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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: April 3, 1998
CLEAN DIESEL TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 06-1393453
(State of other jurisdiction (I.R.S. Employer
of Incorporation) Identification Number)
0-27432
(Commission File Number)
Suite 702, 300 Atlantic Street
Stamford CT 06901
(203) 327-7050
(Address and telephone number of principal executive offices)
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Clean Diesel Technologies, Inc. Current Report on Form 8-K
Item 1. Effective April 3, 1998, Clean Diesel Technologies, Inc. (the
"Registrant") entered into letters of intent with respect to a Bridge Loan of
$1.25 million to be borrowed by it which Bridge Loan may be convertible into
Series A Preferred Stock of the Registrant, all as more particularly described
in Exhibits A, B, C and D attached to and made a part of this report.
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SIGNATURES
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, hereunto duly authorized.
CLEAN DIESEL TECHNOLOGIES
(Registrant)
Date: April 9, 1998 By: /s/ C.W. Grinnell
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(Signature)
Charles W. Grinnell
Corporate Secretary
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EXHIBIT A
S G ASSOCIATES LIMITED
Registered in England No. 1746213
Principals: 45 Queen Anne Street
London W1M 9FA
Derek R Gray, FCA Tel 44 (0) 171 487 4444
Howard R Smith, FTII Fax 44 (0) 171 487 4480
By fax to 1 203 323 0461 / No of pages 4
Mr. J D Peter-Hoblyn
Chief Executive Officer
Clean Diesel Technologies, Inc.
300 Atlantic Street, Suite 702
Stamford CT
06901-3522 31st March 1998
4:10pm
Dear Mr Peter-Hoblyn,
Following my discussions with Mr J A de Havilland, I write to confirm
that S G Associates Limited, on behalf of the S G Associates Retirement Benefits
Scheme and various clients, is prepared to provide the sum of US$750,000 to
Clean Diesel Technologies, Inc as part of a bridge loan based on a term sheet
issued 30th March 1998 at 4:16pm as per copy attached.
S G Associates Limited requests that it receive by way of fee the sum
of US$11,250 representing the sum reimbursable as expenses in accordance with
the term sheet.
It is understood that the bridge loan is due to close on 20th April
1998. We will expect to have your commitment as to the term sheet and related
documentation by close of business on Tuesday 14th April 1998. Thereafter,
following the closing on 20th April 1998, we will arrange electronic transfer of
funds to your designated bank account for value Monday 27th April 1998.
I look forward to hearing from you.
Yours sincerely,
Derek R Gray
for S G Associates Limited
Accepted for and on behalf of Clean Diesel Technologies, Inc
/s/ J.D. Peter-Hoblyn
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President
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EXHIBIT B
April 1, 1998
Jeremy D. Peter-Hoblyn
President and Chief Executive Officer
Clean Diesel Technologies, Inc.
300 Atlantic Street
Stamford CT 06901
Re: Bridge Loan and Series A Convertible Preferred Stock
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Dear Jeremy:
We are pleased to participate in the above-captioned transaction as more
particularly described in the attached term sheets. Fuel Tech, Inc. or its
affiliate, Platinum Plus, Inc., will substitute or novate its present short term
loan facility in the amount of U.S.$500,000 to Clean Diesel Technologies,
Inc.(the "Company") into a U.S.$500,000 participation in an aggregate proposed
Bridge Loan Facility of U.S.$1.25 million (the "Loan").
We understand that you have signed a letter of intent with S.G. Associates
Limited Retirement Benefits Scheme and others to provide the other U.S.$750,000
of the Loan and our intention to participate is contingent on the participation
of those other investors.
We agree not to charge a fee for the Loan in view of our substantial share
ownership in the Company. We do, however, expect to be reimbursed for all out of
pocket expenses such as legal fees, filing fees, courier, telephone and the like
reasonably incurred by us to complete the transaction.
This undertaking is subject to the execution of definitive legal documentation
and the approval of that documentation by our Board of Directors and must be
completed by June 30, 1998. If you are in accord with the foregoing, kindly sign
below where indicated.
Regards,
Charles W. Grinnell
Vice President
Agreed to and Accepted on behalf of Clean Diesel Technologies, Inc. this third
day of April, 1998
Jeremy D. Peter-Hoblyn, President
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EXHIBIT C
Clean Diesel Technologies
Bridge Loan
Term Sheet
Amount: $1.25 million
Closing: April 20, 1998
Investors: Fuel Tech $500,000
S.G. Associates 750,000
Note: The bridge loan participants will be issued a Note bearing 10%
interest per annum. Note becomes due and payable on April 15,
2001.
Security: Bridge Loan is secured by all of the intellectual property of the
Company.
Conversion: Equity Round--The bridge will automatically convert into Series A
Convertible Preferred Stock at the conclusion of a Public
Offering (including a Rights Offering) or a Private Placement
that contributes at least $1.75 million of net proceeds.
Otherwise, the holder has the right to convert at any time,
however, if at least 2/3 of the loan has converted into Series A
Convertible Preferred Stock, then there will be mandatory
conversion of the balance of the Bridge Loan outstanding.
Liquidation
Preference: The Bridge Loan will have a liquidation preference over all other
forms of debt and equity securities. No class of debt will be
issued that is senior to this issue without the prior consent of
investors representing a majority of the Bridge Loan issue.
Expenses: CDT will reimburse the Investors for their reasonable legal
expenses incurred in completing the transaction, up to a maximum
of 1.5% of the amount of the loan.
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EXHIBIT D
Clean Diesel Technologies
Series A Convertible Preferred Stock
Term Sheet
Amount: Minimum: $3.0 million (including Bridge Loan conversion)
Maximum: $5.0 million (including Bridge Loan conversion)
Price: The preferred stock is priced at $500 per share. 6,000 - 10,000
preferred shares will be issued.
Dividend: 9% cash; 11% paid in kind, at the Company's option. Dividends will
accrue. Paid in kind dividends will have the same rights as, and
will be subject to all of the terms and conditions of, the Series A
Preferred Stock.
Conversion: At the option of the holder, each share of preferred stock is
convertible into 333.33 shares of the Company's common stock ($1.50
per common share, subject to antidilution adjustment); Mandatory
conversion will be required in the event of a Qualified Public
Offering. A Qualified Public Offering shall be defined as an
underwritten public offering providing the Company with at least
$10 million gross proceeds at a price per share of at least 200% of
the Conversion Price. In a mandatory conversion, accrued and unpaid
dividends will also convert into the Company's common stock, on the
same terms as the underlying preferred stock. Additionally, the
Company can force conversion if CDT stock trades at a minimum of
$4.50 for 20 consecutive trading days. Such conversion can be
scheduled to occur, at the Investor's option, on a pro rata basis
over the following 18 months.
Redemption: At option of holder after at least 4 years from closing, at cost
plus accrued and unpaid dividends. After notice, the Company shall
redeem the Series A Preferred Stock in 4 equal quarterly
installments.
Board: The Board will be expanded by up to 2 directors. Investors will
elect 2 directors.
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Voting Rights: The holders of the Series A Preferred Stock will have
voting rights equivalent to the underlying common stock
on an as converted basis. Also has a class vote as
provided by law and on (i) the creation of any senior or
pari passu security, (ii) payment of dividends on Common
Stock, (iii) repurchase of Common Stock except upon
termination of employment, (iv) any transaction in which
control of the Company is transferred, (v) an increase in
the number of authorized shares of Series A Preferred
Stock, (vi) any adverse change to the rights, preferences
and privileges of the Series A Preferred Stock, and (vii)
an increase in the size of the Board of Directors of the
Company. A 60% majority is sufficient to carry the class.
Antidilution: Conversion ratio adjusted on a weighted average price
basis in the event of a dilutive issuance, which shall
not apply to stock issued to employees as options. Each
investor shall waive its antidilution provision
permanently if the Company executes a sale of preferred
stock and that investor does not purchase at least its
pro rata share of the offering.
Registration Rights: Unlimited piggyback and 3 demand for underlying
common stock. Demand registrations must be in a minimum
amount of $1.0 million, and no more than 1 demand
registration in any 12 month period. Expenses paid by the
Company.
Rights and
Preferences: Senior to all other classes of stock. No class of equity
will be issued that is senior to this issue without the
approval of a majority of the preferred stock holders.
Liquidation preference of one times initial cost.
Other rights and preferences as are customary in
comparable financings.
Right of First
Refusal: The investors shall have a pro rata right, based on their
fully diluted percentage equity ownership, to participate
in subsequent equity financings of the Company. Should
any Series A investor choose not to purchase their full
pro rata share, the remaining Series A investors shall
have the right to purchase the remaining pro rata shares.
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Representations and
Warranties: Standard representations and warranties provided by the
company.
Assignment of
Inventions and
Confidential Info: All employees and consultants will enter into an
agreement assigning all inventions and assuring
confidentiality, in a form acceptable to the Investors.
Closing Conditions: Negotiation of definitive legal documents. No material
adverse changes.
