NEITHER THIS
SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS.
COMMON STOCK PURCHASE
WARRANTS
To Purchase 1,234,568 Shares of
Common Stock of
CLEAN POWER TECHNOLOGIES,
INC.
No. October
2009-$0.77 October
16, 2009
THIS COMMON STOCK PURCHASE WARRANT (the
“Warrant”) CERTIFIES that, for value received, The
Quercus Trust (the “Holder”), is entitled, upon the
terms and subject to the limitations on exercise and the conditions
hereinafter set forth, at any time on or after the date of this
Warrant and on or prior to the first anniversary of the date of
this Warrant (the “Termination Date”) but not
thereafter, to subscribe for and purchase from Clean Power
Technologies, Inc., a Nevada corporation (the
“Company”), up to 1,234,568 shares (the “Warrant
Shares”) of the Common Stock, par value $0.001 per share, of
the Company (the “Common Stock”). The
purchase price per share of Common Stock is $0.77 (the
“Exercise Price”). The Exercise Price and
the number of Warrant Shares for which the Warrant is exercisable
shall be subject to adjustment as provided
herein. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Stock
Purchase Agreement (the “Stock Purchase Agreement”),
between the Company and the Purchaser thereto (the date of such
Agreement, the “Closing Date”). This Warrant
is being issued to the Purchaser, as more fully described in the
Stock Purchase Agreement.
1. Title to
Warrant . Prior to the Termination Date and subject
to compliance with applicable laws, including transfer restrictions
imposed by applicable securities laws, and Section 7 of this
Warrant, this Warrant and all rights hereunder are transferable, in
whole or in part, at the office or agency of the Company by the
Holder in person or by duly authorized attorney, upon surrender of
this Warrant together with the Assignment Form annexed hereto
properly endorsed. The transferee shall sign an
investment letter in form and substance reasonably satisfactory to
the Company.
2. Authorization
of Shares . Except as provided in the Stock Purchase
Agreement, the Company covenants that all Warrant Shares which may
be issued from time to time upon the exercise of the purchase
rights represented by this Warrant in accordance with the terms of
this Warrant, including the payment of the exercise price for such
Warrant Shares, will, upon exercise of the purchase rights
represented by this Warrant, be duly authorized, validly issued,
fully paid and nonassessable and free from all taxes, liens and
charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such
issue).
(a) Subject to Section
3(c), exercise of the purchase rights represented by this Warrant
may be made within one (1) year from the its issuance, at any time
on or before 5 p.m., New York City time, by delivery to the Company
of a duly executed Notice of Exercise Form annexed hereto (or such
other office or agency of the Company as it may designate by notice
in writing to the registered Holder at the address of such Holder
appearing on the books of the Company) and surrender of this
Warrant, together with payment of the aggregate Exercise Price of
the shares thereby purchased by wire transfer or cashier’s
check drawn on a United States bank in immediately available
funds.
Certificates for Warrant Shares
purchased hereunder shall be delivered to the Holder within three
(3) Trading Days from the delivery to the Company of the Notice of
Exercise Form, surrender of this Warrant and payment of the
aggregate Exercise Price as set forth above (“Warrant Share
Delivery Date”). This Warrant shall be deemed to
have been exercised on the later of the date the Notice of Exercise
is delivered to the Company and the date the Exercise Price is
received by the Company. The Warrant Shares shall be
deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a
holder of record of such shares for all purposes, as of the date
the Warrant has been exercised by payment to the Company of the
Exercise Price and all taxes required to be paid by the Holder, if
any, pursuant to Section 5 prior to the issuance of such shares,
have been paid. If the Company shall fail for any reason
or for no reason to issue to the Holder within three (3) Trading
Days of receipt of the Notice of Exercise, a certificate for the
Warrant Shares to which the Holder is entitled and register such
Warrant Shares on the Company’s share register or to credit
the Holder’s balance account with DTC for such number of
Warrant Shares or other securities to which the Holder is entitled
upon the Holder’s exercise of this Warrant, and if on or
after such Trading Day the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares or other
securities issuable upon such exercise that the Holder anticipated
receiving from the Company (a “Buy-In” ), then the
Company shall, within three (3) business days after the
Holder’s request and in the Holder’s discretion, either
(i) pay cash to the Holder in an amount equal to the Holder’s
total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased (the “Buy-In
Price” ), at which point the Company’s obligation to
deliver such certificate (and to issue such Warrant Shares) shall
terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such Warrant
Shares and pay cash to the Holder in an amount equal to the excess
(if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Bid Price on the date
of exercise. Nothing herein shall limit a Holder’s
right to pursue any other remedies available to it hereunder, at
law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the
Company’s failure to timely deliver certificates representing
shares of Common Stock upon exercise of the Warrant as required
pursuant to the terms hereof.
(b) If this Warrant
shall have been exercised in part, the Company shall, at the time
of delivery of the certificate or certificates representing Warrant
Shares, deliver to Holder a new Warrant evidencing the rights of
Holder to purchase the unpurchased Warrant Shares called for by
this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.
(c) In no event shall
the Holder be entitled to exercise such number of Warrants, which
when added to the sum of the number of shares of Common Stock
beneficially owned (as such term is defined under Section 13(d) and
Rule 13d-3 of the 1934 Act), by the Holder, would exceed 4.99% of
the number of shares of Common Stock outstanding on the Warrant
Share Delivery Date, as determined in accordance with Rule 13d-1(j)
of the 1934 Act.
4. No Fractional
Shares or Scrip . No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of
this Warrant. As to any fraction of a share which Holder
would otherwise be entitled to purchase upon such exercise, the
Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the
Exercise Price.
5. Charges, Taxes
and Expenses . Issuance of certificates for Warrant
Shares shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance
of such certificate, all of which taxes and expenses shall be paid
by the Company, and such certificates shall be issued in the name
of the Holder or in such name or names as may be directed by the
Holder; provided, however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder; and the Company may require, as a condition thereto,
the payment of a sum sufficient to reimburse it for any transfer
tax incidental thereto.
6. Closing of
Books . The Company will not close its stockholder
books or records in any manner which prevents the timely exercise
of this Warrant, pursuant to the terms hereof.
7. Transfer,
Division and Combination .
(a) Subject to
compliance with any applicable securities laws and the conditions
set forth in Sections 1 and 7(e) hereof and to the provisions of
the Stock Purchase Agreement, this Warrant and all rights hereunder
are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company, together with a
written assignment of this Warrant substantially in the form
attached hereto duly executed by the Holder or its agent or
attorney and funds sufficient to pay any transfer taxes payable
upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and
deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denomination or denominations specified in
such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. A Warrant,
if properly assigned, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant
issued. Notwithstanding the foregoing, the Holder will
not voluntarily and knowingly assign or transfer this Warrant or
the Warrant Shares to any direct competitor of the Company without
the Company’s prior written consent.
(b) This Warrant may
be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or
attorney. Subject to compliance with Section 7(a), as to
any transfer which may be involved in such division or combination,
the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
(c) The Company shall
prepare, issue and deliver at its own expense (other than transfer
taxes) the new Warrant or Warrants under this Section 7.
(d) The Company agrees
to maintain, at its aforesaid office, books for the registration
and the registration of transfer of the Warrants.
(e) The Company may
require, as a condition of allowing such transfer (i) that the
Holder or transferee of this Warrant, as the case may be, furnish
to the Company a written opinion of counsel reasonably acceptable
to the Company (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to
the effect that such transfer may be made without registration
under the Securities Act and under applicable state securities or
blue sky laws, (ii) that the holder or transferee execute and
deliver to the Company an investment letter in form and substance
acceptable to the Company and (iii) that the transferee be an
“accredited investor” as defined in Rule 501(a)
promulgated under the Securities Act or a qualified institutional
buyer as defined in Rule 144A(a) under the Securities
Act.
