REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (“Agreement”) is
entered into as of February 10, 2009, between Clean Power Technologies, Inc., a
Nevada corporation (the “Company”) and The
Quercus Trust (the “Purchaser”).
W I T N E S S E T H:
WHEREAS, pursuant to that
certain Stock Purchase Agreement, dated on or about the date hereof, by and
between the Company and The Quercus Trust (the “Purchase
Agreement”), the Purchasers have agreed to acquire from the
Company, (i) 2,222,222 shares of the Company’s Common Stock, par value $0.001
(the “Shares”) and (ii) Warrants (the “Warrants”) to
purchase shares of the Company’s Common Stock, par value $0.001 per share (the
“Common
Stock”) for an aggregate purchase price of $1,000,000, subject to
the terms and conditions set forth therein; and
WHEREAS, the Warrants will be
exercisable for shares of Common Stock (the “Warrant Shares”) pursuant to
the terms and conditions set forth therein.
NOW, THEREFORE, in
consideration of the mutual promises, representations, warranties, covenants and
conditions set forth in the Purchase Agreement, the Warrants and this Agreement,
the Company and each Purchaser agree as follows:
1. Certain
Definitions. Capitalized terms used herein and not otherwise
defined shall have the meaning ascribed thereto in the Purchase Agreement or the
Note. As used in this Agreement, the following terms shall have the
following respective meanings:
“Closing” and “Closing Date” shall have the
meanings ascribed to such terms in the Purchase Agreement.
“Commission” or “SEC” shall mean the Securities
and Exchange Commission or any other federal agency at the time administering
the Securities Act.
“Purchaser” and “Purchasers” shall refer to the
Purchaser and any permitted transferee or transferees of Registrable Securities
(as defined below), the Shares and/or Warrant which have not been sold to the
public to whom the registration rights conferred by this Agreement have been
transferred in compliance with this Agreement and/or the Purchase
Agreement.
“Permitted Free Writing
Prospectus” means a free writing prospectus authorized for use by the
Company in connection with any offering of Registrable Securities that has been
filed with the SEC in accordance with Rule 433 under the Act.
“Register,” “Registered” and “Registration” shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
“Registrable Securities” shall
mean: (i) the Shares or other securities issued or issuable to each
Purchaser or its permitted transferee or designee (a) upon exercise of the
Warrants, or (b) upon any distribution with respect to, any exchange for or any
replacement of, a Shares or Warrant, or (c) upon any exercise or exchange
of any securities issued in connection with any such distribution, exchange or
replacement; (ii) securities issued or issuable in respect of the foregoing upon
any stock split, stock dividend, recapitalization or similar event; and (iii)
any other security issued as a dividend or other distribution with respect to,
in exchange for or in replacement of the securities referred to in the preceding
clauses; provided that all such shares shall cease to be Registrable Securities
at such time as they have been sold under a Registration Statement or pursuant
to Rule 144 under the Securities Act or otherwise or at such time as they are
eligible to be sold without volume limitation pursuant to Rule 144.
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“Registration Expenses” shall
mean all expenses to be incurred in connection with each Purchaser’s
registration rights under this Agreement not included in Selling Expenses,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company and one counsel for
the Purchasers, blue sky fees and expenses, and the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company).
“Registration Statement” shall
have the meaning set forth in Section 2(a) herein.
“Regulation D” shall mean
Regulation D as promulgated pursuant to the Securities Act, and as subsequently
amended.
“Securities Act” or “Act” shall mean the Securities
Act of 1933, as amended.
“Selling Expenses” shall mean
all underwriting discounts and selling commissions applicable to the sale of
Registrable Securities or Demand Registration Securities, as the case may
be.
“Time of Sale Information”
means any preliminary prospectus together with each Permitted Free Writing
Prospectus, if any, used in connection with any offering of Registrable
Securities.
2. Registration
Requirements. The Company shall use its best efforts to effect
the registration of the Registrable Securities (including, without limitation,
the execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act) as would permit or facilitate the sale or distribution of all the
Registrable Securities in the manner (including manner of sale) and in all
states reasonably requested by the Purchaser. Such best efforts by
the Company shall include, without limitation, the following:
(a) As soon
as practicable, but in no event later than six months from the Closing Date (the
“Required Filing Date”) (provided, however, that in the event that the Company
is informed by the Commission that the Registration Statement is deemed to be
part of a serial registration covering the Company’s securities, the Purchaser
agrees to extend the Required Filing Date to such period so that the Company may
comply with the Commission) the Company shall:
(i) prepare
and file a registration statement with the Commission pursuant to Rule 415 under
the Securities Act (“Rule 415”) on Form
S-1 under the Securities Act (or in the event that the Company is ineligible to
use such form, such other form as the Company is eligible to use under the
Securities Act covering resales by the Purchasers as selling stockholders (not
underwriters) of the Registrable Securities (a “Registration
Statement”), which Registration Statement, to the extent allowable under
the Securities Act and the rules promulgated thereunder (including Rule 416),
shall state that such Registration Statement also covers such number of
additional shares of Common Stock as may become issuable upon the exercise of
the Warrants or pursuant to the applicable anti-dilution provisions or
other adjustment provisions of the Warrants. The number of shares of
Common Stock initially included in such Registration Statement shall be no less
than 120% of the maximum number of shares of Common Stock which may be included
in a Registration Statement without exceeding registration limitations imposed
by the SEC pursuant to Rule 415 (the “Rule 415 Amount”) in
a comment letter addressed to the Company; provided that the
Company shall use its commercially reasonable efforts to contest such
limitation, but in any event not less than approximately 5,000,000 shares
of Common Stock. Thereafter, the Company shall use its best efforts
to cause such Registration Statement and other filings to be declared effective,
as soon as possible (the “Required Effective
Date”). The Company shall use its best efforts to ensure that
each subsequent Registration Statement is filed as soon as possible, but in no
event sooner than six (6) months from the effectiveness of a previously filed
Registration Statement. In the event that less than all of the Registrable
Securities are included in a Registration Statement as a result of the
limitations described in this paragraph, then the Company will (i) reduce on a
proportionate basis the number of Registrable Securities of each Purchaser
included in such Registration Statement and (ii) file additional Registration
Statements, each registering the Rule 415 Amount, seriatim, until all
of the Registrable Securities have been registered. The Required Filing Date and
the Required Effective Date of each such additional Registration Statement shall
be within a reasonable time after the first day such Registration Statement may
be filed without objection by the SEC based on Rule 415. Without
limiting the foregoing, the Company will promptly respond to all SEC comments,
inquiries and requests, and shall request acceleration of effectiveness at the
earliest possible date.
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(ii) If at any
time the staff of the Commission takes the position that the offering of some or
all of the Registrable Securities in a Registration Statement is not eligible to
be made on a delayed or continuous basis under the provisions of Rule 415 under
the Securities Act or requires any Investor to be named as an “underwriter” (an
“SEC Objection”), the Company shall promptly notify the Purchasers of such SEC
Objection and if the Investor shall request, the Company shall use its
commercially reasonable efforts to persuade the staff of the Commission that the
offering contemplated by the Registration Statement is a valid secondary
offering and not an offering “by or on behalf of the issuer” as defined in Rule
415 and that the Investor is not an “underwriter” (a “Rule 415 Response
Effort”). The Investor shall have the right to participate or have
its counsel participate in any meetings or discussions with the staff of the
Commission regarding the Rule 415 Response Effort and to comment or have its
counsel comment on any written submission made to the staff of the Commission
with respect to the Rule 415 Response Effort, and to have such comments relayed
to the staff of the Commission with the consent of the Company, not to be
unreasonably withheld. No such Rule 415 Response Effort shall be made
to the staff of the Commission to which the Investor’s counsel reasonably
objects. In the event that, despite the Company’s commercially
reasonable efforts and compliance with the terms of this Section 2(a)(ii), the
staff of the Commission refuses to alter its position, the Company shall (i)
remove from the Registration Statement such portion of the Registrable
Securities (the “Cut Back Shares”) and/or (ii) agree to such restrictions and
limitations on the registration and resale of the Registrable Securities as the
staff of the Commission may require to assure the Company’s compliance with the
requirements of Rule 415; provided, however, that the Company shall not agree to
name any Investor as an “underwriter” in such Registration Statement without the
prior written consent of such Investor (collectively, the “SEC
Restrictions”). To eliminate any ambiguity, delay caused by a refusal
by an Investor to be named as an underwriter shall be deemed to be part of a
Rule 415 Response Effort. Notwithstanding any other provision of this
Agreement to the contrary, no liquidated damages shall accrue pursuant to
Section 2(c) during the period of any Rule 415 Response Effort or (ii) on or as
to any Cut Back Shares until such time as the Company is able, using
commercially reasonable efforts, to cause such additional Registration Statement
or Registration Statements to become effective with respect to the
Cut Back Shares in accordance with any SEC Restrictions (such date, the
“Restriction Termination Date”). If the Company fails to cause
any such Registration Statement to be declared effective within 90 days
following the applicable Restriction Termination Date, liquidated damages shall
accrue on the same basis provided above.
(iii) Prepare
and file with the SEC such amendments and supplements to such Registration
Statement and the prospectus used in connection with such Registration Statement
as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement and notify the Purchasers of the filing and effectiveness of such
Registration Statement and any amendments or supplements.
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(iv) Furnish
to each Purchaser that has Registrable Securities included in a Registration
Statement such numbers of copies of a current prospectus conforming with the
requirements of the Securities Act, copies of such Registration Statement, any
amendment or supplement thereto and any documents incorporated by reference
therein and such other documents as such Purchaser may reasonably require in
order to facilitate the disposition of Registrable Securities owned by such
Purchaser.
(v) Register
and qualify the securities covered by such Registration Statement under the
securities or “Blue Sky” laws of all domestic jurisdictions; provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
(vi) Notify
promptly each Purchaser that has Registrable Securities included in a
Registration Statement of the happening of any event (but not the substance or
details of any such event) of which the Company has knowledge as a result of
which the prospectus (including any supplements thereto or thereof) included in
such Registration Statement, as then in effect, includes an untrue statement of
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing (each an “Event”), and use its
best efforts to promptly update and/or correct such prospectus. Each Purchaser
will hold in confidence and will not make any disclosure of any such Event and
any related information disclosed by the Company.
(vii) Notify
each Purchaser of the issuance by the Commission or any state securities
commission or agency of any stop order suspending the effectiveness of any
Registration Statement or the threat or initiation of any proceedings for that
purpose. The Company shall use its best efforts to prevent the
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible time.
(viii) List the
Registrable Securities covered by such Registration Statement with all
securities exchange(s) and/or markets on which the Common Stock is then listed
and prepare and file any required filings with any exchange or market where the
Common Shares are traded.
(ix) Take all
steps reasonably necessary to enable Purchasers to avail themselves of the
prospectus delivery mechanism set forth in Rule 153 (or successor thereto) under
the Act.
(x) Take all
steps reasonably necessary to keep public information available as those terms
are understood and defined in Rule 144 under the Securities Act.
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(b) Notwithstanding
the obligations under Section 2(a)(vii) or any provision of this Agreement, if
(i) in the good faith judgment of the Company, following consultation with legal
counsel, it would be detrimental to the Company and its stockholderss for
resales of Registrable Securities to be made pursuant to a Registration
Statement due to the existence of a material development or potential material
development involving the Company that the Company would be obligated to
disclose in the Registration Statement, which disclosure would be premature or
otherwise inadvisable at such time or would have a material adverse effect upon
the Company and its stockholderss, or (ii) in the good faith judgment of the
Company, it would adversely affect or require premature disclosure of the filing
of a Company-initiated registration of any class of its equity securities, then
the Company will have the right to suspend the use of the Registration Statement
for one period of not more than 10 calendar days in any 12 month period, but
only if the Company reasonably concludes, after consultation with outside legal
counsel, that the failure to suspend the use of the Registration Statement as
such would create a material liability or violation under applicable securities
laws or regulations.
(c) Effect of Late
Filing. In the event that (i) any Registration Statement has not been
filed by the Required Filing Date, the Company fails to cause to be declared
effective a Registration Statement within ten (10) days following receipt of a
“no review” letter from the SEC, or the Company fails to respond to any SEC
comment letter within thirty (30) days of receipt other than by reason of the
operation of Section 2(b); or (ii) the Company fails to maintain the
effectiveness of the Registration Statement during the registration period and
the Purchaser cannot otherwise effectuate a resale of the Registrable Securities
under Rule 144, then the Company will make a payment to each Purchaser as
liquidated damages for such delay (each a “Late Registration
Payment”). Each Late Registration Payment will be paid in cash and shall
be equal to 1% of the dollar amount invested by the Purchaser in the Initial
Purchase for every (30) day period, or portion thereof that the Registration
Statement is not filed or the Company fails to respond to SEC
comments. The Late Registration Payments will be prorated on a daily
basis during the 30-day period and will be paid to the Purchasers within ten
business days following the end of each 30-day period as to which payment is due
hereunder. The Purchasers may make a claim for additional damages as
a remedy for the Company’s failure to comply with the timelines set forth in
this Section, but acknowledgement of such right in this Agreement shall not
constitute an admission by the Company that any such damages exist or may
exist. Nothing contained in the preceding sentence shall be read to
limit the ability of the Purchasers to seek specific performance of this
Agreement.
(d) During
the registration period, the Company will make available, upon reasonable
advance notice during normal business hours, for inspection by any Purchaser
whose Registrable Securities are being sold pursuant to a Registration
Statement, all pertinent financial and other records, pertinent corporate
documents and properties of the Company (collectively, the “Records”) as
reasonably necessary to enable each such Purchaser to exercise its due diligence
responsibility in connection with or related to the contemplated offering. The
Company will cause its officers, directors and employees to supply all
information that any Purchaser may reasonably request for purposes of performing
such due diligence.
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(e) Each
Purchaser will hold in confidence, use only in connection with the contemplated
offering and not make any disclosure of all Records and other information that
the Company determines in good faith to be confidential, and of which
determination the Purchasers are so notified, unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court or government body of competent
jurisdiction, (iii) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement (to the knowledge of the relevant Purchaser), (iv) the Records
or other information were developed independently by the Purchaser without
breach of this Agreement, (v) the information was known to the Purchaser before
receipt of such information from the Company, or (vi) the information was
disclosed to the Purchaser by a third party not under an obligation of
confidentiality. However, a Purchaser may make disclosure of such Records and
other information to any attorney, adviser, or other third party retained by it
that needs to know the information as determined in good faith by the Purchaser
(the “Purchaser
Representative”), if the Purchaser advises the Purchaser Representative
of the confidentiality provisions of this Section 2(e), but the Purchaser will
be liable for any act or omission of any of its Purchaser Representatives
relative to such information as if the act or omission was that of the
Purchaser. The Company is not required to disclose any confidential information
in the Records to any Purchaser unless and until such Purchaser has entered into
a confidentiality agreement (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially to the effect of this
Section 2(e). Unless legally prohibited from so doing, each Purchaser will, upon
learning that disclosure of Records containing confidential information is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the Company, at
the Company’s expense, to undertake appropriate action to prevent disclosure of,
or to obtain a protective order for, the Records deemed confidential. Nothing
herein will be deemed to limit the Purchaser’s ability to sell Registrable
Securities in a manner that is otherwise consistent with applicable laws and
regulations.
(f) The
Company shall file a Registration Statement with respect to any newly authorized
and/or reserved Registrable Securities consisting of Shares described in clause
(i) of the definition of Registrable Securities within ten (10) business days of
any stockholderss’ meeting authorizing same and shall use its best efforts to
cause such Registration Statement to become effective within ninety (90) days of
the second Closing Date. If the Purchasers become entitled, pursuant
to an event described in clause (ii) and (iii) of the definition of Registrable
Securities, to receive any securities in respect of Registrable Securities that
were already included in a Registration Statement, subsequent to the date such
Registration Statement is declared effective, and the Company is unable under
the securities laws to add such securities to the then effective Registration
Statement, the Company shall promptly file, in accordance with the procedures
set forth herein, an additional Registration Statement with respect to such
newly Registrable Securities. The Company shall use its best efforts
to (i) cause any such additional Registration Statement, when filed, to become
effective within 30 days of that date that the need to file the Registration
Statement arose. All of the registration rights and remedies under
this Agreement shall apply to the registration of such newly reserved shares and
such new Registrable Securities.
3. Expenses of
Registration. All Registration Expenses in connection with any
registration, qualification or compliance with registration pursuant to this
Agreement, and all Selling Expenses shall be borne by the
Purchaser.
4. No Senior Registration
Rights. Without the prior written consent of all Purchasers
who hold Registrable Securities under the Purchase Agreement, the Company will
not grant any registration rights which are senior to the registration rights
granted hereby.
5. Registration
Period. In the case of the registration effected by the
Company pursuant to this Agreement, the Company shall keep such registration
effective and current until the earlier of (a) the date on which all the
Purchasers have completed the sales or distribution described in the
Registration Statement relating thereto or, if earlier until such Registrable
Securities may be sold by the Purchasers under Rule 144 (provided that the
Company’s transfer agent has accepted an instruction from the Company to such
effect) and (b) the second (2nd)
anniversary of the Closing Date.
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6. Indemnification.
(a) Company
Indemnity. The Company will indemnify each Purchaser, each of
its officers, directors, agents and partners, and each person controlling each
of the foregoing, within the meaning of Section 15 of the Securities Act and the
rules and regulations thereunder with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls, within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any Time of Sale Information,
final prospectus (as amended or supplemented if the Company files any amendment
or supplement thereto with the SEC), Registration Statement filed pursuant to
this Agreement or any post-effective amendment thereof or based on any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances under which they were made, or any violation by the Company of
the Securities Act or any state securities law or in either case, any rule or
regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each Purchaser, each of its
officers, directors, agents and partners, and each person controlling each of
the foregoing, for any reasonable legal fees of a single counsel and any other
expenses reasonably incurred in connection with investigating and defending any
such claim, loss, damage, liability or action, provided that the Company will
not be liable in any such case to a Purchaser to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on (i) any untrue
statement or omission based upon written information furnished to the Company by
such Purchaser or underwriter (if any) therefor and stated to be specifically
for use therein, (ii) any failure by any Purchaser to comply with prospectus
delivery requirements of the Securities Act (other than a failure resulting from
an act or omission on the part of the Company) or any other law or legal
requirement applicable to them or any covenant or agreement contained in the
Purchase Agreement or this Agreement or (iii) an offer or sale of Registrable
Securities or Demand Registrable Securities occurring during a period in which
sales under a Registration Statement are suspended as permitted by this
Agreement; provided that notice
has been properly provided to the Purchaser. The indemnity agreement
contained in this Section 6(a) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent will not be unreasonably
withheld).
(b) Purchaser
Indemnity. Each Purchaser will, if Registrable Securities or
Demand Registrable Securities held by it are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors, officers, agents and partners, and
any other stockholders selling securities pursuant to the Registration Statement
and any of its directors, officers, agents, partners, and any person who
controls such stockholders within the meaning of the Securities Act or Exchange
Act and each underwriter, if any, of the Company’s securities covered by such a
Registration Statement, each person who controls the Company or such underwriter
within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder, each other Purchaser (if any), and each of their
officers, directors and partners, and each person controlling such other
Purchaser(s) against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on (i) any untrue statement (or alleged
untrue statement) of a material fact contained in any such, Time of Sale
Information, final prospectus (as amended or supplemented if the Company files
any amendment or supplement thereto with the SEC), Registration Statement filed
pursuant to this Agreement or any post-effective amendment thereof or based on
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statement therein not misleading in
light of the circumstances under which they were made or (ii) failure by such
Purchaser to comply with prospectus delivery requirements of the Securities Act
(other than a failure resulting from an act or omission on the part of the
Company or any other law or legal requirement applicable to them or any covenant
or agreement contained in the Purchase Agreement or this Agreement, and will
reimburse the Company and such other Purchaser(s) and their directors, officers
and partners, underwriters or control persons for any reasonable legal fees or
any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such Time of Sale
Information, final prospectus (as amended or supplemented if the Company files
any amendment or supplement thereto with the SEC), Registration Statement filed
pursuant to this Agreement or any post-effective amendment thereof in
reliance upon and in conformity with written information furnished to the
Company by such Purchaser and stated to be specifically for use therein, and
provided that the maximum amount for which such Purchaser shall be liable under
this indemnity shall not exceed the net proceeds received by such Purchaser from
the sale of the Registrable Securities or Demand Registrable Securities, as the
case may be, pursuant to the registration statement in question. The
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any such claims, losses, damages or liabilities if such
settlement is effected without the consent of such Purchaser (which consent
shall not be unreasonably withheld).
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(c) Procedure. Each
party entitled to indemnification under this Section 6 (the “Indemnified Party”)
shall give notice to the party required to provide indemnification (the “Indemnifying Party”)
promptly after such Indemnified Party has actual knowledge of any claim as to
which indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim in any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the defense of such
claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld), and the
Indemnified Party may participate in such defense at its own expense, and
provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 6 except to the extent that the Indemnifying Party is
materially and adversely affected by such failure to provide
notice. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such non-privileged
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting
therefrom.
7. Contribution. If
the indemnification provided for in Section 6 herein is unavailable to the
Indemnified Parties in respect of any losses, claims, damages or liabilities
referred to herein (other than by reason of the exceptions provided therein),
then each such Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such losses, claims, damages or liabilities as between the
Company on the one hand and any Purchaser(s) on the other, in such proportion as
is appropriate to reflect the relative fault of the Company and of such
Purchaser(s) in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative fault of the Company on the
one hand and of any Purchaser(s) on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or by such Purchaser(s).
In no
event shall the obligation of any Indemnifying Party to contribute under this
Section 7 exceed the amount that such Indemnifying Party would have been
obligated to pay by way of indemnification if the indemnification provided for
under Section 6(a) or 6(b) hereof had been available under the
circumstances.
The
Company and the Purchasers agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Purchasers were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraphs shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section, no
Purchaser shall be required to contribute any amount in excess of the amount by
which in the case of any Purchaser, the net proceeds received by such Purchaser
from the sale of Registrable Securities pursuant to the registration statement
in question. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. Survival. The
indemnity and contribution agreements contained in Sections 6 and 7 shall remain
operative and in full force and effect regardless of (i) any termination of
this Agreement or the Purchase Agreement and (ii) the consummation of the
sale or successive resales of the Registrable Securities.
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9. Information by
Purchasers. As a condition to the obligations of the Company
to complete any registration pursuant to this Agreement with respect to the
Registrable Securities of each Purchaser, such Purchaser will furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended methods of disposition of the Registrable Securities held by it
as is reasonably required by the Company to effect the registration of the
Registrable Securities. At least five business days prior to the first
anticipated filing date of a Registration Statement for any registration under
this Agreement, the Company will notify each Purchaser of the information the
Company requires from that Purchaser whether or not such Purchaser has elected
to have any of its Registrable Securities included in the Registration
Statement. If the Company has not received the requested information from a
Purchaser by the business day prior to the anticipated filing date, then the
Company may file the Registration Statement without including Registrable
Securities of that Purchaser.
10. Further Assurances.
Each Purchaser will cooperate with the Company, as reasonably requested by the
Company, in connection with the preparation and filing of any Registration
Statement hereunder, unless such Purchaser has notified the Company in writing
of such Purchaser’s irrevocable election to exclude all of such Purchaser’s
Registrable Securities from such Registration Statement.
11. Suspension of Sales.
Upon receipt of any notice from the Company under Section 2(a)(v) or 2(b), each
Purchaser will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until (i) it receives copies of a supplemented or amended prospectus
contemplated by Sections 2(a)(v) or (ii) the Company advises the Purchaser that
a suspension of sales under Section 2(b) has terminated. If so directed by the
Company, each Purchaser will deliver to the Company (at the expense of the
Company) or destroy all copies in the Purchaser’ s possession (other than a
limited number of file copies) of the prospectus covering such Registrable
Securities that is current at the time of receipt of such notice.
12. Replacement
Certificates. The certificate(s) representing the Registrable
Securities held by the Purchaser may be exchanged by the Purchaser at any time
and from time to time for certificates with different denominations representing
an equal aggregate number of Registrable Securities of the same tenor, as
reasonably requested by such Purchaser upon surrendering the same. No
service charge will be made for such registration or transfer or
exchange. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of certificates
evidencing any Registrable Securities, and, in the case of loss, theft or
destruction, of indemnity reasonably satisfactory to it, or upon surrender and
cancellation of such certificate if mutilated, the Company will make and deliver
a new certificate of like tenor and dated as of such cancellation at no charge
to the Purchaser.
13. Transfer or
Assignment. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the
Purchaser by the Company under this Agreement to cause the Company to register
Registrable Securities may be transferred or assigned (in whole or in part) to a
transferee or assignee of the Shares, Warrant or Registrable Securities, and all
other rights granted to the Purchaser by the Company hereunder may be
transferred or assigned to any transferee or assignee of the Shares, Warrant or
Registrable Securities; provided in each case that (i) the Company is given
written notice by the Purchaser at the time of or within a reasonable time after
such transfer or assignment, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned; and provided further that the
transferee or assignee of such rights agrees in writing to be bound by the
registration provisions of this Agreement, (ii) such transfer or assignment is
not made under the Registration Statement or Rule 144, (iii) such transfer is
made according to the applicable requirements of the Purchase Agreement, and
(iv) the transferee has provided to the Company an investor questionnaire (or
equivalent document) evidencing that the transferee is a “qualified
institutional buyer” as defined in Rule 144A under the Securities Act or an
“accredited investor” as defined in Rule 501(a)(1),(2),(3), or (7) of Regulation
D.
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14. Miscellaneous.
(a) Remedies. The
Company and the Purchasers acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) Jurisdiction. The
Company and each Purchaser (i) hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court, the California state courts
and other courts of the United States sitting in Los Angeles County, California
for the purposes of any suit, action or proceeding arising out of or relating to
this Agreement and (ii) hereby waives, and agrees not to assert in any such suit
action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. The Company and the Purchaser consent to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing in this paragraph shall affect or limit any
right to serve process in any other manner permitted by law.
(c) Notices. Any
notice or other communication required or permitted to be given hereunder shall
be in writing by facsimile, mail or personal delivery and shall be effective
upon actual receipt of such notice. The addresses for such
communications shall be:
to the
Company:
Clean
Power Technologies, Inc.
000-00xx Xxxxxx,
X.X.
Xxxxxxx,
Xxxxxxx
Xxxxxx
X0X OC1
Facsimile:
(000) 000-0000
Attention:
Xxxxx Xxxxx
10
with a
copy to:
Xxxxxxx
Savage LLP
000
Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention:
Xxxxx X. Xxxxxxx, Esq.
If to the
Purchasers:
The Quercus Trust
0000
Xxxxxxx Xxxx.
X000-XXX
000
Xxxxx
Xxxx, XX 00000
Telephone:
Facsimile:
Attention:
Xxxxx Xxxxxxx
with a
copy to:
The Law Offices of
Xxxxxx X. Xxxxxxxx, P.C.
1900 Avenue of the
Stars, 00xx
Xxxxx
Xxx Xxxxxxx, XX
00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Any party
hereto may from time to time change its address for notices by giving at least
five days’ written notice of such changed address to the other parties
hereto.
11
(d) Waivers. No
waiver by any party of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right accruing to it
thereafter. The representations and warranties and the agreements and
covenants of the Company and each Purchaser contained herein shall survive the
Closing.
(e) Execution in
Counterpart. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same
counterpart.
(f) Signatures. Facsimile
signatures shall be valid and binding on each party submitting the
same.
(g) Entire Agreement;
Amendment. This Agreement, together with the Purchase
Agreement, the Shares, the Warrants, and the agreements and documents
contemplated hereby and thereby, contains the entire understanding and agreement
of the parties, and may not be amended, modified or terminated except by a
written agreement signed by the Company and the Purchaser.
(h) Governing
Law. This Agreement and the validity and performance of the
terms hereof shall be governed by and construed in accordance with the laws of
the State of California applicable to contracts executed and to be performed
entirely within such state, except to the extent that the law of the State of
Nevada regulates the Company’s issuance of securities.
(i) Jury
Trial. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY
JURY.
(j) Titles. The
titles used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
(k) No Strict
Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction will be applied against any
party.
(l) Attorneys’
Fees. In the event any dispute arises out of this Agreement,
the prevailing party shall be entitled to receive from the other party all
costs, including attorneys’ fees, incurred in connection with such
dispute.
(m) Severability. If
any provision of this Agreement shall be held to be illegal, invalid or
unenforceable, such illegality, invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render illegal, invalid
or unenforceable any other provision of this Agreement, and this Agreement shall
be carried out as if any such illegal, invalid or unenforceable provision were
not contained herein.
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IN WITNESS WHEREOF, the
undersigned have caused this Agreement to be executed as of the date first
written above.
COMPANY:
CLEAN
POWER TECHNOLOGIES, INC.
By: /s/ Xxxxx
Xxxxx
Name: Xxxxx
Xxxxx
Title: Chief
Executive Officer
PURCHASER:
THE
QUERCUS TRUST
By:
/s/ Xxxxx
Xxxxxxx
Name: Xxxxx
Xxxxxxx
Title: Trustee
13
