pursuant to a request for confidential treatment. WITNESSETH: ----------- WHEREAS, Licensor has developed and owns a certain patented system for urea injection with the trademark "ARIS 2000" which reduces oxides of nitrogen from the emissions of diesel engines (hereinafter referred to as the "System") and has the exclusive right to grant a license with respect to the System; WHEREAS, Licensee desires to manufacture and sell the Products as defined below for the diesel engine market, excepting the mobile engine market, in Japan, and WHEREAS, Licensee desires to obtain, and Licensor is willing to grant, an exclusive license to manufacture, sub-license, use, sell and lease the Products within such market in Japan. NOW, THEREFORE, the parties hereto agree as follows: Article I Definitions ----------- 1.01 Definitions ----------- As used in this Agreement, the following terms shall have the following respective meanings: (a) "Dollar" or the symbol "$" shall mean the currency of the United States of America. (b) "Effective Date" shall mean the date first written above. (c) "Federal Rate" shall mean the monthly rate of interest as published by the Internal Revenue Service of USA pursuant to Internal Revenue Code Section 7520. (d) "Field" shall mean the diesel engine market, excepting the mobile engine market, in Japan. (e) "Improvement" shall mean any new invention or change in the System made or developed by Licensor, Licensee, or its sublicensees whether patentable or not, provided that the System, after such invention or change, is substantially similar to the System. (f) "Intellectual Property" shall mean: (i) All Patents, Improvements and patent applications and rights with respect to the System; and (ii) All trademarks with respect to the System as provided in Schedule A. (g) "Net Selling Price" shall mean, in relation to royalties under Section 5.01, the gross selling price of the Products as billed by Licensee or its sublicensees, less the following items to the extent that they are included in the gross selling price of the Products; (i) sales, excise and added value taxes; (ii) customs duties; (iii) packaging, transportation, insurance and warehouse charges; (iv) trade and quantity discounts; and (v) credits for returned Products. (h) "Patents" shall mean all Japanese patents or patent applications with respect to the System as provided in Schedule A. (i) "Products" shall mean the manufactured device of the System including injector, sensors, pump, valves, controls and software but excluding tankage, catalyst, engineering and installation. - (j) "Proprietary Information" shall mean all confidential information or other material including trade secrets, business and technical information and data regardless of its form, which is designated by the party disclosing such information as confidential or proprietary. Provided, however, Proprietary Information shall not include such information if such information; (i) was known to party receiving the information (hereinafter referred to as the "receiving party") at the time of disclosure; (ii) is now or becomes hereafter available to the public through no fault of the receiving party; (iii) may be hereafter acquired by the receiving party from a third party without any obligation of secrecy; (iv) is ndependently developed by the receiving party without making use of any confidential information as shown by documentation. (k) "Technical Information" shall include Intellectual Property and all data, designs, software and information in any form with respect to the System. (l) "Term" shall mean the period from the Effective Date to the latest date of expiry of the Patents unless sooner terminated pursuant to this Agreement. Article II Grant of License ---------------- 2.01 Grant of License ------------------ (a) Licensor hereby grants Licensee an exclusive license of the System and Technical Information to manufacture, sub-license, use, sell and lease the Products within the Field for the Term. (b) Licensee and its sublicensees may not solicit or procure sales from locations outside of Japan and Licensee and its sublicensees shall not knowingly sell to any third party who intends directly or indirectly to export Products out of Japan unless such third party is a licensee or permitted sublicensee of Licensor in the territory out of Japan to which such Products are to be exported. 2.02 Option for Mobile License ---------------------------- (a) Subject to execution and delivery of this License by both parties and payment by Licensee to Licensor on the Effective Date of the additional sum of $***, Licensee shall have an option until *** to enter into a License from Licensor for the additional field of use of mobile diesel engines in Japan. "Mobile" shall mean diesel engines mounted on vehicles, including on-road, off-road, marine and railroad uses. Licensee shall exercise this option by notice to Licensor on or before *** stating its intention to exercise the option. The terms and conditions of the mobile license shall provide for a mandatory up-front license fee to Licensor in the amount of $*** and the payment of unit royalties to be mutually agreed. The License shall also contain other terms and conditions substantially similar to those of this License. The License shall be executed and delivered within *** days of Licensee's notice of exercise or this option shall expire. 2.03 Sub-License ----------- Subject to payment by Licensee to Lincensor of the sub-license condition provided in Schedule B, Licensee may grant a non-exclusive sublicense of the System to any third party to the extent of the license granted hereunder in Japan, provided that Licensee shall ensure that the sublicense agreement to be entered into between Licensee and sublicensee and shall require sublicensee to report sales of the Product, and to be subject to audit by Licensee, under the same terms ad provided in this Agreement and to pay to Licensee the same royalties and fees otherwise payable hereunder by Licensee to Licensor as provided in Schedule B. Licensee shall notify the Licensor of such sublicensing within ten (10) days of entering into a sublicense agreement. Sublicensees may not sub-license. Sublicensees may not assign their sublicensees or any rights thereunder. 2.04 Non-Exclusivity --------------- 2.04 Licensee is obligated to fulfill target royalty amounts of $***, $*** and $*** in, respectively, the years ending on the ***, ***, and *** anniversaries of this License and Licensor shall have the right to render the License non-exclusive when the royalty amount in each such year does not reach to the target royalty amount. However, Licensor shall first grant the Licensee the opportunity to make voluntary payments in order to maintain exclusivity. Licensor and Licensee will review the target amount for each year within *** days after the *** anniversary of this agreement and may make adjustments subject to mutual agreement. Article III Transfer of Technical Information and Technical Assistance ---------------------------------------------------------- 3.01 Transfer -------- Within ninety (90) days of the Effective Date, Licensor shall, at its own cost and expense, furnish Licensee with Technical Information by providing copies of Technical Information by mail and other methods agreed upon by the parties. Licensor shall notify Licensee writing or e-mail when such transfer has been made, and Licensee shall confirm such transfer by written notice upon receipt of Technical Information. 3.02 Technical Assistance --------------------- (a) Upon reasonable request of Licensee, Licensor shall send to Licensee qualified personnel of Licensor in order to render technical assistance and services to Licensee for a period to be agreed upon by the parties hereto. All expenses with respect to the dispatch of such personnel, including but not limited to traveling expenses and reasonable living expenses but excluding salary and head office overhead expenses, shall be paid by Licensee. Such assistance shall not involve more than two visits per year or involve more than 10 Mandays per year only for the first two years of the Agreement and only if other methods of assistance are not practical. (b) Upon request of Licensee, Licensor shall permit a reasonable number of employees of the Licensee and/or its sublicensees to visit the facilities of Licensor where products with respect to the System are manufactured, in order to observe the procedures of Licensor. All expenses with respect to such visits shall be paid by Licensee. 3.03 Marketing Assistance --------------------- Licensor and Licensee shall discuss methods of marketing the System and/or the Products within Japan, and Licensor shall inform Licensee of potential customers of the Products in Japan. Article IV Royalties --------- 4.01 Royalties --------- (a) In consideration of all licenses and other rights granted by Licensor hereunder, Licensee shall pay to Licensor the following fees: (1) an upfront license fee of ($495,000) four hundred and ninety five thousand dollars including $***,which has paid to Licensor under the Letter of Intent on 5th June, 2000, shall be regarded a part of upfront license fee. The reminder, $***, shall be paid as follows; $*** shall be paid on the Effective date and $*** shall be paid *** days after the Effective Date; and (2) Running royalties, exhibited in Schedule B, shall be paid by Licensee and sublicensee to Licensor *** within *** days after each *** of Licensee's fiscal year. (b) Licensor and Licensee shall review Running Royalties set out in Schedule B two years from the Effective Date and every year on said date thereafter in order to adjust such amounts based on current market conditions subject to mutual agreement. Any increase or decrease of the Running Royalty shall not cause any adjustment of the minimum royalty payments as stipulated in 2.04 above. (c) In the event Licensee fails to pay Licensor the royalty provided in this Section 4.01(a)(2) above, Licensor may terminate this Agreement or render the license granted to Licensee hereunder as non-exclusive after giving Licensee written notice of such measure. Provided, however, that when Licensee disburses to Licensor the balance of royalty due within *** days of such notice, Licensee shall maintain the exclusive license and other rights granted to Licensee herein. (d) All payments set forth in this Section 4.01 shall be carried out by wire transfer to such bank account of Licensor as designated by Licensor. 4.02 No Withholding --------------- Licensee shall pay the full amount of Royalties due hereunder regardless of a withholding tax, if any, which may from time to time be levied, assessed or required to be withheld and paid for the account of Licensor and Licensee shall itself bear the cost of such withholding tax. Licensee shall at the time of royalty payments to Licensor provide to Licensor appropriate documentary evidence of the payment by it of such withholding tax, if any, applicable to such royalty payment; provided, however, royalties due from Licensee shall be increased by the amount of any withholding tax lawfully levied by the Japanese tax authorities on any amount due to Licensor above those provided in Schedule B. When Licensee deducts and pays any such tax, it shall without delay send to Licensor the official certificate of such tax payment. 4.03 Delinquency Charges -------------------- In event that payment of royalties as defined in Section 4.01 above is not made within thirty (30) days of the due date of payment, Licensee shall pay Licensor delinquency charges at the Federal Rate until such payment is made in full. 4.04 Non-Payment and Termination ----------------------------- *** days after notice to Licensee of Licensee's failure to pay Licensor amounts due hereunder, Licensor may by notice to Licensee terminate this License, whereupon this License shall be of no further force and effect except for the obligation of Licensee to pay to Licensor such amounts as are due to Licensor through such termination. Article V Accounting and Reports ---------------------- 5.01 Books and Records ------------------- Licensee shall, at its principal place of business as defined above, keep full and accurate records of the Products sold hereunder and other sufficient details in accordance with generally accepted accounting principles in Japan to enable the calculation of the amount of royalties payable to Licensor in accordance with generally accepted accounting principles. Licensor shall, upon notice, permit the said records to be examined from time to time by an independent accountant or accounting firm appointed by Licensor during reasonable business hours with prior written notice to the extent necessary to calculate the amount of royalties to be paid to Licensor, provided that such examination shall be made at the expense of the Licensor. 5.02 Reports ------- Each quarterly payment of royalties made by Licensee to Licensor as provided in Section 4.01 shall be accompanied by a written report containing information of each sale made by Licensee or sublicensee during such quarter, including names of customers, date of sales, invoice numbers, quantity of the Products, sales prices. 5.03 Examination ----------- Licensee shall, upon reasonable notice, make the books and records as referred to in clause 4.01 above available for inspection by duly authorized representatives of Licensor. Moreover, Licensor may, not more than once in twelve months, have such books and records audited by a certified independent public accountant or accounting firm selected by Licensor and approved in writing by Licensee which approval shall not unreasonably be withheld, at the expense of Licensor. Nothing herein shall be interpreted to mean that Licensor shall have access to or the right to examine other business records of Licensee. Licensor shall treat any information obtained pursuant to this clause as confidential and its accountant or accounting firm shall undertake to do the same. Article VI Improvement ----------- 6.01 Title and License of Improvement ------------------------------------ The party hereto whose employees or agents have invented or developed such Improvement shall possess all rights including but not limited to applying for patents, trade marks, granting licenses and other titles related to such Improvement. Where Licensor shall have developed and shall be the owner of an Improvement, Licensee shall have a royalty-free right and license in Japan to make, use and sell such Improvement according to the terms and conditions of this License. Where Licensee shall have developed and be the owner of an Improvement, Licensor shall have a perpetual, royalty-free, world-wide right and license to such Improvement. 6.02 Improvement With Other Party ------------------------------- An Improvement, if any, developed jointly or developed individually and without the participation of the other party but with respect to the Patent shall be owned by Licensor but Licensee shall have a royalty free right and license to make use and sell such Improvement in Japan according to the terms and conditions of this License. 6.03 No License Implied to Other Technology ------------------------------------------- The title and License to Improvements provided in Section 6.02 above to the parties shall in itself imply no right or license whatsoever in any party to any other Technology after termination of the Term if required to practice an Improvement in a particular territory even though the lack of such right or license may render the Improvement valueless in the hands of a party. Article VII Representations and Warranties ------------------------------ 7.01 General Representations and Warranties ----------------------------------------- Each party represents and warrants to the other that it is a corporation established and existing under the laws of incorporation and possesses corporate power and authority to execute, deliver and perform this Agreement. 7.02 Representations With Respect to Intellectual Property ------------------------------------------------------ Licensor hereby makes the following representations, warranties and covenants, and acknowledges that Licensee has relied thereon upon entering this Agreement that: (a) Licensor is the sole and exclusive owner of the Patents excepting as identified in Schedule A and Technical Information, and possesses the exclusive right to grant the license granted hereunder and has executed no agreement or taken any action in conflict herewith or in derogation of the license and other rights granted to Licensee hereunder; (b) to the best of Licensor's knowledge and belief, the System and/or Technical Information does not infringe any patents or rights of any third party; (c) to the best of Licensor's knowledge and belief, the patent ------ applications are valid under the relative laws of Japan, and there are ------------ no actions, suits or proceedings pending or threatened against Licensor with respect to the Patents or patent applications before any ---------------------- court or in any jurisdiction; and Licensor has and shall not enter into any agreement or commitment which prevents Licensor from entering into and performing any obligations under this Agreement. ARTICLE VIII Intellectual Property --------------------- 8.01 Maintenance Expense -------------------- Licensor shall be responsible for all fees, annuities and legal expense (excepting legal expense which is or may be associated with any litigation, including but not limited to, juridical, arbitral, administrative or investigation) required to obtain and maintain Japanese patent applications, patents and trademarks as set forth in Schedule A. 8.02 Registry of License --------------------- Licensee may, at its own expense, register exclusive licenses relevant to the Patents in Japan and Licensor shall cooperate with Licensee in such registration. 8.03 Patent Applications -------------------- In the event that either party with respect to Improvements as to which it shall have the right to acquire title, seeks patent protection for such Improvements, it will do so at its own expense (including any annuities or other maintenance fees) and it will receive the cooperation of the other party in the prosecution of such patent applications. When granted, the applicant shall have title to such patent, subject to the rights, if any, of the other party hereunder. 8.04 Trademarks ---------- Licensor does not intend to obtain any trademark with respect to the System other than the trademark set forth in Schedule A. If Licensee desires to obtain a mark or marks with respect to its products in association with the Technology it shall consult Licensor prior to application at the expense of Licensee. When granted such Trademark, Licensee shall possess all rights related to said mark. 8.05 Pending Applications --------------------- The parties shall take no action to jeopardize ongoing prosecutions or the final issuance of pending applications of the Intellectual Property of the other party. 8.06 Infringement ------------ (a) In the event that either party becomes aware of any infringement within Japan of the Products, such party shall immediately inform the other party of the fact and discuss measures to remove such infringement. Licensor shall cooperate with Licensee in removing such infringement. (b) All expenses incurred and all damages awarded or otherwise payable to such third party shall be borne equally by the parties hereto but in no event shall Licensor be liable for expenses or damages in excess in any year of ***% of running royalties paid to Licensor in such year under this Agreement. Article IX TERM AND TERMINATION 9.01 Term ---- This Agreement shall become effective on the date first above written and continue in full force and be binding on each party until the latest date of expiry of the Patents. 9.02 Termination ----------- (a) Licensee may, at any time after the *** anniversary from the Effective Date and at its sole discretion, terminate this Agreement by giving Licensor *** days prior written notice, provided that Licensee shall have made all payments due before such termination date with respect to the license herein. (b) In the event that Licensee fails to pay to Licensor any payment with respect to the license hereunder within *** days after written notice is made by Licensor to Licensee of such failure of payment, Licensor may terminate this Agreement by giving Licensor *** days prior written notice. (c) In the event that either party hereto files a petition in bankruptcy or a petition in bankruptcy is filed against it, becomes insolvent or bankrupt, makes an arrangement for the benefit of creditors, or goes into liquidation, the other party may terminate this Agreement by giving such party a written notice. 9.03 Licensees right After Termination ---------------------------------- After expiration or termination of this Agreement, all licenses and other rights granted to Licensee hereunder shall cease to exist; provided, however, that Licensee shall retain the license and rights hereunder to the extent of selling or otherwise disposing of any inventory Products and to fulfill all contracts with respect to the System and/or Products. In this case, Licensor and Licensee shall discuss and determine the royalty payments to be made by Licnesee with respect to such remaining rights, provided that the royalty amount provided in Section 4.01 shall be the upper limit. Article X Confidentiality --------------- 10.01 Nondisclosure Obligations -------------------------- (a) The parties understand that the Proprietary Information of the other party constitutes valuable property rights. Therefore, the party receiving Proprietary Information agrees not to provide or otherwise make available any portion of the Proprietary Information in any form to anyone other than employees and outside consultants solely for purposes of carrying out the rights, duties and obligations of such party pursuant to this Agreement. Each party agrees to notify its employees permitted access to the Proprietary Information, of the obligations under this Agreement. The parties shall also cause such employees thereto to execute written nondisclosure and confidentiality agreements with the receiving party, prohibiting such employees from further disclosure of the other party's Proprietary Information or use of such Proprietary Information for the benefit of any person other than Licensor or Licensee. (b) Each party shall safeguard appropriately all documents, items of work in process and work products that embody Proprietary Information of the other party. A party having knowledge of loss or theft of the other party's Intellectual Property or Proprietary Information shall immediately notify the other party thereof. 10.02 Survival of Confidentiality Obligations ------------------------------------------ The non-disclosure obligations set forth in clause 10.01 above shall continue for *** years after the termination of this Agreement. 10.03 Exceptions to Non-Disclosure Obligations ------------------------------------------- The confidentiality and non-disclosure obligations set forth in clause 10.01 above shall not apply to such information if: (a) any such Proprietary Information is in public knowledge at the time of disclosure (b) any such Proprietary Information that subsequently becomes public through no fault of the receiving party; or (c) any such Proprietary Information that is subsequently disclosed to the receiving party by third parties that have no confidential obligations. With respect to public use, however, the parties understand and agree that Proprietary Information of a party shall not be deemed to be in public use or publicly available merely because it may be derived from combinations of public information. Article XI Government Approvals -------------------- 11.01 Approvals --------- Licensee shall, at its own expense, apply for all government approvals which may be required for the execution of the transactions contemplated in this Agreement, and shall furnish written Licensor with evidence of such approvals. 11.02 Export Controls ---------------- Licensee acknowledges that the further transfer of the Technical Information or the sale of Products by Licensor to persons outside of the United States and the further transfer by Licensee of the Technical Information may from time to time be governed by specific regulations related to the Technical Information or Products and Licensee agrees to comply with such specific regulations and at its own expense and from time to time to obtain such consents, if any, as may be required to so comply. Article XII Miscellaneous ------------- 12.01 Non-Assignment -------------- Neither this Agreement nor any right or obligation hereunder may be assigned or transferred to any third party by either party in whole or in part, without the prior written consent of the other party. 12.02 No Joint Venture ----------------- This Agreement shall not imply any establishment of partnership or joint venture between the parties. Neither party hereto shall act or attempt to act or represent itself, directly or by implication, as having the power to bind the other party or in any manner to create any obligation on behalf of the other party. 12.03 Notices ------- Any notice or other communication shall be given or sent hereunder in writing and delivered personally, sent by prepaid registered post, fax, or e-mail (with electronic confirmation of delivery) to either party at the following address, fax number or such other address or fax number as either party shall have provided to the other party pursuant to this Section. if to Licensor: Airmail: Clean Diesel Technologies, Inc. 300 Atlantic Street, Stanford, CT, U.S.A. Attention: James M. Valentine Chief Operating Officer Fax: +1-203-323-0461 E-mail: jvalentine@cdti.com if to Licensee: Airmail: Mitsui & Co., Ltd. 2-1, Ohtemachi 1-chome, Chiyoda-ku, Tokyo, Japan Attention: Yuji Shiro General Manager Research & Development Group Inorganic Raw Materials Division Fax: +81-3-3285-9149 E-mail: Y.Shiro@xm.mitsui.co.jp ----------------------- 12.04 Successors ---------- This Agreement shall be binding upon the parties and their successors and permitted assignees. 12.05 Entire Agreement ----------------- This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior communications, understandings and agreements relating thereto except as expressly otherwise herein provided. 12.06 Amendments ---------- No amendment to or modification of this Agreement shall be effective for any purpose whatsoever, if not confirmed in writing by the duly authorized representative of each of the parties. 12.07 No Waiver ---------- The failure of one party at any time to require performance by the other party of any provision hereof, shall in no way affect such party's right to require full performance thereof at any time thereafter, nor shall the waiver by one party of a breach of any provision hereof be taken or held to be a waiver by such party of any succeeding breach of such provision or as a waiver of the provision itself. 12.08 Section Headings ----------------- Section headings as used in this Agreement are for convenience only and shall not effect the construction or interpretation of this Agreement. Article XIII ARBITRATION AND GOVERNING LAW 13.01 Arbitration ----------- Any controversy or claim arising out of or relating to this Agreement shall be determined by arbitration under the International Arbitration Rules of the American Arbitration Association. The arbitration shall take place in New York, U.S.A., and shall be conducted in the English language. The award of the arbitrator(s) shall be final and binding on both parties. 13.02 Governing Law ------------- This Agreement and the rights and obligations of the parties under this Agreement shall be governed by, construed and interpreted in accordance with the laws of the State of New York provided however, that issues related to the validity and enforcement of the Patents shall be governed by Japanese law. Article IX Former License Agreement ------------------------ 14.01 Former License Agreement -------------------------- The parties hereby agree that the former license agreement entered into between the parties on the 5th day of June 2000 with respect to the System shall be automatically terminated and superseded by this Agreement in its entirety upon execution of this Agreement. 14.02 Notices ------- All notices hereunder shall be deemed effective when made in writing when (a) upon receipt when delivered by hand or by facsimile transmission and acknowledged electronically or by air courier and the courier records delivery or (b) three days after deposit in the U.S.A mail when transmitted by postage pre-paid certified or registered mail return receipt requested, in either case to the addresses for the parties set out herein and to the attention of the person signing below for such party or to such other address and person as may by such notice be given. 14.03 Counterparts ------------ This License may be executed in any number of counterparts and each counterpart shall be considered for all purposes as an original agreement but all such counterparts shall in the aggregate constitute a single agreement. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the Effective Date. CLEAN DIESEL TECHNOLOGIES, INC. MITSUI & CO., LTD /s/ James M. Valentine /s/ Jiro Tamagawa - -------------------------------- ----------------------------------- James M. Valentine Jiro Tamagawa Chief Operating Officer General Manager Inorganic Row Material Division SCHEDULE A PATENTS JP App. No. 542874/1998 Tarabulski Reducing NOx emissions from an engine while maximizing fuel economy, EGR/SCR. WO 00/18491 (P1030A) CDTI and AMBAC Nozzle design (Injector). PCT/US00/40111 (P7001A) FT and CDTI Urea supply controlled with the aid of SCR fluorescence. JP App. No. 541923/1998 Peter-Hoblyn Heat and pressure applied to NOx (P1021C) Balles reducing material prior to Hofmann Introduction into exhaust by Return flow injection system. (Fundamental return-flow concept) WO 00/21881 (P1021D) Tarabulski In-tank module for urea solution Knapper control and feed. Peter-Hoblyn Valentine SCHEDULE B Royalties & Fees ---------------- (Stationary Diesel Engines) Standard ARIS 2000 stationary unit (1 Injector) $*** 2 Injector ARIS 2000 stationary unit $*** 3 Injector ARIS 2000 stationary unit $*** (Includes required control upgrade) 4 Injector ARIS 2000 stationary unit $*** Spare Injector $*** Royalties on field-engineered systems will be $*** per Injector plus ***% of Net Sales on all other ARIS 2000 components including controls, sensors, pumps and valves. Field engineered ----------------- systems shall be those systems using other than ------------------------------------------------------ standard modular ARIS units. ------------------------------- Upfront Sublicense Fees ----------------------- Licensor shall receive ***% of any Upfront Sublicense Fee charged by Licensee to Sublicensees. AMENDMENT NO. 1 TO THE LICENSE AGREEMENT OF JULY 13, 2001 BETWEEN MITSUI AND CDT DATED DECEMBER 18, 2002 1) Under the Agreement of July 13, 2001 (the "Agreement") between the parties, Mitsui acquired an option on a license for the mobile ARIS technology for Japan. Subject to the following specific terms and conditions including up-front license fees, royalties and minimums for the continuation of the mobile license, CDT and Mitsui do hereby agree to amend the License Agreement of July 13, 2001 to incorporate the previously excluded Mobile Engine Market as a licensed Field in Japan consistent with the Terms and Conditions of the Agreement. 2) Royalties for Mobile ARIS a. Up Front License Fees: Mitsui will pay to CDT the amount of $250,000 as an upfront license payment on or before ***. Mitsui will further undertake design, engineering, development and demonstration programs in Japan of at least $*** in cost to further the commercialization of the ARIS mobile technology over the *** month period commencing on ***. Mitsui will report to CDT on such expenditures on a mutually agreed basis no later than ***. b. Running Royalties shall be paid by License and sublicensees at the following rates for ARIS mobile urea SCR Systems manufactured or caused to be manufactured by Licensee or sublicensee or purchased from CDT licensed manufacturers as below: Cumulative Injectors Unit Royalty -------------------- ------------ 1 - 1,000 $*** 1,001 - 100,000 $*** 100,001 + $*** c. Licensee and each sublicensee shall pay a separate royalty of $*** per application for each use of EGR/SCR combination following issuance of a Japanese patent to CDT or its assignee if such combination is not used in conjunction with the ARIS System covered by royalties under 2b. d. In addition to targeted royalty amounts specified in 2.04 of the Agreement, Licensee shall pay to Licensor additional targeted royalty amounts of $***, $*** and $*** on the ***, *** and *** anniversaries of this Amendment and Licensor shall have the right to render this mobile License non exclusive if Licensee shall not make such payments within *** days of each of such anniversary dates. e. License shall pay to Licensor ***% of any sublicensee fees, if any, collected by Licensee from sublicensees of the ARIS technology. /s/ James M. Valentine /s/ Yuji Shiro - ----------------------------------- -------------------------------- CLEAN DIESEL TECHNOLOGIES, INC. MITSUI AND CO. EX-10.2 3 doc3.txt EXHIBIT 10.2 Exhibit 10.2 License Agreement(1) -------------------- Clean Diesel Technologies, Inc. Combustion Components Associates, Inc. AGREEMENT entered into as of this 31st day of March, 2003 between Clean Diesel Technologies, Inc. (CDT), a Delaware corporation ("Licensor") of 300 Atlantic Street, Stamford, CT 06901 and Combustion Components Associates, Inc. (CCA), a Connecticut corporation, of 884 Main Street, Monroe, CT 06468. - ------------- 1. Portions of this exhibit denoted with three asterisks (***) have been omitted pursuant to a request for confidential treatment. Recitals -------- Licensor has developed and owns its patented "ARIS (R) 2000" method of reducing emissions of oxides of nitrogen from diesel engines (the "System"), which is inclusive of its entire circulation components, injectors, controls, sensors, pumps and valves, tankage and other storage components, catalyst and the costs of engineering and installation. Licensee desires to enter the business of manufacturing and selling Systems in the on-highway, off-road and portable retrofit sectors. Accordingly, Licensor and Licensee agree, all on the terms and conditions provided below, that Licensor shall license non exclusively its ARIS 2000 NOx reduction Technology to Licensee for the uses and in the territories provided below (the "License") and Licensee accepts the License and shall make the payments provided below to Licensor. Article I Definitions ----------- 1.01 "Effective Date" means the date first written above in this Agreement. 1.02 "Federal Rate" shall mean the monthly rate of interest as published by the Internal Revenue Service pursuant to Internal Revenue Code Section 7520. 1.03 "Fields of Use" shall mean application of the Technology to diesel engines used in on-highway and, off-road mobile retrofit applications and retrofit applications to portable diesel engines. 1.04 "Retrofit" shall mean, application to on-road, off-road vehicles and portable diesel engines on which title has passed from the original engine manufacturer to a distributor or end user. 1.05 "Portable" shall mean intended for use at a site for less than 12 consecutive months. 1.06 "Improvement" means any new invention or change in the Technology made, conceived or first reduced to practice hereunder by Licensor or Licensee, whether patented or not, which results in better products or a more efficient or less expensive means of manufacturing or installing or using products, provided, however, that the Technology after the improvement is substantially similar to the Technology as originally licensed hereunder. 1.07 "Intellectual Property" means: (a) All United States and Canadian patent applications (including United States provisional applications) and any and all patents issuing therefrom or otherwise corresponding thereto, letters patent, and all divisions, continuations, continuations-in-part, reissues, and extensions thereof, describing and/or claiming any rights with respect to the System and as set forth on Schedule A attached hereto and made a part hereof or any amendment thereof; and (b) All trademarks and applications or registrations thereof relating to the System and set forth on Schedule A attached hereto and made a part hereof or any amendment thereof. 1.08 "Term" means the period from the Effective Date until the date of expiration of the last of the patents on Schedule A to expire, unless sooner terminated pursuant to the terms of this License or extended by agreement of the parties. 1.09 "Licensor Representatives" means those employees of Licensor identified herein who shall be responsible for transfer and disclosure of the Technology to Licensee. 1.10 "Licensee Representatives" means those employees of Licensee identified herein who shall be responsible for receipt of the transfer and disclosure of the Technology on behalf of Licensee. 1.11 "Net Sales" means, in relation to Running Royalties under Sec.4.01.2 of this License, the gross sales price as billed by Licensee of Products, less discounts and allowed credits, returns, customs duties, excise taxes, sales or value added taxes, transportation, crating and insurance charges, if any of such items shall be included in the gross sales price. A Product shall be deemed to be sold when the buyer has made payment for such Product. 1.12 "Product" means any object or device manufactured in whole or in part by means of the Technology for the Application but excludes freight, storage, catalyst, ductwork and costs of engineering, testing and installation. 1.13 "Proprietary Information" means information, or other material, regardless of its form, (a) designated by a party as "confidential," or "proprietary," whether or not owned or developed by the party making such designation, and, (b) regardless of whether it has been specifically designated as "confidential" or proprietary (i) is proprietary to a party or (ii) is not generally available to the public about the business, products, plans, financial condition, customers, methods of marketing, business systems or methods, proposals, policies, or trade secrets of the party. 1.14 "Technology" means the Intellectual Property and any and all data and information (in whatever format and whether or not subject to proprietary rights protection and embodied in whatever media) relating to the System. 1.15 "Territory" means the United States of America, its possessions and territories, and Canada. Article II Grant of License ---------------- 2.01 Grant of License. Licensor hereby grants to Licensee for the Term the non ----------------- exclusive right to receive the Technology and to make, use and sell Systems, Products and/or services under or embodying or incorporating the Technology in the Territory and within the Fields of Use. 2.02 Sub-Licenses. Licensee may not sublicense or assign the Technology to other ------------ parties (except for customers to use Products). 2.03 Loss of License. If the total annual Running Royalties due and payable ----------------- under Sec.4.01.2 hereunder in the ***, and any subsequent year do not amount to at least $*** per year, this License shall be terminated, if in its discretion Licensor by notice to Licensee terminates this License. Licensee may, however, make voluntary payments to maintain the License notwithstanding that royalties are not due and payable in the amounts provided above. 2.04 Licensee Restriction. In order to ensure commercial development of the --------------------- System, Licensee shall not during the Term, except where the parties may otherwise agree, make use or sell competing systems to the System for the Applications in the Territory. 2.05 Purchase of Injectors. Licensee shall acquire injectors for use or sale in --------------------- connection with the System from AMBAC International, Inc. ("AMBAC") or CDT or other CDT licensed manufacturers. Licensor hereby consents to AMBAC's sale of injectors to Licensee. Licensee shall include in reports furnished to Licensor under Sec.5.02 below, the number of injectors purchased quarterly. Licensee shall also have the right itself to manufacture injectors for its own use and sale for the Applications in the Territory or to other CDT licensed manufacturers in the Territory during the Term and shall furnish quarterly reports and pay the royalties due on the number of injectors made and sold. 2.06 Cancellation. Licensee may in its sole discretion at any time after the *** ------------ anniversary hereof cancel and terminate this License on *** days notice to Licensor, provided, however, that Licensee shall have made payment to Licensor of all amounts accrued and unpaid and due to Licensor through the effective date of cancellation. 2.07 Trademark Use. Licensee shall identify the Trademark in Schedule A as -------------- a registered Trademark of Licensor and use the Trademark in product literature and advertising as mutually agreed with Licensor. Article III Technical Transfer and Assistance --------------------------------- 3.01 Technology Transfer. (a) The Parties agree that upon the Effective Date -------------------- disclosure and transfer to Licensee of the Technology by Licensor will be deemed to have been completed. 3.02 Marketing Assistance. Throughout the Term Licensor and Licensee shall --------------------- consult from time to time as to methods of marketing to customers of Licensee. Licensor and Licensee may from time to time inform one another of potential customers for Applications of Systems and Products in the Territory. 3.03 Parties Independent. This Agreement is not intended in any manner to create ------------------- the relationship of principal and agent between Licensor on the one hand and Licensee on the other. This Agreement shall not be deemed to have established a partnership or joint venture. Neither party hereto shall act or attempt to act or represent itself, directly or by implication, as having the power to bind the other party or in any manner to assume or create any obligation on behalf of the other party. Article IV Royalties --------- 4.01 Royalties. In consideration of the rights granted hereunder, Licensee shall --------- pay to Licensor License Fees and Running Royalties, as follows: 4.01.1 License Fees. License Fees shall be a payment in the amount of $***; ------------- payable as $*** on signing this License and further amounts of $*** paid within *** months of the effective date less a total credit of up to $*** for documented unreimbursed mobile ARIS development expenditures for the *** months preceding and the *** months following the effective date and a further amount of $*** paid within *** months of the effective date. Development expenditures shall include equipment purchases, third party development expenses and unburdened engineering charges directed to the development of the ARIS mobile system by CCA. 4.01.2 Running Royalties. Running Royalties shall be payments with respect to ------------------ Net Sales of Products by Licensee as set out on Schedule B. 4.02 Royalty Review. Licensor and Licensee shall in good faith review the --------------- Running Royalty amounts set out on Schedule B on the *** anniversary of the Effective Date and every *** year anniversary thereafter of the Effective Date with a view toward adjusting such amounts either up or down based on current market conditions. The maximum increase or decrease per adjustment period, however, shall be limited to ***% of the royalties set forth on Schedule B, as adjusted. Any increase or decrease in the per unit royalty fee shall not cause any adjustment in the minimum royalty payments stipulated in Sec.2.03 above. 4.03 Royalty Payments. Royalties shall be paid to Licensor in U.S. dollars ----------------- within *** days, with respect to Running Royalties, after each calendar quarter with respect to Net Sales in that fiscal quarter. Such payments shall be made to Licensor's address set out above or to such other address or by wire transfer to Licensor's bank account as may be designated by notice hereunder. 4.04 No Withholding. Licensee shall pay the full amount of Royalties due --------------- hereunder regardless of a withholding tax, if any, which may from time to time be levied, assessed or required to be withheld and paid for the account of Licensor and Licensee shall itself bear the cost of such withholding tax. Licensee shall at the time of royalty payments to Licensor provide to Licensor appropriate documentary evidence of the payment by it of such withholding tax, if any, applicable to such royalty payment. 4.05 Late Payments. In the event that payment is not made within *** days of the ------------- date when any amount is due to Licensor hereunder, Licensee shall pay interest quarterly to Licensor on such amount at the Federal Rate at the place and in the manner required for the payment of royalties. 4.06 Non Payment and Termination. *** days after notice to Licensee of ------------------------------ Licensee's failure to pay Licensor amounts due hereunder, Licensor may by notice to Licensee terminate this Agreement whereupon this Agreement shall be of no force and effect except for the obligation of Licensee to pay to Licensor such amounts as have accrued hereunder through such termination. Article V Accounting, Reports and Audit ----------------------------- 5.01 Books and Records. Licensee shall keep at its principal place of business ------------------ full and accurate books of account and supporting records containing all particulars necessary for computing accurately the amounts to be paid to Licensor hereunder, all in accordance with generally accepted accounting principles. 5.02 Reports. Each payment of royalties by Licensee shall be accompanied by a ------- statement signed by the chief accounting officer of Licensee or other duly authorized officer containing such information as may be necessary for computation of the amount payable to Licensor hereunder and setting forth separately with respect to each sale sold by Licensee during the respective quarter, the customer, date and invoice number, quantity and sales price. The form of such report may be provided by Licensor from time to time. If no sales shall be made during any quarter, a negative report shall be submitted. 5.03 Audits. Licensee during the Term shall upon *** days notice make the books ------ and records referred to in Section 5.01 above available for inspection by duly authorized representatives of Licensor and for *** years thereafter. Moreover, Licensor may, not more often than *** in any *** -month period, elect to have such books and records audited at Licensor's expense by a certified independent public accountant or accounting firm selected by Licensor and approved by Licensee (which approval shall not be unreasonably withheld) who may examine and make such extracts from such books and records as may be necessary to verify the computation of any amount payable to Licensor hereunder. Such accountant or accounting firm shall not have performed regular services to either of Licensor or Licensee and may be licensed by any state. Nothing herein shall be interpreted to mean that Licensor shall have access to or the right to examine other business records of Licensee. Licensor shall treat as confidential any information obtained pursuant to this Section 5.03 and its accountant or accounting firm shall undertake to do the same. If any such audit shall determine that the amounts payable to Licensor have been understated by the lesser of (i) *** percent (***%) thereof or (ii) $***, Licensee shall reimburse Licensor the cost of such audit. Article VI Improvements ------------ 6.01 Disclosure of Improvements. Licensor and Licensee shall during the Term ---------------------------- hereof disclose and explain to one another all Improvements subject to the disclosing Parties right, but not obligation, to file patent applications prior to any such disclosure. Any such disclosure shall be treated as Proprietary Information of the disclosing party. 6.02 Title and License to Improvements. That party hereto who or whose employees --------------------------------- or agents shall have invented or developed such Improvement shall have title and ownership of such Improvement and the other party shall have no right to any Improvement by the other party other than if a separate Agreement is made. 6.03 No License Implied to Other Technology. The title and license to ------------------------------------------- Improvements provided in Section 6.02 above to the parties shall in itself imply no right or license whatsoever in any party to any other Technology required to practice such Improvement even though the lack of such right or license may render the Improvement valueless in the hands of a party. Article VII Representations and Warranties ------------------------------ 7.01 General Representations and Warranties. Each party represents and warrants -------------------------------------- to the other that (a) it is a corporation in good standing under the laws of the state of its incorporation and it has all corporate power and authority to conduct its business as now being conducted; (b) that the execution and delivery of this Agreement is duly authorized; (c) when executed and delivered this Agreement shall be binding on each party and enforceable according to its terms, excepting as laws relating to bankruptcy, insolvency and equitable remedies may affect such enforceability; and (d) neither this Agreement nor the performance thereof is, or will be, in violation of any agreement or any order, decree or award of any court or other forum to which a party is subject or by which it is bound. 7.02 Representations as to Intellectual Property. Licensor hereby makes the ----------------------------------------------- following representations, warranties and covenants, and acknowledges that Licensee has relied thereon in entering upon this Agreement: (a) Licensor is the sole and exclusive owner of the Technology, has the right to grant the license granted hereunder and has executed no agreement or taken any action in conflict herewith or in derogation of the rights granted hereunder; (b) To Licensor's knowledge, the Technology does not infringe any patents or rights of any third party; (c) To Licensor's knowledge, no circumstances of any sort exist that could in any way restrict Licensor from licensing the Technology to Licensee and there is no (i) unauthorized use of the Technology, (ii) circumstance which prevents Licensee from utilizing the Technology for the purposes provided for herein or diminishes the value to Licensee of the license to the Technology; and (d) Licensor has not and will not enter into any agreement or commitment which might in any way limit, restrict or prevent Licensor from entering into and performing its obligations under this Agreement. 7.03 Disclaimer of Warranties. Except as otherwise set forth above in this -------------------------- Article VII of this Agreement, the parties disclaim any warranties whatsoever whether express or implied, including any warranty of merchantability or fitness for a particular purpose with respect to the Technology or that the Technology may be able to be effectively utilized in Licensee's business. Article VIII Protection and Maintenance of Intellectual Property --------------------------------------------------- 8.01 Maintenance Expense. Licensor shall be responsible at its own expense for -------------------- all fees, annuities and legal expense (excepting legal expense which is or might be associated with any litigation including any judicial, arbitral, administrative or investigative proceeding) reasonably required to obtain or maintain in force the United States and Canadian patent applications and patents and the trademark on Schedule A. 8.02 Patent Applications. In the event that either party with respect to -------------------- Improvements as to which it has the right to acquire title, seeks patent protection for such Improvements, it will do so at its own expense (including any annuities or other maintenance fees) and it will receive the cooperation of the other party in the prosecution of such patent application. When granted, the applicant shall have title to such patent, subject to the rights, if any, of the other party hereunder. 8.03 Trademarks. Licensor does not intend to obtain any trademark with respect ---------- to the Technology other than the trademark set forth on Schedule A. If Licensee desires to obtain a mark or marks with respect to its products in association with the Technology it shall consult with Licensor prior to applying at Licensee's expense for such a mark or marks. When granted, Licensee shall have title to such marks. In the event that this License shall terminate for any reason, Licensor shall have the right and option to purchase and take an assignment of any such mark at its then amortized cost on the books of Licensee. 8.04 Pending Applications. For any Intellectual Property that is during the Term -------------------- the subject of any pending application, the parties shall take no action to jeopardize ongoing prosecution or the final issuance of such pending Intellectual Property. 8.05 Third Party Infringements. (a) During the Term each party shall --------------------------- immediately inform the other party, if it becomes aware of any actual or potential infringement of the Technology, and the parties shall consult with one another concerning such infringement. (b) During the Term Licensor may but shall not be required to prosecute infringements within the licensed rights hereunder, so long as it shall deem it practical and reasonable to do so. (c) If Licensor during the Term shall not prosecute an infringement within the licensed rights hereunder or shall cease such prosecution once commenced, then Licensees may, but shall not be required to, prosecute such infringement, so long as it deems it practical and reasonable to do so. (d) Licensor and Licensee shall provide to one another such information and assistance as may reasonably be requested in the course of any prosecution of infringements whether by Licensor or Licensee. 8.06 Infringement Claims. In the event of any claim, demand, suit, action or -------------------- proceeding brought against either or both of Licensor or Licensee, by any person, firm or corporation, alleging or claiming that the Technology (in itself and not in combination with other technology or art of Licensee) as practiced by Licensee or its sublicensees, infringes on any patent right or misappropriates any trade secret of such claimant: (a) Licensee shall promptly notify Licensor of any such claim, demand, suit, action, or proceeding brought against Licensee. (b) Licensor shall thereupon, at its own expense, and in its discretion either (i) render the Technology non-infringing, (ii) procure a license or right from the claimant to enable Licensee to practice the patent or trade secret of such claimant, or (iii) settle or defend on behalf of itself and Licensee, its affiliates and their agents, employees, directors and permitted assigns such claim, demand, suit, action or proceeding, and, in the event any judgment or settlement is rendered against either or both of Licensor or Licensee, its affiliates and their agents, employees, directors and authorized assigns for damages in any such suit, action or proceeding, Licensor shall indemnify and save harmless Licensee, its affiliates and their agents, employees, directors and authorized assigns from all such costs and damages, but only in this regard only in any fiscal year of Licensee to the extent of *** percent (***%) of Running Royalties accruing to Licensor in such year. (c) If Licensor fails to timely dispose of the above mentioned claims, demands, suits, actions, or proceedings as provided in sub-section (b) above, Licensee shall have the right, upon notification to Licensor, but not the obligation, to take all necessary action on behalf of itself and Licensor, and deduct up to in any fiscal year not more than *** percent (***%) of reasonable costs, expenses and damages arising in this regard in such year from Running Royalties payable to Licensor by Licensee. Article IX Confidentiality --------------- 9.01 Nondisclosure Obligations. (a) Each party understands that the other -------------------------- party's Proprietary Information constitutes valuable property rights. Therefore, each party coming into possession of Proprietary Information of the other party agrees not to provide or otherwise make available, nor permit or otherwise allow any of its employees to provide or otherwise make available, the whole or any portion of the other party's Proprietary Information, in any form, to any person other than such party's employees solely for purposes of carrying out the rights, duties and obligations of such party pursuant to this Agreement. Each party agrees that it will notify its employees permitted access to the Proprietary Information of the other party of their obligations under this Agreement with respect to use, reproduction, protection and security of the other party's Proprietary Information and cause its employees having access thereto to execute written nondisclosure and confidentiality agreements with such party, prohibiting such employees from further disclosure of the other party's Proprietary Information or use of such Proprietary Information for the benefit of any person other than Licensor or Licensee. (b) Notwithstanding the foregoing, each party shall have the right to disclose the other party's Proprietary Information to its outside consultants, if any, having a need to know such Proprietary Information for purposes of carrying out the rights, duties and obligations of such party under this Agreement; subject, however, to the conditions that any such outside consultants execute written nondisclosure and confidentiality agreements with such party, prohibiting such outside consultants from further disclosure of the other party's Proprietary Information or use of the other party's Proprietary Information for the benefit of any person other than Licensor and Licensee. (c) Each party will appropriately safeguard all documents, items of work in process and work products that embody Proprietary Information of the other party. A party having knowledge of loss or theft of the other party's Intellectual Property or Proprietary Information shall immediately notify the other party thereof. 9.02 Survival of Confidentiality Obligations. Each party agrees that its ------------------------------------------ nondisclosure obligations set forth in Section 9.01 above will continue after the termination of this Agreement for any reason whatsoever, and until such time as the other party, its licensors, successors or assigns hold no patent, copyright, trade secret or any other proprietary right in such other party's Proprietary Information, or any portion thereof. 9.03 Exceptions to Non-Disclosure Obligations. The confidentiality and ------------------------------------------- nondisclosure obligations of Section 9.01 above shall not apply with respect to the other party's Proprietary Information that falls within the scope of the following:(a) any such Proprietary Information that is in the public domain at the time of disclosure to the receiving party; (b) any such Proprietary Information that subsequently becomes public, through no fault of the receiving party; or (c) any such Proprietary Information that is subsequently disclosed to the receiving party by third parties having no obligation to the disclosing party, or to any other parties to maintain the confidentiality of such Proprietary Information. With respect to public use, however, the parties understand and agree that Proprietary Information of a party shall not be deemed to be in public use or publicly available merely because it may be embraced by a more general disclosure, or merely because it may be derived from combinations of disclosures in public use. Article X Government Approvals -------------------- 10.01 Approvals. Licensee shall at its own expense apply in a timely manner for --------- all government approvals, if any, which may be required for the execution of the transactions contemplated by this Agreement, and shall furnish evidence of such approvals to Licensor or shall advise Licensor that no such approval is required. 10.02 Export Controls. Licensee acknowledges that the further transfer of the ---------------- Technology or the sale of Products by Licensor to persons outside of the United States may from time to time be governed by the export control laws and regulations of the United States and Licensee agrees to comply with such laws and regulations at its own expense and from time to time to obtain such consents, if any, as may be required to enable Licensee to so comply. This acknowledgement relates to home office sales by Licensee to third parties within the Territory for export and is not intended to grant any right or license to make, use or sell outside of the Territory. Article XI Miscellaneous ------------- 11.01 Assignment. Neither this Agreement nor the Technology nor any right or ---------- obligation hereunder is assignable or transferable by either party in whole or in part without the prior written consent of the other party and any such purported assignment without such consent shall be void, except, however, upon a sale or transfer by a party of all or substantially all of its business as a going concern wherein the purchasing or acquiring party assumes and agrees to perform all of the obligations of the assigning party under this Agreement. 11.02 Successors and Assigns. This Agreement shall benefit and bind the parties ---------------------- and their permitted successors and assigns. 11.03 Integration. This Agreement contains a complete statement of all ----------- arrangements between the parties relating to its subject matter and supersedes all existing agreements or understandings related thereto. 11.04 Modifications; Amendments. This Agreement may only be modified or a -------------------------- provision hereof waived by a writing signed by the parties which refers to this Agreement and states that it is an amendment or waiver of a provision thereof. The failure of a party to insist on strict adherence to any provision hereof shall not be construed as a waiver thereof. 11.05 Force Majure. Neither party shall incur any liability to the other party ------------- on account of any loss or damage resulting from any delay or failure to perform all or any part of this Agreement, where such delay or failure is caused principally by events, occurrences or causes beyond the reasonable control of the parties. 11.06 Invalid Provisions. Any provision of this Agreement which is prohibited or ------------------ unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibited or unenforceable provision shall be valid in any other jurisdiction. ll.07 Section Headings. The section headings used in this Agreement are for ----------------- convenience of reference only and are not to effect the construction or to be taken into consideration in the interpretation hereof. 11.08 Law. This Agreement and the rights and obligations of the parties under --- this Agreement shall be governed by, and construed and interpreted in accordance with the internal substantive laws of the State of Connecticut with respect to contracts to be performed in that jurisdiction. 11.09 Arbitration. This Agreement and all questions of its interpretation or any ----------- claims or disputes with respect to any of the transactions contemplated herein shall be determined exclusively in binding arbitration before a single neutral arbitrator under the rules then in force of commercial arbitration of the American Arbitration Association ("AAA"). The location of the arbitration shall be Stamford, Connecticut. Any award in such arbitration may be entered in or an order of enforcement obtained from any court having jurisdiction. The arbitrator acting hereunder shall have the power only to award compensatory damages. Prior to the commencement of any arbitration proceeding, the parties agree to engage in mediation under the AAA rules then in effect. The parties agree to share equally the costs of the AAA and of any mediator or arbitrator and otherwise to bear their own costs. Notwithstanding the foregoing, claims or disputes between the parties hereto shall be determined judicially when such claims or disputes arise from a judicial proceeding brought by a third party against either one or both of the parties hereto and one party hereto seeks or may seek reimbursement or indemnity from the other party hereto for the claims asserted by such third party in such judicial proceeding. 11.10 Remedies. Except as may otherwise be provided in Section 8.06 above -------- concerning infringements and except for such equitable remedies as may be required to enforce the nondisclosure obligations in Article IX above, the remedies of the parties hereunder shall be limited to compensatory damages. 11.11 Notices. All notices hereunder shall be deemed effective when made in ------- writing (a) upon receipt when delivered by hand or by facsimile transmission and acknowledged electronically or by air courier and the courier records delivery or (b) three days after deposit in the U.S. mail when transmitted by postage pre-paid certified or registered mail return receipt requested, in either case to the addresses for the parties set out herein and to the attention of the person signing below for such party or to such other address and person as may by such notice be given. 11.12 Counterparts. This Agreement may be executed in any number of counterparts ------------ and each counterpart will be considered for all purposes as an original agreement, but all such counterparts shall in the aggregate constitute a single agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date by their officers thereunto duly authorized. CLEAN DIESEL TECHNOLOGIES, INC. By: /s/ James M. Valentine - ----------------------------------- NAME: JAMES M. VALENTINE - ------------------------------------------ Title: President & C.O.O. - ----------------------------------- COMBUSTION COMPONENTS ASSOCIATES, INC. By: /s/ Edward H. Bird - ----------------------------------- Name: Edward H. Bird - ----------------------------------- Title: V.P. Finance & Adm. - ----------------------------------- SCHEDULE A ---------- Licensed Patents ---------------- (CDT/CCA Agreement) A. US Patent 5,976,475 Process patent. Return flow injection system for urea using reagent for injector cooling single fluid or air assisted. B. US Patent 6,063,350 Continuation in part of A above. Method to operate and control the return flow system. Modular in-tank assembly identified embodiment. C. US Patent 6,279,603 Reagent cooled injector D. US Patent 5,924,280 EGR/SCR - Reducing NOx while maximizing fuel economy. US Trademark No. 2,368,220 ARIS (R) 2000 urea injection system SCHEDULE B ---------- Running Royalties ----------------- Licensee shall pay to Licensor a royalty of $***/injector sold plus ***% of the sales price of other system components sold by Licensee excluding catalyst, start-up services, testing services, installation and freight. EX-10.3 4 doc4.txt EXHIBIT 10.3 Exhibit 10.3 OFFICE LEASE AGREEMENT SHORT FORM LEASE THIS OFFICE LEASE AGREEMENT (the "LEASE") is made and entered into as of the 29 day of January 2004, by and between CT-STAMFORD ATLANTIC FORUM, L.L.C., A DELAWARE LIMITED LIABILITY COMPANY ("LANDLORD") and CLEAN DIESEL TECHNOLOGIES, INC., A DELAWARE CORPORATION ("TENANT"). Pursuant to the terms of this Lease, Landlord agrees to lease the Premises (hereinafter defined) to Tenant and Tenant agrees to lease the Premises from Landlord. The Lease includes the following exhibits and attachments: EXHIBIT A (Outline and Location of Premises), EXHIBIT B (Expenses and Taxes), EXHIBIT C (Work Letter), EXHIBIT D (Building Rules and Regulations), EXHIBIT E (Additional Provisions) and EXHIBIT F (Outline and Location of Temporary Space). 1. BASIC LEASE INFORMATION 1.01 "BUILDING" shall mean the building located at 300 Atlantic Street, Stamford, Connecticut 06901, commonly known as 300 Atlantic Street. "RENTABLE SQUARE FOOTAGE OF THE BUILDING" is deemed to be 272,458 square feet. "PROPERTY" shall mean the Building and the parcel(s) of land on which it is located. "COMMON AREAS" shall mean the portion of the Building and Property that are designated by Landlord for the common use of tenants and others. 1.02 "PREMISES" shall mean the area shown on EXHIBIT A to this Lease. The Premises are located on the 7th floor and known as suite number 702. The "RENTABLE SQUARE FOOTAGE OF THE PREMISES" is deemed to be 3,928 square feet. 1.03 "BASE RENT": - ------------------------ ---------------------------- ------------------ PERIOD OR MONTHS OF TERM ANNUAL RATE PER SQUARE FOOT MONTHLY BASE RENT - ------------------------ ---------------------------- ------------------ 04/01/04 - 03/31/09 $ 29.50 $ 9,656.33 - ------------------------ ---------------------------- ------------------ 1.04 "TENANT'S PRO RATA SHARE": 1.4417%. Tenant shall pay Tenant's Pro Rata Share of Taxes and Expenses in accordance EXHIBIT B of this Lease 1.05 "BASE YEAR" for Taxes (as defined in EXHIBIT B): 2004; "BASE YEAR" for Expenses(as defined in EXHIBIT B: 2004. 1.06 "TERM": A period of 60 months. Subject to Section 2, the Term shall commence on April 1, 2004 (the "COMMENCEMENT DATE") and, unless terminated early in accordance with this Lease, end on March 31, 2009 (the "TERMINATION DATE"). 1.07 "SECURITY DEPOSIT": $19,967.00. 1.08 "BROKER": None. 1.09 "PERMITTED USE": general office use. 1.10 "NOTICE ADDRESSES": Landlord: Tenant: CT-Stamford Atlantic Forum, L.L.C. ____________________________ c/o Equity Office ____________________________ One Canterbury Green ____________________________ Stamford, Connecticut 06901 ____________________________ Attention: Property Manager ____________________________ A copy of any notices to Landlord shall be sent to Equity Office, Two North Riverside Plaza, Suite 2100, Chicago, IL, 60606, Attn: New York General Counsel 1.11 "LANDLORD WORK" means the work that Landlord is obligated to perform in the Premises pursuant to a separate work letter agreement (the "WORK LETTER, ") attached to this Lease as EXHIBIT C. 1.12 Notwithstanding anything to the contrary contained in Article 6 of this Lease, all electricity consumed by Tenant in the Premises shall be paid for by Tenant as Additional Rent in accordance with the terms of this Lease. During each calendar year, or portion thereof, falling within the Term, Tenant shall pay to Landlord a Premises Electric Charge (hereinafter defined) of $1.75 per square foot per annum (i.e. assuming 3,928 square feet, the Premises Electric Charge would be $572.83 per month/$6,874.00 per annum). The Premises Electric Charge may be adjusted from time to time as provided hereinafter, provided, however that in no event shall the Premises Electric Charge be reduced below the annual per square foot amount stated above. For the purposes of this Lease, the term "PREMISES ELECTRIC CHARGE" shall mean the amount determined by applying the estimated connected electrical load and usage thereof in the Premises (as initially estimated by Landlord or thereafter determined by the electrical consultant) to the rate charged for such load and usage in the service classification in effect from time to time pursuant to which Landlord then purchased electric current for the entire Building. If the cost to Landlord of electricity shall have been, or shall be, increased subsequent to the Commencement Date (whether by change in Landlord's electric rates, charges, fuel adjustment, or service classification, or by taxes or charges of any kind imposed thereon, or for any other such reason), then the Premises Electric Charge shall be increased in the same percentage. Landlord's electrical consultant may from time to time conduct surveys in the Premises covering the electrical equipment and fixtures and use of current therein, and, based upon such surveys, may adjust the Premises Electric Charge. Electrical service to the Premises may be furnished by one or more companies providing electrical generation, transmission and distribution services, and the cost of electricity may consist of several different components or separate charges for such services, such as generation, distribution and stranded cost charges. Landlord shall have the exclusive right to select any company providing electrical service to the Premises, to aggregate the electrical service for the Property and Premises with other buildings, to purchase electricity through a broker and/or buyers group and to change the providers and manner of purchasing electricity. Landlord shall be entitled to receive a fee (if permitted by Law) for the selection of utility companies and the negotiation and administration of contracts for electricity, provided that the amount of such fee shall not exceed 50% of any savings obtained by Landlord. 2. ADJUSTMENT OF COMMENCEMENT DATE; POSSESSION. 2.01 Landlord is required to perform Landlord Work prior to the Commencement Date and therefore: (a) the date set forth in Section 1.06 as the Commencement Date shall instead be defined as the "TARGET COMMENCEMENT DATE"; (b) the actual Commencement Date shall be the date on which the Landlord Work is substantially complete, as reasonably determined by Landlord; and (c) the Termination Date will be the last day of the Term as determined based upon the actual Commencement Date. If the Termination Date does not fall on the last day of a calendar month, Landlord and Tenant may elect to adjust the Termination Date to the last day of the calendar month in which Termination Date occurs by the mutual execution of a commencement letter agreement setting forth such adjusted date. Landlord's failure to substantially complete the Landlord Work by the Target Commencement Date shall not be a default by Landlord or otherwise render Landlord liable for damages. If Landlord is delayed in the performance of the Landlord Work as a result of the acts or omissions of Tenant, the Tenant Related Parties (defined in Section 12) or their respective contractors or vendors, including, without limitation, changes requested by Tenant to approved plans, Tenant's failure to comply with any of its obligations under this Lease, or the specification of any materials or equipment with long lead times (a "TENANT DELAY"), the Landlord Work shall be deemed to be Substantially Complete on the date that Landlord could reasonably have been expected to Substantially Complete the Landlord Work absent any Tenant Delay. 2.02 The Premises are accepted by Tenant in "as is" condition and configuration without any representations or warranties by Landlord. Landlord shall not be liable for any failure to deliver possession of the Premises or any other space due to the holdover or unlawful possession of such space by any party. In such event, the commencement date for such space shall be postponed until the date Landlord delivers possession of the Premises to Tenant free from occupancy by any party. 3. RENT. Tenant shall pay Landlord, without any setoff or deduction all Base Rent and Additional Rent due for the Term (collectively referred to as "RENT"). "ADDITIONAL RENT" means all sums (exclusive of Base Rent) that Tenant is required to pay Landlord under this Lease. Tenant shall pay and be liable for all rental, sales and use taxes (but excluding income taxes), if any, imposed upon or measured by Rent. Base Rent and recurring monthly charges of Additional Rent shall be due and payable in advance on the first day of each calendar month without notice or demand. All other items of Rent shall be due and payable by Tenant on or before 30 days after billing by Landlord provided that the installment of Base Rent and Additional Rent for the first full calendar month of the Term shall be payable upon the execution of this Lease by Tenant. Rent shall be made payable to the entity and sent to the address Landlord designates. Tenant shall pay Landlord an administration fee equal to 5% of all past due Rent. In addition, past due Rent shall accrue interest at 12% per annum. Rent for any partial month during the Term shall be prorated. No endorsement or statement on a check or letter accompanying payment shall be considered an accord and satisfaction. Tenant's covenant to pay Rent is independent of every other covenant in this Lease. 4. COMPLIANCE WITH LAWS; USE. The Premises shall be used for the Permitted Use and for no other use whatsoever. Tenant shall comply with all statutes, codes, ordinances, orders, rules and regulations of any municipal or governmental entity ("LAWS"), regarding the operation of Tenant's business and the use, condition, configuration and occupancy of the Premises. Tenant shall comply with the rules and regulations of the Building attached as Exhibit D and such other reasonable rules and regulations adopted by Landlord from time to time. 5. SECURITY DEPOSIT. The Security Deposit shall be delivered to Landlord upon the execution of this Lease by Tenant and held by Landlord without liability for interest (unless required by Law) as security for the performance of Tenant's obligations. The Security Deposit is not an advance payment of Rent or a measure of damages. Landlord may use all or a portion of the Security Deposit to satisfy past due Rent or to cure any Default (defined in Section 17) by Tenant. If Landlord uses any portion of the Security Deposit, Tenant shall on demand restore the Security Deposit to its original amount. Landlord shall return any unapplied portion of the Security Deposit to Tenant within 45 days after the later to occur of: (a) determination of the final Rent due from Tenant; or (b) the later to occur of the Termination Date or the date Tenant surrenders the Premises to Landlord in compliance with Section 24. Landlord shall not be required to keep the Security Deposit separate from its other accounts. 6. BUILDING SERVICES. Landlord shall furnish Tenant with the following services: (a) water service for use in the base building lavatories; (b) customary heat and air conditioning in season during standard Building service hours. Tenant shall have the right to receive HVAC service during hours other than standard service hours by paying Landlord's then standard charge for additional HVAC service and providing such reasonable prior notice as is specified by Landlord; (c) standard janitor service; (d) Elevator service; (e) Such security and monitoring systems as Landlord may reasonably impose, including initially, sign-in procedures and presentation of identification cards; and (f) Electricity. Electricity used by Tenant in the Premises shall be paid for by Tenant by a separate charge payable by Tenant to Landlord. Tenant's use of electrical service shall not exceed the standard usage for the Building. Landlord's failure to furnish, or any interruption, diminishment or termination of, services due to the application of Laws, the failure of any equipment, the performance of repairs, improvements or alterations, utility interruptions or the occurrence of an event of Force Majeure (defined in Section 25.03) shall not render Landlord liable to Tenant, constitute a constructive eviction of Tenant, give rise to an abatement of Rent, nor relieve Tenant from the obligation to fulfill any covenant or agreement. 7. LEASEHOLD IMPROVEMENTS. All improvements in and to in the Premises, including any Alterations (COLLECTIVELY, "LEASEHOLD IMPROVEMENTS") shall remain upon the Premises at the end of the Term without compensation to Tenant. Landlord, however, by written notice to Tenant at least 30 days prior to the Termination Date, may require Tenant, at its expense, to remove any electronic, phone and data cabling and related equipment (collectively, "CABLE") installed by or for the benefit of Tenant and any Landlord Work or Alterations that, in Landlord's reasonable judgment, are not standard office improvements and are of a nature that would require material removal and repair costs (collectively referred to as "REQUIRED REMOVABLES"). 8. REPAIRS AND ALTERATIONS. 8.01 Tenant shall periodically inspect the Premises to identify any conditions that are dangerous or in need of maintenance or repair and shall promptly provide Landlord with notice of any such conditions. Tenant shall, at its sole cost and expense, promptly perform all maintenance and repairs to the Premises that are not Landlord's express responsibility under this Lease, and shall keep the Premises in good condition and repair, reasonable wear and tear excepted. If Tenant fails to make any repairs to the Premises for more than 15 days after notice from Landlord (although notice shall not be required in an emergency), Landlord may make the repairs, and Tenant shall pay the reasonable cost of the repairs, together with an administrative charge in an amount equal to 10% of the cost of the repairs. Landlord shall perform all maintenance and repairs upon the: (a) structural elements of the Building; (b) mechanical, electrical, plumbing and fire/life safety systems serving the Building in general; (c) Common Areas; (d) roof of the Building; (e) exterior windows of the Building; and (f) elevators serving the Building. 8.02 Tenant shall not make alterations, repairs, additions or improvements or install any Cable (collectively referred to as "ALTERATIONS") without first obtaining the written consent of Landlord in each instance, which consent shall not be unreasonably withheld. In order to obtain such approvals, Tenant shall furnish Landlord with plans and specifications; names of contractors acceptable to Landlord; required permits and approvals; evidence of contractor's and subcontractor's insurance in amounts reasonably required by Landlord and naming Landlord as an additional insured; and any security for performance in amounts reasonably required by Landlord. Tenant shall reimburse Landlord for any sums paid by Landlord for third party examination of Tenant's plans for Alterations. In addition, Tenant shall pay Landlord a fee for Landlord's oversight and coordination of any Alterations equal to 10% of the cost of the Alterations. Upon completion, Tenant shall furnish "as-built" plans for Alterations, completion affidavits and full and final waivers of lien. 9. ENTRY BY LANDLORD. Landlord may enter the Premises to inspect the Premises, to clean and make repairs, alterations or additions and to perform or facilitate maintenance, repairs, alterations or additions to any portion of the Building and to show the Premises during the one year period prior to the Termination Date (as such Termination Date may be extended if Tenant exercises the Renewal Option defined in Exhibit E). Except in emergencies or to provide Building services, Landlord shall provide Tenant with reasonable prior verbal notice of entry. Entry by Landlord shall not constitute a constructive eviction or entitle Tenant to an abatement or reduction of Rent. 10. ASSIGNMENT AND SUBLETTING. Tenant shall not assign, sublease, transfer or encumber any interest in this Lease or allow any third party to use any portion of the Premises (collectively or individually, a "TRANSFER") without the prior written consent of Landlord, which consent shall not be unreasonably withheld if Landlord does not exercise its recapture rights. Any attempted Transfer in violation of this Article shall, at Landlord's option, be void. Within 15 Business Days after receipt of executed copies of the transfer documentation and such other information as Landlord may request, Landlord shall either: (a) consent to the Transfer by execution of a consent agreement in a form reasonably designated by Landlord; (b) refuse to consent to the Transfer; or (c) recapture the portion of the Premises that Tenant is proposing to Transfer. If Landlord exercises its right to recapture, the Lease shall automatically be amended to delete the applicable portion of the Premises effective on the proposed effective date of the Transfer. In no event shall any Transfer release or relieve Tenant from any obligation under this Lease. Tenant shall pay Landlord a review fee of $1,500.00 for Landlord's review of any requested Transfer. Tenant shall pay Landlord as Additional Rent 50% of all rent and other consideration which Tenant receives as a result of a Transfer that is in excess of the Rent payable to Landlord for the portion of the Premises and Term covered by the Transfer. If Tenant is in Default, Landlord may require that all sublease payments be made directly to Landlord, in which case Tenant shall receive a credit against Rent in the amount of Tenant's share of payments received by Landlord. 11. LIENS. Tenant shall not permit mechanic's or other liens to be placed upon the Property or Premises in connection with any work purportedly done by or for the benefit of Tenant or its transferees. Tenant shall, within 10 days of notice from Landlord, fully discharge any lien by settlement, by bonding or by insuring over the lien in the manner prescribed by Law. If Tenant fails to do so, Landlord may bond, insure over or otherwise discharge the lien. Tenant shall reimburse Landlord for any amount paid by Landlord, including, without limitation, reasonable attorneys' fees. 12. INDEMNITY AND WAIVER OF CLAIMS. Tenant hereby waives all claims against and releases Landlord and its trustees, members, principals, beneficiaries, partners, officers, directors, employees, Mortgagees and agents (the "LANDLORD RELATED PARTIES") from all claims for any injury to or death of persons, damage to property or business loss in any manner related to (a) acts of God, (b) acts of third parties, (c) the bursting or leaking of any tank, water closet, drain or other pipe; (d) the inadequacy or failure of any security services, personnel or equipment. or (e) any matter outside of the reasonable control of Landlord. Notwithstanding the foregoing, except as provided in Section 14 to the contrary, Tenant shall not be required to waive any claims against Landlord (other than for loss or damage to Tenant's business) where such loss or damage is due to Landlord's negligence or willful misconduct. Except to the extent caused by the negligence or willful misconduct of Landlord or any Landlord Related Parties, Tenant shall indemnify, defend and hold Landlord and Landlord Related Parties harmless against and from all liabilities, obligations, damages, penalties, claims, actions, costs, charges and expenses, including, without limitation, reasonable attorneys' fees and other professional fees (if and to the extent permitted by Law), which may be imposed upon, incurred by or asserted against Landlord or any of the Landlord Related Parties by any third party and arising out of or in connection with any damage or injury occurring in the Premises or any acts or omissions (including violations of Law) of Tenant, the Tenant Related Parties or any of Tenant's transferees, contractors or licensees. 13. INSURANCE. Tenant shall maintain the following insurance ("TENANT'S INSURANCE"): (a) Commercial General Liability Insurance applicable to the Premises and its appurtenances providing, on an occurrence basis, a minimum combined single limit of $2,000,000.00; (b) Property/Business Interruption Insurance written on an All Risk or Special Perils form, with coverage for broad form water damage including earthquake sprinkler leakage, at replacement cost value and with a replacement cost endorsement covering all of Tenant's business and trade fixtures, equipment, movable partitions, furniture, merchandise and other personal property within the Premises ("TENANT'S PROPERTY") and any Leasehold Improvements performed by or for the benefit of Tenant; (c) Workers' Compensation Insurance as required by Law and in amounts as may be required by applicable statute and Employers Liability Coverage of at least $1,000,000.00 per occurrence. Any company writing Tenant's Insurance shall have an A.M. Best rating of not less than A-VIII. All Commercial General Liability Insurance policies shall name Landlord (or its successors and assignees), the managing agent for the Building (or any successor), Equity Office Properties Trust, EOP Operating Limited Partnership and their respective members, principals, beneficiaries, partners, officers, directors, employees, and agents, and other designees of Landlord and its successors as the interest of such designees shall appear, as additional insureds. All policies of Tenant's Insurance shall contain endorsements that the insurer(s) shall give Landlord and its designees at least 30 days' advance written notice of any cancellation, termination, material change or lapse of insurance. Tenant shall provide Landlord with a certificate of insurance evidencing Tenant's Insurance prior to the earlier to occur of the Commencement Date or the date Tenant is provided with possession of the Premises, and thereafter as necessary to assure that Landlord always has current certificates evidencing Tenant's Insurance. 14. SUBROGATION. Landlord and Tenant hereby waive and shall cause their respective insurance carriers to waive any and all rights of recovery, claims, actions or causes of action against the other for any loss or damage with respect to Tenant's Property, Leasehold Improvements, the Building, the Premises, or any contents thereof, including rights, claims, actions and causes of action based on negligence, which loss or damage is (or would have been, had the insurance required by this Lease been carried) covered by insurance. 15. CASUALTY DAMAGE. Landlord, by notice to Tenant within 60 days of the date of the fire or other casualty (a "CASUALTY"), shall have the right to terminate this Lease if all or any part of the Premises is damaged to the extent that it cannot reasonably be repaired within 120 days after the date of the Casualty. If this Lease is not terminated, Landlord shall promptly and diligently, restore the Premises. Such restoration shall be to substantially the same condition that existed prior to the Casualty, except for modifications required by Law. Upon notice from Landlord, Tenant shall assign to Landlord (or to any party designated by Landlord) all property insurance proceeds payable to Tenant under Tenant's Insurance with respect to any Leasehold Improvements performed by or for the benefit of Tenant; provided if the estimated cost to repair such Leasehold Improvements exceeds the amount of insurance proceeds received by Landlord from Tenant's insurance carrier, the excess cost of such repairs shall be paid by Tenant to Landlord prior to Landlord's commencement of repairs. Within 15 days of demand, Tenant shall also pay Landlord for any additional excess costs that are determined during the performance of the repairs. Landlord shall not be liable for any inconvenience to Tenant, or injury to Tenant's business resulting in any way from the Casualty or the repair thereof. Provided that Tenant is not in Default, during any period of time that all or a material portion of the Premises is rendered untenantable as a result of a Casualty, the Rent shall abate for the portion of the Premises that is untenantable and not used by Tenant. 16. CONDEMNATION. Either party may terminate this Lease if any material part of the Premises is taken or condemned for any public or quasi-public use under Law, by eminent domain or private purchase in lieu thereof (a "TAKING"). Landlord shall also have the right to terminate this Lease if there is a Taking of any portion of the Building or Property which would have a material adverse effect on Landlord's ability to profitably operate the remainder of the Building. The terminating party shall provide written notice of termination to the other party within 45 days after it first receives notice of the Taking. The termination shall be effective on the date the physical taking occurs. All compensation awarded for a Taking, or sale proceeds, shall be the property of Landlord. 17. EVENTS OF DEFAULT. Each of the following occurrences shall be considered to be a "DEFAULT": (a) Tenant's failure to pay any portion of Rent when due, if the failure continues for 3 days after written notice to Tenant, which notice shall be in satisfaction of, and not in addition to, notice required by Law ("MONETARY DEFAULT"); or (b) Tenant's failure (other than a Monetary Default) to comply with any term, provision, condition or covenant of this Lease, if the failure is not cured within 10 days after written notice to Tenant, which notice shall be in satisfaction of, and not in addition to, notice required by Law, provided, however, if Tenant's failure to comply cannot reasonably be cured within 10 days, Tenant shall be allowed additional time (not to exceed 60 days) as is reasonably necessary to cure the failure so long as Tenant commences to cure within 10 days and Tenant diligently pursues the cure to completion. 18. REMEDIES. 18.01 Upon Default, Landlord shall have the right to terminate this Lease or Tenant's right to possession, in which case Tenant shall immediately surrender the Premises to Landlord. If Tenant fails to surrender the Premises, Landlord may, in compliance with Law, enter upon and take possession of the Premises. Tenant shall pay Landlord, on demand, all past due Rent and other losses and damages Landlord suffers as a result of Tenant's Default, including, without limitation, all Costs of Reletting (defined below) and any deficiency that may arise from reletting or the failure to relet the Premises. "COSTS OF RELETTING" shall include all costs and expenses incurred by Landlord in reletting or attempting to relet the Premises, including, without limitation, reasonable legal fees, brokerage commissions, the cost of alterations and the value of other concessions or allowances granted to a new tenant. Landlord may collect and receive all rents and other income from the reletting. Landlord shall not be responsible or liable for the failure to relet all or any part of the Premises or for the failure to collect any rent. 18.02 In lieu of calculating damages under Sections 18.01 above, Landlord may elect to receive as damages the sum of (a) all Rent accrued through the date of termination of this Lease or Tenant's right to possession, and (b) an amount equal to the total Rent that Tenant would have been required to pay for the remainder of the Term discounted to present value, minus the then present fair rental value of the Premises for the remainder of the Term, similarly discounted, after deducting all anticipated Costs of Reletting. If Tenant is in Default of any of its non-monetary obligations under the Lease, Landlord shall have the right to perform such obligations. Tenant shall reimburse Landlord for the cost of such performance upon demand together with an administrative charge equal to 10% of the cost of the work performed by Landlord. The repossession or re-entering of all or any part of the Premises shall not relieve Tenant of its liabilities and obligations under the Lease. No right or remedy of Landlord shall be exclusive of any other right or remedy. Each right and remedy shall be non-exclusive, cumulative and in addition to any other right and remedy now or subsequently available to Landlord at Law or in equity. 19. LIMITATION OF LIABILITY. THE LIABILITY OF LANDLORD (AND OF ANY SUCCESSOR LANDLORD) SHALL BE LIMITED TO THE LESSER OF (A) THE INTEREST OF LANDLORD IN THE PROPERTY, OR (B) THE EQUITY INTEREST LANDLORD WOULD HAVE IN THE PROPERTY IF THE PROPERTY WERE ENCUMBERED BY THIRD PARTY DEBT IN AN AMOUNT EQUAL TO 70% OF THE VALUE OF THE PROPERTY PLUS THE AMOUNTOF THE SECURITY DEPOSIT HELD BY LANDLORD. TENANT SHALL LOOK SOLELY TO LANDLORD'S INTEREST IN THE PROPERTY FOR THE RECOVERY OF ANY JUDGMENT OR AWARD AGAINST LANDLORD OR ANY LANDLORD RELATED PARTY. NEITHER LANDLORD NOR ANY LANDLORD RELATED PARTY SHALL BE PERSONALLY LIABLE FOR ANY JUDGMENT OR DEFICIENCY AND IN NO EVENT SHALL LANDLORD OR ANY LANDLORD RELATED PARTY BE LIABLE TO TENANT FOR ANY LOST PROFIT, DAMAGE TO OR LOSS OF BUSINESS OR ANY FORM OF SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGE. BEFORE FILING SUIT FOR AN ALLEGED DEFAULT BY LANDLORD, TENANT SHALL GIVE LANDLORD AND THE MORTGAGEE(S) (DEFINED IN SECTION 22 BELOW) WHOM TENANT HAS BEEN NOTIFIED HOLD MORTGAGES (DEFINED IN SECTION 22 BELOW), NOTICE AND REASONABLE TIME TO CURE THE ALLEGED DEFAULT. 20. RELOCATION. Landlord, at its expense, at any time before or during the Term, may relocate Tenant from the Premises to space of reasonably comparable size and utility ("RELOCATION SPACE") within the Building upon 60 days' prior written notice to Tenant. From and after the date of the relocation, "Premises" shall refer to the Relocation Space into which Tenant has been moved and the Base Rent and Tenant's Pro Rata Share shall be adjusted based on the rentable square footage of the Relocation Space. 21. HOLDING OVER. If Tenant fails to surrender all or any part of the Premises at the termination of this Lease, occupancy of the Premises after termination shall be that of a tenancy at sufferance. Tenant's occupancy shall be subject to all the terms and provisions of this Lease and Tenant shall pay an amount (on a per month basis without reduction for partial months during the holdover) equal to 150% of the sum of the Base Rent and Additional Rent due for the period immediately preceding the holdover. No holdover by Tenant or payment by Tenant after the termination of this Lease shall be construed to extend the Term or prevent Landlord from immediate recovery of possession of the Premises by summary proceedings or otherwise. 22. SUBORDINATION TO MORTGAGES; ESTOPPEL CERTIFICATE. Tenant accepts this Lease subject and subordinate to any mortgage(s), deed(s) of trust, ground lease(s) or other lien(s) now or subsequently arising upon the Premises, the Building or the Property, and to renewals, modifications, refinancings and extensions thereof (collectively referred to as a "MORTGAGE"). This clause shall be self-operative, but upon request from the holder of a Mortgage (a "MORTGAGEE"), Tenant shall execute a commercially reasonable subordination agreement. As an alternative, a Mortgagee shall have the right at any time to subordinate its Mortgage to this Lease. Upon request, Tenant shall, without charge, attorn to any successor to Landlord's interest in the Lease. Tenant shall, within 10 days after receipt of a written request from Landlord, execute and deliver a commercially reasonable estoppel certificate to those parties as are reasonably requested by Landlord. 23. NOTICE. All demands, approvals, consents or notices shall be in writing and delivered by hand or sent by registered or certified mail with return receipt requested, or sent by overnight or same day courier service at the party's respective Notice Address(es) set forth in Section 1. Each notice shall be deemed to have been received on the earlier to occur of actual delivery or the date on which delivery is refused, or, if Tenant has vacated the Premises or any other Notice Address without providing a new Notice Address, 3 days after notice is deposited in the U.S. mail or with a courier service in the manner described above. Either party may, at any time, change its Notice Address (other than to a post office box address) by giving the other party written notice of the new address. 24. SURRENDER OF PREMISES. At the termination of this Lease or Tenant's right of possession, Tenant shall remove Tenant's Property and any designated Required Removables from the Premises, and quit and surrender the Premises to Landlord, broom clean, and in good order, condition and repair, ordinary wear and tear and damage which Landlord is obligated to repair hereunder excepted. If Tenant fails to remove any of Tenant's Property within 2 days after termination, Landlord, at Tenant's sole cost and expense, shall be entitled to remove and store Tenant's Property. Landlord shall not be responsible for the value, preservation or safekeeping of Tenant's Property. Tenant shall pay Landlord, upon demand, the expenses and storage charges incurred. If Tenant fails to remove Tenant's Property from the Premises or storage within 30 days after notice, Landlord may deem all or any part of Tenant's Property to be abandoned and title to Tenant's Property shall vest in Landlord. If Tenant fails to remove any of the designated Required Removables by the Termination Date or perform related repairs in a timely manner, Landlord may perform such work at Tenant's expense. 25. MISCELLANEOUS. 25.01 If either party institutes a suit against the other for violation of or to enforce any covenant, term or condition of this Lease, the prevailing party shall be entitled to all of its costs and expenses, including, without limitation, reasonable attorneys' fees. Landlord and Tenant hereby waive any right to trial by jury in any proceeding based upon a breach of this Lease. Either party's failure to declare a default immediately upon its occurrence, or delay in taking action for a default shall not constitute a waiver of the default, nor shall it constitute an estoppel. 25.02 Whenever a period of time is prescribed for the taking of an action by Landlord or Tenant (other than the payment of the Security Deposit or Rent), the period of time for the performance of such action shall be extended by the number of days that the performance is actually delayed due to strikes, acts of God, shortages of labor or materials, war, terrorist acts, civil disturbances and other causes beyond the reasonable control of the performing party ("FORCE MAJEURE"). Force Majeure shall not include financial difficulties of the party required to perform. 25.03 Landlord shall have the right to transfer and assign, in whole or in part, all of its ownership interest, rights and obligations in the Building, Property or Lease, including the Security Deposit, and upon transfer Landlord shall be released from any further obligations hereunder, and Tenant agrees to look solely to the successor in interest of Landlord for the performance of such obligations and the return of any Security Deposit. Such party shall assume Landlord's obligations under the Lease including, without limitation, those obligations regarding the Security Deposit. 25.04 Landlord has delivered a copy of this Lease to Tenant for Tenant's review only, and the delivery of it does not constitute an offer to Tenant or an option. Tenant represents that it has dealt directly with and only with the Broker as a broker in connection with this Lease. Tenant shall indemnify and hold Landlord and the Landlord Related Parties harmless from all claims of any brokers claiming to have represented Tenant in connection with this Lease. 25.05 The expiration of the Term, whether by lapse of time, termination or otherwise, shall not relieve either party of any obligations which accrued prior to or which may continue to accrue after the expiration or termination of this Lease. 25.06 Tenant shall, and may peacefully have, hold and enjoy the Premises, subject to the terms of this Lease, provided Tenant pays the Rent and fully performs all of its covenants and agreements. This covenant and all other covenants of Landlord shall be binding upon Landlord and its successors only during its or their respective periods of ownership of the Building. 25.07 This Lease constitutes the entire agreement between the parties and supersedes all prior agreements and understandings related to the Premises. This Lease may be modified only by a written agreement signed by Landlord and Tenant. This Lease shall be interpreted and enforced in accordance with the Laws of the state or commonwealth in which the Building is located. 25.08 Tenant represents and warrants to Landlord that each individual executing this Lease on behalf of Tenant is authorized to do so on behalf of Tenant and that Tenant is not, and the entities or individuals constituting Tenant or which may own or control Tenant or which may be owned or controlled by Tenant are not, among the individuals or entities identified on any list compiled pursuant to Executive Order 13224 for the purpose of identifying suspected terrorists. Landlord represents and warrants to Tenant that each individual executing this Lease on behalf of Landlord is authorized to do so on behalf of Landlord. Landlord and Tenant have executed this Lease as of the day and year first above written.
WITNESS/ATTEST: LANDLORD: CT-STAMFORD ATLANTIC FORUM, L.L.C., A DELAWARE LIMITED LIABILITY COMPANY By: Equity Office Management, L.L.C., a Delaware limited /s/ Shanna Charles liability company, its non-member manager Name (print): Shanna Charles By: /s/ Thomas Q. Bakke ___________________________ Name: Thomas Q. Bakke Name (print): ________________ Title: Regional Senior Vice President WITNESS/ATTEST: TENANT: CLEAN DIESEL TECHNOLOGIES, INC., A DELAWARE CORPORATION By: /s/ D.W. Whitwell /s/ Pat McCoy Name: David W. Whitwell Name (print): Pat McCoy Title: Vice President & Chief Operating Officer /s/ Curtis J. Knapper 06-1393453 Name (print): Curtis J. Knapper TENANT'S TAX ID NUMBER (SSN OR FEIN)
EXHIBIT A OUTLINE AND LOCATION OF PREMISES -------------------------------- EXHIBIT B EXPENSES AND TAXES This Exhibit is attached to and made a part of the Lease by and between CT-STAMFORD ATLANTIC FORUM, L.L.C., A DELAWARE LIMITED LIABILITY COMPANY ("Landlord") and CLEAN DIESEL TECHNOLOGIES, INC., A DELAWARE CORPORATION ("Tenant") for space in the Building located at 300 Atlantic Street, Stamford, Connecticut 06901. 1. PAYMENTS. 1.01 Tenant shall pay Tenant's Pro Rata Share of the amount, if any, by which Expenses (defined below) for each calendar year during the Term exceed Expenses for the Base Year (the "EXPENSE EXCESS") and also the amount, if any, by which Taxes (defined below) for each calendar year during the Term exceed Taxes for the Base Year (the "TAX EXCESS"). If Expenses or Taxes in any calendar year decrease below the amount of Expenses or Taxes for the Base Year, Tenant's Pro Rata Share of Expenses or Taxes, as the case may be, for that calendar year shall be $0. Landlord shall provide Tenant with a good faith estimate of the Expense Excess and of the Tax Excess for each calendar year during the Term. On or before the first day of each month, Tenant shall pay to Landlord a monthly installment equal to one-twelfth of Tenant's Pro Rata Share of Landlord's estimate of both the Expense Excess and Tax Excess. After its receipt of the revised estimate, Tenant's monthly payments shall be based upon the revised estimate. If Landlord does not provide Tenant with an estimate of the Expense Excess or the Tax Excess by January 1 of a calendar year, Tenant shall continue to pay monthly installments based on the previous year's estimate(s) until Landlord provides Tenant with the new estimate. 1.02 As soon as is practical following the end of each calendar year, Landlord shall furnish Tenant with a statement of the actual Expenses and Expense Excess and the actual Taxes and Tax Excess for the prior calendar year. If the estimated Expense Excess or estimated Tax Excess for the prior calendar year is more than the actual Expense Excess or actual Tax Excess, as the case may be, for the prior calendar year, Landlord shall either provide Tenant with a refund or apply any overpayment by Tenant against Additional Rent due or next becoming due, provided if the Term expires before the determination of the overpayment, Landlord shall refund any overpayment to Tenant after first deducting the amount of Rent due. If the estimated Expense Excess or estimated Tax Excess for the prior calendar year is less than the actual Expense Excess or actual Tax Excess, as the case may be, for such prior year, Tenant shall pay Landlord, within 30 days after its receipt of the statement of Expenses or Taxes, any underpayment for the prior calendar year. 2. EXPENSES. 2.01 "EXPENSES" means all costs and expenses incurred in each calendar year in connection with operating, maintaining, repairing, and managing the Building and the Property. Expenses include, without limitation: (a) all labor and labor related costs, including wages, salaries, bonuses, taxes, insurance, uniforms, training, retirement plans, pension plans and other employee benefits; (b) management fees; (c) the cost of equipping, staffing and operating an on-site and/or off-site management office for the Building, provided if the management office services one or more other buildings or properties, the shared costs and expenses of equipping, staffing and operating such management office(s) shall be equitably prorated and apportioned between the Building and the other buildings or properties; (d) accounting costs; (e) the cost of services; (f) rental and purchase cost of parts, supplies, tools and equipment; (g) insurance premiums and deductibles; (h) electricity, gas and other utility costs; and (i) the amortized cost of capital improvements (as distinguished from replacement parts or components installed in the ordinary course of business) made subsequent to the Base Year which are: (1) performed primarily to reduce current or future operating expense costs, upgrade Building security or otherwise improve the operating efficiency of the Property; or (2) required to comply with any Laws that are enacted, or first interpreted to apply to the Property, after the date of this Lease. The cost of capital improvements shall be amortized by Landlord over the lesser of the Payback Period (defined below) or the useful life of the capital improvement as reasonably determined by Landlord. The amortized cost of capital improvements may, at Landlord's option, include actual or imputed interest at the rate that Landlord would reasonably be required to pay to finance the cost of the capital improvement. "PAYBACK PERIOD" means the reasonably estimated period of time that it takes for the cost savings resulting from a capital improvement to equal the total cost of the capital improvement. Landlord, by itself or through an affiliate, shall have the right to directly perform, provide and be compensated for any services under this Lease. If Landlord incurs Expenses for the Building or Property together with one or more other buildings or properties, whether pursuant to a reciprocal easement agreement, common area agreement or otherwise, the shared costs and expenses shall be equitably prorated and apportioned between the Building and Property and the other buildings or properties. 2.02 Expenses shall not include: the cost of capital improvements (except as set forth above); depreciation; principal payments of mortgage and other non-operating debts of Landlord; the cost of repairs or other work to the extent Landlord is reimbursed by insurance or condemnation proceeds; costs in connection with leasing space in the Building, including brokerage commissions; lease concessions, rental abatements and construction allowances granted to specific tenants; costs incurred in connection with the sale, financing or refinancing of the Building; fines, interest and penalties incurred due to the late payment of Taxes or Expenses; organizational expenses associated with the creation and operation of the entity which constitutes Landlord; or any penalties or damages that Landlord pays to Tenant under this Lease or to other tenants in the Building under their respective leases. 2.03 If at any time during a calendar year the Building is not at least 95% occupied or Landlord is not supplying services to at least 95% of the total Rentable Square Footage of the Building, Expenses shall, at Landlord's option, be determined as if the Building had been 95% occupied and Landlord had been supplying services to 95% of the Rentable Square Footage of the Building. If Expenses for a calendar year are determined as provided in the prior sentence, Expenses for the Base Year shall also be determined in such manner. Notwithstanding the foregoing, Landlord may calculate the extrapolation of Expenses under this Section based on 100% occupancy and service so long as such percentage is used consistently for each year of the Term. The extrapolation of Expenses under this Section shall be performed in accordance with the methodology specified by the Building Owners and Managers Association. 3. "TAXES" shall mean: (a) all real property taxes and other assessments on the Building and/or Property, including, but not limited to, gross receipts taxes, assessments for special improvement districts and building improvement districts, governmental charges, fees and assessments for police, fire, traffic mitigation or other governmental service of purported benefit to the Property, taxes and assessments levied in substitution or supplementation in whole or in part of any such taxes and assessments and the Property's share of any real estate taxes and assessments under any reciprocal easement agreement, common area agreement or similar agreement as to the Property; (b) all personal property taxes for property that is owned by Landlord and used in connection with the operation, maintenance and repair of the Property; and (c) all costs and fees incurred in connection with seeking reductions in any tax liabilities described in (a) and (b), including, without limitation, any costs incurred by Landlord for compliance, review and appeal of tax liabilities. Without limitation, Taxes shall not include any income, capital levy, transfer, capital stock, gift, estate or inheritance tax. If a change in Taxes is obtained for any year of the Term during which Tenant paid Tenant's Pro Rata Share of any Tax Excess, then Taxes for that year will be retroactively adjusted and Landlord shall provide Tenant with a credit, if any, based on the adjustment. Likewise, if a change is obtained for Taxes for the Base Year, Taxes for the Base Year shall be restated and the Tax Excess for all subsequent years shall be recomputed. Tenant shall pay Landlord the amount of Tenant's Pro Rata Share of any such increase in the Tax Excess within 30 days after Tenant's receipt of a statement from Landlord. 4. AUDIT RIGHTS. Tenant, within 365 days after receiving Landlord's statement of Expenses, may give Landlord written notice ("REVIEW NOTICE") that Tenant intends to review Landlord's records of the Expenses for the calendar year to which the statement applies. Within a reasonable time after receipt of the Review Notice, Landlord shall make all pertinent records available for inspection that are reasonably necessary for Tenant to conduct its review. If any records are maintained at a location other than the management office for the Building, Tenant may either inspect the records at such other location or pay for the reasonable cost of copying and shipping the records. If Tenant retains an agent to review Landlord's records, the agent must be with a CPA firm licensed to do business in the state or commonwealth where the Property is located. Tenant shall be solely responsible for all costs, expenses and fees incurred for the audit. Within 90 days after the records are made available to Tenant, Tenant shall have the right to give Landlord written notice (an "OBJECTION NOTICE") stating in reasonable detail any objection to Landlord's statement of Expenses for that year. If Tenant fails to give Landlord an Objection Notice within the 90 day period or fails to provide Landlord with a Review Notice within the 365 day period described above, Tenant shall be deemed to have approved Landlord's statement of Expenses and shall be barred from raising any claims regarding the Expenses for that year. The records obtained by Tenant shall be treated as confidential. In no event shall Tenant be permitted to examine Landlord's records or to dispute any statement of Expenses unless Tenant has paid and continues to pay all Rent when due. EXHIBIT C WORK LETTER ----------- This Exhibit is attached to and made a part of the Lease by and between CT-STAMFORD ATLANTIC FORUM, L.L.C., A DELAWARE LIMITED LIABILITY COMPANY ("Landlord") and CLEAN DIESEL TECHNOLOGIES, INC., A DELAWARE CORPORATION ("Tenant") for space in the Building located at 300 Atlantic Street, Stamford, Connecticut 06901. 1. Landlord shall perform improvements to the Premises in accordance with the plans prepared by _________________________________________, dated _____________, 2003, (the "PLANS"). The improvements to be performed by Landlord in accordance with the Plans and expressly listed on the Work List below are hereinafter referred to as the "LANDLORD WORK." The Landlord Work shall be performed using Building standard methods, materials and finishes. It is agreed that construction of the Landlord Work will be completed at Landlord's sole cost and expense (subject to the terms of Section 2 below) using Building standard methods, materials and finishes. Landlord shall enter into a direct contract for the Landlord Work with a general contractor selected by Landlord. In addition, Landlord shall have the right to select and/or approve of any subcontractors used in connection with the Landlord Work. Landlord's supervision or performance of any work for or on behalf of Tenant shall not be deemed a representation by Landlord that such Plans or the revisions thereto comply with applicable insurance requirements, building codes, ordinances, Laws or regulations, or that the improvements constructed in accordance with the Plans and any revisions thereto will be adequate for Tenant's use, it being agreed that Tenant shall be responsible for all elements of the design of Tenant's plans (including, without limitation, compliance with Law, functionality of design, the structural integrity of the design, the configuration of the Premises and the placement of Tenant's furniture, appliances and equipment). WORK LIST - Repaint the Premises as needed. - Install new carpeting in the Premises. - Relocate existing door signage to the door of the Premises. 2. If Tenant shall request any revisions to the Plans, Landlord shall have such revisions prepared at Tenant's sole cost and expense and Tenant shall reimburse Landlord for the cost of preparing any such revisions to the Plans, plus any applicable state sales or use tax thereon, upon demand. Promptly upon completion of the revisions, Landlord shall notify Tenant in writing of the increased cost in the Landlord Work, if any, resulting from such revisions to the Plans. Tenant, within 1 Business Day, shall notify Landlord in writing whether it desires to proceed with such revisions. In the absence of such written authorization, Landlord shall have the option to continue work on the Premises disregarding the requested revision. Tenant shall be responsible for any Tenant Delay in completion of the Premises resulting from any revision to the Plans. If such revisions result in an increase in the cost of Landlord Work, such increased costs, plus any applicable state sales or use tax thereon, shall be payable by Tenant upon demand. Notwithstanding anything herein to the contrary, all revisions to the Plans shall be subject to the approval of Landlord. 3. Landlord and Tenant agree to cooperate with each other in order to enable the Landlord Work to be performed in a timely manner and with as little inconvenience to the operation of Tenant's business as is reasonably possible. Notwithstanding anything herein to the contrary, any delay in the completion of the Landlord Work or inconvenience suffered by Tenant during the performance of the Landlord Work shall not delay the Commencement Date nor shall it subject Landlord to any liability for any loss or damage resulting therefrom or entitle Tenant to any credit, abatement or adjustment of Rent or other sums payable under the Lease. 4. This Exhibit shall not be deemed applicable to any additional space added to the Premises at any time or from time to time, whether by any options under the Lease or otherwise, or to any portion of the original Premises or any additions to the Premises in the event of a renewal or extension of the original Term of the Lease, whether by any options under the Lease or otherwise, unless expressly so provided in the Lease or any amendment or supplement to the Lease. EXHIBIT D BUILDING RULES AND REGULATIONS ------------------------------ The following rules and regulations shall apply, where applicable, to the Premises, the Building, the parking garage (if any), the Property and the appurtenances. In the event of a conflict between the following rules and regulations and the remainder of the terms of the Lease, the remainder of the terms of the Lease shall control. Capitalized terms have the same meaning as defined in the Lease. 1. Sidewalks, doorways, vestibules, halls, stairways and other similar areas shall not be obstructed by Tenant or used by Tenant for any purpose other than ingress and egress to and from the Premises. No rubbish, litter, trash, or material shall be placed, emptied, or thrown in those areas. At no time shall Tenant permit Tenant's employees to loiter in Common Areas or elsewhere about the Building or Property. 2. Plumbing fixtures and appliances shall be used only for the purposes for which designed, and no sweepings, rubbish, rags or other unsuitable material shall be thrown or placed in the fixtures or appliances. Damage resulting to fixtures or appliances by Tenant, its agents, employees or invitees, shall be paid for by Tenant, and Landlord shall not be responsible for the damage. 3. No signs, advertisements or notices shall be painted or affixed to windows, doors or other parts of the Building, except those of such color, size, style and in such places as are first approved in writing by Landlord. All tenant identification and suite numbers at the entrance to the Premises shall be installed by Landlord, at Tenant's cost and expense, using the standard graphics for the Building. Except in connection with the hanging of lightweight pictures and wall decorations, no nails, hooks or screws shall be inserted into any part of the Premises or Building except by the Building maintenance personnel without Landlord's prior approval, which approval shall not be unreasonably withheld. 4. Landlord may provide and maintain in the first floor (main lobby) of the Building an alphabetical directory board or other directory device listing tenants, and no other directory shall be permitted unless previously consented to by Landlord in writing. 5. Tenant shall not place any lock(s) on any door in the Premises or Building without Landlord's prior written consent, which consent shall not be unreasonably withheld, and Landlord shall have the right to retain at all times and to use keys or other access codes or devices to all locks within and into the Premises. A reasonable number of keys to the locks on the entry doors in the Premises shall be furnished by Landlord to Tenant at Tenant's cost, and Tenant shall not make any duplicate keys. All keys shall be returned to Landlord at the expiration or early termination of this Lease. 6. All contractors, contractor's representatives and installation technicians performing work in the Building shall be subject to Landlord's prior approval, which approval shall not be unreasonably withheld, and shall be required to comply with Landlord's standard rules, regulations, policies and procedures, which may be revised from time to time. 7. Movement in or out of the Building of furniture or office equipment, or dispatch or receipt by Tenant of merchandise or materials requiring the use of elevators, stairways, lobby areas or loading dock areas, shall be restricted to hours reasonably designated by Landlord. Tenant shall obtain Landlord's prior approval by providing a detailed listing of the activity. If approved by Landlord, the activity shall be under the supervision of Landlord and performed in the manner required by Landlord. Tenant shall assume all risk for damage to articles moved and injury to any persons resulting from the activity. If equipment, property, or personnel of Landlord or of any other party is damaged or injured as a result of or in connection with the activity, Tenant shall be solely liable for any resulting damage or loss. 8. Landlord shall have the right to approve the weight, size, or location of heavy equipment or articles in and about the Premises, which approval shall not be unreasonably withheld. Damage to the Building by the installation, maintenance, operation, existence or removal of Tenant's Property shall be repaired at Tenant's sole expense. 9. Corridor doors, when not in use, shall be kept closed. 10. Tenant shall not: (1) make or permit any improper, objectionable or unpleasant noises or odors in the Building, or otherwise interfere in any way with other tenants or persons having business with them; (2) solicit business or distribute, or cause to be distributed, in any portion of the Building, handbills, promotional materials or other advertising; or (3) conduct or permit other activities in the Building that might, in Landlord's sole opinion, constitute a nuisance. 11. No animals, except those assisting handicapped persons, shall be brought into the Building or kept in or about the Premises. 12. No inflammable, explosive or dangerous fluids or substances shall be used or kept by Tenant in the Premises, Building or about the Property, except for those substances as are typically found in similar premises used for general office purposes and are being used by Tenant in a safe manner and in accordance with all applicable laws, rules and regulations. Tenant shall not, without Landlord's prior written consent, use, store, install, spill, remove, release or dispose of, within or about the Premises or any other portion of the Property, any asbestos-containing materials or any solid, liquid or gaseous material now or subsequently considered toxic or hazardous under the provisions of 42 U.S.C. Section 9601 et seq. or any other applicable environmental Law which may now or later be in effect. Tenant shall comply with all Laws pertaining to and governing the use of these materials by Tenant, and shall remain solely liable for the costs of abatement and removal. 13. Tenant shall not use or occupy the Premises in any manner or for any purpose which might injure the reputation or impair the present or future value of the Premises or the Building. Tenant shall not use, or permit any part of the Premises to be used, for lodging, sleeping or for any illegal purpose. 14. Tenant shall not take any action which would violate Landlord's labor contracts or which would cause a work stoppage, picketing, labor disruption or dispute, or interfere with Landlord's or any other tenant's or occupant's business or with the rights and privileges of any person lawfully in the Building ("Labor Disruption"). Tenant shall take the actions necessary to resolve the Labor Disruption, and shall have pickets removed and, at the request of Landlord, immediately terminate any work in the Premises that gave rise to the Labor Disruption, until Landlord gives its written consent for the work to resume. Tenant shall have no claim for damages against Landlord or any of the Landlord Related Parties, nor shall the Commencement Date of the Term be extended as a result of the above actions. 15. Tenant shall not install, operate or maintain in the Premises or in any other area of the Building, electrical equipment that would overload the electrical system beyond its capacity for proper, efficient and safe operation as determined solely by Landlord. Tenant shall not furnish cooling or heating to the Premises, including, without limitation, the use of electronic or gas heating devices, without Landlord's prior written consent. Tenant shall not use more than its proportionate share of telephone lines and other telecommunication facilities available to service the Building. 16. Tenant shall not operate or permit to be operated a coin or token operated vending machine or similar device (including, without limitation, telephones, lockers, toilets, scales, amusement devices and machines for sale of beverages, foods, candy, cigarettes and other goods), except for machines for the exclusive use of Tenant's employees and invitees. 17. Bicycles and other vehicles are not permitted inside the Building or on the walkways outside the Building, except in areas designated by Landlord. 18. Landlord may from time to time adopt systems and procedures for the security and safety of the Building, its occupants, entry, use and contents. Tenant, its agents, employees, contractors, guests and invitees shall comply with Landlord's systems and procedures. 19. Landlord shall have the right to prohibit the use of the name of the Building or any other publicity by Tenant that in Landlord's sole opinion may impair the reputation of the Building or its desirability. Upon written notice from Landlord, Tenant shall refrain from and discontinue such publicity immediately. 20. Neither Tenant nor its agents, employees, contractors, guests or invitees shall smoke or permit smoking in the Common Areas, unless the Common Areas have been declared a designated smoking area by Landlord, nor shall the above parties allow smoke from the Premises to emanate into the Common Areas or any other part of the Building. Landlord shall have the right to designate the Building (including the Premises) as a non-smoking building. 21. Landlord shall have the right to designate and approve standard window coverings for the Premises and to establish rules to assure that the Building presents a uniform exterior appearance. Tenant shall ensure, to the extent reasonably practicable, that window coverings are closed on windows in the Premises while they are exposed to the direct rays of the sun. 22. Deliveries to and from the Premises shall be made only at the times, in the areas and through the entrances and exits reasonably designated by Landlord. Tenant shall not make deliveries to or from the Premises in a manner that might interfere with the use by any other tenant of its premises or of the Common Areas, any pedestrian use, or any use which is inconsistent with good business practice. 23. The work of cleaning personnel shall not be hindered by Tenant after 5:30 p.m., and cleaning work may be done at any time when the offices are vacant. Windows, doors and fixtures may be cleaned at any time. Tenant shall provide adequate waste and rubbish receptacles to prevent unreasonable hardship to the cleaning service. EXHIBIT E ADDITIONAL PROVISIONS --------------------- This Exhibit is attached to and made a part of the Lease by and between CT-STAMFORD ATLANTIC FORUM, L.L.C., A DELAWARE LIMITED LIABILITY COMPANY ("Landlord") and CLEAN DIESEL TECHNOLOGIES, INC., A DELAWARE CORPORATION ("Tenant") for space in the Building located at 300 Atlantic Street, Stamford, Connecticut 06901. 1. PARKING. 1.01 During the initial Term, Tenant agrees to lease from Landlord and Landlord agrees to lease to Tenant a total of 9 unreserved parking spaces (collectively, the "SPACES") in the Building garage ("GARAGE") for the use of Tenant and its employees at no additional charge. No allowances shall be made for days when Tenant or any of its employees does not utilize the parking facilities or for Tenant utilizing less than all of the Spaces. Tenant shall not have the right to use more than the number of unreserved Spaces set forth above but may request to lease additional Spaces from Landlord and, if Landlord agrees to do so, Tenant shall pay Landlord the standard charge for such additional Spaces as Additional Rent at Landlord's standard charge (as such charge may be changed by Landlord from time to time). 1.02 Except for particular spaces and areas designated by Landlord for reserved parking, all parking in the Garage and surface parking areas serving the Building shall be on an unreserved, first-come, first-served basis. 1.03 Landlord shall not be responsible for money, jewelry, automobiles or other personal property lost in or stolen from the Garage or the surface parking areas regardless of whether such loss or theft occurs when the Garage or other areas therein are locked or otherwise secured. Except as caused by the negligence or willful misconduct of Landlord and without limiting the terms of the preceding sentence, Landlord shall not be liable for any loss, injury or damage to persons using the Garage or the surface parking areas or automobiles or other property therein, it being agreed that, to the fullest extent permitted by Law, the use of the Spaces shall be at the sole risk of Tenant and its employees. 1.04 Landlord shall have the right from time to time to designate the location of the Spaces and to promulgate reasonable rules and regulations regarding the Garage, the surface parking areas, if any, the Spaces and the use thereof, including, but not limited to, rules and regulations controlling the flow of traffic to and from various parking areas, the angle and direction of parking and the like. Tenant shall comply with and cause its employees to comply with all such rules and regulations as well as all reasonable additions and amendments thereto. 1.05 Tenant shall not store or permit its employees to store any automobiles in the Garage or on the surface parking areas without the prior written consent of Landlord. Except for emergency repairs, Tenant and its employees shall not perform any work on any automobiles while located in the Garage or on the Property. If it is necessary for Tenant or its employees to leave an automobile in the Garage or on the surface parking areas overnight, Tenant shall provide Landlord with prior notice thereof designating the license plate number and model of such automobile. 1.06 Landlord shall have the right to temporarily close the Garage or certain areas therein in order to perform necessary repairs, maintenance and improvements to the Garage or the surface parking areas, if any. 1.07 Tenant shall not assign or sublease any of the Spaces without the consent of Landlord. Landlord shall have the right to terminate this Parking Agreement with respect to any Spaces that Tenant desires to sublet or assign. 1.08 Landlord may elect to provide parking cards or keys to control access to the Garage or surface parking areas, if any. In such event, Landlord shall provide Tenant with one card or key for each Space that Tenant is leasing hereunder, provided that Landlord shall have the right to require Tenant or its employees to place a deposit on such access cards or keys and to pay a fee for any lost or damaged cards or keys. 1.09 Landlord hereby reserves the right to enter into a management agreement or lease with an entity for the Garage ("GARAGE OPERATOR"). In such event, Tenant, upon request of Landlord, shall enter into a parking agreement with the Garage Operator and pay the Garage Operator the monthly charge established hereunder (if any), and Landlord shall have no liability for claims arising through acts or omissions of the Garage Operator unless caused by Landlord's negligence or willful misconduct. It is understood and agreed that the identity of the Garage Operator may change from time to time during the Term. In connection therewith, any parking lease or agreement entered into between Tenant and a Garage Operator shall be freely assignable by such Garage Operator or any successors thereto. 2. RENEWAL OPTION. 2.01 Grant of Option; Conditions. Tenant shall have the right to extend the --------------------------- Term (the "RENEWAL OPTION") for one additional period of 5 years commencing on the day following the Termination Date of the initial Term and ending on the 5th anniversary of the Termination Date (the "RENEWAL TERM"), if: a. Landlord receives notice of exercise ("INITIAL RENEWAL NOTICE") not less than 12 full calendar months prior to the expiration of the initial Term; and b. Tenant is not in default under the Lease beyond any applicable cure periods at the time that Tenant delivers its Initial Renewal Notice or at the time Tenant delivers its Binding Notice (as defined below); and c. No part of the Premises is sublet (other than pursuant to a Permitted Transfer, as defined in Article 11 of the Lease) at the time that Tenant delivers its Initial Renewal Notice or at the time Tenant delivers its Binding Notice; and d. The Lease has not been assigned (other than pursuant to a Permitted Transfer, as defined in 11 of the Lease) prior to the date that Tenant delivers its Initial Renewal Notice or prior to the date Tenant delivers its Binding Notice. 2.02 Terms Applicable to Premises During Renewal Term. ------------------------------------------------------- a. The initial Base Rent rate per rentable square foot for the Premises during the Renewal Term shall equal the Prevailing Market (hereinafter defined) rate per rentable square foot for the Premises. Base Rent during the Renewal Term shall increase, if at all, in accordance with the increases assumed in the determination of Prevailing Market rate. Base Rent attributable to the Premises shall be payable in monthly installments in accordance with the terms and conditions of Article 3 of the Lease. b. Tenant shall pay Additional Rent (i.e. Taxes and Expenses) for the Premises during the Renewal Term in accordance with Article 3 of the Lease, and the manner and method in which Tenant reimburses Landlord for Tenant's share of Taxes and Expenses and the Base Year, if any, applicable to such matter, shall be some of the factors considered in determining the Prevailing Market rate for the Renewal Term. 2.03 Procedure for Determining Prevailing Market. Within 30 days after ----------------------------------------------- receipt of Tenant's Initial Renewal Notice, Landlord shall advise Tenant of the applicable Base Rent rate for the Premises for the Renewal Term. Tenant, within 15 days after the date on which Landlord advises Tenant of the applicable Base Rent rate for the Renewal Term, shall either (i) give Landlord final binding written notice ("BINDING NOTICE") of Tenant's exercise of its Renewal Option, or (ii) if Tenant disagrees with Landlord's determination, provide Landlord with written notice of rejection (the "REJECTION NOTICE"). If Tenant fails to provide Landlord with either a Binding Notice or Rejection Notice within such 15 day period, Tenant's Renewal Option shall be null and void and of no further force and effect. If Tenant provides Landlord with a Binding Notice, Landlord and Tenant shall enter into the Renewal Amendment (as defined below) upon the terms and conditions set forth herein. If Tenant provides Landlord with a Rejection Notice, Landlord and Tenant shall work together in good faith to agree upon the Prevailing Market rate for the Premises during the Renewal Term. When Landlord and Tenant have agreed upon the Prevailing Market rate for the Premises, such agreement shall be reflected in a written agreement between Landlord and Tenant, whether in a letter or otherwise, and Landlord and Tenant shall enter into the Renewal Amendment in accordance with the terms and conditions hereof. Notwithstanding the foregoing, if Landlord and Tenant are unable to agree upon the Prevailing Market rate for the Premises within 30 days after the date Tenant provides Landlord with the Rejection Notice, Tenant's Renewal Option shall be deemed to be null and void and of no force and effect. 2.04 Renewal Amendment. If Tenant is entitled to and properly exercises its ----------------- Renewal Option, Landlord shall prepare an amendment (the "RENEWAL AMENDMENT") to reflect changes in the Base Rent, Term, Termination Date and other appropriate terms. The Renewal Amendment shall be sent to Tenant within a reasonable time after Landlord's receipt of the Binding Notice or other written agreement by Landlord and Tenant regarding the Prevailing Market rate, and Tenant shall execute and return the Renewal Amendment to Landlord within 15 days after Tenant's receipt of same, but, upon final determination of the Prevailing Market rate applicable during the Renewal Term as described herein, an otherwise valid exercise of the Renewal Option shall be fully effective whether or not the Renewal Amendment is executed. 2.05 Definition of Prevailing Market. For purposes of this Renewal Option, ---------------------------------- "PREVAILING MARKET" shall mean the arms length fair market annual rental rate per rentable square foot under renewal leases and amendments entered into on or about the date on which the Prevailing Market is being determined hereunder for space comparable to the Premises in the Building and office buildings comparable to the Building in Stamford, Connecticut. The determination of Prevailing Market shall take into account any material economic differences between the terms of this Lease and any comparison lease or amendment, such as rent abatements, construction costs and other concessions and the manner, if any, in which the landlord under any such lease is reimbursed for operating expenses and taxes. The determination of Prevailing Market shall also take into consideration any reasonably anticipated changes in the Prevailing Market rate from the time such Prevailing Market rate is being determined and the time such Prevailing Market rate will become effective under this Lease. 3. TEMPORARY SPACE. 3.01 During the period beginning on the later of (i) April 1, 2004 (ii) the full and final execution of this Lease by Landlord and Tenant, (iii) delivery of all prepaid rental, if any, required under this Lease, and (iv) delivery of all initial certificates of insurance required by this Lease (which certificates of insurance shall specifically cover both the Temporary Space during the Temporary Space Term, as hereinafter defined, and the Premises), and ending on the Commencement Date of this Lease (such period being referred to herein as the "TEMPORARY SPACE TERM"), Landlord shall allow Tenant to occupy approximately 2,900 rentable square feet of space located on the 7th floor of the Building as shown on EXHIBIT F of this Lease (the "TEMPORARY SPACE") for the Permitted Use. During the Temporary Space Term, the Temporary Space shall be deemed the "Premises" for purposes of Section 13 (Indemnity and Waiver of Claims) of the Lease. Such Temporary Space shall be accepted by Tenant in its "as-is" condition and configuration, it being agreed that Landlord shall be under no obligation to perform any work in the Temporary Space or to incur any costs in connection with Tenant's move in, move out or occupancy of the Temporary Space. Tenant acknowledges that it shall be entitled to use and occupy the Temporary Space at its sole cost, expense and risk. Tenant shall not construct any improvements or make any alterations of any type to the Temporary Space without the prior written consent of Landlord. All costs in connection with making the Temporary Space ready for occupancy by Tenant shall be the sole responsibility of Tenant. 3.02 The Temporary Space shall be subject to all the terms and conditions of the Lease except as expressly modified herein, provided that Base Rent for the Temporary Space during the Temporary Space Term shall be $7,129.17 (based upon $29.50 per rentable square foot in the Temporary Space) each month during the Temporary Space Term, payable in accordance with the Lease, with the first installment due on the date the Temporary Space Term begins. If the Temporary Space Term commences on other than the first day of a calendar month or ends on other than the last day of a calendar month, then the monthly Base Rent payable for the Temporary Space for any such partial month shall be prorated to reflect the actual number of days of such partial month falling within the Temporary Space Term. Tenant shall not be required to pay Tenant's Pro Rata Share of Expenses and Taxes for the Temporary Space during the Temporary Space Term. Notwithstanding anything to the contrary contained in the Lease, Tenant shall not be entitled to receive any allowances, abatement or other financial concession in connection with the Temporary Space which was granted with respect to the Premises, and the Temporary Space shall not be subject to any renewal or expansion rights of Tenant under the Lease. 3.03 Upon termination of the Temporary Space Term, Tenant shall vacate the Temporary Space and deliver the same to Landlord in the same condition that the Temporary Space was delivered to Tenant, ordinary wear and tear excepted. At the expiration or earlier termination of the Temporary Space Term, Tenant shall remove all debris, all items of Tenant's personalty, and any trade fixtures of Tenant from the Temporary Space. Tenant shall be fully liable for all damage Tenant or Tenant's agents, employees, contractors, or subcontractors cause to the Temporary Space. Tenant shall have no right to hold over or otherwise occupy the Temporary Space at any time following the expiration or earlier termination of the Temporary Space Term, and in the event of such holdover, Landlord shall immediately be entitled to institute dispossessory proceedings to recover possession of the Temporary Space, without first providing notice thereof to Tenant. In the event of holding over by Tenant after expiration or termination of the Temporary Space Term without the written authorization of Landlord, Tenant shall pay, for such holding over, the monthly Base Rent due for the Temporary Space at the rate in effect immediately preceding the expiration of the Temporary Space Term for each month or partial month of holdover, plus all consequential damages that Landlord incurs as a result of the Tenant's holdover. During any such holdover, Tenant's occupancy of the Temporary Space shall be deemed that of a tenant at sufferance, and in no event, either during the Temporary Space Term or during any holdover by Tenant, shall Tenant be determined to be a tenant-at-will under applicable Law. While Tenant is occupying the Temporary Space, Landlord or Landlord's authorized agents shall be entitled to enter the Temporary Space, upon reasonable notice, to display the Temporary Space to prospective tenants. EXHIBIT F OUTLINE AND LOCATION OF TEMPORARY SPACE --------------------------------------- EX-10.4 5 doc5.txt EXHIBIT 10.4 Exhibit 10.4 Amendment No. 1 to Employment Agreement Amendment No. 1 of September 30, 2002 to Agreement of December 2, 1996 (the "Agreement") between Jeremy D. Peter-Hoblyn ("Employee") and Clean Diesel Technologies, Inc. (the "Company"). The parties agree to amend the Agreement by: 1. Revoking in its entirety Section 3 thereof and substituting in its place the following text: "(a) The Company as from March 15, 2002 will cause Employee to be paid for his services hereunder an increased base salary of $300,000 per year. Employee shall be paid such base salary by the Company according to its normal and customary procedures but not less often than monthly. Employee shall be entitled to participate in such benefit plans, or equivalent, as have heretofore been extended to him by the Company and to such plans, or equivalent, as the Company may in the future extend to officers as a class. The Company may rescind Employee's participation in such benefit plans, or equivalent, so long as such rescission applies to officers as a class. (b) By agreement between the Employee and the Company the total sum of $135,416.73 of Employee's salary has been deferred to date and accrued on the Company's books as a general unsecured liability of the Company and will not be paid out to the Employee until the Payout Date. (c) The Company until the Payout Date shall pay up to $50,000 per year (or an allocable portion thereof for periods of less than one year) for the premium for an annuity or for a pension plan contribution for the Employee (less such amounts, if any, of Company contributions as shall be credited to Employee's account in the Company's 401(k) or profit sharing plans). The Company and the Employee have agreed, however, that such amount of $50,000 shall be deferred annually and shall accrue on the Company's books as a general unsecured liability of the Company and will not be paid out to the Employee until the Payout Date, or earlier, on the retirement of the Employee from service to the Company. The Company and the Employee agree that the total amount of such accrued annuity payment as at September 30, 2002 on the Company's books is $270,000." (d) The Payout Date shall be such time as the Company (or any successor to the Company) shall have attained the amount of $5 million in annual gross revenues as evidenced by the Company's audited statement of operations. Retirement shall mean voluntary or involuntary termination of service as an employee of the Company or an affiliate of the Company after the age of sixty-two (62). 2. Adding the following text to the text of Section 9: "Provided, however, that the Company may assign this Agreement to any affiliate of the Company which undertakes to pay and perform all of the obligations of the Company hereunder, provided that the Company shall remain liable for such payment and performance in default of same by the assignee." The parties have signed and delivered this agreement as of the date first above written. Clean Diesel Technologies, Inc. By: /s/ David W. Whitwell /s/ J. D. Peter-Hoblyn ------------------------- --------------------------------- David W. Whitwell Jeremy D. Peter-Hoblyn Vice President Employee EX-10.5 6 doc6.txt EXHIBIT 10.5 Exhibit 10.5 EMPLOYMENT AGREEMENT -------------------- AGREEMENT made as of the 1st day of March, 2001 by and between, CLEAN DIESEL TECHNOLOGIES, INC. a Delaware corporation of 300 Atlantic Street, Stamford, Connecticut 06901 (the "Company"), and DAVID W. WHITWELL of 5 Mohegan Lane Rye Brook, NY 10573 ("Employee"). WHEREAS, the Company desires certain services for itself and its subsidiaries and affiliates and Employee desires to contract with the Company to perform such services; NOW THEREFORE, in consideration of the mutual covenants hereinafter recited, the sufficiency of which is hereby acknowledged, the parties hereto agree as follows: TERM: THIS AGREEMENT SHALL COMMENCE AS OF THE DATE FIRST WRITTEN ABOVE (THE - ---- "COMMENCEMENT DATE") AND SHALL CONTINUE THEREAFTER UNTIL TERMINATED BY EITHER PARTY AS PROVIDED BELOW. SCOPE OF WORK; TITLE: ON THE COMMENCEMENT DATE EMPLOYEE SHALL BE VICE PRESIDENT - -------------------- AND CHIEF FINANCIAL OFFICER OF THE COMPANY. IN SUCH EMPLOYMENT, EMPLOYEE SHALL ON A FULL-TIME BASIS DIRECT ALL OF HIS EFFORTS TOWARD THE PERFORMANCE OF SUCH DUTIES AS SHALL BE ASSIGNED TO HIM BY THE PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE COMPANY. "FULL TIME" SHALL MEAN NO OTHER SUBSTANTIAL OUTSIDE BUSINESS ACTIVITIES. SALARY; BENEFITS: THE COMPANY AGREES TO CAUSE EMPLOYEE TO BE PAID FOR HIS - ----------------- SERVICES HEREUNDER AT THE RATE OF ONE HUNDRED SIXTY FIVE THOUSAND ($165,000) DOLLARS PER YEAR, EMPLOYEE TO BE PAID SUCH AMOUNTS BY THE COMPANY ACCORDING TO ITS NORMAL AND CUSTOMARY PROCEDURES FROM TIME TO TIME IN EFFECT BUT NOT LESS OFTEN THAN MONTHLY. EMPLOYEE SHALL BE ENTITLED TO PARTICIPATE FROM TIME TO TIME IN SUCH BENEFIT PROGRAMS AS THE COMPANY MAY CUSTOMARILY EXTEND TO ITS OFFICERS AND EMPLOYEES AS A CLASS. THIS AGREEMENT MAY NOT BE CONSTRUED TO PREVENT THE COMPANY FROM RESCINDING ANY SUCH BENEFIT FOR EMPLOYEE SO LONG AS SUCH RESCISSION APPLIES TO OFFICERS OR EMPLOYEES AS A CLASS. EXPENSES: EMPLOYEE SHALL BE REIMBURSED BY THE COMPANY FOR ALL ORDINARY AND - -------- NECESSARY OUT OF POCKET EXPENSES INCURRED BY EMPLOYEE IN PERFORMING HIS SERVICES HEREUNDER. SUCH EXPENSES TO BE REPORTED FROM TIME TO TIME BY EMPLOYEE ON THE COMPANY'S CUSTOMARY FORM OF EXPENSE REPORT AND SUBMITTED FOR APPROVAL TO THE COMPANY PURSUANT TO ITS POLICIES FROM TIME TO TIME IN EFFECT. TERMINATION OF EMPLOYMENT: JUST CAUSE. THE COMPANY MAY AT ANY TIME TERMINATE - -------------------------- ---------- THIS AGREEMENT FOR JUST CAUSE. JUST CAUSE SHALL MEAN CONVICTION OF THE EMPLOYEE UNDER, OR A PLEA OF GUILTY BY THE EMPLOYEE TO, ANY STATE OR FEDERAL FELONY CHARGE; ANY INSTANCE OF FRAUD, EMBEZZLEMENT, SELF-DEALING, INSIDER TRADING OR SIMILAR MALFEASANCE WITH RESPECT TO THE COMPANY REGARDLESS OF THE AMOUNT OF MONEY OR VALUE OF PROPERTY INVOLVED; SUBSTANCE ABUSE WHICH SHALL, IN THE SOLE DISCRETION OF THE BOARD OF DIRECTORS OF THE COMPANY, LIMIT EMPLOYEE'S PERFORMANCE OF HIS DUTIES; OR ANY TRANSGRESSION FOR WHICH TERMINATION OF EMPLOYMENT IS IDENTIFIED AS A DISCIPLINARY MEASURE IN ANY COMPANY EMPLOYEE MANUAL OR WRITTEN POLICY. Disability. The Company may terminate this agreement upon the ---------- physical or mental disability of Employee, if the Directors shall determine that, as a result of such disability Employee has for a continuous period of six (6) months been substantially absent from his customary place of work and unable to perform his customary duties. At Will. Either of Employee or Company may terminate this -------- agreement on written notice one to the other. Where Employee shall terminate this agreement by resigning his employment, he shall provide three month's written notice thereof to Company. Where Company shall so terminate this agreement under this clause and not for just cause or disability, Company shall provide salary and benefit continuation (in the amount and of the nature then enjoyed by Employee) to the Employee month to month for a period of nine (9) months or until Employee shall sooner find other employment. The obligation of Company hereunder to provide salary and benefit continuation shall subsist only so long as Employee shall diligently continue to seek other employment. "Other employment" shall mean other substantially comparable employment as Employee shall have held with the Company or an affiliate thereof. Termination at will ------------------- under this sub-section (c) shall also include constructive discharge within one ------------------------------------------------------------------------------ year following a Change in Control of the Company. "Constructive - ------------------------------------------------------------------------- discharge" means that the responsibilities of Employee have been materially - -------------------------------------------------------------------------------- diminished or Employee's position is to be relocated more than one hundred miles - -------------------------------------------------------------------------------- from the Company's headquarters at the time of Change in Control. "Change in - -------------------------------------------------------------------------------- Control" has the meaning for such phrase as is set out in the Company's 1994 - -------------------------------------------------------------------------------- Incentive Plan. - --------------- Discoveries and Inventions: (a) All patentable and unpatentable inventions, - ---------------------------- discoveries and ideas which are made or conceived by Employee during the term of this Agreement, and which are based upon or arise out of Employee's services hereunder ("Developments") are or shall become the Company's property. Employee agrees to disclose promptly to the Company each such Development and, upon the Company's request and at its expense, Employee whether or not still employed by the Company or during the term of this agreement or not, will assist the Company, or its designee, in making application for Letters Patent in any country in the world. Employee further agrees to execute all papers and do all things which may be necessary or advisable to prosecute such applications, and to transfer to and vest in the Company, or its designee, all the right, title and interest in and to such Developments, and all applications for patents and Letters Patent issued thereon. If for any reason Employee is unable to effectuate a full assignment of any such Development, Employee agrees to transfer to the Company, or its designee, Employee's transferable rights, whether they be exclusive or non-exclusive, or as a joint inventor or partial owner of the Development. No action or inaction by the Company shall in any event be construed as a waiver or abandonment of its rights to any such Development except an instrument in writing signed by an authorized official of the Company by which it specifically states it intends to be bound in such respect. Proprietary Information: Employee will not at any time, either during the term - ------------------------ of this Agreement or thereafter, disclose to others, or use for his own benefit or the benefit of others, any of the Developments or any confidential, proprietary or secret information owned, possessed or used by the Company or any of its subsidiaries or affiliates (collectively, "Proprietary Information"), which, by way of illustration, but not limitation, includes devices, structures, machines, processes, trade secrets, disclosures, data, know-how, business opportunities, marketing plans, forecasts, unpublished financial statements, budgets, and information concerning prices, costs, employees, customers and suppliers. Employee's undertakings and obligations under this Paragraph 7 will not apply to any Proprietary Information which: (a) is or becomes generally known to the public through no action on the part of Employee or (b) is generally disclosed to third parties by the Company or any of its subsidiaries or affiliates without restriction on such third parties. Upon termination of this Agreement or at any other time upon request, Employee will promptly deliver to the Company all notes, memoranda, notebooks, drawings, designs, three dimensional figures, photographs, layouts, diagrams, records, reports, files and other documents (and all copies or reproductions of such materials) in his possession or under his control, whether prepared by him or others, which contain Proprietary Information. Employee acknowledges that this material is the sole property of the Company or an affiliate of the Company. Non-Competition: Following the termination of Employment for any reason, - --------------- Employee agrees that Employee will not recruit, entice, induce or encourage any of the Company's other employees or consultants to engage in any activity which, were it done by Employee, would violate any provision of this Agreement. Employee shall not during a one (1) year period following Employee's termination of employment with the Company undertake employment with a competitor of the Company or its affiliates in a line of business substantially similar to that of the Company or its affiliates and in a position where there is a reasonable probability that Employee would make use of the Company's Proprietary Information for such competitor. For such one year period and before performing any services for others, as employee or consultant or otherwise, in the actual lines of business in which the Company or its affiliates were engaged during his term of employment, Employee will notify the Company of the general nature of the services to be performed and the party for whom they will be performed and Employee will, also, prior to undertaking such service or employment inform the other party of the existence of this covenant in this Agreement. Employee admits that breach of his covenants hereunder regarding the Company's Proprietary Information is likely to cause serious economic injury to the Company. Assignment: This Agreement may not be assigned by either party without the - ---------- prior written consent of the other party. Continuing Obligations: The Employee's covenants set forth in Sections 6, 7, - ----------------------- and 8 above shall continue according to their terms following the termination of this Agreement. The Company may enforce its rights under such covenants by means of equitable judicial remedies, including temporary restraining orders, temporary injunctions and injunctions and appeals arising from any applications for such remedies. Governing law; Waiver of Jury Trial and Bond. This agreement, the - --------------------------------------------------- interpretation hereof and any and all disputes between the Company and Employee - ------------- shall be governed by and interpreted under the internal substantive laws of the State of Connecticut applicable to contracts to be performed in that State and without any reference to any conflicts of laws rules. In any legal proceeding, including appeals, in any jurisdiction between the Company and Employee, Employee does hereby irrevocably waive (a) any right to trial by jury with respect to any claim by or against the Company and (b) any requirement that Company post any bond for any reason. Exclusivity. Employee's rights to salary continuation hereunder shall be in - ----------- lieu of severance benefits, if any, separately provided under policies of the Company from time to time in effect which separately provided severance benefits Employee hereby waives. Notices. All notices hereunder shall be in writing and shall be deemed - ------- effective upon receipt if hand delivered or if sent by facsimile and acknowledged electronically or by courier and acknowledged. Notices by mail shall be deemed received four (4) days after delivery if sent priority mail postage prepaid return receipt requested and the sender shall have the signed receipt. In each case notices shall be transmitted to the address first given above or such other address as may be given by notice as provided herein. IN WITNESS WHEREOF, the parties hereto have executed this Agreement. Employee CLEAN DIESEL TECHNOLOGIES, INC. By: /s/ David W. Whitwell By: /s/ C. W. Grinnell -------------------------- --------------------------- David W. Whitwell Charles W. Grinnell Vice President Vice President Date: 8/6/01 Date: 8/7/01 ------------------------- --------------------------- EX-10.6 7 doc7.txt EXHIBIT 10.6 Exhibit 10.6 CLEAN DIESEL TECHNOLOGIES, INC. EMPLOYMENT AGREEMENT AGREEMENT made as of the 1st day of April, 2002 by and between Clean Diesel Technologies, Inc., a Delaware corporation of 300 Atlantic Street, Stamford CT 06901 (the "Company"), and R. Glen Reid (the "Employee") of 5994 Woodthrush Lane, West Chester Ohio 45069. WHEREAS, the Company desires certain services and Employee desires to contract with the Company to perform such services; NOW THEREFORE, in consideration of the mutual covenants below, the parties hereto agree as follows: Term: This Agreement shall commence as of April 1, 2002, (the ---- "Commencement Date") and shall continue until terminated by either party as provided below. Scope of Work; Title: On the Commencement Date, Employee shall be Vice ----------------------- President - Sales and Marketing of the Company. In such employment, Employee shall on a full-time basis direct all of his efforts toward the performance of such duties as shall be assigned to him by the President of the Company. "Full time" shall mean no other substantial outside business activities. Salary; Benefits: The Company agrees to pay Employee for his services the ----------------- initial base salary of One Hundred Sixty Thousand Dollars ($160,000) per year, according to the Company's customary procedures from time to time in effect and not less often than monthly. Employee shall be entitled to participate from time to time in such benefit programs as the Company may customarily extend to its officers as a class. This agreement may not be construed to prevent the Company from rescinding any such benefit for Employee so long as such rescission applies to officers of the Company as a class. Stock Option. The Company shall also by separate agreement as and when ------------- authorized by the Board of Directors of the Company (the "Board"), grant, pursuant to the terms of the Company's 1994 Incentive Plan, to Employee a stock option to purchase Fifty Thousand (50,000) of the Company's common shares. Expenses: Employee shall be reimbursed by the Company for all ordinary and -------- necessary out of pocket expenses incurred by Employee in performing his services. Such expenses shall be reported by Employee on the Company's customary form of expense report and submitted for approval to the Company pursuant to its policies from time to time in effect. Termination of Employment: Cause. The Company may at any time terminate -------------------------- this Agreement for Cause. "Cause" shall mean, in the sole judgement of the Board, conviction of the Employee under, or a plea of guilty by the Employee to, any state or Federal felony charge (or the equivalent thereof outside of the United States); any instance of fraud, embezzlement, self dealing, insider trading or similar malfeasance with respect to the Company regardless of amount; substance or alcohol abuse; or other conduct for which dismissal has been identified by the Company to its employees in writing as a potential disciplinary measure. Disability. The Company may terminate this Agreement upon the physical disability of Employee, if the Board shall determine that, as a result of physical disability, Employee has for a period of six months been substantially absent from his customary place of work and unable to perform his customary duties. At Will. Either of Employee or Company may terminate this agreement on written notice one to the other at any time. Where Employee shall terminate this agreement by resigning his employment, he shall provide ninety (90) days written notice thereof to the Company. Where the Company shall so terminate this agreement, the Company shall provide Employee with six (6) months written notice thereof or salary and benefit continuation in lieu of notice for a sixty (60) day period. Discoveries and Inventions: (a) All patentable and unpatentable ---------------------------- inventions, discoveries and ideas which are made or conceived by Employee and which are based upon or arise out of Employee's services hereunder ("Developments") are or shall become the Company's property. Employee agrees to disclose promptly to the Company each such Development and, upon the Company's request and at its expense, Employee, whether or not still employed by the Company or during the term of this agreement or not, will assist the Company, or its designee, in making application for Letters Patent in any country in the world. Employee further agrees at ther Company's expense to execute all papers and do all things which may be necessary or advisable to prosecute such applications and to transfer to and vest in the Company, or its designee, all the right, title and interest in and to such Developments and all applications for patents and Letters Patent issued thereon. If for any reason Employee is unable to effectuate a full assignment of any such Development, Employee agrees to transfer to the Company, or its designee, Employee's transferable rights, whether they are exclusive or non-exclusive, or as a joint inventor or partial owner of the Development. No action or inaction by the Company shall in any event be construed as a waiver or abandonment of its rights to any such Development except an instrument in writing signed by an authorized official of the Company by which it specifically states it intends to be bound in such respect. Proprietary Information: Employee will not at any time, either during the ------------------------ term of this Agreement or thereafter, disclose to others, or use for his own benefit or the benefit of others, any of the Developments or any confidential, proprietary or secret information owned, possessed or used by the Company or any of its subsidiaries or affiliates (collectively, "Proprietary Information"), which, by way of illustration, but not limitation, includes formulations, patent applications, devices, structures, machines, processes, trade secrets, disclosures, data, know-how, business opportunities, marketing plans, forecasts, unpublished financial statements, budgets, and information concerning prices, costs, employees, customers, suppliers and products. Employee's undertakings and obligations under this Paragraph 7 will not apply to any Proprietary Information which is or becomes generally known to the public through no action on the part of Employee. Upon termination of this Agreement or at any other time upon request, Employee will promptly deliver to the Company all notes, memoranda, notebooks, drawings, designs, three dimensional figures, photographs, layouts, diagrams, records, reports, files, computers and other documents or data storage material (and all copies or reproductions of such materials) in his possession or under his control, whether prepared by him or others, which contain Proprietary Information. Employee acknowledges that this material is the sole property of the Company. Employee also agrees not to disclose to the Company any proprietary information of any third party which he is obligated to maintain in confidence. Unfair Competition: Following the termination of Employment for any ------------------- reason, Employee agrees that Employee will not recruit, entice, induce or encourage any of the Company's other employees or consultants to engage in any activity which, were it done by Employee, would violate any provision of this Agreement. Employee shall not during the two-year period following Employee's termination of employment with the Company (i) undertake employment with a competitor of the Company or its subsidiaries or affiliates (ii) with responsibilities in a line of business substantially similar to that in which Employee provided services to the Company and (iii) in a position where there is a reasonable probability that Employee would make use of the Company's Proprietary Information. For such two year period and before performing any services for others, as employee or consultant or otherwise, in the actual lines of business in which Employee has performed services for the Company. Employee will notify the Company of the general nature of the services to be performed and the party for whom they will be performed and Employee will, also, prior to undertaking such service or employment inform the other party of the existence of this covenant in this Agreement. Assignment: This Agreement may not be assigned by either party without the ---------- prior written consent of the other party. Continuing Obligations: The Employee's covenants set forth in Sections 7, ----------------------- 8 and 9 above shall continue according to their terms following the termination of this Agreement. Governing Law; Injunctive Relief; Waiver of Jury Trial and Bond. This -------------------------------------------------------------------- agreement, and any and all disputes between the parties hereunder or arising out of Employee's employment, shall be governed by and interpreted under Connecticut law applicable to contracts to be entirely performed within that State without regard to the conflicts of laws rules of that State and shall be determined exclusively in the Superior Court of Connecticut Stamford/Norwalk District or the Federal District Court for the District of Connecticut and the Parties hereby submit to the jurisdiction of those courts. Employee admits that breach of his covenants hereunder regarding the Company's Proprietary Information is likely to cause serious economic injury to the Company which is not capable of estimation and for which damages may be inadequate. Accordingly, the Company may, in any jurisdiction, seek a restraining order and/or injunctive relief and related damages in the enforcement of its rights under Sections 7, 8 and 9 above. The parties hereby waive trial by jury in any proceeding in any jurisdiction and also waive all requirements of bond, including with respect to appeals, in any proceeding in any jurisdiction. Exclusivity. Employee's rights to salary continuation hereunder shall be ----------- to such extent in lieu of any severance benefits provided under policies of the Company from time to time in effect. Notices. All notices hereunder shall be in writing and shall be deemed ------- effective upon receipt if hand delivered or if sent by facsimile and acknowledged electronically or by courier and acknowledged. Notices by mail shall be deemed received three days after delivery, if sent first class postage prepaid return receipt requested. In each case notices shall be transmitted to the address first given above or such other address as may be given by notice as provided herein. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Commencement Date. Employee Clean Diesel Technologies, Inc. /s/ R. Glen Reid By: /s/ David W. Whitwell - ------------------- ------------------------ EX-10.7 8 doc8.txt EXHIBIT 10.7 Exhibit 10.7 15 June, 2004 Mr. F. Azima One Palace Gate London W8 5LS Dear Farad, Following our discussions after the Annual General Meeting, I am pleased to confirm the matters on which we request your advice and assistance in addition to the assistance you are giving to J M Finn and Nabarro Wells in their approach to possible investors. As discussed, the Company needs to achieve a step change in its ability to commercialise its products (Platinum Plus and ARIS 2000) world-wide. This will involve your assistance in consultation with the Board in: - - the recruitment of a CEO to replace Jeremy Peter-Hoblyn on his retirement - - recruitment of non-executive board members - - recommending partners/licensees for the technology - - recommending distribution agreements - - establishing liaison with academic research institutions - - evaluation of potential acquisitions and all consequential matters. I acknowledge that you have not carried out due diligence or any investigation into the Company's financial position or business, which is outside the scope of your knowledge. You are relying in good faith upon the results presented at the Company's annual general meeting on 10th June 2004 and other historical information concerning the Company made available to you. You are not qualified to and will not have any responsibility to provide financial advice or act as financial adviser to the Company or anyone else. Nor do you have any responsibility to raise funding for the Company. If you attend meetings with potential investors in the Company, any representations made regarding the Company will be made by the management of or the brokers or financial advisers to the Company and you will have no responsibility for them. I confirm that, in consideration of your agreeing to assist the Company in its current fund raising exercise, the Company will indemnify you and hold you indemnified against any actions claims or demands made or brought against you in connection with the performance of your duties as a consultant to the Company or in connection with any fund raising by the Company, and against all liability relating thereto (including the costs of defending any such litigation). This indemnity will survive the termination of your consultancy for whatever reason. Further, the Compensation and Nominating Committee of the Board of Directors of the Company will be pleased to nominate you as an additional director and Executive Vice Chairman once it is clear that the prospective funding will proceed satisfactorily and the Company will be then able to proceed to the next level of activity where your contribution will be needed. Yours sincerely, /s/ J. D. Peter-Hoblyn - ------------------------- Jeremy D. Peter Hoblyn Chief Executive Officer I agree the terms of the above letter this 18th day of June, 2004. /s/ Farad Azima - ----------------- Farad Azima [GRAPHIC OMITED] CLEAN DIESEL TECHNOLOGIES, INC. - -------------------------------------------------------------------------------- 300 Atlantic Street, Suite 702, Stamford, CT 06901-2522 Tel: (203) 327-7050 Fax: (203) 323-0461 Farad Azima Esq., One Palace Gate, London W8 5LS 25th May 2004 Dear Farad, We are delighted that you have agreed to advise us as to general business matters in the capacity of consultant. I write to confirm the arrangements. As you know, last year we achieved 'verification status' with US EPA for our first system; we now believe we are close to achieving broad coverage for our two primary systems with EPA and that CARB seem likely to verify at least one system in due course. As we achieve these crucial thresholds it is vital that we position ourselves to maximise the opportunities that are opening up both in USA and internationally. Your advice and assistance is sought in planning and affecting the strategies that we need to put in place. This broadly defines the task. We have agreed a fee of 25,000 per quarter payable in arrears effective 1st June 2004. The term of the consultancy is initially for 3 months and is extendable as mutually agreed. On or by the completion of the consultancy and subject to agreeing a suitable plan for the next phase of the company's development we would propose to the Board that you be nominated for appointment to our Board in such capacity as shall be mutually agreed and approved by the Board at that time. As a consultant you will observe the usual confidentiality terms and will not undertake any similar consulting work for a competing business. As agreed you will need appropriate office facilities and, as far as London is concerned, you are welcome to use my office in Queen Anne Street and the Company's offices in Stamford are available to you. You may need to visit other locations. Travel expenses will be reimbursed on a business class basis. I am also recommending to the Board that you be granted warrants over 250,000 of the company shares at an exercise price equal to the placing price in the funding proposed by Eddie Edmonstone and conditional upon successful completion of that funding. The warrants will have a ten year life and will be transferable. Agreed Yours sincerely, /s/ F. Azima /s/ Derek Gray May 25 2004 Chairman EX-31.1 9 doc9.txt EXHIBIT 31.1 Exhibit 31.1 I, Jeremy D. Peter-Hoblyn, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Clean Diesel Technologies Inc.: 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15 (f)) for the registrant and have: a) Designed such disclosures controls and procedures or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; and b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting, which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting; Date: August 13, 2004 By: /s/Jeremy D. Peter-Hoblyn --------------------------- Jeremy D. Peter-Hoblyn Director and Chief Executive Officer EX-31.2 10 doc10.txt EXHIBIT 31.2 Exhibit 31.2 I, David W. Whitwell, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Clean Diesel Technologies Inc.: 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15 (f) and 15d-15 (f)) for the registrant and have: a) Designed such disclosures controls and procedures or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; and b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting, which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting; Date: August 13, 2004 By: /s/ David W. Whitwell ----------------------- David W. Whitwell Chief Financial Officer, Vice President and Treasurer EX-32 11 doc11.txt EXHIBIT 32 Exhibit 32 Certification of CEO and CFO Pursuant to18 U.S.C. Section 1350 The undersigned, Jeremy D. Peter-Hoblyn and David W. Whitwell, in their capacities as Chief Executive Officer and Chief Financial Officer of Clean Diesel Technologies, Inc. (the "Registrant") do each hereby certify with respect to the Quarterly Report on Form 10-Q of the Registrant for the period ended March 31, 2004, as filed with the Securities and Exchange Commission on the date thereof (the "Report"), that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant as of, and for, the periods presented in this Report. /S/ JEREMY D. PETER-HOBLYN --------------------------------------------- JEREMY D. PETER-HOBLYN CHIEF EXECUTIVE OFFICER AND DIRECTOR AUGUST 13, 2004 /S/ DAVID W. WHITWELL --------------------------------------------- DAVID W. WHITWELL CHIEF FINANCIAL OFFICER, VICE PRESIDENT ANDTREASURER AUGUST 13, 2004 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (the "Act") this certification accompanies the Report and shall not, except to the extent required by the Act, be deemed filed by Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Clean Diesel Technologies, Inc. and will be retained by Clean Diesel Technologies, Inc. and will be furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----