Engagement Letter between Cleantech Biofuels, Inc. and Bauhaus Capital Partners dated April 23, 2012

1.  

CLEANTECH BIOFUELS, is a corporation dully registered and operating under the laws of Delaware, USA. Currently the Company, is publicly traded, is the only operative subsidiary of CLEANTECH BIOFUELS. The corporate purpose of the Company is the development of Projects and Technology in Biomass from the Recycling of Municipal Solid Waste (MSW) market and other cleantech energy technologies. The Company is a developing these technologies on patented rights and licenses. (the Technology).  The Company owns the intellectual property rights and licenses for this technology.

2.  

CLEANTECH BIOFUELS, is in direct contact with local markets, distribution channels, administrations, institutions and state and federal agencies throughout the USA and the rest of the world, declares that it has solid market and industry contacts to develop the Technology and to rapidly bring to market its product across North America and the rest of the world.

3.  

It is the intent of the Company to go into an expansion phase of growth to a stage where it is fully developed, ready for full scale commercial market deployment, franchising, distribution and servicing and to build plants and sell its know-how in North America and on the global market. To this end the Company requires a qualified industry or financial investor to participate together with the Company in its development, expansion, production and distribution.

4.  

It is recognized that CLEANTECH BIOFUELS has a licensing agreement with Biomass North America and is working with other companies close to the biofuels market which are of interest in combination with the application of the CLEANTECH BIOFUELS technology.

5.  

It is recognized by the Parties that the Project has a very high economic potential but that the contractual structure, financial and risk management models require further study and development before they are investor ready for this investment round and also understands that the value of the CLEANTECH BIOFUELS stake interest can be multiplied with the proper treatment and structuring of the Transaction and to this end wishes to engage the Advisor.

1.  

Bauhaus Capital Partners S.L. (NIF B/86168333) is an Investment Bank, incorporated under the laws of Spain and having its registered office at C/Murcia, 30, 28750 San Agustin del Guadalix, Madrid Spain, and which is specialized in advising, fund raising, investor relationships, financial structuring, identifying and building business development relationships, sourcing companies and projects with operators, developers, owners and other interested parties for this product in general as well as other related electrical storage and energy projects.

2.  

That the Advisor is interested in working with the Company in a long term relationship that will enable the Company to get development and growth funding that the Advisor will arrange for and also be able to raise additional funding for the individual Project(s) both of which the Advisor will arrange for as laid out herein. This will require the Advisor to develop the scope of work detailed herein in order to make the Company and Projects financially feasible, optimize the current appraisal value as well as increase the  future Enterprise Value and assure that the Project is quickly and securely made investor ready and together reach a bankable state.

3.  

That the Advisor has also developed contacts and projects in this field and can also bring them to the common effort as also described herein and is interested in participating in the portfolio of Projects and supporting CLEANTECH BIOFUELS in setting the operations up jointly or in a separate fashion.

(i)  

Objective (i) The primary objective is to raise a secondary round in a private placement in public equities (PIPE) of committed capital of approximately an estimated $15M to fund the Company itself in exchange for as yet an undetermined minority share. The application of the funds will be for the construction of a commercially operating plant in Gary Indiana, the reduction or elimination of outstanding debt, notes, the repurchase of shares, rights or other obligations providing a stronger capital structure, further development of the technology, EPC capabilities and commercial production facilities and further grow the Company, marketing, working capital, project development, commercial deployments and general business development of production sites in North America and elsewhere. It is initially unknown at this time whether this will be a Financial or Strategic Investment partner (“Operator”) and which will add the most value at each stage of development. This capital can come from the same source as in Objective (ii).

(ii)  

Objective (ii) The secondary, but equally important, objective is to raise a secondary rounds of committed capital and debt for a total of approximately $90M for use in the construction of other plants in following years, this amount must not be considered as fixed and can be drawn down in several tranches as required by the Project(s) according to milestones and Project portfolio negotiated with the investor(s) for CLEANTECH BIOFUELS which is to enter the Project Special Purpose Vehicle (SPVs) as a capital increase through the issuance of new shares, a debt facility or a mix of both and be applied to develop each Project as they come down the CLEANTECH BIOFUELS development pipeline. Framework agreements are preferred and a minimum amount of framework package investment commitment will be determined for efficiency and cost reasons. It is the intent of this objective for CLEANTECH BIOFUELS to retain a “carried interest” (equity interest) that will further enhance its cash flow streams and realize its Buy, Own and Operate (BOO) corporate strategy as well as leverage its speed to market.

(i)  

Identifying suitable Operators, Investors and/or Strategic Industry Partners from their extensive international network in line with the Company’s business objectives through to completing the Proposed Transaction(s) with the selected Investor(s);

(ii)  

The review of the relevant financial, technical, operational aspects and contractual structure of the targeted investments and the expansion of the Company to ensure that these combine into a suitable proposition for Investor(s);

(iii)  

Marketing advise and consulting regarding the Product Positioning in the market segment to match the investor's requirements in terms of IRR and sales projections.

(iv)  

The preparation of support materials related to the Proposed Transaction(s);

(v)  

Provide additional assistance with regards to due diligence required to raise funding on behalf of the Company, or a Project.

(vi)  

Contact, select and lead the negotiations with Investor(s) to close the Proposed Transaction(s).

1.  

Evaluation, development, adjustment and actualization of the Company business plan, enterprise appraisal, contractual structure, optimal investment proposal structure, including financial modeling in tranches of the project, projections and tranche valuation, draw down objectives and time frames, exit strategy and recommendations on matching the investment proposal and Company to Investor criteria.

2.  

Objectively assess risks and support and recommend on how to reduce, mitigate or even eliminate them in the target market.

3.  

The Advisor will support the Company in analysis of the applicable target projects, market structure and players and support in profiling the best investment target with focus on international strategic Investors.

4.  

Preparation of the corresponding marketing materials. Contact, presentation and negotiation support of the Transaction to interested Investors. The Company will provide access to the information necessary for this and if required direct contact with the acquisition targets.

5.  

Profiling of investor targets whether they finally be Financial or Strategic Investors be and a qualified long list provided as examples.

6.  

Marketing to and engagement with Investor(s).

7.  

Investor short list agreed with the Company and engagement in formal negotiations with an Expression of Interest Letter (EOI) from an accredited Investor approved by the Company.

8.  

Support and assistance on management presentation(s) to Investor(s) and Lenders.

9.  

Senior negotiation assistance and any necessary support to finalize documentation and closing of the Proposed Transactions with Investors and Lenders.

10.  

Support in managing pre due diligence (data room review, Q&A assistance) LOI signed for objectives (i). Support to facilitate the evaluation of the proposed Transaction (Term Sheets, LOI etc.) by the Investor and Lenders during the entire engagement.

11.  

Support in financial modeling assistance during due diligence. Coordination of the conversations, negotiations and due diligence process of the Investor and Lenders together with the Company’s other advisors.

12.  

Coordination of other advisors involved (legal, tax, etc.) provide either by the Investor, Lenders or the Company.

13.  

Support in reviewing, recommending and negotiating indicative and final term sheets and investment and loan covenants.

14.  

●  

BCP considers that a sound framework is fundamental to creation and enhancing shareholder value. The objective of our risk management process is to ensure that asset allocation relies on benchmarks, or passive indices, that represent a feasible investment strategy. BCP conducts a process of identification, analysis and either acceptance or mitigation of uncertainty for investment decision-making.

●  

A sensitivity analysis on the project or investment is done on the risks that most affect the expected return and therefore the risk level. These risks, once identified are managed in such a way as to reduce their risk impact to acceptable levels through a series of actions depending on the nature of the risk and project.

●  

Several case scenarios are done on the financial model; a base case, a moderate case and a case representing the possible upside.

●  

Principal strategic, operational and financial risks are identified and mitigated through industrial, technological or financial mechanisms. Effective processes and systems are suggested to be put in place put in place in place to monitor and manage risks.

●  

The Advisor agrees will charge a reduced retainer and deliverable fees for this objective. These fees will not be deducted from the final Transaction Fee due upon successful financial closing The payment conditions of this fee is as follows:

1.  

$6,678.24 once the Engagement Agreement is signed.

2.  

$6,678.24 once the Advisor brings and/or reaches deliverables 1, 2, and 3 included in claim M&A advisory (i) (2 weeks)

3.  

$6,678.24 once the Advisor brings and/or reaches deliverables 4, 5, 6 and 7 included in claim M&A advisory (i) including an Expression of Interest Letter (EOI) from an accredited Investor approved by the Company (2 weeks).

4.  

$6,678.24 once the Advisor brings and/or reaches deliverables 8 included in claim M&A advisory (i) (2 to 4 weeks) including EOI and proof of funds.

5.  

$6,678.24 once the Advisor brings and/or reaches deliverables 9 and 10 included in claim M&A advisory (i) (2 to 4 weeks) with the investor LOI.

1.  

The post money capital structure is agreed to be 60% share interest for CLEANTECH BIOFUELS and 40% assigned to Bauhaus Capital Advisors to be used in any way or assign in any form to ensure the funding required in accordance with this agreement and may retain a portion of this assignment as its own share interest as long as the main funding objective has been successfully obtained.

2.  

Bauhaus Capital Partners will be exclusively entitled to provide the bankable EPC company, under acceptable market terms, for the first 36 months after the formation and commencement of operations of the SPV to ensure funding of the SPV as well as the first plants.

(i)  

to provide the Advisor with, or procure the provision to the Advisor of, all necessary information in English concerning the Transaction to the extent possible;

(ii)  

to keep the Advisor informed of any material developments in relation to the business or operations of the Company, but only where and to the extent these have or are reasonably expected to have a material effect on the Transaction (such information, “Material Information”). The Company will further inform the Advisor as soon as reasonably practicable upon becoming aware of any Material Information provided to the Advisor being misleading or incomplete in any material respect; provided, however that the Company does not assume any responsibility for the accuracy and completeness of any such information provided by or on behalf of the project developer.

I.  

Correct and rebuild the financial information materials for raising additional capital

II.  

Identifying necessary and required agreements and permits needed

III.  

Ensure bankability of the agreement portfolio

IV.  

Screen possible investors and stake holders

V.  

Create a complete risk analyses

VI.  

Prearrange a risk elimination “tool box”

VII.  

Commence negotiations and proceed to LOI(s)

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