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As filed with the Securities and Exchange Commission on October 19, 2015

No. 333-                

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form F-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

WESTPORT INNOVATIONS INC.

(Exact name of registrant as specified in its charter)

 

 

 

Alberta		3537		Not Applicable
(State or other jurisdiction of		(Primary Standard Industrial		(I.R.S. Employer
incorporation or organization)		Classification Code Number)		Identification Number)

Suite 101, 1750 West 75th Avenue

Vancouver, British Columbia

Canada V6P 6G2

(604) 718-2000

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

CT Corporation System

111 Eighth Avenue

New York, NY 10011

USA

(212) 590-9070

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

With copies to:

 

Gordon Caplan Matthew J. Guercio Willkie Farr & Gallagher LLP 787 Seventh Avenue New York, New York 10019 USA		Bruce Hibbard Bennett Jones LLP 4500 Bankers Hall East 855 2nd Street SW Calgary, AB T2P 4K7 Canada

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effective date of this registration statement and all other conditions to the proposed transaction described herein have been satisfied or waived.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ¨

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ¨

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to Be Registered		Amount to be Registered (1)		Proposed Maximum Offering Price Per Share		Proposed Maximum Aggregate Offering Price (2)		Amount of Registration Fee (3)
Common Shares, par value $0.001		38,521,193		N/A		$128,826,161.44		$12,972.80

(1)	Represents the maximum number of common shares of the registrant to be issued to holders of shares of common stock of Fuel Systems Solutions, Inc. (“Fuel Systems”) in connection with the proposed merger of Fuel Systems with and into a wholly-owned subsidiary of the registrant.

(2)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(f) of the Securities Act of 1933, as amended (the “Securities Act”). The proposed aggregate maximum offering price was calculated based upon the market value of shares of Fuel Systems common stock (the securities to be cancelled in the merger) in accordance with Rule 457(c) as follows: (i) the product of (A) $7.12, the average of the high and low price per share of Fuel Systems common stock on the NASDAQ Stock Market on October 14, 2015 and (B) 18,093,562, the maximum possible number of shares of Fuel Systems common stock that may be cancelled and exchanged in the merger.

(3)	Computed in accordance with Section 6(b) of the Securities Act at a rate equal to $100.70 per $1,000,000 of the proposed maximum aggregate offering price.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

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The information in this proxy statement/prospectus is not complete and may be changed. We may not sell the securities offered by this proxy statement/prospectus until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction where an offer, solicitation or sale is not permitted.

PRELIMINARY—SUBJECT TO COMPLETION—DATED [●], 2015

 

 

[●], 2015

PROPOSED MERGER—YOUR VOTE IS VERY IMPORTANT

To our Stockholders:

Each of the boards of directors of Westport Innovations Inc. (“Westport”) and Fuel Systems Solutions, Inc. (“Fuel Systems”) has unanimously approved a strategic transaction for the combination of Westport and Fuel Systems, as described below (the “merger”). Fuel Systems is sending you this proxy statement/prospectus to invite you to attend a special meeting of Fuel Systems stockholders being held to vote on the merger and to ask you to vote at the special meeting in favor of adopting the agreement and plan of merger.

The Merger

Westport and Fuel Systems entered into an agreement and plan of merger on September 1, 2015 (the “merger agreement”) pursuant to which, subject to Fuel Systems and Westport stockholder approval and certain other customary closing conditions, Fuel Systems and Westport will combine their businesses through the merger of Whitehorse Merger Sub Inc. (“Merger Sub”) a newly formed, wholly owned subsidiary of Westport with Fuel Systems, with Fuel Systems thereupon becoming a wholly owned subsidiary of Westport.

Share Consolidation

If the merger is completed, each Fuel Systems stockholder will receive 2.129 common shares of Westport for each share of Fuel Systems common stock owned. This exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to the closing. No fractional shares of Westport common shares will be issued in the merger, and holders of shares of Fuel Systems common stock will, instead, receive cash in lieu of any fractional shares of Westport common shares. Upon completion of the merger, Fuel Systems’ former stockholders will own approximately 37.6% of the then outstanding Westport common shares, based on the number of shares and equity awards of Westport and Fuel Systems outstanding on October 9, 2015. The value of the merger consideration to be received in exchange for each share of Fuel Systems common stock will fluctuate with the market value of Westport common shares until the merger is completed.

The Premium

Based on the closing sale price for Westport common shares on August 31, 2015, the last trading day before public announcement of the merger, the 2.129 exchange ratio represented approximately $7.54 per share in value for each share of Fuel Systems common stock. Based on the closing sale price for Westport common shares on [●], 2015, the last trading day before the printing of this proxy statement/prospectus, the 2.129 exchange ratio represented approximately $[●] in value for each share of Fuel Systems common stock.

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Westport common shares are listed on the NASDAQ Stock Market (“NASDAQ”) under the symbol “WPRT” and on the Toronto Stock Exchange (the “TSX”) under the symbol “WPT.” Fuel Systems common stock is listed on NASDAQ under the symbol “FSYS.” The shares listed on the TSX are expressed in Canadian dollars and the shares listed on NASDAQ are in U.S. dollars. We urge you to obtain current market quotations for the common shares of Westport and the shares of common stock of Fuel Systems.

Your Vote is Important

The vote of Fuel Systems stockholders is very important regardless of the number of shares of Fuel Systems common stock you own. The merger cannot be completed unless Fuel Systems stockholders adopt the merger agreement. Fuel Systems is holding a special meeting of its stockholders to vote on the proposal necessary to complete the merger and certain related matters. Information about this meeting, the merger and the other business to be considered by Fuel Systems stockholders at the special meeting is contained in this proxy statement/prospectus. We urge you to read this proxy statement/prospectus carefully. You should also carefully consider the risks that are described in the “Risk Factors” section beginning on page [●].

Whether or not you plan to attend Fuel Systems’ special meeting of stockholders, please submit your proxy as soon as possible to make sure that your shares are represented at that meeting.

The Fuel Systems board of directors unanimously recommends that Fuel Systems stockholders vote “FOR” the proposal to adopt the merger agreement, which is necessary to complete the merger.

Sincerely,

 

Mariano Costamagna

Chief Executive Officer

Fuel Systems Solutions, Inc.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the merger or the other transactions described in this proxy statement/prospectus or the securities to be issued in connection with the merger or determined if this proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated [●], 2015, and is first being mailed to stockholders of Fuel Systems on or about [●], 2015.

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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON [●], 2015

To the Stockholders of Fuel Systems Solutions, Inc.:

Notice is hereby given that a special meeting of stockholders of Fuel Systems Solutions, Inc. will be held at the offices of Day Pitney LLP, 7 Times Square, 20th Floor, New York, New York 10036, on [●], 2015 at [●], Eastern Time, for the following purposes:

 

1.

Merger proposal: To approve the merger and adopt the merger agreement, dated as of September 1, 2015, by and among Westport Innovations Inc., Whitehorse Merger Sub Inc. and Fuel Systems Solutions, Inc., as the same may be amended from time to time, a copy of which is attached as Annex A to the proxy statement/prospectus accompanying this notice.

 

2.

Amendments to Non-Employee Directors’ Restricted Stock Awards proposal: To approve amendments to awards of restricted stock issued to Fuel Systems’ non-employee directors providing that the vesting date shall be the earlier of the vesting date set forth in the award or a change in control of Fuel Systems.

 

3.

Advisory Compensation proposal: To consider and vote on a proposal to approve, on an advisory (non-binding) basis, the payments that will or may be paid by Fuel Systems to its named executive officers in connection with the merger.

 

4.

Adjournment proposal: To consider and vote on a proposal to approve any motion to adjourn the Fuel Systems special meeting, if necessary to solicit additional proxies if there are not sufficient votes to approve the Merger proposal at the time of the Fuel Systems special meeting.

Approval of the Merger proposal is required for completion of the merger. The Amendments to Non-Employee Directors’ Restricted Stock Awards proposal, the Advisory Compensation proposal, and the Adjournment proposal are not a condition to the obligations of Westport or Fuel Systems to complete the merger.

Fuel Systems will transact no other business at the special meeting, except for business properly brought before the special meeting or any adjournment or postponement thereof.

The Fuel Systems board of directors has set [●], 2015 as the record date for the special meeting. Only holders of record of shares of Fuel Systems common stock at the close of business on [●], 2015 will be entitled to notice of and to vote at the Fuel Systems special meeting and any adjournments or postponements thereof.

Your vote is very important. To ensure your representation at the Fuel Systems special meeting, please complete and return the enclosed proxy card or submit your proxy by telephone or through the Internet. Please vote promptly whether or not you expect to attend the Fuel Systems special meeting. Submitting a proxy now will not prevent you from being able to vote in person at the Fuel Systems special meeting.

The Fuel Systems board of directors has unanimously approved the merger agreement and the transactions contemplated thereby and recommends that you vote “FOR” the Merger proposal, “FOR” the Amendments to Non-Employee Directors’ Restricted Stock Awards proposal, “FOR” the Advisory Compensation proposal, and “FOR” the Adjournment proposal.

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By Order of the Board of Directors,

 

Kevin Buckley

Secretary

[●], 2015

New York, New York

PLEASE SUBMIT YOUR PROXY PROMPTLY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY CARD. IF YOU HAVE QUESTIONS ABOUT THE PROPOSALS OR ABOUT SUBMITTING A PROXY FOR YOUR SHARES, PLEASE CALL LAUREL HILL ADVISORY GROUP AT (888) 742-1305 (BANKS AND BROKERS CALL COLLECT AT (516) 933-3100).

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ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates by reference important business and financial information about Westport and Fuel Systems from other documents that are not included in or delivered with this proxy statement/prospectus. For a listing of the documents incorporated by reference into this proxy statement/prospectus, see “Where You Can Find More Information” beginning on page [●].

You can obtain any of the documents incorporated by reference into this proxy statement/prospectus by requesting them in writing or by telephone from Laurel Hill Advisory Group, Fuel Systems’ proxy solicitor, at the following address and telephone number:

2 Robbins Lane, Suite 201

Jericho, New York 11753

Banks and Brokers Call (516) 933-3100

All Others Call Toll-Free (888) 742-1305

To receive timely delivery of the documents in advance of the special meeting, you should make your request no later than [●], 2015.

You may also obtain any of the documents incorporated by reference into this proxy statement/prospectus without charge through the Securities and Exchange Commission, or the SEC, website at www.sec.gov. In addition, you may obtain copies of documents filed by Westport with the SEC by accessing Westport’s website at www.westport.com under the tab “Company” and then under the heading “Investors.” You may also obtain copies of documents filed by Fuel Systems with the SEC by accessing Fuel Systems’ website at www.fuelsystemssolutions.com under the tab “Investor Relations.”

We are not incorporating the contents of the websites of the SEC, Westport, Fuel Systems or any other entity into this proxy statement/prospectus. We are providing the information about how you can obtain certain documents that are incorporated by reference into this proxy statement/prospectus at these websites only for your convenience.

ABOUT THIS DOCUMENT

This document, which forms part of a registration statement on Form F-4 filed with the SEC by Westport (File No. [●]), constitutes a prospectus of Westport under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to Westport common shares to be issued pursuant to the merger agreement. This document also constitutes a notice of meeting and a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with respect to the special meeting of Fuel Systems stockholders, at which Fuel Systems stockholders will be asked to consider and vote on, among other matters, a proposal to adopt the merger agreement and approve the merger.

You should rely only on the information contained in or incorporated by reference into this proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement/prospectus. This proxy statement/prospectus is dated [●], 2015. The information contained in this proxy statement/prospectus is accurate only as of that date or, in the case of information in a document incorporated by reference, as of the date of such document, unless the information specifically indicates that another date applies. Neither the mailing of this proxy statement/prospectus to Fuel Systems stockholders nor the issuance by Westport of its shares pursuant to the merger agreement will create any implication to the contrary.

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which it is unlawful to make any such offer or solicitation in such jurisdiction.

The information concerning Westport contained in this proxy statement/prospectus or incorporated by reference has been provided by Westport, and the information concerning Fuel Systems contained in this proxy statement/prospectus or incorporated by reference has been provided by Fuel Systems.

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TABLE OF CONTENTS

 

		Page
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING			iv
SUMMARY			S-1
Information About the Companies			S-1
The Merger			S-2
Consideration to be Received in the Merger by Fuel Systems Stockholders			S-2
Treatment of Fuel Systems Stock Options and Other Stock-based Awards			S-2
Board of Directors and Executive Officers After Completion of the Merger			S-3
Recommendation of the Fuel Systems Board of Directors			S-4
Opinion of Fuel Systems’ Financial Advisor			S-4
Interests of Fuel Systems Directors and Executive Officers in the Merger			S-4
U.S. Federal Income Tax Considerations			S-4
Certain Canadian Tax Consequences of the Merger			S-5
Accounting Treatment of the Merger			S-5
Westport’s Status as a Foreign Private Issuer under the United States Securities Exchange Act of 1934			S-5
No Appraisal Rights			S-5
Regulatory Matters			S-5
Conditions to Completion of the Merger			S-6
No Solicitation of Other Offers			S-7
Termination of the Merger Agreement			S-7
Matters to be Considered at the Special Meeting			S-8
Voting by Fuel Systems Directors and Fuel Systems Officers			S-8
Risk Factors			S-9
Comparison of Rights of Stockholders of Fuel Systems and Shareholders of Westport			S-9
Litigation Related to the Merger			S-9
SELECTED HISTORICAL FINANCIAL DATA OF WESTPORT			11
SELECTED HISTORICAL FINANCIAL DATA OF FUEL SYSTEMS			12
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA			14
COMPARATIVE PER SHARE DATA			15
MARKET PRICES AND DIVIDENDS AND OTHER DISTRIBUTIONS			16
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS			18
RISK FACTORS			20
Risks Relating to the Merger			20
Risks Relating to Tax Matters			24
Risks Relating to the Combined Company Following the Merger			28
THE MERGER			34
Background of the Merger			34
Westport Board of Directors’ Recommendation and its Reasons for the Merger			43
Fuel Systems Board of Directors’ Recommendation and its Reasons for the Merger			44
Opinion of Fuel Systems’ Financial Advisor			47
Certain Unaudited Financial and Operating Forecasts			55
Board of Directors and Executive Officers of the Combined Company After Completion of the Merger; Headquarters and Name			59
Accounting Treatment of the Merger			59
Regulatory Approvals Required for the Merger			59

 

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Appraisal Rights			60
Restrictions on Sales of Shares of Westport Common Shares Received in the Merger			60
NASDAQ and TSX Listing of Westport Common Shares; Delisting and Deregistration of Fuel Systems Common Stock			60
Interests of Directors and Executive Officers in the Merger			61
Treatment of Fuel Systems Stock Options and Other Equity-based Awards			64
U.S. FEDERAL INCOME TAX CONSIDERATIONS			66
In General			66
U.S. Federal Income Tax Consequences of the Merger to U.S. Holders of Fuel Systems Common Stock			67
U.S. Federal Income Tax Considerations to U.S. Holders of Owning and Disposing of Westport Common Shares Received in the Merger			69
U.S. Information Reporting and Backup Withholding			73
U.S. Federal Income Tax Consequences of the Merger for Non-U.S. Holders of Fuel Systems Common Stock			73
MATERIAL CANADIAN FEDERAL TAX CONSEQUENCES			74
Certain Canadian Federal Income Tax Consequences			74
THE MERGER AGREEMENT			76
Terms of the Merger Agreement			76
Exchange of Fuel Systems Stock Certificates			77
Treatment of Fuel Systems Stock Options and Other Equity-based Awards			77
Completion of the Merger			79
Conditions to Completion of the Merger			79
Representations and Warranties			79
Covenants and Agreements			81
No Solicitations of Other Offers			85
Board Recommendation			87
Reasonable Best Efforts to Obtain Required Stockholder Approval			88
Agreement to Take Further Action and to Use Reasonable Best Efforts			89
Employee Benefits Matters			90
Other Covenants and Agreements			91
Termination of the Merger Agreement			94
Effect of Termination; Termination Fees			95
Amendment and Waiver			96
Fees and Expenses			97
Assignment			97
Specific Performance			97
Governing Law			97
THE VOTING AGREEMENTS			98
Douglas Voting Agreement			98
Costamagna Voting Agreement			99
Becker Voting Agreement			99
INFORMATION ABOUT WESTPORT			101
Security Ownership of Certain Beneficial Owners			101
INFORMATION ABOUT FUEL SYSTEMS			102
Business Overview			102
Security Ownership of Certain Beneficial Owners			102

 

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		Page
INFORMATION ABOUT MERGER SUB			103
FUEL SYSTEMS SPECIAL MEETING			103
Date, Time and Place			103
Purpose of the Fuel Systems Special Meeting			103
Recommendation of the Fuel Systems Board			104
Fuel Systems Record Date; Stock Entitled to Vote			104
Quorum			104
Required Vote			105
Voting of Proxies; Incomplete Proxies			105
Revocability of Proxies and Changes to a Fuel Systems’ Stockholder’s Vote			106
Solicitation of Proxies			106
Voting by Fuel Systems’ Directors and Executive Officers			106
Stockholders Should Not Send Certificates with Their Proxies			106
Attending the Fuel Systems Special Meeting			107
No Other Business			107
FUEL SYSTEMS PROPOSALS			108
Item 1. The Merger Proposal			108
Item 2. Amendments to Non-Employee Directors’ Restricted Stock Awards Proposal			108
Item 3. The Advisory Compensation Proposal			109
Item 4. The Adjournment Proposal			110
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION			111
Westport Innovations Inc. Unaudited Pro Forma Condensed Combined Balance Sheet As At June  30, 2015			112
Westport Innovations Inc. Unaudited Pro  Forma Condensed Combined Statement Of Operations And Comprehensive Loss For the Year Ended December 31, 2014			113
Westport Innovations Inc. Unaudited Pro  Forma Condensed Combined Statement Of Operations And Comprehensive Loss For the Six Months Ended June 30, 2015			114
Westport Innovations Inc. Notes to the Unaudited Pro Forma Condensed Combined Financial Information			115
COMPARISON OF RIGHTS OF STOCKHOLDERS OF FUEL SYSTEMS AND SHAREHOLDERS OF WESTPORT			127
LEGAL MATTERS			139
EXPERTS			139
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING			139
Westport			139
Fuel Systems			139
WHERE YOU CAN FIND MORE INFORMATION			140

Annex A—Merger Agreement

Annex B—Opinion of J.P. Morgan Securities LLC

Annex C—Douglas Voting Agreement

Annex D—Costamagna Voting Agreement

Annex E—Becker Voting Agreement

 

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING

The following questions and answers briefly address some commonly asked questions about the Fuel Systems special meeting. They do not include all the information that is important to stockholders of Fuel Systems. Stockholders should carefully read this entire proxy statement/prospectus, including the annexes and the other documents referred to herein.

 

Q:	Why am I receiving this proxy statement/prospectus?

 

A:

Westport and Fuel Systems have agreed to a merger, pursuant to which Fuel Systems will merge with Merger Sub, a newly formed, direct wholly owned subsidiary of Westport. Fuel Systems is sending these materials to its stockholders to help them decide how to vote their shares of Fuel Systems common stock with respect to the merger and other matters to be considered at the special meeting.

The merger cannot be completed unless Fuel Systems stockholders adopt the merger agreement. Fuel Systems is holding a special meeting of its stockholders to vote on the proposals necessary to complete the merger. Information about the special meeting, the merger and the other business to be considered by stockholders at the special meeting is contained in this proxy statement/prospectus.

This document constitutes both a proxy statement of Fuel Systems and a prospectus of Westport. It is a proxy statement because the board of directors of Fuel Systems is soliciting proxies from its stockholders. It is a prospectus because Westport will issue its common shares in exchange for outstanding shares of Fuel Systems common stock in the merger as described in this proxy statement/prospectus.

Fuel Systems’ board of directors is soliciting proxies for the special meeting. You are receiving a proxy statement because you owned shares of Fuel Systems’ common stock on [●], 2015, and that entitles you to vote at the meeting. By use of a proxy, you can vote whether or not you attend the meeting. This proxy statement describes the matters on which we would like you to vote and provides information on those matters so that you can make an informed decision.

 

Q:	What will happen in the merger?

 

A:	Under the merger agreement, Merger Sub, a direct wholly owned subsidiary of Westport, will merge with and into Fuel Systems, with Fuel Systems continuing as the surviving entity and a wholly owned subsidiary of Westport, in a transaction which is referred to as the merger.

 

Q:	What will I receive in the merger?

 

A:

You will receive 2.129 Westport common shares for each share of Fuel Systems common stock held by you, which is referred to as the exchange ratio. This exchange ratio will not be adjusted to reflect changes in the stock price of either company before the merger is completed. No fractional Westport common shares will be issued in the merger, and holders of shares of Fuel Systems common stock will, instead, receive cash in lieu of any fractional Westport common shares.

 

Q:	When do Westport and Fuel Systems expect to complete the merger?

 

A:

Westport and Fuel Systems are working to complete the merger as soon as practicable. If the stockholders of Fuel Systems approve the merger, Westport and Fuel Systems currently expect that the merger will be completed by December 31, 2015. Neither Westport nor Fuel Systems can predict, however, the actual date on which the merger will be completed because it is subject to conditions beyond each company’s control, including the approval of the Merger proposal by Fuel Systems’ stockholders and the approval of the issuance of the merger consideration by Westport’s shareholders. See “The Merger Agreement—Conditions to Completion of the Merger” beginning on page [●].

 

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Q:	What happens if the merger is not completed?

 

A:

If the Merger proposal is not approved by Fuel Systems stockholders or if the merger is not completed for any other reason, you will not receive any form of consideration for your shares of Fuel Systems common stock in connection with the merger. Instead, Fuel Systems will remain an independent publicly traded corporation and its common stock will continue to be listed and traded on NASDAQ. If the merger agreement is terminated under specified circumstances, including in certain circumstances in connection with an alternative proposal, or if there is a change in recommendation by the Fuel Systems board, Fuel Systems will be required to pay a termination fee in the amount USD $5.5 million. Following payment of the termination fee, Fuel Systems will not have any further liability to Westport in respect of the merger agreement (other than liability for any willful breach or fraud). See “The Merger Agreement—Effect of Termination; Termination Fees” beginning on page [●].

 

Q:	What am I being asked to vote on?

 

A:	Fuel Systems stockholders are being asked to vote on the following proposals:

 

1.

The Merger proposal: To approve the merger and adopt the merger agreement, a copy of which is attached as Annex A to this proxy statement/prospectus.

 

2.

The Amendments to Non-Employee Directors’ Restricted Stock Awards proposal: To approve amendments to awards of restricted stock issued to Fuel Systems’ non-employee directors providing that the vesting date shall be the earlier of the vesting date set forth in the award or a change in control of Fuel Systems.

 

3.

The Advisory Compensation proposal: To consider and vote on a proposal to approve, on an advisory (non-binding) basis, the payments that will or may be paid by Fuel Systems to its named executive officers in connection with the merger.

 

4.

The Adjournment proposal: To consider and vote on a proposal to approve any motion to adjourn the Fuel Systems special meeting, if necessary, to solicit additional proxies if there are not sufficient votes to approve the Merger proposal at the time of the Fuel Systems special meeting.

 

Q:	Who is entitled to vote at the Fuel Systems’ special meeting?

 

A:

Only Fuel Systems stockholders of record at the close of business on [●], 2015, which is referred to herein as the record date, are entitled to receive notice of and to participate in the special meeting. If you were a Fuel Systems stockholder of record at the close of business on the record date, you will be entitled to vote all of the shares that you held on that date at the meeting, or any postponements or adjournments of the special meeting.

 

Q:	How many votes do I have?

 

A:

You will be entitled to one vote for each outstanding share of Fuel Systems’ common stock you owned as of the record date on each matter considered at the meeting. As of the record date, there were [●] shares of Fuel Systems’ common stock outstanding and eligible to vote. There is no cumulative voting.

 

Q:	What vote is required to approve each proposal at the Fuel Systems Special Meeting?

 

A:	The vote required to approve each proposal at the Fuel Systems Special Meeting is as follows:

 

1.

The Merger proposal: The affirmative vote of holders of a majority of the outstanding shares of Fuel Systems’ common stock entitled to vote. Abstentions and broker non-votes would have the same effect as a vote “AGAINST” the proposal.

 

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2.

The Amendments to Non-Employee Directors’ Restricted Stock Awards proposal: The affirmative vote of holders of a majority of the shares of Fuel Systems’ common stock present in person or by proxy and entitled to vote at the special meeting. Abstentions would have the same effect as a vote “AGAINST” the proposal. Broker non-votes will have no effect on the outcome of this proposal.

 

3.

The Advisory Compensation proposal: The affirmative vote of holders of a majority of the shares of Fuel Systems’ common stock present in person or by proxy and entitled to vote at the special meeting. This vote is advisory and therefore not binding on Fuel Systems board of directors. In reviewing the results of this advisory vote, the Fuel Systems board of directors expects to consider votes cast “FOR” or “AGAINST” the proposal. Due to the unique nature of this advisory vote, the Fuel Systems board of directors does not expect to consider abstentions as votes cast either in favor of or against the proposal in determining the outcome of this advisory vote. Broker non-votes will have no effect on the outcome of this proposal.

 

4.

The Adjournment proposal: The affirmative vote of holders of a majority of the shares of Fuel Systems’ common stock present in person or by proxy and entitled to vote at the special meeting. Abstentions would have the same effect as a vote “AGAINST” the proposal. Broker non-votes will have no effect on the outcome of this proposal.

 

Q:	What constitutes a quorum?

 

A:

The presence at the meeting, in person or by proxy, of the holders of one-third of the aggregate voting power of Fuel Systems’ common stock outstanding on the record date will constitute a quorum, permitting the conduct of business at the special meeting. Abstentions and broker non-votes, if any, which are described below, will be treated as present for the purposes of determining the presence or absence of a quorum for each special meeting.

 

Q:	How does the board of directors of Fuel Systems recommend that I vote?

 

A:	The Fuel Systems board of directors recommends that Fuel Systems stockholders vote “FOR” the Merger proposal, “FOR” the Amendments to Non-Employee Directors’ Restricted Stock Awards proposal, “FOR” the Advisory Compensation proposal, and “FOR” the Adjournment proposal.

 

Q:	What do I need to do now?

 

A:

After carefully reading and considering the information contained in this proxy statement/prospectus, please vote your shares as soon as possible so that your shares will be represented at Fuel Systems’ special meeting. Please follow the instructions set forth on the proxy card or on the voting instruction form provided by the record holder if your shares are held in the name of your broker, bank or other nominee.

 

Q:	How do I vote?

 

A:

Stockholders may vote by attending the special meeting and voting in person. We urge you to vote by proxy even if you plan to attend the special meeting so that Fuel Systems will know as soon as possible that enough votes will be present for it to hold the meeting. If you attend the meeting in person, you may vote at the special meeting and your proxy will not be counted.

You may also vote your shares without attending the special meeting. Stockholders may vote by using one of these alternative methods:

 

(1)

Via the Internet at www.proxyvote.com;

 

(2)

By telephone at 1-800-690-6903 and follow the instructions for telephone voting; or

 

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(3)

By completing and mailing a proxy card to Voting Processing c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

Proxy cards submitted by mail must be received by Broadridge no later than [●], 2015 to be voted at the special meeting.

If you hold your shares in “street name” and you plan to vote in person at the special meeting, you must obtain a proxy from the bank, broker or other record holder to vote at the meeting. Please refer to the voter instruction cards used by your bank, broker or other record holder for specific instructions on methods of voting, including by telephone or using the Internet.

Your shares will be voted as you indicate. If you submit your proxy but you do not indicate your voting preferences, then the individuals named on the proxy will vote your shares in accordance with the recommendations of the Fuel Systems board of directors. The Fuel Systems board of directors and management do not currently intend to present any matters at the special meeting other than those outlined in the notice of the special meeting. Should any other matter requiring a vote of stockholders arise, stockholders submitting their proxy confer upon the individuals named in the proxy discretionary authority to vote the shares represented by such proxy on any such other matter in accordance with their best judgment.

 

Q:	When and where is the Fuel Systems special meeting?

 

A:	The special meeting of Fuel Systems stockholders will be held at the offices of Day Pitney LLP, 7 Times Square, 20th Floor, New York, New York 10036, on [●], 2015 at [●], Eastern Time.

 

Q:	Who can attend the meeting?

 

A:

All Fuel Systems’ stockholders as of the record date, or their duly appointed proxies, may attend the meeting. Fuel Systems’ invited guests may also attend the meeting. If you attend, please note that you will be asked to present valid picture identification and your proxy card to enter the meeting. Cameras (including cell phones with photographic capabilities), recording devices and other electronic devices will not be permitted at the meeting.

Please also note that if you hold your shares in “street name”, you will need to bring a copy of a brokerage statement reflecting your stock ownership as of the record date and check in at the registration desk at the meeting. Please note that the document evidencing your stockholdings to be used to gain entry to the meeting is non-transferable.

 

Q:	My shares are held in “street name” by my broker, so I am a non-registered stockholder. Will my broker automatically vote my shares for me?

 

A:

No. If your shares are held in the name of a bank, broker or other nominee, you are considered the “beneficial owner” of the shares held for you in what is known as “street name.” You are not the “record holder” or “registered holder” of such shares. If this is the case, this proxy statement/prospectus has been forwarded to you by your bank, broker or other nominee. As the beneficial owner, you have the right to direct your bank, broker or other nominee as to how to vote your shares. If you do not provide voting instructions to your bank, broker or other nominee, your shares will not be voted on any proposal, unless your bank, broker or other nominee has discretionary authority to vote with respect to the proposal, which is called a “broker non-vote.” Banks, brokers or other nominees do not have discretionary authority with respect to any of the proposals being voted on at the special meeting, and therefore, if you do not provide voting instructions, your shares will not be voted. Broker non-votes will have the same effect as a vote “AGAINST” the Merger proposal and will have no effect on the Amendment to Non-Employee Directors’ Restricted Stock Awards proposal, the Advisory Compensation proposal or the Adjournment proposal. However, Fuel Systems anticipates that there will not be any broker non-votes cast in connection with any of the proposals.

 

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Please follow the voting instructions provided by your bank, broker or other nominee so that it may vote your shares on your behalf. Please note that you may not vote shares held in street name by returning a proxy card directly to Fuel Systems or by voting in person at the special meeting, unless you first provide a proxy from your bank, broker or other nominee.

 

Q:	What will happen if I return my proxy or voting instruction card without indicating how to vote?

 

A:

If you sign and return your proxy or voting instruction card without indicating how to vote on any particular proposal, the Fuel Systems common stock represented by your proxy will be voted as recommended by the Fuel Systems board of directors with respect to that proposal. Unless a Fuel Systems stockholder checks the box on its proxy card to withhold discretionary authority, the proxy holders may use their discretion to vote on other matters relating to the Fuel Systems special meeting.

 

Q:	May I revoke my proxy or change my vote after I have delivered my proxy or voting instruction card?

 

A:	Yes. You may change your vote at any time before your proxy is voted at the Fuel Systems special meeting. You may do this by:

 

•

sending a written notice, which is received prior to your vote being cast at the Fuel Systems special meeting, to the Secretary of Fuel Systems;

 

•

submitting a valid, later-dated proxy by mail, telephone or via the Internet that is received prior to your vote being cast at the Fuel Systems special meeting; or

 

•

attending the Fuel Systems special meeting and voting by ballot in person (your attendance at the special meeting will not, by itself, revoke any proxy that you have previously given).

If you hold your shares of Fuel Systems common stock through a broker or other nominee, you must follow the directions you receive from your broker or other nominee in order to revoke your proxy or change your voting instructions.

 

Q:	How are we soliciting this proxy and who is bearing the associated costs?

 

A:

Fuel Systems is soliciting this proxy on behalf of its board of directors by mail and will pay all expenses associated with this solicitation. Fuel Systems has engaged Laurel Hill Advisory Group to assist in the solicitation of proxies for the meeting and Fuel Systems estimates it will pay Laurel Hill Advisory Group a fee of approximately $7,500 (plus reimbursement of expenses) for these services. In addition to mailing or providing access to these proxy materials, certain of Fuel Systems’ officers, directors and other employees may, without compensation other than their regular compensation, solicit proxies by further mailing or personal conversations, or by e-mail, telephone, facsimile or other electronic means. Fuel Systems will also, upon request, reimburse brokers and other persons holding stock in their names, or in the names of nominees, for their reasonable out-of-pocket expenses for forwarding proxy materials to the beneficial owners of Fuel Systems common stock and obtaining proxies.

 

Q:	Can the special meeting be adjourned?

 

A:

Any adjournment of the special meeting may be made without notice, by approval of the holders of a majority of the shares of Fuel Systems’ common stock present in person or represented by proxy at the special meeting, whether or not a quorum exists. In the event that a quorum is not present at the time the special meeting is convened, or if for any other reason we believe that additional time should be allowed for the solicitation of proxies, we may adjourn the special meeting and the persons named in the enclosed proxy will vote all shares of common stock for which they have voting authority “FOR” such adjournment.

 

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Q:	What happens if I sell my shares of Fuel Systems common stock after the record date but before the special meeting?

 

A:

The record date for the Fuel Systems special meeting is earlier than the date of the special meeting and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer your shares of Fuel Systems’ common stock after the record date but before the date of the Fuel Systems special meeting, you will retain your right to vote at the special meeting. However, you will not have the right to receive the merger consideration to be received by Fuel Systems’ stockholders in the merger. In order to receive the merger consideration, you must hold your shares of Fuel Systems common stock through completion of the merger.

 

Q:	What does it mean if I receive more than one proxy card or voting instruction card?

 

A:

Your receipt of more than one proxy card or voting instruction card may mean that you have multiple accounts with Fuel Systems’ transfer agent or with a brokerage firm, bank or other nominee. If voting by proxy by mail, you will need to sign and return all proxy cards or voting instruction cards to ensure that all of your shares of Fuel Systems common stock are voted. Each proxy card or voting instruction card represents a distinct number of shares of Fuel Systems common stock and it is the only means by which those particular shares of Fuel Systems common stock may be voted by proxy.

 

Q:	What are the U.S. federal income tax consequences of the merger to U.S. Holders of Fuel Systems common stock?

 

A:

The merger is intended to qualify as a tax-free reorganization under Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended and in effect from time to time (the “Code”). It is uncertain, however, whether the application of Section 367(a)(1) of the Code (discussed in “U.S. Federal Income Tax Considerations—U.S. Federal Income Tax Consequences of the Merger to U.S. Holders of Fuel Systems Common Stock—Application of Section 367(a)(1)” beginning on page [●]) would require recognition of gain for holders of Fuel Systems common stock who receive Westport common shares in the merger. Assuming the merger qualifies as a tax-free reorganization under Section 368(a) of the Code, and the application of Section 367(a)(1) of the Code does not require the recognition of gain for holders of Fuel Systems common stock who receive Westport common shares in the merger, then, except as described below with respect to a U.S. Holder of Fuel Systems common stock that owns, directly or by attribution, 5% or more of Westport common shares immediately after the consummation of the merger (a “5% U.S. Holder”), you will not recognize any gain or loss with respect to your Fuel Systems common stock exchanged therefor, other than with respect to any cash received in lieu of a fractional Westport common share. A 5% U.S. Holder that receives Westport common shares pursuant to the merger will generally qualify for the treatment described above only if the 5% U.S. Holder timely files a “gain recognition agreement,” as defined in applicable U.S. Treasury Regulations promulgated under Section 367(a) of the Code, with the U.S. Internal Revenue Service (the “IRS”).

If application of Section 367(a)(1) of the Code does require recognition of gain to holders of Fuel Systems common stock who receive Westport common shares in the merger, you generally will recognize capital gain (but not loss) in an amount equal to the excess, if any, of the fair market value as of the closing date of the merger of any Westport common shares (including fractional shares) received in such exchange, over your tax basis in the Fuel Systems common stock surrendered in such exchange. For more information regarding the U.S. federal income tax consequences of the merger to holders of Fuel Systems common stock, see “U.S. Federal Income Tax Considerations—U.S. Federal Income Tax Consequences of the Merger to U.S. Holders of Fuel Systems Common Stock” beginning on page [●].

 

Q:	Do I have appraisal rights in connection with the merger?

 

A:	No. Under Delaware law, holders of Fuel Systems common stock will not be entitled to exercise any appraisal rights in connection with the merger.

 

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Q:	What will holders of Fuel Systems stock options and other equity based awards receive in the merger?

 

A:

Stock Options. Upon completion of the merger, each outstanding in-the-money option (whether or not then vested or exercisable) to purchase shares of Fuel Systems common stock will automatically vest and become exercisable, and will be assumed by Westport and will otherwise continue to have, and be subject to, the same terms and conditions as were applicable to such options prior to the completion of the merger, except that (i) each such in-the-money option will be exercisable for that number of common shares of Westport equal to the product (rounded down to the nearest whole) of the number of shares of Fuel Systems common stock subject to such in-the-money option immediately prior to the completion of the merger and 2.129, and (ii) the per share exercise price for shares of Westport issuable upon exercise of such assumed in-the-money option will be equal to the quotient (rounded up to the nearest whole cent) determined by dividing the per share exercise price of each Fuel Systems common stock at which such assumed in-the-money option was exercisable immediately prior to the completion of the merger by 2.129. Any outstanding option that has an exercise price per share of Fuel Systems common stock greater than or equal to the per share dollar value of the merger consideration immediately prior to the completion of the merger will automatically be cancelled and forfeited for no consideration and all rights with respect to such option will terminate.

Restricted Stock Units. Upon completion of the merger, each outstanding restricted stock unit of Fuel Systems will be assumed by Westport and will continue to have, and be subject to, the same terms and conditions (including vesting terms), as were applicable prior to the completion of the merger, except that each restricted stock unit award of Fuel Systems will be converted into a number of restricted stock units of Westport (convertible into shares of Westport common shares on vesting) equal to the product (rounded down to the nearest whole number) of the number of shares of Fuel Systems common stock subject to such restricted stock unit award immediately prior to the completion of the merger multiplied by 2.129.

Restricted Stock. Upon completion of the merger, each outstanding share of restricted stock of Fuel Systems will be assumed by Westport and will continue to have, and be subject to, the same terms and conditions (including applicable restrictions and vesting terms) as were applicable immediately prior to the completion of the merger, except that each such share of restricted stock of Fuel Systems will be converted into a number of restricted shares of Westport equal to the product (rounded down to the nearest whole number) of the number of shares of Fuel Systems restricted stock immediately prior to the closing of the merger multiplied by 2.129. Notwithstanding the foregoing, restricted stock held by the non-employee directors of Fuel Systems will immediately vest upon consummation of the merger and will not be subject to vesting conditions if the Amendments to Non-Employee Directors’ Restricted Stock Awards proposal is approved by stockholders at the special meeting.

Phantom Shares. Upon completion of the merger, each outstanding phantom share of Fuel Systems will become fully vested and all restrictions will lapse and each such phantom share will be converted into an amount, payable in cash, equal to the product of (i) the number of shares of Fuel Systems common stock subject to the Fuel Systems phantom share multiplied by (ii) the difference between (x) the per share dollar value of the merger consideration and (y) the applicable “exercise price” for such Fuel Systems phantom share. Any outstanding phantom share that has an exercise price per share of Fuel Systems common stock greater than or equal to the per share dollar value of the merger consideration will automatically be cancelled and forfeited for no consideration and all rights with respect to such phantom share will terminate.

 

Q:	Whom should I contact if I have any questions about the proxy materials or voting?

 

A:

If you have any questions about the merger or if you need assistance submitting your proxy or voting your shares or need additional copies of this proxy statement/prospectus or the enclosed proxy card, you should contact the proxy solicitation agent Laurel Hill Advisory Group, toll-free at (888) 742-1305.

 

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SELECTED HISTORICAL FINANCIAL DATA OF WESTPORT

The selected historical consolidated financial data of Westport for each of the years ended December 31, 2014, 2013 and 2012 and as of December 31, 2014 and 2013, have been derived from Westport’s audited annual financial information and related notes contained in Westport’s second amended Annual Report on Form 40-F/A for the year ended December 31, 2014, which is incorporated by reference in this proxy statement/prospectus. The selected historical consolidated financial data as of and for the six months ended June 30, 2015 and June 30, 2014 have been derived from Westport’s unaudited consolidated financial information and related notes thereto contained in Westport’s Current Report on Form 6-K filed with the SEC on July 29, 2015, which is incorporated by reference in this proxy statement/prospectus.

The selected historical consolidated financial data for the nine months ended December 31, 2011 and the year ended March 31, 2011 and as of December 31, 2012 and 2011 and March 31, 2011 have been derived from Westport’s audited consolidated financial information as of and for such years, which have not been incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data as of June 30, 2014 have been derived from Westport’s unaudited interim consolidated financial information and related notes thereto contained in Westport’s Current Report on Form 6-K filed with the SEC on August 1, 2014, which has not been incorporated by reference into this proxy statement/prospectus.

Historical results are not indicative of the results that should be expected in the future. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Westport or the combined company, and you should read the following information together with Westport’s audited consolidated financial information, the notes related thereto and the document entitled “Management’s Discussion and Analysis” contained in Westport’s second amended Annual Report on Form 40-F/A for the fiscal year ended December 31, 2014 and Westport’s unaudited consolidated financial information, the notes related thereto and the document entitled “Management’s Discussion and Analysis” contained in Westport’s Form 6-K filed with the SEC on July 29, 2015, which are incorporated by reference in this proxy statement/prospectus. For more information, see the section titled “Where You Can Find More Information” beginning on page [●]. Unless specifically stated otherwise, all dollar amounts set forth in this section are presented in U.S. dollars.

 

		Six Months Ended June 30,								Year Ended December 31,												Nine months ended December 31,				Year Ended March 31,
		2015				2014				2014				2013				2012				2011				2011
		(in thousands, except share amounts)
Revenues and Income
Total Revenues		$	55,868			$	77,789			$	130,569			$	164,032			$	155,626			$	87,696			$	36,775
Loss from Continuing Operations		$	(43,593	)		$	(57,303	)		$	(159,387	)		$	(194,210	)		$	(108,298	)		$	(59,075	)		$	(47,963	)
Net Loss		$	(37,693	)		$	(59,224	)		$	(149,618	)		$	(185,410	)		$	(98,774	)		$	(45,794	)		$	(42,142	)
Per Share Data
Loss Per Share—Basic and Diluted		$	(0.59	)		$	(0.94	)		$	(2.37	)		$	(3.22	)		$	(1.83	)		$	(0.96	)		$	(1.00	)
Weighted Average Shares Outstanding
Basic			63,985,492				63,005,649				63,130,022				57,633,190				54,072,513				47,933,348				42,305,889
Diluted			63,985,492				63,005,649				63,130,022				57,633,190				54,072,513				47,933,348				42,305,889
Financial Position
Total Assets		$	277,755			$	444,983			$	337,695			$	491,671			$	490,077			$	325,762			$	232,193
Long-Term Debt		$	71,661			$	79,121			$	78,542			$	66,013			$	80,722			$	86,145			$	25,222
Stockholders’ Equity		$	128,061			$	268,892			$	168,008			$	322,902			$	336,081			$	152,590			$	181,228

 

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SELECTED HISTORICAL FINANCIAL DATA OF FUEL SYSTEMS

The selected historical consolidated financial data of Fuel Systems for each of the years ended December 31, 2014, 2013 and 2012 and as of December 31, 2014 and 2013 have been derived from Fuel Systems’ audited consolidated financial information and related notes thereto contained in Fuel Systems’ Annual Report on Form 10-K for the year ended December 31, 2014, which is incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data for the six months ended June 30, 2015 and June 30, 2014 and as of June 30, 2015 have been derived from Fuel Systems’ unaudited interim consolidated financial information and related notes thereto contained in Fuel Systems’ Quarterly Report on Form 10-Q for the six months ended June 30, 2015, which is incorporated by reference into this proxy statement/prospectus.

The selected historical consolidated financial data for the years ended December 31, 2011 and 2010 and as of December 31, 2012, 2011 and 2010 have been derived from Fuel Systems’ audited consolidated financial information as of and for such years, which have not been incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data as of June 30, 2014 have been derived from Fuel Systems’ unaudited interim consolidated financial information and related notes thereto contained in Fuel Systems’ Quarterly Report on Form 10-Q for the six months ended June 30, 2014, which has not been incorporated by reference into this proxy statement/prospectus.

Historical results are not indicative of the results that should be expected in the future. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Fuel Systems or the combined company, and you should read the following information together with Fuel Systems’ audited consolidated financial information, the notes related thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Fuel Systems’ Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and Fuel Systems’ unaudited consolidated financial information, the notes related thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Fuel Systems’ Quarterly Report on Form 10-Q for the six months ended June 30, 2015, which are incorporated by reference in this proxy statement/prospectus. For more information, see the section titled “Where You Can Find More Information” beginning on page [●].

 

		Six Months Ended June 30,								Years Ended December 31,
		2015				2014				2014				2013				2012				2011				2010
		(in thousands, except as noted)
Statements of Operations:
Revenue		$	130,478			$	168,687			$	339,128			$	399,841			$	393,947			$	418,134			$	430,632
Operating (loss) income			(9,719	)			(50,190	)			(54,219	)			4,409				(13,286	)			11,825				58,301
Net (loss) income attributable to Fuel Systems		$	(17,869	)		$	(46,196	)		$	(53,416	)		$	(460	)		$	(15,632	)		$	5,168			$	39,702
Per Share Data:
Net (loss) income attributable to Fuel Systems per common share
Basic			(.95	)			(2.30	)			(2.66	)			(0.02	)			(0.78	)			0.26				2.24
Diluted			(.95	)			(2.30	)			(2.66	)			(0.02	)			(0.78	)			0.26				2.23
Number of shares used in per share calculation
Basic			18,885,109				20,098,532				20,074,773				20,073,360				20,020,487				19,972,969				17,725,049
Diluted			18,885,109				20,098,532				20,074,773				20,073,360				20,020,487				20,004,236				17,807,330

 

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		Six Months Ended June 30,								Years Ended December 31,
		2015				2014				2014				2013				2012				2011				2010
		(in thousands, except as noted)
Balance Sheets:
Cash and cash equivalents		$	48,583			$	69,649			$	85,180			$	80,961			$	75,675			$	96,740			$	124,775
Total current assets			201,246				283,081				254,659				290,147				282,941				299,285				306,928
Total assets			262,660				359,980				324,241				415,299				419,818				450,002				454,563
Total liabilities			73,891				92,237				87,506				96,247				102,771				120,180				115,996
Long-term debts			—				107				0				215				713				3,698				7,571
Total equity		$	188,769			$	267,743			$	236,735			$	319,052			$	317,047			$	329,822			$	338,567

 

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SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The unaudited pro forma condensed combined financial information of Westport for the six months ended June 30, 2015 and the year ended December 31, 2014 included in this proxy statement/prospectus have been prepared by Westport using the acquisition method of accounting for business combinations under U.S. GAAP. The following selected unaudited pro forma condensed combined statements of operations data for the six months ended June 30, 2015 and year ended December 31, 2014 have been prepared to give effect to the merger as if the merger had been completed on January 1, 2014. The unaudited pro forma condensed combined balance sheet data at June 30, 2015 has been prepared to give effect to the merger as if the merger was completed on June 30, 2015.

The unaudited pro forma condensed combined financial information assume that, at the effective time, each outstanding Fuel Systems share will be converted into the right to receive 2.129 Westport common shares. Pro forma book value per share is calculated by dividing total assets (including both tangible and intangible assets) minus total liabilities of Westport as at June 30, 2015 by the total number of Westport common shares outstanding at such date (including issuance of Westport common shares to Fuel Systems stockholders as of such date).

The selected unaudited pro forma condensed combined financial data is based on estimates and assumptions that are preliminary, presented for illustrative purposes only and is not necessarily indicative of the combined financial position or results of operations of future periods or the results that actually would have been realized had the entities been a single entity during these periods. The assumptions underlying the selected unaudited pro forma condensed combined financial data are described in the notes to the unaudited pro forma condensed combined financial information of Westport as at June 30, 2015, for the six months ended June 30, 2015 and for the year ended December 31, 2014 and should be read in conjunction with the selected unaudited pro forma condensed combined financial data presented below. The following information should also be read in conjunction with (i) the unaudited condensed consolidated financial information of Westport as at June 30, 2015 and for the six months ended June 30, 2015, including the notes thereto, contained in Westport’s Form 6-K filed with the SEC on July 29, 2015 and the audited consolidated financial information of Westport as at December 31, 2014 and for the year ended December 31, 2014, including the notes thereto, contained in Westport’s second amended Form 40-F filed with the SEC on October 16, 2015, and (ii) the unaudited consolidated financial information of Fuel Systems, including the notes thereto, contained in Fuel Systems’ Quarterly Report on Form 10¬-Q for the quarter ended June 30, 2015 and the audited consolidated financial information of Fuel Systems, including the notes thereto, contained in Fuel Systems’ Annual Report on Form 10-K for the year ended December 31, 2014, each of which are incorporated by reference into this proxy statement/prospectus. See “Unaudited Pro Forma Condensed Combined Financial Information” on page [●] of this proxy statement/prospectus. All dollar amounts set forth in this section are presented in U.S. dollars.

 

		Six Months Ended June 30, 2015				Year Ended December 31, 2014
		(in thousands, except per share amounts)
Pro Forma Statement of Operations Data
Net Loss		$	(54,576	)		$	(203,030	)
Loss Per Share, Basic		$	(0.53	)			(1.92	)
Loss Per Share, Diluted		$	(0.53	)		$	(1.92	)

 

		At June 30, 2015
		(in thousands)
Pro Forma Balance Sheet Data
Cash and Cash Equivalents		$	108,520
Total Assets			533,299
Total Liabilities			240,616
Stockholder’s Equity			292,683

 

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COMPARATIVE PER SHARE DATA

The following table shows per share data regarding earnings (losses) from continuing operations, book value per share and cash dividends for Westport and Fuel Systems on a historical and pro forma combined basis. The pro forma earnings (losses) from continuing operations information was computed as if the merger had been completed on January 1, 2014. The pro forma book value per share information was computed as if the merger had been completed on June 30, 2015.

Westport and Fuel Systems present basic loss per share for their common shares, calculated by dividing the loss attributable to their common shareholders by the weighted average number of common shares outstanding during the period. Diluted loss per share does not adjust the loss attributable to common shareholders or the weighted average number of common shares outstanding when the effect is anti-dilutive. Historical book values for Westport and Fuel Systems are calculated by dividing total assets (including both tangible and intangible assets) minus total liabilities as at the dates indicated below by the total number of common shares outstanding as of such dates.

The following comparative per share data is derived from the historical consolidated financial statements of each of Westport and Fuel Systems. The information below should be read in conjunction with “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page [●]. All dollar amounts set forth in this section are presented in U.S. dollars.

 

		As of and for the Year Ended December 31, 2014				As of and for the Six Months Ended June 30, 2015
Westport Innovations Inc.
Earnings (Loss) Per Share, Basic		$	(2.37	)		$	(0.59	)
Earnings (Loss) Per Share, Diluted		$	(2.37	)		$	(0.59	)
Book value per share		$	2.66			$	2.00
Cash dividends		$	—			$	—
Fuel Systems Solutions, Inc.
Earnings (Loss) Per Share, Basic		$	(2.66	)		$	(0.95	)
Earnings (Loss) Per Share, Diluted		$	(2.66	)		$	(0.95	)
Book value per share		$	11.98			$	10.43
Cash dividends			—				—
Pro Forma Combined (Unaudited)
Earnings (Loss) Per Share, Basic		$	(1.92	)		$	(0.53	)
Earnings (Loss) Per Share, Diluted		$	(1.92	)		$	(0.53	)
Book value per share		$	NA	(a)		$	2.84

 

 

(a)	The book value per common share had not been presented for the year ended December 31, 2014 given that Article 11 of SEC Regulation S-X requires that the pro forma balance sheet be presented as at the latest balance sheet (i.e., June 30, 2015), which is the assumed date of the merger.

 

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MARKET PRICES AND DIVIDENDS AND OTHER DISTRIBUTIONS

Stock Prices

The table below sets forth, for the calendar quarters indicated, the high and low sales prices per Westport common shares, which trade on NASDAQ under the symbol “WPRT” and on the TSX under the symbol “WPT” and Fuel Systems common stock, which trades on NASDAQ under the symbol “FSYS.”

 

		Westport Common Shares TSX (in C$)												Westport Common Shares NASDAQ (in US$)												Fuel Systems Common Stock (in US$)
		High				Low				Dividend				High				Low				Dividend				High				Low				Dividend
2013
First Quarter		$	33.24			$	26.36				—			$	32.89			$	26.50				—			$	18.13			$	13.38				—
Second Quarter		$	36.14			$	27.80				—			$	34.44			$	27.50				—			$	18.10			$	13.34				—
Third Quarter		$	36.57			$	24.70				—			$	35.40			$	23.95				—			$	21.44			$	17.34				—
Fourth Quarter		$	26.65			$	18.29				—			$	25.87			$	17.07				—			$	19.90			$	12.25				—
2014
First Quarter		$	24.11			$	15.34				—			$	22.50			$	13.84				—			$	14.20			$	10.02				—
Second Quarter		$	19.34			$	13.67				—			$	18.14			$	12.42				—			$	11.48			$	9.25				—
Third Quarter		$	20.32			$	11.62				—			$	18.98			$	10.37				—			$	11.40			$	8.70				—
Fourth Quarter		$	9.22			$	3.95				—			$	8.25			$	3.40				—			$	11.88			$	8.00				—
2015
First Quarter		$	8.41			$	3.82				—			$	6.74			$	3.24				—			$	11.64			$	9.47				—
Second Quarter		$	7.46			$	4.92				—			$	6.18			$	3.90				—			$	11.57			$	7.20				—
Third Quarter (through October 9, 2015)		$	6.61			$	3.23							$	5.10			$	2.42							$	7.73			$	4.79

The following table presents trading information on the last full trading day prior to the public announcement of the merger and on the latest practicable date before the date of this proxy statement/prospectus. On August 31, 2015, the last trading day before the public announcement of the signing of the merger agreement, the closing sale price per share of Westport common shares was $3.54 on NASDAQ and $4.63 CAD on the TSX, and the closing sale price per share of Fuel Systems common stock was $6.85 on NASDAQ. On October 9, 2015, the latest practicable date before the date of this proxy statement/prospectus, the last sales price per share of Westport common shares was $3.92 on NASDAQ and $5.06 CAD on the TSX, and the closing sale price per share of Fuel Systems common stock was $7.43 on NASDAQ.

 

		Westport common shares TSX (in C$)		Westport common shares NASDAQ (in US$)		Fuel Systems Common Stock (in US$)
August 31, 2015		$4.63		$3.54		$6.85
October 9, 2015		$5.06		$3.92		$7.43

Fuel Systems stockholders are advised to obtain current market quotations for Westport common shares. The market prices of Westport common shares will fluctuate between the date of this proxy statement/prospectus and the completion of the merger. No assurance can be given concerning the market price of Westport common shares before or after the effective date of the merger.

Fuel Systems has never paid or declared any dividends on its common stock.

 

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Number of Holders of Common Stock and Number of Shares Outstanding

As of October 9, 2015, there were 158 shareholders of record of Westport common shares who held an aggregate of 64,197,763 of Westport common shares.

As of October 9, 2015, there were 228 shareholders of record of Fuel Systems common stock who held an aggregate of 18,093,562 shares of Fuel Systems common stock.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This document contains certain forward-looking information about Westport, Fuel Systems and the combined company that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Exchange Act. Words such as: “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “predict,” “potential,” “continue,” “seeks,” “on-going” or the negative of these terms or other comparable terminology often identify forward-looking statements, although not all forward-looking statements contain these words. The statements contained in this proxy statement/prospectus that are not historical facts are forward-looking statements that represent management’s beliefs and assumptions based on currently available information. These statements may be made directly in this proxy statement/prospectus or may be incorporated by reference to other documents and may include statements for the period after completion of the merger. These forward-looking statements relate to outlooks or expectations for earnings, revenues, expenses, asset quality or other future financial or business performance, strategies or expectations, or the effect of legal, regulatory or supervisory matters on business, results of operations or financial condition, and include, among other things, statements regarding the anticipated timing for and ultimate completion of the merger, result, timing and financial metrics associated with Westport’s and Fuel Systems’ combined operating business units and consolidated business, revenue and cash usage expectations, the effect of the proposed reorganization and restructuring of Westport’s and Fuel Systems’ business, continued research and development investment, future of Westport’s and Fuel Systems’ development programs, timing for launch, delivery and completion of milestones related to the products referenced herein, Westport’s and Fuel Systems’ expected actions and results relating to the key components of their business strategy in 2015 and to the integration of Westport’s and Fuel Systems’ businesses, future sales of assets and the benefits therefrom, the demand for the companies’ products, the future success of the business and technology strategies, investment in new product and technology development and otherwise, cash and capital requirements, intentions of partners and potential customers, the performance and competitiveness of Westport’s and Fuel Systems’ products and expansion of product coverage, future market opportunities, speed of adoption of natural gas for transportation and terms and timing of future agreements as well as the combined company’s management’s response to any of the aforementioned factors.

Forward-looking statements reflect management judgment based on currently available information and involve a number of factors, risks and uncertainties. With respect to these forward-looking statements, each of Westport’s and Fuel Systems’ management has made assumptions regarding, among other things, future demand and market prices for natural gas, capacity, fuel and emission allowances, operating, general and administrative costs, financial and economic market conditions and legislative, regulatory and/or market developments. The future and assumptions about the future cannot be ensured. Actual results may differ materially from those in the forward-looking statements. Some factors, risks and uncertainties that could cause actual results to differ include:

 

•

Fuel Systems or Westport may be unable to obtain governmental and regulatory approvals required for the merger, or required governmental and regulatory approvals may delay the merger or result in the imposition of conditions that could cause the parties to abandon the merger;

 

•

a condition to closing of the merger may not be satisfied;

 

•

the timing to consummate the proposed merger;

 

•

the businesses will not be integrated successfully;

 

•

insufficient capital and liquidity to achieve the business plan of the combined company;

 

•

expected cost savings and any other synergies from the transaction may not be fully realized within the expected time frames or at all;

 

•

disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers;

 

•

the actions and determinations of joint venture and development partners;

 

•

the diversion of management time on merger-related issues;

 

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•

revenues following the merger may be lower than expected;

 

•

government regulation or other actions;

 

•

unpredictable nature of the developing alternative fuel U.S. automotive market;

 

•

the growth of non-gaseous alternative fuel products and other new technologies;

 

•

the price differential between alternative gaseous fuels and gasoline;

 

•

the repeal or implementation of government regulations relating to reducing vehicle emissions;

 

•

the ability of management to execute its plans to meet its goals;

 

•

other risks inherent in Westport’s and Fuel Systems’ business that are discussed in Westport’s and Fuel Systems’ most recent annual reports on Form 40-F and Form 10-K, respectively, and in other Westport and Fuel Systems reports on file with the SEC; and

 

•

those set forth in or incorporated by reference into this proxy statement/prospectus in the section entitled “Risk Factors” beginning on page [●].

You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this proxy statement/prospectus, or in the case of a document incorporated by reference, as of the date of that document. Neither Westport nor Fuel Systems undertakes any obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date that they were made or to reflect the occurrence of unanticipated events.

Additional factors, risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in reports filed with the SEC by Westport and Fuel Systems. See “Where You Can Find More Information” beginning on page [●] for a list of the documents incorporated by reference.

 

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RISK FACTORS

In addition to the other information included or incorporated by reference in this proxy statement/prospectus, including the matters addressed in “Cautionary Statement Regarding Forward-Looking Statements” beginning on page [●], you should carefully consider the following risks before deciding how to vote. Although Westport and Fuel Systems believe that the matters described below cover the material risks related to the merger, they may not contain all of the information that is important to you in evaluating the merger. Accordingly, we urge you to read this entire proxy statement/prospectus, including the annexes and the information included or incorporated by reference in this documents. Please also refer to the additional risk factors identified in the periodic reports and other documents of Westport and Fuel Systems incorporated by reference into this proxy statement/prospectus and listed in the section entitled “Where You Can Find More Information.” Realization of any of the risks described below, any of the events described under “Cautionary Statement Regarding Forward-Looking Statements” or any of the risks or events described elsewhere in this proxy statement/prospectus or in the documents incorporated herein by reference could have a material adverse effect on Westport’s, Fuel Systems’ or the combined company’s businesses, financial condition, cash flows and results of operations and could result in a decline in the trading prices of their respective shares.

Risks Relating to the Merger

Because the exchange ratio is fixed and the market price of shares of Westport common shares will fluctuate, Fuel Systems stockholders cannot be sure of the value of the merger consideration they will receive.

Upon completion of the merger, each outstanding share of Fuel Systems common stock will be converted into the right to receive 2.129 Westport common shares. The number of Westport common shares to be issued pursuant to the merger agreement for each share of Fuel Systems common stock is fixed and will not change to reflect changes in the market price of Westport common shares or Fuel Systems common stock. The market price of Westport common shares at the time of completion of the merger may vary significantly from the market prices of Westport common shares on the date the merger agreement was executed, the date of this proxy statement/prospectus and the date of the respective special stockholder meetings. Accordingly, at the time of the Fuel Systems special meeting, you will not know or be able to calculate the market value of the merger consideration you will receive upon completion of the merger.

In addition, the merger might not be completed until a significant period of time has passed after the Fuel Systems special meeting. Because the exchange ratio will not be adjusted to reflect any changes in the market value of Westport common shares or Fuel Systems common stock, the market value of the Westport common shares issued in connection with the merger and the Fuel Systems common stock surrendered in connection with the merger may be higher or lower than the values of those shares on earlier dates. Stock price changes may result from, among other things, changes in the business, operations or prospects of Westport or Fuel Systems prior to or following the merger, litigation or regulatory considerations, general business, market, industry or economic conditions and other factors both within and beyond the control of Westport and Fuel Systems. Neither Westport nor Fuel Systems is permitted to terminate the merger agreement solely because of changes in the market price of either company’s common stock.

The merger agreement contains provisions that limit Fuel Systems’ ability to pursue alternatives to the merger, which could discourage a potential acquirer of Fuel Systems from making an alternative transaction proposal and, in certain circumstances, could require Fuel Systems to pay to Westport a significant termination fee.

The merger agreement contains “no shop” provisions that, subject to limited exceptions, prohibit Fuel Systems, its subsidiaries and their respective representatives from, directly or indirectly, soliciting, initiating, knowingly encouraging or knowingly facilitating any inquiry in respect of, discussing or negotiating, or furnish any non-public information in connection with, or entering into any understanding or agreement in respect of, a

 

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competing third-party proposal for the acquisition of Fuel Systems’ stock or assets. In addition, the parties are generally required to negotiate in good faith to modify the terms of the merger in response to any competing acquisition proposals before Fuel Systems’ board may withdraw or qualify its recommendation with respect to the merger. In some circumstances, upon termination of the merger agreement, Fuel Systems may be required to pay Westport a termination fee of USD $5.5 million.

See “The Merger Agreement—No Solicitations of Other Offers” beginning on page [●]; “The Merger Agreement—Termination of the Merger Agreement” beginning on page [●]; and “The Merger Agreement—Effect of Termination; Termination Fees” beginning on page [●].

These provisions could discourage a potential third-party acquirer that might have an interest in acquiring all or a significant portion of Fuel Systems’ stock or assets from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than the market value proposed to be received or realized in the merger. Similarly, these provisions might result in a potential third-party acquirer proposing to pay a lower price to Fuel Systems stockholders than it might otherwise have proposed to pay before of the added expense of the termination fee that may become payable in certain circumstances. If the merger agreement is terminated and Fuel Systems determines to seek another business combination, it may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the merger.

Fuel Systems will be subject to various uncertainties and contractual restrictions while the merger is pending that could adversely affect its financial results.

Uncertainty about the effect of the merger on employees, suppliers and customers may have an adverse effect on Fuel Systems. These uncertainties may impair Fuel Systems’ ability to attract, retain and motivate key personnel until the merger is completed and for a period of time thereafter, and could cause customers, suppliers and others that deal with Fuel Systems to seek to change existing business relationships with Fuel Systems. Employee retention and recruitment may be particularly challenging prior to completion of the merger, as employees and prospective employees may experience uncertainty about their future roles with the combined company.

The pursuit of the merger and the preparation for the integration may place a significant burden on management and internal resources. Any significant diversion of management attention away from ongoing business and any difficulties encountered in the transition and integration process could affect Fuel Systems’ financial results.

In addition, the merger agreement restricts Fuel Systems from making certain acquisitions and dispositions and taking other specified actions while the merger is pending without Westport’s consent. These restrictions may prevent Fuel Systems from pursuing attractive business opportunities and making other changes to their respective businesses prior to completion of the merger or termination of the merger agreement. See “The Merger Agreement—Covenants and Agreements” beginning on page [●].

The issuance of Westport common shares in connection with the merger could decrease the market price of Westport common shares.

In connection with the merger and as part of the merger consideration, Westport will issue Westport common shares to Fuel Systems stockholders. The issuance of Westport common shares in the merger may result in fluctuations in the market price of Westport common shares, including a share price decrease.

Certain rights of holders of Fuel Systems common stock will change as a result of the merger.

Fuel Systems is incorporated under the laws of the State of Delaware and, accordingly, the rights of the stockholders of Fuel Systems are currently governed by the DGCL. Westport is incorporated under the laws of

 

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Alberta, Canada and, accordingly, the rights of the shareholders of Westport are currently governed by the Business Corporations Act (Alberta) (the “ABCA”). Following the completion of the merger, holders of Fuel Systems common stock will no longer be stockholders of Fuel Systems, but instead will be shareholders of Westport. There will be certain differences between your current rights as a stockholder of Fuel Systems, on the one hand, and the rights to which you will be entitled as a shareholder of Westport, on the other hand. For a more detailed discussion of the differences in the rights of stockholders in Fuel Systems and Westport, see “Comparison of Rights of Stockholders of Fuel Systems and Shareholders of Westport” beginning on page [●].

Purported class action lawsuits have been filed against the individual members of the board of directors of Fuel Systems and against Fuel Systems, Westport and Merger Sub, and additional lawsuits may be filed, challenging the merger and seeking injunctive relief. An adverse judgment in any pending case or additional lawsuits could prevent the merger from occurring or could have a material adverse effect on Fuel Systems or Westport following the merger.

On September 11, 2015, a putative class action lawsuit challenging the merger was filed in the Court of Chancery of the State of Delaware by a purported stockholder of Fuel Systems. The lawsuit, captioned Peck v. Fuel Systems Solutions, Inc., et al., C.A. No. 11495-CB, names as defendants the individual members of the Fuel Systems board of directors, Fuel Systems, Westport and Merger Sub. The Peck lawsuit alleges, among other things, that the individual members of the Fuel Systems board of directors breached their fiduciary duties by approving the proposed merger between Fuel Systems and Westport because, among other things, the merger consideration is allegedly inadequate and the merger agreement allegedly contains unreasonable deal protection provisions. The Peck lawsuit also alleges that Westport and Merger Sub aided and abetted such breaches of fiduciary duty. The Peck lawsuit seeks, among other things, declaratory and injunctive relief prohibiting the defendants from consummating the proposed merger and awarding compensatory damages against the defendants.

On September 17, 2015, another purported stockholder of Fuel Systems filed a putative class action complaint, captioned Nehamen v. Fuel Systems Solutions, Inc., et al., C.A. No. 11517-CB, in the Court of Chancery of the State of Delaware, containing substantially similar allegations and claims and seeking substantially the same relief as the Peck lawsuit and naming as defendants the individual members of the Fuel Systems board of directors, Westport and Merger Sub.

On September 21, 2015, another purported stockholder of Fuel Systems filed a putative class action complaint, captioned Barrie v. Fuel Systems Solutions, Inc., et al., C.A. No. 11530-CB, in the Court of Chancery of the State of Delaware. The Barrie suit asserts substantially the same allegations and claims in the Peck and Nehamen suits, and also asserts an aiding and abetting claim against Fuel Systems. The Barrie lawsuit names as defendants the individual members of the Fuel Systems board of directors, Fuel Systems, Westport and Merger Sub.

On October 2, 2015, another purported stockholder of Fuel Systems filed a putative class action complaint, captioned Nami v. Becker, et al., C.A. No. 11569-CB, in the Court of Chancery of the State of Delaware. The Barrie suit asserts substantially the same allegations and claims in the Peck, Nehamen and Barrie suits. The Nami lawsuit names as defendants the individual members of the Fuel Systems board of directors, Westport and Merger Sub. The parties intend to vigorously defend the Peck, Nehamen, Barrie and Nami lawsuits.

Additional lawsuits may be filed against the board of directors of Fuel Systems, Fuel Systems, Westport and/or Merger Sub in connection with the merger, and they may seek to enjoin the proposed merger or to obtain monetary relief from any or all of the defendants. An unfavorable resolution of any such litigation could delay or prevent the consummation of the merger. The cost of defending the litigation, even if resolved favorably, could be substantial, and the litigation could substantially divert the attention and resources of Fuel Systems’ and Westport’s management. There can also be no assurance that the board of directors of Fuel Systems, Fuel Systems, Westport, and/or Merger Sub, as applicable, will prevail in defense of any such lawsuits to which they are a party, even in an event where such company believes that the claims made in such lawsuits are without merit and vigorously defends against such claims.

 

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One of the conditions to the completion of the merger is that no law, order, judgment or injunction shall have been enacted or adopted that prohibits consummation of the merger. A preliminary injunction could delay or jeopardize the completion of the merger, and an adverse judgment granting permanent injunctive relief could indefinitely enjoin completion of the merger. An adverse judgment for rescission or for monetary damages could have a material adverse effect on Fuel Systems and Westport following the merger. For more information on the lawsuit, see “Summary—Litigation Related to the Merger.”

The merger and related transactions are subject to approval by Fuel Systems stockholders and the issuance of the merger consideration is subject to approval by Westport shareholders.

In order for the merger to be completed, Fuel Systems stockholders must adopt the merger agreement, which requires the approval of the holders of a majority of the outstanding shares of Fuel Systems common stock entitled to vote on the Merger proposal as of the record date for the Fuel Systems special meeting and Westport shareholders must approve, among other things, the issuance of the merger consideration and the assumption by Westport of Fuel Systems’ restricted stock units and restricted stock, which requires the approval of the majority of the total votes cast to approve the merger consideration.

The merger is subject to conditions, including certain conditions that may not be satisfied, or completed on a timely basis, if at all.

The merger is subject to certain other conditions beyond Westport’s and Fuel Systems’ control that may prevent, delay or otherwise materially adversely affect its completion, including the approval of the Merger proposal by Fuel Systems’ stockholders and the approval of the merger consideration by Westport’s shareholders, the termination or expiration of the waiting period required under the HSR Act, and the relevant approvals under the antitrust and competition laws of Turkey. Neither Westport nor Fuel Systems can predict whether and when these other conditions will be satisfied. Any delay in completing the merger could cause the combined company not to realize some or all of the synergies expected to be achieved if the merger is successfully completed within its expected time frame. See “The Merger Agreement—Conditions to Completion of the Merger” beginning on page [●].

Failure to complete the merger could negatively affect Fuel Systems’ stock price, its future business and financial results.

If the merger is not completed, Fuel Systems’ ongoing businesses may be adversely affected and Fuel Systems will be subject to several risks and consequences, including the following:

 

•

under the merger agreement, Fuel Systems may be required, under certain circumstances, to pay Westport a termination fee of USD $5.5 million;

 

•

Fuel Systems will be required to pay the costs and expenses it incurred related to the merger, whether or not the merger is completed, such as the fees and expenses of its legal, accounting and financial advisors, including in connection with certain due diligence investigations related thereto. In addition, the fees and expenses related to the printing and filing of this proxy statement/prospectus will be shared by Fuel Systems and Westport, other than attorneys’ and accountants’ fees;

 

•

Fuel Systems would not realize the expected benefits of the merger;

 

•

under the merger agreement, Fuel Systems is subject to certain restrictions on the conduct of its business prior to completing the merger, which may adversely affect its ability to execute certain of its business strategies;

 

•

matters relating to the merger may require substantial commitments of time and resources by Fuel Systems management, which could otherwise have been devoted to other opportunities that may have been beneficial to Fuel Systems as an independent company; and

 

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•

Fuel Systems may lose key employees during the period in which Fuel Systems and Westport are pursuing the merger, which may adversely affect Fuel Systems in the future if it is not able to hire and retain qualified personnel to replace departing employees.

In addition, if the merger is not completed, Fuel Systems may experience negative reactions from the financial markets and from its customers and employees. Fuel Systems also could be subject to litigation related to any failure to complete the merger or to enforcement proceedings commenced against Fuel Systems to attempt to force it to perform their respective obligations under the merger agreement.

Certain directors and executive officers of Fuel Systems have interests in the merger that are different from, or in addition to, those of other Fuel Systems stockholders, which could have influenced their decisions to support or approve the merger.

In considering whether to approve the proposals at the Fuel Systems special meeting, Fuel Systems stockholders should recognize that certain directors and executive officers of Fuel Systems have interests in the merger that differ from, or that are in addition to, their interests as stockholders of Fuel Systems. These interests include, among others, continued service as a director or an executive officer of the combined company, and the accelerated vesting of certain equity awards, certain transaction-related bonuses and/or certain severance benefits, in connection with the merger. These interests, among others, may influence the directors and executive officers of Fuel Systems to support or approve the Merger proposal. See the section entitled “The Merger—Interests of Directors and Executive Officers in the Merger” beginning on page [●].

Completion of the merger may trigger change in control or other provisions in certain agreements to which Fuel Systems is a party.

The completion of the merger may trigger change in control or other provisions in certain agreements to which Fuel Systems is a party. If Westport and Fuel Systems are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if Westport and Fuel Systems are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to Fuel Systems or the combined company.

Risks Relating to Tax Matters

You should read the discussion under the caption “U.S. Federal Income Tax Considerations” below for a more complete discussion of U.S. federal income tax considerations relating to the merger and the ownership and disposition of Westport common shares received in the merger.

The IRS may not agree that Westport should be treated as a foreign corporation for U.S. federal income tax purposes following the merger.

A corporation is generally considered a tax resident in the jurisdiction of its organization or incorporation for U.S. federal income tax purposes. Because Westport is a Canadian entity, it would generally be classified as a foreign corporation (and, therefore, not a U.S. tax resident) under these rules. Even so, the IRS may assert that Westport should be treated as a U.S. corporation (and, therefore, a U.S. tax resident) for U.S. federal income tax purposes pursuant to Section 7874 of the Code.

Under Section 7874 of the Code, if the former stockholders of Fuel Systems hold 80% or more of the vote or value of the shares of Westport by reason of holding Fuel Systems common stock (the percentage (by vote and value) of Westport common shares considered to be held (for purposes of Section 7874 of the Code) by former Fuel Systems stockholders immediately after the merger by reason of holding Fuel Systems common stock is referred to in this disclosure as the “Section 7874 Percentage”), and Westport’s expanded affiliated group after

 

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the merger does not have substantial business activities in Canada relative to its worldwide business activities, Westport would be treated as a U.S. corporation for U.S. federal income tax purposes. If the Section 7874 Percentage were determined to be at least 60% (but less than 80%), Section 7874 of the Code would cause Westport to be treated as a “surrogate foreign corporation” if Westport does not have substantial business activities in Canada relative to its worldwide business activities.

Under current law, Westport should not be treated as a U.S. corporation for U.S. federal income tax purposes. However, determining the Section 7874 Percentage is complex and is subject to factual and legal uncertainties, including that such determination takes into account several factors other than the estimated ratio of ownership of Westport by former Fuel Systems stockholders following the merger, which ratio is expected to be approximately 37.6%. For example, the IRS recently announced that it intends to issue U.S. Treasury Regulations that would disregard, for purposes of determining the Section 7874 Percentage, certain distributions made by Fuel Systems during the 36 months preceding the closing of the merger. Such U.S. Treasury Regulations have not yet been issued and their scope and precise effect are unclear, but they would likely have the effect of increasing the Section 7874 Percentage. Even taking into account these uncertainties, we currently expect the Section 7874 Percentage will be significantly less than 60% (in which case, Westport should not be treated as a U.S. corporation and the limitations described in the paragraph below should not apply to Fuel Systems). However, there can be no assurance that the IRS will agree with the position that the Section 7874 Percentage is less than 60%.

If the Section 7874 Percentage were determined to be at least 60% (but less than 80%), several limitations could apply to Fuel Systems. For example, Fuel Systems would be prohibited from using its net operating losses, foreign tax credits or other tax attributes to offset the income or gain recognized by reason of the transfer of property to a foreign related person during the 10-year period following the merger or any income received or accrued during such period by reason of a license of any property by Fuel Systems to a foreign related person. In addition, the IRS has announced that it will promulgate new rules, which, in that situation, may limit the ability to restructure the non-U.S. members of the Fuel Systems tax group or access cash earned in its non-U.S. subsidiaries. Moreover, in such case, Section 4985 of the Code and rules related thereto would impose an excise tax on the value of certain Fuel Systems stock compensation held directly or indirectly by certain “disqualified individuals” (including officers and directors of Fuel Systems) at a rate equal to 15%, but only if gain is otherwise recognized by Fuel Systems stockholders as a result of the merger.

Changes in law could affect Westport’s status as a foreign corporation for U.S. federal income tax purposes or limit the U.S. tax benefits from Westport engaging in certain transactions.

Westport believes that, under current law, it should be treated as a foreign corporation for U.S. federal income tax purposes. However, changes to Section 7874 of the Code or the U.S. Treasury Regulations promulgated thereunder could adversely affect Westport’s status as a foreign corporation for U.S. federal tax purposes, and any such changes could have prospective or retroactive application. If Westport were to be treated as a U.S. corporation for U.S. federal income tax purposes, it could be subject to materially greater U.S. tax liability than currently contemplated as a non-U.S. corporation. Specifically, if Westport were to be treated as a U.S. corporation for U.S. federal income tax purposes, Westport would be subject to U.S. corporate income tax on its worldwide income, and the income of its foreign subsidiaries would be subject to U.S. tax when repatriated or when deemed recognized under the U.S. federal income tax rules for controlled foreign subsidiaries. Moreover, in such a case, a non-U.S. Holder of Westport common shares would be subject to U.S. withholding tax on the gross amount of any dividends paid by Westport to such shareholder.

Recent legislative proposals have aimed to expand the scope of U.S. corporate tax residence, including by potentially causing Westport to be treated as a U.S. corporation if the management and control of Westport and its affiliates were determined to be located primarily in the United States, or by reducing the Section 7874 Percentage at or above which Westport would be treated as a U.S. corporation. In addition, other recent legislative proposals would cause Westport and its affiliates to be subject to certain intercompany financing

 

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limitations, including with respect to their ability to use certain interest expense deductions, if the Section 7874 Percentage were to be at least 60%. Thus, the rules under Section 7874 and other relevant provisions could change on a prospective or retroactive basis in a manner that could adversely affect Westport and its affiliates.

Future changes in U.S. and non-U.S. tax laws could adversely affect Westport.

The U.S. Congress, the Organization for Economic Co-operation and Development and government agencies in jurisdictions where Westport and its affiliates do business have had an extended focus on issues related to the taxation of multinational corporations. In particular, specific attention has been paid to “base erosion and profit shifting,” where payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. As a result, the tax laws in the U.S. and other countries in which Westport and its affiliates do business could change on a prospective or retroactive basis, and any such change could adversely affect Westport.

If Westport is, or becomes, a “passive foreign investment company,” adverse U.S. federal income tax consequences may result for U.S. shareholders of Westport.

U.S. Holders of Westport common shares should be aware that Westport believes it was not classified as a passive foreign investment company (“PFIC”) for its tax year ended December 31, 2014, and based on current business plans and financial expectations, Westport expects that it will not be a PFIC for the current tax year. Westport has not made any determination as to its PFIC status for future tax years. PFIC classification is fundamentally factual in nature, generally cannot be determined until the close of the tax year in question, and is determined annually. Consequently, there can be no assurance that Westport will not become a PFIC for any tax year during which U.S. Holders own Westport common shares.

If Westport is a PFIC for any year during a U.S. Holder’s holding period, then such U.S. Holder generally will be required to treat any gain realized upon a disposition of Westport common shares, or any “excess distribution” received on its Westport common shares, as ordinary income, and to pay an interest charge on a portion of such gain or distribution, unless the U.S. Holder makes a timely and effective “qualified electing fund” election (“QEF Election”) or a “mark-to-market” election with respect to its Westport common shares. A U.S. Holder who makes a QEF Election generally must report on a current basis its share of Westport’s net capital gain and ordinary earnings for any year in which Westport is a PFIC, whether or not Westport distributes any amounts to its shareholders. However, U.S. Holders should be aware that there can be no assurance that Westport will satisfy the record keeping requirements that apply to a qualified electing fund, or that Westport will supply U.S. Holders with information that such U.S. Holders require to report under the QEF Election rules, in the event that Westport is a PFIC and a U.S. Holder wishes to make a QEF Election. Thus, U.S. Holders may not be able to make a QEF Election with respect to their Westport common shares. A U.S. Holder who makes a mark-to-market election generally must include as ordinary income each year the excess of the fair market value of the Westport common shares over such holder’s tax basis therein. This risk factor is qualified in its entirety by the discussion below under the heading “U.S. Federal Income Tax Considerations.” Each U.S. Holder should consult its own tax advisors regarding the PFIC rules and the U.S. federal income tax consequences of the merger and the acquisition, ownership, and disposition of Westport common shares.

The merger is expected to result in an ownership change for Fuel Systems, and may result in an ownership change for Westport, under Section 382 of the Code, potentially limiting the use of Westport’s and Fuel Systems’ net operating loss carryforwards and certain other tax attributes in future years. In addition, each of Westport’s and Fuel Systems’ ability to use its net operating loss carryforwards may be further limited if taxable income does not reach sufficient levels.

As of July 31, 2015, Fuel Systems had approximately $108.3 million of net operating loss (“NOL”) carryforwards available to reduce U.S. federal taxable income in future years. As of June 30, 2015, Westport had approximately $64.0 million of NOL carryforwards available to reduce U.S. federal taxable income in future

 

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years. Under Section 382 of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period.

The merger is expected to result in an ownership change under Section 382 of the Code for Fuel Systems, potentially limiting the use of Fuel Systems’ NOL carryforwards in future taxable years for U.S. federal income tax purposes. These limitations may affect the timing of when these NOL carryforwards can be used which, in turn, may impact the timing of when cash is used to pay the taxes of Fuel Systems and have a negative impact on Fuel Systems’ financial position and results of operations. In addition, Fuel Systems’ ability to use its NOL carryforwards will be dependent on its ability to generate taxable income. Some portion of the NOL carryforwards could expire before Fuel Systems generates sufficient taxable income.

The merger, together with other transactions, may result in an ownership change under Section 382 of the Code for Westport, potentially limiting the use of Westport’s NOL carryforwards in future taxable years for U.S. federal income tax purposes. These limitations may affect the timing of when these NOL carryforwards can be used which, in turn, may impact the timing of when cash is used to pay the taxes of Westport and have a negative impact on Westport’s financial position and results of operations. In addition, Westport’s ability to use its NOL carryforwards will be dependent on its ability to generate taxable income. Some portion of the NOL carryforwards could expire before Westport generates sufficient taxable income.

The application of Section 367(a)(1) of the Code may result in your recognition of taxable gain (but not loss) in respect of the Fuel Systems common stock you exchange for Westport common shares in the merger.

The receipt of Westport common shares for Fuel Systems common stock pursuant to the merger should qualify as a tax-free reorganization within the meaning of Section 368(a) of the Code. However, Section 367(a)(1) of the Code and the applicable Treasury Regulations thereunder provide that where a U.S. shareholder exchanges stock in a U.S. corporation for stock in a non-U.S. corporation in a transaction that would otherwise constitute a tax-free exchange, the U.S. shareholder is required to recognize gain, but not loss, realized on such exchange unless certain requirements are met. While Westport and Fuel Systems generally expect such requirements to be met, one such requirement is that the value of Westport equal or exceed the value of Fuel Systems, as specifically determined for purposes of Section 367 of the Code, as of the closing date of the merger. Whether this requirement is met cannot be known until the closing date of the merger. In determining the value of Westport for these purposes, acquisitions of assets by Westport made outside of the ordinary course of business during the 36 months preceding the merger will be disregarded unless such acquisitions either (i) consist of interests in certain foreign corporations or partnerships, or (ii) do not consist of passive assets (including cash) and are not undertaken with a principal purpose of satisfying such requirement.

In addition, the IRS has announced an intention to issue regulations effective prior to the date of the merger whereby, for purposes of determining the value of Fuel Systems, certain distributions made by Fuel Systems during the 36 months preceding the merger will be added back to the value of Fuel Systems for purposes of this requirement. Under such regulations, distributions (including share repurchases) made by Fuel Systems over the 36 months preceding the merger would be added back to the value of Fuel Systems to the extent that amounts distributed during a given year exceed 110 percent of the average amounts distributed over the 3 preceding years. Regulations addressing the specific method for determining the amount that would be added back for this purpose have not been issued. If the application of Section 367(a)(1) requires recognition of gain to a holder of Fuel Systems common stock in the merger, such holder of Fuel Systems common stock would recognize gain (but not loss) in an amount equal to the excess, if any, of the fair market value as of the closing date of the merger of any Westport common shares (including fractional shares) received in the merger, over such holder’s tax basis in the shares of Fuel Systems common stock surrendered by the holder in the merger. Any gain so recognized would generally be long-term capital gain if the holder has held the Fuel Systems common stock for more than one year at the time the merger is completed. If you do not expect that the value of Westport will equal

 

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or exceed the value of Fuel Systems, as specifically determined for purposes of Section 367 of the Code (as discussed above), as of the closing date of the merger, you should assume, for purposes of deciding how to vote, that the merger will be treated in such manner.

Risks Relating to the Combined Company Following the Merger

The market price of Westport’s common shares has been, and may continue to be, volatile, and Fuel Systems stockholders could lose all or part of their investment.

The market price of Westport’s common shares has fluctuated substantially, may continue to do so, and may be higher or lower than the initial price received upon the exchange. As a result, Westport’s future stock price may be volatile. Over the twelve month period ending on September 30, 2015, the market price of Westport’s common shares on the TSX has ranged from a low of C$3.29 to a high of C$9.22. Over the twelve month period ending on September 30, 2015, the market price of Westport’s common shares on NASDAQ has ranged from a low of $2.47 to a high of $8.25. The market price of Westport’s common shares following the merger will depend on a number of factors, many of which are beyond Westport’s control. These fluctuations could cause Fuel Systems stockholders to lose all or part of their investment in Westport common shares since Fuel Systems stockholders might be unable to sell their shares at or above the price initially received upon the exchange of shares of Fuel Systems common stock. Factors that could cause fluctuations in the market price of Westport’s common shares include the following:

 

•

price and volume fluctuations in the overall stock market from time to time;

 

•

changes in operating performance and stock market valuations of other companies generally, or those in Westport’s industry in particular;

 

•

announcements of technological innovations, new products or services by Westport or its competitors;

 

•

the addition or loss of Westport’s customers;

 

•

future capital raising activities of Westport and the use of proceeds;

 

•

sales of Westport common shares by holders thereof or Westport;

 

•

failure of securities analysts to maintain coverage of Westport, changes in financial estimates by securities analysts who follow Westport, or Westport’s failure to meet these estimates or the expectations of investors;

 

•

the financial projections Westport may provide to the public, any changes in those projections or Westport’s failure to meet those projections;

 

•

the announcements by Westport or its competitors of significant acquisitions, strategic relationships, joint ventures, capital commitments or divestitures;

 

•

the public’s reaction to Westport’s press releases, other public announcements and filings with the SEC and the applicable Canadian securities regulatory authorities;

 

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rumors and market speculation involving Westport or other companies in Westport’s industry;

 

•

actual or anticipated changes in Westport’s operating results or fluctuations in Westport’s operating results;

 

•

actual or anticipated developments in Westport’s business, Westport’s competitors’ businesses or the competitive landscape generally;

 

•

litigation involving Westport, Westport’s industry or both, or investigations by regulators into Westport’s operations or those of Westport’s competitors;

 

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additions or departures of key employees;

 

•

announced or completed acquisitions of businesses by Westport or Westport’s competitors;

 

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•

new laws or regulations or new interpretations of existing laws or regulations applicable to Westport and its business;

 

•

changes in accounting standards, policies, guidelines, interpretations or principles;

 

•

any significant change in Westport’s management; and

 

•

general economic conditions and slow or negative growth of Westport’s markets.

Current Fuel Systems stockholders will have reduced ownership and voting interests after the merger.

Based on 18,093,562 shares of common stock of Fuel Systems outstanding on [●], the record date for the special meeting, and the exchange ratio, it is anticipated that Westport will issue 38,521,193 Westport common shares to the shareholders of Fuel Systems upon completion of the merger. Based on the number of common shares of Westport outstanding on October 9, 2015, current Fuel Systems stockholders and current Westport shareholders would own approximately 37.6% and 62.4% of Westport’s common shares, respectively, upon the completion of the merger, assuming no additional issuances of common shares by either Westport or Fuel Systems between October 9, 2015 and the effective time, which is expected to occur by December 31, 2015. However, Westport could issue up to 1,239,300 common shares upon the exercise of outstanding Westport options prior to the effective time, and Fuel Systems could issue up to 117,020 shares of common stock (equivalent to 249,136 Westport common shares) upon the exercise of outstanding Fuel Systems options prior to the effective time. In addition, following the effective time, Westport may issue additional common shares pursuant to the exercise of outstanding Westport options, including pursuant to those Fuel Systems options assumed by Westport in connection with the merger. Further, Westport may issue additional common shares in connection with future financings or other transactions.

At the closing of the merger, each Fuel Systems stockholder who receives Westport common shares will become a shareholder of Westport. As a result, the percentage ownership of Westport held by each current Fuel Systems stockholder will be smaller than such shareholder’s percentage ownership of Fuel Systems prior to the merger. Fuel Systems’ current stockholders will, therefore, have proportionately less ownership and voting interests in Westport following the merger than they have now in Fuel Systems.

The merger will result in changes to Westport’s board of directors and management that may affect the strategy and operations of the combined company as compared to that of Fuel Systems and Westport as they currently exist.

If the merger is completed, the composition of Westport’s board of directors and management team will change. Upon completion of the merger, the board of directors of the combined company will consist of ten members. On the closing of the merger, three members of the current Westport board of directors are anticipated to resign and three new members will be appointed to fill the vacancies created by such resignations. These three individuals are Mariano Costamagna and [●] and [●].

In addition, it is expected that the combined company will create a new business unit called “Fuel Systems Automotive and Industrial Group” that will be led by members of Westport’s and Fuel Systems’ management teams. This new unit will represent the combination of Fuel Systems with Westport’s Operations unit. Its automotive division will be headquartered in Cherasco, Italy, and its industrial division will be headquartered in Santa Ana, California.

There can be no assurance that the newly constituted board of directors and new management of the combined company will function effectively as a team and that there will not be any adverse effect on the combined company’s business as a result.

Any delay in completing the merger may reduce or eliminate the benefits expected to be achieved thereunder.

In addition to the required regulatory approvals and clearances, the merger is subject to certain other conditions beyond shareholders’ control that may prevent, delay, or otherwise materially adversely affect its

 

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completion. It is not predicable whether and when these other conditions will be satisfied. Furthermore, the requirements for obtaining the required clearances and approvals could delay the completion of the merger for a significant period of time or prevent it from occurring. Any delay in completing the merger could cause shareholders not to realize some or all of the synergies and other benefits that are expected to be achieved if the merger is successfully completed within its expected time frame.

Uncertainties associated with the merger may cause a loss of management personnel and other key employees which could adversely affect the future business and operations following the merger.

The combined company will be dependent on the experience and industry knowledge of Fuel Systems and Westport officers and other key employees to execute its business plans. Westport’s success after the merger will depend in large part upon its ability to retain key management personnel and other key employees. As the combined company develops additional capabilities, it may require more skilled employees. Given the highly specialized nature of Westport’s and Fuel Systems’ products, these employees must be highly skilled and have a sound understanding of the combined company’s industry, business or technology. Fuel Systems’ and Westport’s current and prospective employees may experience uncertainty about their roles within Westport following the merger or other concerns regarding its operations following the merger, any of which may have an adverse effect on Westport’s ability to attract or retain key management and other key personnel. Accordingly, no assurance can be given that Fuel Systems and Westport will be able to attract or retain key management personnel and other key employees until the merger is consummated or following the merger to the same extent that Fuel Systems and Westport have previously been able to attract or retain such employees.

The expected benefits of the merger may not be realized.

To be successful after the merger, Westport will need to combine and integrate the operations of Fuel Systems and Westport. Integration will require substantial management attention and resources and could detract attention and resources from the day-to-day business of Westport. Westport could encounter difficulties in the integration process, such as:

 

•

the potential inability to successfully combine Fuel Systems’ business with Westport’s business in a manner that permits it to achieve the operational and cost synergies expected to be achieved as a result of the completion of the merger and other benefits anticipated to result from the merger;

 

•

complexities associated with managing the combined businesses, including difficulty addressing possible differences in corporate cultures and management philosophies and the challenge of integrating different development and manufacturing methods and assets of each of the companies in a seamless manner that minimizes any adverse impact on customers, clients, employees, lenders, and other constituencies;

 

•

the loss of key employees, customers, suppliers, vendors and partners;

 

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insufficient capital and liquidity to achieve the business plan;

 

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the inability of the combined company to meet its cost and sales expectations;

 

•

potential unknown liabilities and unforeseen increased expenses or delays associated with the merger.

If Westport cannot integrate Fuel Systems’ business successfully with its own, Westport may fail to realize the expected benefits of the merger. In addition, there is no assurance that all of the goals and anticipated benefits of the merger will be achievable, particularly as the achievement of the benefits are in many important respects subject to factors that neither Westport nor Fuel Systems controls. These factors include such things as the reactions of third parties with whom contracts are entered into and with which business is undertaken and the reactions of investors and analysts.

In addition, Fuel Systems and Westport have operated and, until the completion of the merger, will continue to operate independently. It is possible that the integration process could result in diversion of the attention of

 

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each company’s management which could adversely affect each company’s ability to maintain relationships with customers, clients, employees, and other constituencies or Westport’s ability to achieve the anticipated benefits of the merger, or could reduce each company’s operating results or otherwise adversely affect Westport’s business and financial results following the merger.

The obligations and liabilities of Westport, some of which may be unanticipated or unknown, may be greater than anticipated, which may diminish the value of Westport’s shares.

Westport’s obligations and liabilities, some of which may be unanticipated or unknown, or may be greater than anticipated, may not be reflected or reserved for in Westport’s historical financial statements. The obligations and liabilities of Westport could have a material adverse effect on Westport’s business, financial condition, or results of operations following the merger. Fuel Systems stockholders will not be entitled to indemnification from Westport under the merger agreement with respect to obligations or liabilities of Westport, whether known or unknown. Any such liabilities could substantially reduce Westport’s earnings and cash flows or otherwise materially and adversely affect its business, financial condition, or results of operations following the merger.

Westport’s future results following the merger may differ materially from the unaudited pro forma condensed combined financial information included in this proxy statement/prospectus.

The unaudited pro forma condensed combined financial information contained in this proxy statement/prospectus is presented for purposes of presenting Westport’s historical consolidated financial information with Fuel Systems’ historical consolidated financial information as adjusted to give effect to the merger as though the merger had occurred on June 30, 2015, and is not necessarily indicative of the financial condition or results of operations of Westport following the merger. In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect Westport’s financial condition and results of operations following the merger. Any change in Westport’s financial condition or results of operations may cause significant variation in the value of the Westport common shares issued to shareholders of Fuel Systems as part of the merger. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page [●] for more information.

Westport expects to maintain its status as a “foreign private issuer” in the U.S. and thus will be exempt from a number of rules under the Exchange Act and will be permitted to file less information with the SEC than a company incorporated in the U.S.

Westport is considered a “foreign private issuer” under the rules of the SEC. As a foreign private issuer, Westport is subject to the reporting requirements under the Exchange Act applicable to foreign private issuers. Westport is required to file its annual report on Form 40-F with the SEC at the time it files its annual information form with the applicable Canadian securities regulatory authorities. In addition, Westport must furnish reports on Form 6-K to the SEC regarding certain information required to be publicly disclosed by Westport in Canada or filed with the TSX and which was made public by the TSX, or regarding information distributed or required to be distributed by Westport to its shareholders. Moreover, although Westport is required to comply with Canadian disclosure requirements, in some circumstances Westport is not required to file periodic reports and financial information with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. Furthermore, Westport is not required to comply with Regulation FD, which addresses certain restrictions on the selective disclosure of material information, although it must comply with Canadian disclosure requirements. In addition, among other matters, Westport’s officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of Westport common shares. Therefore, Westport’s shareholders may not know on as timely a basis when its officers, directors and principal shareholders purchase or sell common shares as the reporting periods under the corresponding Canadian insider reporting requirements are longer.

 

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Fuel Systems and Westport expect to incur substantial expenses related to the merger and the integration of the two companies.

Westport and Fuel Systems expect to incur significant transaction costs and significant synergy planning and integration costs in connection with the merger. While Westport and Fuel Systems have assumed that this level of expense will be incurred, there are many factors beyond its control that could affect the total amount or the timing of the merger and integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. To the extent these transaction and integration expenses are higher than anticipated or are incurred at different times than anticipated, Westport’s future operating results and financial condition may be materially adversely affected. The companies cannot be certain that the elimination of duplicative costs or the realization of other efficiencies related to the integration of the two businesses will offset the transaction and the merger related costs in the near term, or at all.

Westport’s future results will suffer if it does not effectively manage its expanded operations following the merger.

Following the merger, the size of Westport’s business will increase significantly. Its future success depends, in part, upon its ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations, and associated increased costs and complexity. There can be no assurances that Westport will be successful following the merger.

The merger may result in a loss of customers, clients, suppliers and strategic alliances.

Some of the customers, clients, suppliers, potential customers or clients or strategic partners of Fuel Systems or Westport may terminate their business relationship with Fuel Systems or Westport following the merger. Potential clients, suppliers, or strategic partners may delay entering into, or decide not to enter into, a business relationship with Fuel Systems or Westport because of the merger. Further, certain of Fuel Systems’ existing customer contracts may require the purchaser’s consent to the change of control of Fuel Systems, and there can be no assurance that such consent will be forthcoming. If customer, supplier or client relationships or strategic alliances are adversely affected by the merger, Westport’s business and financial performance following the merger would suffer.

The market price of the combined company’s common shares may be affected by factors different from those affecting Westport’s common shares or Fuel Systems’ common stock prior to consummation of the merger.

Westport’s historical business differs from that of Fuel Systems. Accordingly, the results of operations of the combined company and the market price of the combined company’s common shares may be affected by factors different from those that previously affected the independent results of operations and the market price of the common shares of each of Fuel Systems and Westport.

Current financing requirements of the combined business may not be adequate.

The combined company may need additional financing in connection with the implementation of its business and strategic plans from time to time after closing of the merger. The development and manufacture of Westport’s and Fuel Systems’ products requires a substantial amount of capital and may depend on the combined company’s ability to obtain financing through joint ventures, debt financing, equity financing or other means. The combined entity may accordingly need further capital depending on operational results and market conditions, including the prices at which the combined company sells its products, or in order to take advantage of further opportunities or acquisitions. The combined company’s financial condition, general market conditions, volatile interest rates, a claim against the combined company, a significant disruption to the combined company’s business or operations or other factors may make it difficult to secure financing necessary for the expansion of its business or to take advantage of opportunities for acquisitions. Further, continuing volatility in the credit markets

 

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may increase costs associated with debt instruments due to increased spreads over relevant interest rate benchmarks, or may affect the ability of the combined company, or third parties it seeks to do business with, to access those markets. There is no assurance that the combined company will be successful in obtaining required financing as and when needed on acceptable terms, if at all. If the combined company raises additional funding by issuing additional equity securities or securities convertible, exercisable or exchangeable for equity securities, such financing may substantially dilute the interests of the shareholders of the combined company and reduce the value of their investment.

Risks Inherent in an Investment in Westport

You should read and consider the other risk factors specific to Westport’s businesses that will also affect Westport after the consummation of the merger described in Westport’s second amended Annual Report on Form 40-F/A for the year ended December 31, 2014 filed with the SEC on October 16, 2015 and other documents that have been filed by Westport with the SEC and which are incorporated by reference into this proxy statement/prospectus.

 

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THE MERGER

The following is a discussion of the merger and the material terms of the merger agreement between Westport and Fuel Systems. You are urged to read carefully the merger agreement in its entirety, a copy of which is attached as Annex A to this proxy statement/prospectus and incorporated by reference herein.

Background of the Merger

As part of their ongoing evaluation of Fuel Systems’ business, the Fuel Systems board of directors and senior management, with the assistance of financial and legal advisors, regularly review and assess Fuel Systems’ strategic and financial alternatives in light of developments in Fuel Systems’ business, in the sectors in which it competes, in the economy and in the financial markets. In particular, beginning in early 2014, following a review of Fuel Systems’ results of operations for 2013, the board of directors began to take steps to mitigate losses, reduce costs, rationalize programs, develop a strategic plan and discuss the potential engagement of a third party consultant to assist the company with such efforts.

On September 10, 2014, in order to further facilitate recommendations to the Fuel Systems board of directors on potential business strategies, the Fuel Systems board of directors created a strategic oversight committee (the “strategy committee”), including Mr. DiToro as chair, with Mr. Nall, Mr. Clarke and Mr. Johnston as members. The strategy committee was tasked with overseeing the development of a strategic plan, including review and assessment of business combinations and strategic transactions. The Fuel Systems board of directors authorized the strategy committee to hire advisors as the committee deemed necessary to carry out its functions.

On September 16, 2014, Fuel Systems engaged J.P. Morgan, for a flat fee of $100,000 per quarter, to assist Fuel Systems in its strategic and financial analysis. J.P. Morgan was selected based on, among other things, J.P. Morgan’s reputation and its experience in mergers and acquisitions, valuation, financing, and capital markets. During September, Fuel Systems also engaged a third party consultant to assist in continuing to develop a strategic plan for the company.

On October 21 and October 22, 2014, at a meeting of the Fuel Systems board of directors, members of Fuel Systems’ senior management and board of directors discussed with representatives of J.P. Morgan and a third party consultant a variety of financial and strategic alternatives for Fuel Systems, including pursuing a potential business combination, possible capital raising alternatives, a stock repurchase program and cost saving initiatives. J.P. Morgan and the Fuel Systems board of directors and management discussed the relative benefits, detriments and considerations in the context of various alternatives, as well as the anticipated value creation, from both qualitative and quantitative perspectives. The third party consultant developed an initial business plan, including restructuring plans, which was used as a basis of an analysis of strategic alternatives. J.P. Morgan also presented a list of certain entities that might be interested in a potential transformative transaction with Fuel Systems, including both strategic investors and U.S. based, Italian based and/or Italian focused financial sponsor parties, based on, among other criteria, financial strength, quality of assets and management and relative performance of publicly traded equity securities. Some of these possible counterparties were proposed by Fuel Systems based on such parties’ previous communications with Fuel Systems about possible transactions.

On October 29, 2014, Fuel Systems and Becker Drapkin (a stockholder in Fuel Systems, owning at the time approximately 8.9% of the Fuel Systems’ outstanding common stock) entered into an agreement pursuant to which, among other things, the Fuel Systems board of directors appointed Mr. Steven A. Becker to the Fuel Systems board of directors, to the nominating & corporate governance committee and to the position of chair of the strategy committee. Following Mr. Becker’s appointment as chair, the strategy committee consisted of Messrs. Becker, Di Toro, Nall, and Clarke. The Fuel Systems board of directors believed it was in the best interests of Fuel Systems to appoint Mr. Becker to these positions because of his financial and business acumen, broad range of experience as a public company director and his perspective as a major stockholder.

 

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On November 6, 2014, Fuel Systems announced a $25 million share repurchase program to deliver returns to its stockholders through a return of capital within the overall context of a prudent capital allocation strategy.

On November 14, 2014, at a telephonic meeting of the strategy committee, J.P. Morgan discussed with the strategy committee available strategic options, including a review of potential strategic investors and financial sponsors that could be considered as potential counterparties to a transaction. The members of the strategy committee discussed various potential transaction structures concerning Fuel Systems as a whole or its industrial (“Industrial”) or automotive (“Automotive”) divisions separately. The strategy committee recommended that a meeting of the board of directors of Fuel Systems should be convened prior to the regularly scheduled Fuel Systems board of directors meeting in order to discuss the strategy committee’s recommendation that J.P. Morgan be instructed to make initial contact with a select group of potential interested parties, subject to customary nondisclosure agreements. This initial targeted group was comprised of four strategic buyers, whose characteristics and history of interest in Fuel Systems made them reasonable initial potential counterparties in the judgment of the strategy committee. In deciding not to expand the initial list of targeted buyers, the strategy committee considered competitive concerns as well as execution risk.

On November 18, 2014, at a telephonic meeting of the Fuel Systems board of directors, the Fuel Systems board of directors and J.P. Morgan reviewed the various alternatives and options available to Fuel Systems, including selling the company as a whole, the sale of its Industrial or Automotive division and potential transformative transactions. The Fuel Systems board of directors also reviewed the list of potential counterparties to a transaction that was discussed at the earlier meetings of the Fuel Systems board of directors held on October 21 and October 22, 2014, as well as the recommendations of the strategy committee. Based on this review with J.P. Morgan and the recommendation of the strategy committee, the Fuel Systems board of directors instructed J.P. Morgan to engage in an initial dialogue with the select group of four potential strategic counterparties recommended by the strategy committee, including Westport.

Later in the week of November 17, 2014 and continuing through the week of November 24, 2014, the representatives of Party A, Party B, Party C and Westport that previously had made initial inbound inquiries were contacted. Within the previous year, each of these parties had communicated with Fuel Systems about possible strategic transactions with Fuel Systems, but specific terms, including price, were not discussed. No company that had made an initial inbound inquiry to Fuel Systems within the prior year was excluded from the group of initial potential buyers that J.P. Morgan had been instructed to contact.

On November 30, 2014, at a regularly scheduled meeting of the Fuel Systems board of directors, and based on its confidential inquiries, J.P. Morgan informed the Fuel Systems board of directors that all four strategic counterparties, including Westport, verbally expressed interest in obtaining additional information regarding Fuel Systems. Also at the meeting, Mr. Costamagna, Fuel Systems’ chief executive officer, outlined a proposed restructuring plan involving certain expense reductions and related initiatives within Fuel Systems, as well as the rationale for such restructuring. It was anticipated that the restructuring would take approximately two years to complete once commenced. At a meeting of the strategy committee later in the day, the strategy committee unanimously approved hiring Skadden, Arps, Meagher & Flom LLP (“Skadden”) as counsel to the strategy committee and the Fuel Systems board of directors to supplement and work with Day Pitney LLP, Fuel Systems’ outside counsel.

On December 1, 2014, at a reconvened regularly scheduled meeting of the Fuel Systems board of directors, Mr. Costamagna continued his report on the contemplated restructuring plan and reviewed its potential impact on operating income. After the presentation, the Fuel Systems board of directors approved the engagement of a third party consultant to participate with management in developing a detailed restructuring plan (the “Restructuring Plan”), which provides for (i) promptly implementing certain changes in the short-term while allowing exploratory discussion and strategic analysis to occur concurrently, and (ii) developing a longer-term, detailed business plan for 2015-2020, taking into account the initiatives and impact of the first two years of the Restructuring Plan with high-level financial projections for the following years.

 

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During the months of December 2014 and January and February 2015, the Fuel Systems board of directors and the strategy committee each continued to meet and discuss with J.P. Morgan and members of senior management, among other things, the list of prospective bidders, financial forecasts and the draft confidential memorandum of Fuel Systems that would be shared with prospective bidders (the “Information Materials”). During this same period, Fuel Systems entered into confidentiality agreements with Party A, Party B, Party C and a financial sponsor affiliated with Party B. The confidentiality agreements entered into with these parties contained customary “standstill” provisions, each of which was later waived in connection with the execution of the merger agreement.

On December 19, 2014, at a telephonic meeting of the strategy committee, J.P. Morgan updated the committee on the status of the process with the four strategic bidders, and the committee reviewed drafts of the Information Materials.

On January 23, 2015, at a telephonic meeting of the strategy committee, the third party consultant presented materials relating to the Restructuring Plan, including in respect of operating profit improvement initiatives, providing an overview of each initiative and illustrative examples of various anticipated enhancements. In the meeting, J.P. Morgan provided an update regarding the status of the negotiation of the confidentiality agreements with the four strategic parties.

On January 30, 2015, at a telephonic meeting of the Fuel Systems board of directors, the third party consultant presented materials relating to the Restructuring Plan similar to the presentation given to the strategy committee the previous week, which included summaries of preliminary initiatives associated with possible operating optimization alternatives, product range streamlining and rationalization, among other matters. The third party consultant also discussed the next steps in the Restructuring Plan, including a completion of its financial analysis based on 2014 data, and the implementation of initiatives with clear, approved plans and low risk profiles. Fuel Systems’ projected financials for 2015 through 2017, prepared by Fuel Systems’ management and its third party consultants, were presented to the Fuel Systems board of directors (the “Forecasts”) and were later provided to Westport and Rothschild, Inc. (“Rothschild”). Also at the meeting, J.P. Morgan provided an update in regards to process with the four strategic parties. A draft of the Information Materials was also presented for the board’s review.

Between the weeks of February 23, 2015 and March 16, 2015, at the request of the Fuel Systems board of directors, J.P. Morgan reached out to an additional three strategic parties and 11 sponsor parties to gauge interest and negotiate confidentiality agreements. The Fuel Systems board of directors also instructed J.P. Morgan to send Information Materials and letters describing the bidding process to Parties A, B, C and Westport.

On February 27, 2015, Party C sent a preliminary indication of interest noting its willingness to pay between $60 million and $70 million in cash for the Industrial division, subject to satisfactory due diligence and a 90-day exclusivity period. Also on February 27, 2015, Rothschild, Westport’s financial advisor, contacted J.P. Morgan and indicated that Westport would potentially be interested in a stock-for-stock merger. On the same day, Party A sent a request for exclusivity with no indication of proposed value or transaction terms.

On March 6, 2015, at a telephonic meeting of the strategy committee, J.P. Morgan updated the strategy committee on the status of the process with the initial four strategic bidders, including that Party C had been advised, at the direction of the Fuel Systems board of directors, that its initial bid was too low and that initial contacts with the additional 14 parties had not yet resulted in any acceptable preliminary indications of interests.

On March 11, 2015, Party C provided a revised indication of interest contemplating a cash asset purchase of the Industrial division for an increased purchase price of $80 million, subject to financing and satisfactory due diligence, among other items.

On March 16, 2015, Fuel Systems entered into a confidentiality agreement with Westport. On the same day, Party A provided a preliminary indication of interest for the purchase of the Industrial division, contemplating a

 

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cash asset purchase of the Industrial division for a purchase price between $50 million and $60 million and indicated that it would also be open to a reverse merger transaction, which would require entering into an exclusivity period and would be conditioned upon finding an alternative solution for Automotive. No value was proposed by Party A for the reverse merger transaction.

On March 17, 2015, at a telephonic meeting of the strategy committee, Mr. Becker provided an update on the process, including a review of the history of contacts with the initial four strategic parties and how the list of the additional 14 potential counterparties was developed. The 14 additional counterparties included, among others, parties that had made individual calls to either Fuel Systems’ management or individual members of the Fuel Systems board of directors subsequent to the meetings held on October 21 and October 22, 2014, during which the initial list of potential counterparties was reviewed and certain other parties that the Fuel Systems board of directors determined to be likely candidates. At the direction of the special committee J.P. Morgan responded to one party that had contacted Mr. Becker and found that such party had determined it was not capable of an acquisition. This party was not included in the additional 14 potential counterparties discussed above.

On March 18 and March 19, 2015, at a meeting of the Fuel Systems board of directors, J.P. Morgan provided an update as to the process with the initial four strategic contacts as well as the additional 14 potential counterparties and their preliminary indications of interest, noting that the then-current deadline for preliminary indications of interest for the parties was March 24, 2015. J.P. Morgan recommended the deadline be extended due to the addition of the other 14 potential counterparties to the process and certain potential counterparties’ requests for additional time to evaluate the opportunity.

On March 23, 2015, Party B provided a preliminary indication of interest contemplating a stock-for-stock transaction between Party B and Fuel Systems; however, no price, governance terms or transaction structure for the business combination was proposed.

On March 24, 2015, representatives of Rothschild, on behalf of Westport, provided a preliminary indication of interest proposing a stock-for-stock transaction valued at prevailing market prices with no premium.

On March 27, 2015, at a telephonic meeting of the strategy committee, representatives of J.P. Morgan reported on the status of the strategic process and provided an update on recent discussions and meetings, including a summary of each of the indications of interest received from Westport, Party A, Party B and Party C. J.P. Morgan also updated the committee on the status of several potential sponsor bidders (that were among the group of 14) whom J.P. Morgan had contacted but that had declined the opportunity. In consultation with its advisors, the Fuel Systems strategy committee also considered certain issues that could arise in connection with a stock-for-stock transaction with Party B due to Party B’s current overseas stock exchange listing and local currency, requiring additional complex structuring considerations, and determined that potential antitrust issues with the four parties that had indicated interest should be analyzed early in the process. The strategy committee agreed to move forward with management presentations with Westport, Party A, Party B and Party C and to begin a preliminary level of due diligence review, including reciprocal due diligence with Westport and Party B, due to each of their proposals including stock consideration.

During the period between March 2015 and May 2015, Fuel Systems entered into additional confidentiality agreements with an additional seven potential counterparties, which included six financial sponsors and one strategic party, three of whom were among the group of 14. Each of the confidentiality agreements included a customary “standstill” provision with substantially the same terms, each of which were later waived in connection with the execution of the merger agreement. Each of these seven additional bidders declined to make bids.

On April 20, 2015, at a telephonic meeting of the Fuel Systems board of directors, J.P. Morgan updated the board on the process with each of Westport, Party A, Party B and Party C, and discussed the upcoming meetings

 

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for Fuel Systems’ management presentations. The third party consultant also provided an update in regards to the overall initiatives in the Restructuring Plan, including a status overview of revenue enhancement, cost reductions, cost optimization, manufacturing optimization and inventory reduction alternatives.

Following a public announcement of Fuel Systems’ review of strategic alternatives on April 27, 2015, one additional strategic party and three additional sponsor parties reached out to Fuel Systems to indicate interest in a potential transaction, each of which later signed a confidentiality agreement (as discussed above). None of these four parties submitted a bid.

On April 30, 2015, representatives of Fuel Systems, Party B, Skadden, J.P. Morgan and certain other advisors to both parties participated in a conference call to discuss Party B’s preliminary indication of interest, including stock exchange listings, potential synergies, and anticipated governance and antitrust issues and concerns, among other items. Both parties agreed that additional work would need to be done in regards to structuring due to the cross-border nature of the transactions and potential antitrust implications.

In May 2015, Fuel Systems granted Westport, Party A, Party B and Party C access to Fuel Systems’ electronic data room to permit such parties to conduct a preliminary due diligence review of Fuel Systems.

On May 8, 2015, Party A provided two revised indication of interests, the first contemplating a cash asset purchase of Industrial for an increased purchase price of $72.5 million, requiring new debt financing, and the second reflecting a merger transaction between Party A and Fuel Systems and a concurrent divestiture of Automotive, valuing the Industrial division at $76 million.

During the week of May 11, 2015, members of Fuel Systems’ senior management, and representatives of J.P. Morgan and Fuel Systems’ legal advisors, held management meetings with each of Westport, Party A, Party B and Party C, at which Fuel Systems’ and its advisors gave management presentations to each party, and both Westport and Party B provided reciprocal management presentations.

On May 18, 2015, Party C provided a revised indication of interest contemplating a cash asset purchase of the Industrial division for a decreased purchase price of $55 million.

On May 21, 2015, Westport provided a revised indication of interest, reiterating its proposal for an all-stock merger transaction with an implied offer price of $8.53 per share of Fuel Systems common stock based on prevailing market prices and diluted number of shares as of March 31, 2015. Under the revised Westport proposal, existing Fuel Systems stockholders and Westport shareholders would own approximately 30% and 70%, respectively, of the combined company. The combined company would remain incorporated in Canada and its equity would be dual listed on NASDAQ and the TSX.

Also on May 21, 2015, Party B provided a revised indication of interest with a fixed pro-forma ownership split, resulting in 50% Fuel Systems ownership and 50% Party B ownership of the combined company, reflecting a 10.9% discount to Fuel Systems’ then-current share price and an implied offer price of $7.60 per share based on prevailing market prices and diluted number of shares as of March 31, 2015. The indication of interest failed to include other items which had been requested by Fuel Systems’ representatives, including additional details regarding transaction structure, country of exchange listing for the combined company and currency of consideration.

On May 22, 2015, Party A provided two revised indications of interest, the first contemplating a cash asset purchase of Industrial for a decreased purchase price of $67.5 million, requiring new debt financing, and the second reflecting a combination of Party A and Fuel Systems while retaining the public company vehicle and a concurrent divestiture of the Automotive division, valuing the Industrial division at a decreased price of $73 million.

On May 26, 2015 and May 27, 2015, at a regularly scheduled meeting of the Fuel Systems board of directors, Mr. Becker, on behalf of the strategy committee, provided an update on the strategic process. The

 

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directors were briefed by representatives of J.P. Morgan on the overview and history of the strategic process as well as an update of recent discussions and meetings, including a summary of the terms of each of the transaction proposals received from Party A, Party B, Party C and Westport. The directors were also presented with a preliminary antitrust analysis prepared by Fuel Systems’ legal advisors with respect to the strategic transactions presented by Westport and Party B. Management also briefed the Fuel Systems’ board on an update of the ongoing restructuring program, including detailed action plans and an overview of the 2015 through 2017 initiatives and cost optimizations for Industrial. The Fuel Systems board of directors further agreed to direct management to develop and oversee a Fuel Systems team to assist with the continued due diligence and analysis of potential transactions with Party A, Party B and Westport, including working with the company’s advisors to further analyze certain items of Westport’s proposal from the perspective of technical, commercial, market, financial and tax matters over the course of the next several weeks. Party C was not included as a potential party moving forward due to its reduction in purchase price for the Industrial division and unwillingness to consider an increase in purchase price. The Fuel Systems board of directors also directed J.P. Morgan to simultaneously continue dialogue with Party B and seek a revised offer.

On June 9, 2015, certain members of Fuel Systems’ management and J.P. Morgan met with certain members of Westport management in Vancouver, B.C., to further diligence Westport’s financial projections, joint ventures, cost reduction initiatives and certain Westport development programs. Also on June 9, 2015, Party B submitted a revised indication of interest to J.P. Morgan, with a fixed pro-forma ownership split, resulting in 55% Fuel Systems’ stockholder ownership and 45% Party B’s stockholder ownership, a 0.1% premium to Fuel Systems’ then current share price and an implied offer price of $7.89 per share based on prevailing market prices and diluted number of shares as of March 31, 2015. No additional information was provided by Party B concerning the foreign stock exchange listing of Party B, the currency of merger consideration to be issued in the proposed transaction or structural issues regarding the proposed merger that had previously been identified to Party B. Additionally, Party B and its advisors did not supply information in response to requests regarding potential antitrust issues, and failed to put forth any proposals in regards to the governance of the combined company.

On June 12, 2015, members of Fuel Systems’ management and J.P. Morgan met with members of Westport management in Cherasco, Italy, to provide a tour of Fuel Systems’ Cherasco facilities as well as to further diligence Automotive. Based upon these meetings and as a result of further diligence on Fuel Systems, Westport provided a revised indication of interest later in the day, with a fixed exchange ratio reflecting a 10.0-12.5% premium to Fuel Systems’ stock price the day before the announcement of the merger, subject to a collar, which represented an implied offer price of between $8.68 and $8.88 per share based on prevailing market prices and diluted number of shares as of March 31, 2015 with a pro-forma ownership of the combined company of between approximately 30.1% and 30.6% for Fuel Systems stockholders. Westport’s offer, based on share prices as of June 12, 2015, had a share price premium between 10.1% to 12.6% greater than Party B’s prior offer.

In light of the time commitments and costs Westport was incurring as a result of the process, in mid-June, Westport began insisting that Fuel Systems enter into an exclusivity agreement with them if Westport were to continue committing resources to exploring a proposed transaction. Fuel Systems initially declined in order to continue its process with the other potential transaction parties and explore strategic alternatives.

On June 15, 2015, at a telephonic meeting of the Fuel Systems board of directors, representatives of J.P. Morgan provided an update on the bid process, including follow-up due diligence requests and revised indications of interest provided by Westport and Party B, a review of Westport’s and Party B’s offers, and projections and related analysis of the values of the proposals, including Westport management’s projections for 2015 through 2020, which had been sent by Rothschild. Following discussions surrounding views of the various scenarios, the Fuel Systems board of directors authorized J.P. Morgan, together with Fuel Systems’ management input and support, to, among other things, (i) commence the next steps with respect to a possible transaction with Westport, including confirming an upcoming management meeting with Westport in Italy, (ii) inquire with Party B about its interest in pursuing an Automotive-only transaction, and (iii) continue to maintain discussions with Party A. The Fuel Systems board of directors also agreed that the strategy committee would reconvene each Friday for weekly status updates, as necessary.

 

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On June 19, 2015, at a telephonic meeting of the strategy committee, the committee discussed, among other things, management’s perspective on potential deal terms with Westport, including in regards to valuation, premium and exchange ratios, corporate deal structure, Westport’s high pressure direct injection technology, or HPDI technology, and corporate governance and management matters in respect to the combined company. J.P. Morgan and advisors to the strategy committee suggested to the Fuel Systems’ board of directors next steps to be undertaken in the process, including working with Fuel Systems’ management to develop a reciprocal due diligence list for Westport, integrating strategy committee input for a proposed counterproposal to Westport and coordinating with advisors on preparation of a draft merger agreement.

On June 26, 2015, at a telephonic meeting of the Fuel Systems board of directors, representatives from J.P. Morgan provided an updated overview of the process undertaken to date with Party B and Westport. In consultation with its advisors, the Fuel Systems board of directors further considered antitrust issues and concerns, and the antitrust analysis performed with respect to Party B and Westport. Fuel Systems’ board of directors subsequently determined that a transaction with Party B had significant additional regulatory risks when compared to a potential strategic transaction with Westport, including: (i) that a regulatory reviewing agency might seek to challenge the proposed transaction or otherwise require a remedy that would reduce the anticipated benefits of the transaction; (ii) that a reviewing agency may request further information regarding the proposed transaction, likely in one or more jurisdictions, which could cause significant delays in the timing of a transaction with Party B when compared to a potential transaction with Westport, and (iii) that Fuel Systems could incur significant additional costs relating to structuring and antitrust considerations. The Fuel Systems’ board of directors agreed that the increased execution risk associated with a transaction with Party B favored a potential transaction with Westport.

On July 10, 2015, at a telephonic meeting of the Fuel Systems board of directors, representatives of J.P. Morgan provided an update on the process with Westport. In light of the significant concerns relating to Party B’s prior proposal, including its ability to be executed upon (as discussed above), Fuel Systems’ board of directors authorized a conversation between Mr. Becker and David R. Demers, Westport’s Chief Executive Officer, to determine whether a transaction between Fuel Systems and Westport could be negotiated in a prompt manner. The Fuel Systems board of directors also discussed Westport’s continued requests for an exclusivity agreement and entry into such an agreement. As the Fuel Systems’ board of directors had determined an entire company transaction was preferable, J.P. Morgan noted, at the direction of the strategy committee, that they would re-engage with Party A for a potential sale of the Industrial division, if an entire company transaction could not be realized.

Also on July 10, 2015, Mr. Becker held a telephonic conversation with Mr. Demers, during which Mr. Demers indicated he was of the belief that a potential transaction between Fuel Systems and Westport made sense for both companies and was committed to pursuing the potential transaction aggressively to see if there can be a meeting of the minds. Mr. Demers also indicated his requirement that Fuel Systems and Westport enter into an exclusivity letter for a limited period of time in order to continue to evaluate a potential transaction and negotiate a definitive agreement.

In view of the increased regulatory risks involved in executing a transaction with Party B and the view that the then-current offers by Party A and C represented less value to Fuel Systems stockholders compared to Westport’s proposal, Fuel Systems entered into an exclusivity agreement with Westport dated as of July 14, 2015 (the “Westport Exclusivity Letter”), which, among other things, provided for Fuel Systems to engage in exclusive negotiations with Westport regarding the merger of Fuel Systems and Westport, until August 12, 2015.

Over the next several weeks, certain Westport employees, accountants and advisors, including representatives from Willkie Farr & Gallagher LLP (“Willkie”), Westport’s outside counsel, continued their due diligence with respect to Fuel Systems, and certain Fuel Systems employees, accountants and advisors, and representatives from Skadden and Day Pitney were granted access to Westport’s electronic dataroom.

 

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On July 17, 2015, at a telephonic meeting of the strategy committee, Mr. Becker reported on his recent discussion with Mr. Demers and updated the strategy committee on the status of discussions with Westport, including upcoming meetings of management and board members from both companies. Fuel Systems’ advisors discussed Westport’s current board composition, and potential negotiating options relating to proportional board representation in the combined company.

On July 24, 2015, at a telephonic meeting of the strategy committee, Mr. Becker updated the strategy committee on the status of discussions with Westport, including the upcoming meetings between representatives of Fuel Systems and Westport and discussed the various governance matters for the combined company to be discussed at those sessions. The Fuel Systems board discussed various scenarios for representation on the combined company’s board and unanimously agreed that three directors from Fuel Systems on the combined company board would be appropriate given the deal terms.

From late July 2015 until the end of August 2015, the parties worked to complete their due diligence reviews and negotiate the definitive transaction documentation. During this time, Fuel Systems management and advisors periodically updated the Fuel Systems board of directors regarding the status of due diligence and negotiations.

On July 30, 2015, certain members of both parties’ boards of directors, including Mr. Hodge, Mr. Horvath, and Mr. Demers from Westport, and Mr. Becker, Mr. Clarke and Mr. Di Toro from Fuel Systems, met in Chicago to discuss the timing of the transaction, post-merger governance and board composition of the combined company, questions regarding Westport’s strategy for cash management and capital options, and issues surrounding personnel retention and transition and to review certain technologies under development, including HPDI.

On July 31, 2015, certain members of both parties’ management, including Mr. Demers, Ms. Gougarty, Mr. Achuthan and Mr. Grando from Westport and Mr. Costamagna, Mr. Alghisi, Mr. Bersani and Mr. Fissore from Fuel Systems, as well as representatives from Willkie and Skadden, met in Chicago to discuss timing considerations surrounding the transaction, potential cost-savings and synergies resulting from a potential merger, a high level overview of research and development activities, staffing at certain locations and retention of key employees, and Cherasco automotive headquarters, among other items. The parties agreed to work diligently on both completing their respective due diligence investigations and a draft merger agreement.

On August 7, 2015, at a telephonic meeting of the strategy committee, J.P. Morgan provided an update on the process with Westport, including the status of diligence items, site visits and related matters. It was noted that the Westport Exclusivity Letter would expire on August 12, 2015 and that Westport had requested an extension to August 31, 2015, to which the strategy committee agreed. Additionally, the committee members discussed their views on Westport’s technology and adoption by the larger market of that technology, including in regards to Westport’s HPDI technology. Additionally, on August 7, 2015, at a telephonic meeting of the Fuel Systems board of directors, Mr. Becker, on behalf of the strategy committee, updated the board on the status of the transaction with Westport.

On August 10, 2015, Fuel Systems’ management distributed a version of the Forecasts to J.P. Morgan, with downwardly revised financial projections for fiscal year 2015, reflecting softening in the automotive markets as a result of lower oil prices, continued aggressive competition in the transportation market and a significant slowdown in the Argentinian aftermarket (the “Revised Forecast”), which was also distributed to Rothschild, who in turn distributed the Revised Forecast to Westport’s management. For a more detailed discussion concerning the Revised Forecast, please see “—Certain Unaudited Financial and Operating Forecasts” beginning on page [●].

On August 12, 2015, Fuel Systems and Westport executed an extension of the Westport Exclusivity Letter, which provided for an extension for Fuel Systems to engage in exclusive negotiations with Westport regarding the merger of Fuel Systems and Westport until August 31, 2015.

 

 

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Between August 12, 2015 and September 1, 2015, Fuel Systems and representatives of Skadden continued to negotiate the terms of the merger agreement with Westport and its counsel.

On August 14, 2015, at a telephonic meeting of the strategy committee, J.P. Morgan provided an update on the process with Westport, including the status of diligence items and other open items. Fuel Systems’ advisors noted that in the latest draft of the merger agreement, Westport had requested stockholder voting agreements with certain large stockholders of Fuel Systems and that terms such as a collar, exchange ratio and other material items could not be determined until due diligence was completed.

On August 21, 2015, at a telephonic meeting of the strategy committee, J.P. Morgan provided an update on the process with Westport, including the status of diligence items, open items, a review of illustrative timelines for similar transactions and the schedule for upcoming management meetings. J.P. Morgan also explained various possible pricing structures for the transaction, including the use of an exchange ratio, collar mechanisms and a related illustration of their uses, share premium and the differences between fixed and floating exchange ratios. The committee discussed the views of certain members of the Fuel Systems board of directors on Westport’s HPDI technology. At the committee’s request, J.P. Morgan requested Westport to schedule a diligence session regarding the HPDI technology, which later took place.

On August 22, 2015, Westport provided revised unaudited financial projections to be used by Fuel Systems’ management as part of their due diligence review of Westport and which were reported to the Fuel Systems board of directors on August 31, 2015, as discussed below (the “Westport Projections”). For a more detailed discussion concerning the Westport Projections, please see “—Certain Unaudited Financial and Operating Forecasts” beginning on page [●].

On August 24, 2015, at a telephonic meeting of the strategy committee, the strategy committee, with the assistance of J.P. Morgan, discussed and compared a fixed versus floating exchange ratio and the use of a collar in regards to the proposed transaction with Westport, including in relation to the range of premiums previously discussed, the impact of current market instability, and their advantages and disadvantages. The strategy committee requested J.P. Morgan to favor a fixed exchange ratio, and to press Westport for a premium percentage in the upper-teens rather than pressing for a collar. Also on August 24, 2015, Fuel Systems’ management distributed to J.P. Morgan the Revised Forecast, plus extrapolated financials for the years 2018 and 2019 based on the Revised Forecast (the “Five Year Forecast”) for use in J.P. Morgan’s analysis of the proposed transaction with Westport.

On August 26, 2015, the Fuel Systems board of directors held a telephonic meeting at which representatives of J.P. Morgan updated the Fuel Systems board on negotiations that had occurred the prior day between Mr. Costamagna, Mr. Demers and their respective advisors, including assurances regarding capital for Automotive and a proposed name change for Westport, which Mr. Demers agreed to consider. Additionally, Mr. Clarke discussed the company’s diligence in regards to HPDI following the scheduled HPDI diligence session on August 25, 2015, and discussed above. Skadden advised the board as to remaining open items in the merger agreement, with a draft and summary of material terms to follow shortly after the meeting.

On August 27, 2015, Fuel Systems provided extrapolated financial projections for fiscal years 2020 through 2025 for Fuel Systems based on the Five Year Forecast, to be used in connection with J.P. Morgan’s discounted cash flow analysis for Fuel Systems.

On August 28, 2015, the Fuel Systems board of directors held a telephonic meeting at which representatives of J.P. Morgan updated the Fuel Systems board on negotiations in respect of the exchange ratio. Westport had previously orally proposed a 1.9458 exchange ratio, which implied a 33% to 34% ownership for Fuel Systems’ stockholders following the merger, based on then-current market prices. J.P. Morgan advised that, at the Fuel Systems board of directors request, it was working to increase the ownership to 35%. Representatives of Skadden then noted the progress in regards to diligence matters and terms surrounding the combined company operations

 

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and that Westport had agreed to three members of the Fuel Systems board of directors sitting on the combined company’s board following the merger until at least the combined company’s 2018 annual shareholder meeting.

On August 30, 2015, the Fuel Systems board of directors held a telephonic meeting at which representatives of J.P. Morgan updated the Fuel Systems board on negotiations with Westport relating to the exchange ratio, which had been increased from 1.946 to 2.0573 following extensive negotiations between representatives of J.P. Morgan, Rothschild and Mr. Becker on behalf of the strategy committee. The increased exchange ratio provided Fuel Systems stockholders approximately 35% of the combined company, and represented a 6.7% premium for Fuel Systems’ stockholders’ shares based upon the spot price on August 28, 2015, a 6.7% premium based upon the 10–day volume weighted average price (the “VWAP”), an 11% premium based upon the 20–day VWAP and a 21% premium based upon the 30–day VWAP, which equated to an implied value of $7.08 per share. Due to the recent volatility in the financial markets, representatives of J.P. Morgan recommended reaching an agreement as to the exchange ratio and explained that a possible next step would be to attempt to negotiate an increased exchange ratio which would provide Fuel Systems’ stockholders with approximately 35.7% of the combined company. To facilitate discussions regarding the merger agreement, copies of the draft merger agreement, along with a summary of the material terms of the merger agreement were distributed to the Fuel Systems board of directors prior to the meeting. Representatives of Skadden presented a summary of the merger agreement and the outstanding issues.

On August 31, 2015, the Fuel Systems board of directors held a telephonic meeting at which representatives of J.P. Morgan advised that the exchange ratio had significantly been improved from 2.0573 to 2.129, which represented a 10.5% premium based upon the 10–day VWAP, a 13.7% premium based upon the 20–day VWAP and a 23.9% premium based upon the 30–day VWAP, providing Fuel Systems stockholders with between approximately 34.7% and 35.8% of the combined company. Representatives of Skadden updated the directors on the merger agreement.

On the morning of September 1, 2015, the Fuel Systems board of directors held a telephonic meeting to again discuss the proposed transaction with Westport. At the meeting, representatives of Skadden reviewed the most recent changes to the merger agreement, including a reduction in the termination fee to $5.5 million. Representatives of J.P. Morgan reviewed with the Fuel Systems board of directors the process that J.P. Morgan had undertaken on behalf of Fuel Systems in connection with exploring a potential transformative transaction, including that, at the direction of the Fuel Systems board of directors representatives of J.P. Morgan had communicated with 22 prospective counterparties, Fuel Systems had executed 11 confidentiality agreements, representatives of J.P. Morgan and members of senior management had met with four bidders and Fuel Systems had received four initial indications of interest. A representative of J.P. Morgan then reviewed and discussed its analysis with respect to Fuel Systems and the proposed merger with Westport. Thereafter, at the request of Fuel Systems board of directors, J.P. Morgan then rendered its oral opinion, which was subsequently confirmed in writing, to the Fuel Systems board of directors that, as of that date, and based upon and subject to the factors and assumptions set forth in its opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to the holders of Fuel Systems’ common stock. Following the discussion, the board unanimously determined that the merger agreement and the transactions contemplated thereby, including the merger, were advisable and in the best interests of Fuel Systems and its stockholders and resolved, among other things, to authorize and approve the merger agreement and the transactions contemplated thereby, including the merger and to recommend that Fuel Systems’ stockholders vote to adopt the merger agreement.

Later in the morning on September 1, 2015, the parties executed the merger agreement, and, shortly after the opening of the financial markets on September 1, 2015, Fuel Systems and Westport issued a joint press release publicly announcing the execution of the merger agreement and the details of the proposed merger.

Westport Board of Directors’ Recommendation and its Reasons for the Merger

On August 31, 2015, Westport’s board of directors has unanimously determined that the merger agreement and the transactions contemplated thereby are advisable and in the best interests of Westport and its shareholders.

 

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In the course of their due diligence and evaluation of the merger agreement and the merger, the Westport board of directors consulted Westport’s executive management team and legal counsel as well as its financial advisor, Rothschild Inc. The Westport board of directors also reviewed a significant amount of information and considered a number of factors related to the merger, and believes that the merger will provide Westport and its shareholders with a number of benefits, including but not limited to:

 

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The combined company will have a broad global reach, with increased scale and product diversity enhancing the ability to serve some of the world’s largest and fastest growing markets through an enhanced geographic footprint, greater product diversity, and a distribution network spanning 70 countries.

 

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The merger would combine Westport’s development expertise in medium- and heavy-duty and high horsepower applications with Fuel Systems’ core focus and development efforts in automotive and industrial applications. Together, the combined technological expertise and future product development will span passenger cars to heavy-duty trucks to locomotives and from marine applications to stationary power.

 

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Westport and Fuel Systems will combine their industry experience and complementary portfolio of products and technologies, resulting in a comprehensive solutions offering across light- and heavy-duty transportation applications and industrial-focused applications. The complementary customer bases and communities will be served with a combined asset base and facilities strategically located across five continents and a shared commitment to providing exceptional products, service and related solutions.

 

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The merger will broaden the combined company’s OEM relationships, bringing together the long standing relationships with several key global OEMs of Fuel Systems and Westport.

 

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The combined company is expected to have a strengthened track record of product development as a result of the merger, and benefit from capital-efficient and optimized research and development programs and a highly skilled employee base. The combined company is anticipated to be well positioned to create a stronger innovation platform to invest in developing new products and new technologies, and to be positioned to fuel future growth better than either company on a standalone basis.

 

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The combined company will benefit from the combination of Westport and Fuel Systems intellectual property portfolios.

 

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The combined company is anticipated to generate substantial synergies, including reductions in corporate management costs, manufacturing costs and operating expenses.

 

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The combined company will also benefit from a strengthened balance sheet and enhanced liquidity and will be positioned for continued investment and long-term financial stability.

Fuel Systems Board of Directors’ Recommendation and its Reasons for the Merger

At a meeting on September 1, 2015, the Fuel Systems board, by unanimous vote, determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable and in the best interests of Fuel Systems and its stockholders, approved the merger agreement and the transactions contemplated thereby, including the merger, and determined to recommend that Fuel Systems’ stockholders vote to adopt the merger agreement.

In evaluating the merger, the Fuel Systems board consulted with Fuel Systems’ management, as well as Fuel Systems’ legal and financial advisors, and, in reaching its conclusion, considered the following factors:

 

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The board’s knowledge of Fuel Systems’ business, operations, financial condition, earnings and prospects and of Westport’s business, operations, financial condition, earnings and prospects, taking into account the results of Fuel Systems’ due diligence review of Westport, as well as the prevailing economic conditions in the industry in which Fuel Systems and Westport operate.

 

•

The merger agreement provides that each Fuel Systems stockholder will receive 2.129 common shares of Westport for each share of Fuel Systems common stock.

 

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•

Based upon closing trading prices on August 31, 2015, the merger consideration represents an implied value to Fuel Systems’ shareholders of $7.54 per share, a 10.5% premium based upon the 10–day VWAP, a 13.7% premium based upon the 20–day VWAP, and a 23.9% premium based upon the 30–day VWAP.

 

•

Based on the implied value of the merger consideration as of August 31, 2015, Fuel Systems stockholders would own approximately 36% of the combined company on a fully diluted basis.

 

•

The exchange ratio is fixed and therefore the value of the consideration payable to Fuel Systems stockholders will increase in the event that the market price of Westport’s common shares increases prior to the closing of the merger. Following the merger, former Fuel Systems stockholders who continue to hold Westport common shares will participate in future increases in the market price of Westport common shares.

 

•

The Fuel Systems board retained financial and legal advisors with knowledge and experience with respect to public merger and acquisition transactions, Fuel Systems’ and Westport’s industry generally and Fuel Systems’ particularly, as well as substantial experience advising other companies with respect to transactions similar to the merger.

 

•

The Fuel Systems board’s review, based in part on the due diligence performed by Fuel Systems’ management and its financial, legal and tax advisors, in connection with the transaction, of Westport’s business, financial condition, potential options for capital raises, results of operations and management, the strategic fit between the parties, the potential synergies expected from the merger, the geographic fit between Fuel Systems and Westport’s service areas, and the business risks associated with the merger.

 

•

The opinion, dated September 1, 2015 of J.P. Morgan to the Fuel Systems board as to the fairness, from a financial point of view and as of the date of the opinion, to the holder of Fuel Systems common stock of the exchange ratio in the merger, as more fully described under “The Merger—Opinion of Fuel Systems’ Financial Advisor” and Annex B to this proxy statement/prospectus, which contains the full text of the J.P. Morgan opinion.

 

•

The Fuel Systems board’s view as to the expected pro forma financial impact of the transaction, taking into account anticipated cost savings and other factors, on both Fuel Systems stockholders and Westport shareholders.

 

•

Fuel Systems’ management’s recommendation in favor of the merger.

 

•

The Fuel Systems board’s review, in consultation with Fuel Systems’ legal and financial advisors, of the structure of the merger and the financial and other terms and conditions of the merger agreement, including the merger consideration and the Fuel Systems board’s view of the likelihood of completing the merger on the anticipated schedule.

 

•

The terms of the merger agreement, principally:

 

•

the provisions allowing the Fuel Systems board to withdraw or change its recommendation of or to terminate the merger agreement, subject to the payment of a specified termination fee upon termination under certain circumstances, in the event of a superior proposal, or to change its recommendation in the event of certain intervening events, if the board makes a good faith determination that the failure to change its recommendation or terminate the merger agreement would be inconsistent with its fiduciary duties under applicable law;

 

•

Westport’s agreement, upon the closing of the merger, to appoint three individuals who are directors of Fuel Systems as directors of the combined company, which is expected to provide a degree of continuity and enhance the likelihood that the strategic benefits that Fuel Systems expects to achieve as a result of the merger will be realized; and

 

•

Westport’s agreement, upon the closing of the merger, to change the name of the combined company for purposes of reassuring Fuel Systems’ customers.

 

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The Fuel Systems board also considered potential risks and potentially negative factors concerning the merger in connection with its deliberations of the proposed transaction, including:

 

•

The regulatory and other approvals required in connection with the merger and the expectation that such regulatory approvals will be received in a timely manner and without the imposition of unacceptable conditions.

 

•

The potential for diversion of management and employee attention, and for employee attrition, during the period prior to the completion of the merger and the potential effect on Fuel Systems’ business and relations with customers, service providers and other stakeholders, whether or not the merger is completed.

 

•

The fact that the exchange ratio is fixed and therefore the value of the consideration payable to Fuel Systems stockholders will decrease in the event that the market price of Westport’s common shares decreases prior to the closing of the merger.

 

•

The possibility that the merger may not be completed, or that completion may be unduly delayed, for reasons beyond the control of Fuel Systems and Westport, which could result in significant costs and disruption to Fuel Systems’ normal business.

 

•

The expected benefits and synergies sought in the merger, including cost savings, may not be realized or may not be realized within the expected time period.

 

•

Westport’s history of net losses and likely losses in the near future due to, among other things, Westport’s substantial investment in new technologies, including HPDI.

 

•

The potential that the exchange of shares of Fuel Systems common stock for shares of Westport common shares pursuant to the merger agreement may be taxable to U.S. stockholders of Fuel Systems common stock.

 

•

Certain terms of the merger agreement, principally:

 

•

restrictions on the ability of Fuel Systems to solicit offers for alternative proposals or to engage in discussions regarding such proposals, subject to exceptions, which could have the effect of discouraging such proposals from being made or pursued;

 

•

the termination fee that would be payable by Fuel Systems in connection with a termination of the merger agreement as a result of a superior proposal for Fuel Systems, which could have the effect of discouraging an alternative proposal for Fuel Systems; and

 

•

restrictions on the conduct of Fuel Systems’ business during the period between the signing of the merger agreement and completion of the merger.

 

•

Fuel Systems’ stockholders will be forgoing the potential benefits, if any, that could be realized by remaining as stockholders of Fuel Systems as a standalone entity.

 

•

The substantial costs to be incurred in connection with the merger, including the costs of integrating the businesses of Fuel Systems and Westport and the transaction expenses arising from the merger.

 

•

The risks of the type and nature described under “Risk Factors,” and the matters described under “Cautionary Statement Regarding Forward-Looking Statements.”

The foregoing discussion is not intended to be exhaustive, but is intended to address the material information and principal factors considered by the Fuel Systems board in considering the merger. In view of the number and variety of factors and the amount of information considered, the Fuel Systems board did not find it practicable to, and did not make specific assessments of, quantify or otherwise assign relative weights to, the specific factors considered in reaching its determination. In addition, the Fuel Systems board did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination, and individual members of the Fuel Systems board may have given different weights to different factors.

 

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The Fuel Systems board made its recommendation based on the totality of information presented to, and the investigation conducted by, the Fuel Systems board. It should be noted that certain statements and other information presented in this section are forward-looking in nature and, therefore, should be read in light of the factors discussed under the heading “Cautionary Statement Regarding Forward-Looking Statements.”

The Fuel Systems board of directors recommends that Fuel Systems stockholders vote “FOR” the Merger proposal, “FOR” the Amendments to Non-Employee Directors’ Restricted Stock Awards proposal, “FOR” the Advisory Compensation proposal and “FOR” the Adjournment proposal.

Opinion of Fuel Systems’ Financial Advisor

Pursuant to an engagement letter dated April 20, 2015, Fuel Systems retained J.P. Morgan as its financial advisor in connection with the proposed merger. The Fuel Systems board selected J.P. Morgan based on J.P. Morgan’s qualifications, expertise and reputation.

At the meeting of the Fuel Systems board of directors on September 1, 2015, J.P. Morgan rendered its oral opinion to the Fuel Systems board of directors that, as of such date and based upon and subject to the factors and assumptions set forth in its opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to the holders of Fuel Systems’ common stock. J.P. Morgan has confirmed its September 1, 2015 oral opinion by delivering its written opinion to the Fuel Systems board of directors, dated September 1, 2015, that, as of such date, the exchange ratio in the proposed merger was fair, from a financial point of view, to the holders of Fuel Systems’ common stock. No limitations were imposed by the Fuel Systems board of directors upon J.P. Morgan with respect to the investigations made or procedures followed by it in rendering its opinion.

The full text of the written opinion of J.P. Morgan dated September 1, 2015, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement/prospectus and is incorporated herein by reference. Fuel Systems’ stockholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion is addressed to the Fuel Systems board of directors, is directed only to the exchange ratio in the merger and does not constitute a recommendation to any stockholder of Fuel Systems as to how such stockholder should vote at the Fuel Systems’ special meeting. The summary of the opinion of J.P. Morgan set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion.

In arriving at its opinion, J.P. Morgan, among other things:

 

•

reviewed a draft dated August 30, 2015 of the merger agreement;

 

•

reviewed certain publicly available business and financial information concerning Fuel Systems and Westport and the industries in which they operate;

 

•

compared the proposed financial terms of the merger with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration paid for such companies;

 

•

compared the financial and operating performance of Fuel Systems and Westport with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of Fuel Systems’ common stock and Westport’s common shares and certain publicly traded securities of such other companies;

 

•

reviewed certain internal financial analyses and forecasts prepared by each of the managements of (a) Fuel Systems relating to its business and (b) Westport relating to its business, as adjusted by the management of Fuel Systems, as well as the estimated amount and timing of cost savings and related expenses and synergies expected to result from the merger (see “— Certain Unaudited Financial and Operating Forecasts”); and

 

•

performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.

 

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J.P. Morgan also held discussions with certain members of the management of Fuel Systems and Westport with respect to certain aspects of the merger, and held discussions with the management of Fuel Systems with respect to the past and current business operations of Fuel Systems and Westport, the financial condition and future prospects and operations of Fuel Systems and Westport, the effects of the merger on the financial condition and future prospects of Fuel Systems and Westport, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.

J.P. Morgan relied upon and assumed, without assuming responsibility or liability for independent verification, the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by Fuel Systems and Westport or otherwise reviewed by or for J.P. Morgan. J.P. Morgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of Fuel Systems or Westport under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to it, including the synergies referred to above, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of Fuel Systems and Westport to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts (including the synergies) or the assumptions on which they were based. J.P. Morgan also assumed that the merger will qualify as a tax-free reorganization for United States federal income tax purposes, and will be consummated as described in the merger agreement and this proxy statement/prospectus, and that the definitive merger agreement would not differ in any material respect from the draft thereof provided to J.P. Morgan. J.P. Morgan relied as to all legal matters relevant to the rendering of its opinion upon the advice of counsel. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on Fuel Systems or Westport or on the contemplated benefits of the merger.

The projections furnished to J.P. Morgan for Fuel Systems were prepared by the management of Fuel Systems and the projections furnished to J.P. Morgan for Westport were prepared by the management of Westport and subsequently adjusted by the management of Fuel Systems, each as described under “—Certain Unaudited Financial and Operating Forecasts.” Neither Fuel Systems nor Westport publicly disclose internal management financial projections of the type provided to J.P. Morgan in connection with J.P. Morgan’s analysis of the merger, and such projections were not prepared with a view toward public disclosure. These projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of management, including, without limitation, factors related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in such projections. Solely for illustrative purposes in the event that Westport were to issue convertible debt and in reliance on assumptions provided by the managements of Fuel Systems and Westport with respect to the terms of a potential convertible debt issuance by Westport, and the maximum allowable number of Westport’s common shares issuable pursuant to such convertible debt under the merger agreement, J.P. Morgan also analyzed the merger by taking into account the resulting dilution from a potential convertible debt offering. Analysis in this section entitled “Westport (C)” takes into account Westport’s potential convertible debt issuance.

J.P. Morgan’s opinion is based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinion. Subsequent developments may affect J.P. Morgan’s opinion, and J.P. Morgan does not have any obligation to update, revise, or reaffirm such opinion. J.P. Morgan’s opinion is limited to the fairness, from a financial point of view, of the exchange ratio in the proposed merger, and J.P. Morgan has expressed no opinion as to the fairness of the merger to, or any consideration of, the holders of any other class of securities, creditors or other constituencies of Fuel Systems or the underlying decision by Fuel Systems to engage in the merger. J.P. Morgan expressed no opinion as to the price at which Fuel Systems’ common stock or Westport’s common shares will trade at any future time, whether before or after the closing of the merger.

 

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The terms of the merger agreement, including the exchange ratio, were determined through arm’s length negotiations between Fuel Systems and Westport, and the decision to enter into the merger agreement was solely that of the Fuel Systems board of directors and Westport board of directors. J.P. Morgan’s opinion and financial analyses were only one of the many factors considered by the Fuel Systems board of directors in its evaluation of the proposed merger and should not be viewed as determinative of the views of the Fuel Systems board of directors or management with respect to the proposed merger or the exchange ratio.

In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methods in reaching its opinion. The following is a summary of the material financial analyses utilized by J.P. Morgan in connection with providing its opinion. The financial analyses summarized below include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by J.P. Morgan, the tables must be read together with the full text of this summary of J.P. Morgan’s financial analyses. Considering the data set forth herein without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgan’s financial analyses.

For each of the analyses performed by J.P. Morgan, J.P. Morgan used the fully diluted number of shares for both Fuel Systems and Westport based on the total outstanding number of shares for each company as of June 30, 2015 and all shares issuable pursuant to outstanding restricted stock units and performance stock units to calculate fully diluted shares outstanding. Additionally, when evaluating the effect of a potential convertible debt offering by Westport, J.P. Morgan considered the potential dilutive impact of such convertible debt based on the maximum allowable numbers of shares of Westport’s common shares issuable pursuant to such instrument under the merger agreement.

Public Trading Multiples

Using publicly available information, J.P. Morgan compared selected financial data of Fuel Systems and Westport, respectively, with similar data for selected publicly traded companies engaged in businesses which J.P. Morgan judged to be similar to Fuel Systems and Westport, respectively, and for which similar valuation metrics are used. The companies selected by J.P. Morgan were:

Fuel Systems FV/EBITDA Multiples Comparable Companies

 

•

Fuel Systems

 

•

Power Solutions

 

•

Hexagon Composites

 

•

Landi Renzo

Westport FV/revenue Multiples Comparable Companies

 

•

Westport

 

•

Clean Energy Fuels

 

•

Quantum Company10

 

 

10

J.P. Morgan ultimately excluded Quantum Fuels from Westport FV/revenue multiples comparable companies set due to both its relatively small size and lack of scale and recent issues faced by Quantum Fuels that are particular to its business rendering the company a poor comparable in the current context.

 

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These companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of Fuel Systems and Westport based on business operations, end markets, profitability profile and similar valuation metrics for trading multiples. For each comparable company, publicly available estimates of financial performance through the twelve months ended December 31, 2015 was measured. J.P. Morgan calculated for (1) Fuel Systems and its comparable companies the firm value as of August 28, 2015 as a multiple of estimated EBITDA for calendar year 2015, and (2) Westport and its comparable companies the firm value as of August 28, 2015 as a multiple of estimated revenue for calendar year 2015. The calculations for Westport in this subsection included the value of its long-term investments in certain joint ventures as of June 30, 2015 that are currently unconsolidated in the revenue of Westport. The analysis indicated the following:

 

Fuel Systems Comparable Companies		FV / 2015 EBITDA
Fuel Systems Solutions			13.1x
Power Solutions			14.9x
Hexagon Composites			15.9x
Landi Renzo			13.9x
Westport Comparable Companies		FV / 2015 Revenue
Westport Innovations			2.09x
Clean Energy Fuels			2.51x
Quantum Fuel Systems			1.16x

J.P. Morgan selected the following values for each company’s multiple, specifically: (1) Fuel Systems’ common stock: 13x to 16x estimated 2015 EBITDA and (2) Westport’s common shares: 2.00x to 2.50x estimated 2015 revenue. J.P. Morgan did not rely solely on the quantitative results of the selected multiples analysis in developing reference ranges or otherwise applying its analysis. Based on various judgments concerning relative comparability of each of the selected companies to Fuel Systems, as well its experience with the industry in which Fuel Systems participates, J.P. Morgan selected a range of EBITDA multiples that it believed reflected an appropriate range of multiples applicable to Fuel Systems. J.P. Morgan employed the same aforementioned methods in selecting a range of revenue multiples that it believed reflected an appropriate range of multiples applicable to Westport.

The EBITDA multiples were then applied to Fuel Systems’ EBITDA projections for fiscal year 2015, yielding implied equity values per share for Fuel Systems’ common stock of approximately $7.40 to $8.45 per share. The revenue multiples were then applied to Westport’s revenue projections for fiscal year 2015, yielding implied equity values per share for Westport’s common shares of approximately $3.40 to $4.20 per share. J.P. Morgan also calculated the implied equity value per share for Westport’s common shares by applying the same revenue multiple ranges but also taking into account a potential convertible debt issuance by Westport, yielding implied equity values per share of approximately $3.40 to $4.21 per share.

J.P. Morgan compared the results of the implied equity values per share for Fuel Systems and Westport. For each comparison, J.P. Morgan compared (1) the ratio of the highest implied equity value per share for Fuel Systems shown above to the lowest implied equity value per share for Westport shown above and (2) the ratio of the lowest implied equity value per share for Fuel Systems shown above to the highest implied equity value per share for Westport shown above, in order to derive a range of implied exchange ratios. The implied exchange ratios were:

 

		Implied Exchange Ratio
Assuming no convertible debt is issued			1.757x – 2.485x
Assuming convertible debt is issued			1.763x – 2.485x

 

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Discounted Cash Flow Analysis

J.P. Morgan conducted a discounted cash flow analysis for the purpose of determining the fully diluted equity values per share for both Fuel Systems’ common stock and Westport’s common shares. J.P. Morgan calculated the unlevered free cash flows that Fuel Systems and Westport, respectively, are expected to generate during fiscal years 2015 through 2025 based upon the financial projections prepared on behalf of Fuel Systems’ management through the years ended December 31, 2025 and upon financial projections prepared on behalf of Westport’s management, which were based on financial projections prepared by Westport’s management, as adjusted by the management of Fuel Systems, through the years ended December 31, 2025. The unlevered free cash flows of Fuel Systems included the $3 million to $4 million attributable to incremental cash flows resulting from tax savings reflected from Fuel Systems’ net operating losses which were then discounted using the applicable discount range for Fuel Systems as provided below. The unlevered free cash flows of Westport included the $24 million to $26 million attributable to incremental cash flows resulting from tax savings reflected from Westport’s net operating losses which were then discounted using the applicable discount rate range for “Westport—Operations” as provided below. The net operating losses were provided by the respective managements of Fuel Systems and Westport and were based on projected financial performance. For purposes of the discounted cash flow analysis, J.P. Morgan treated stock-based compensation as a non-cash expense and thus added such expense back to both Fuel Systems’ and Westport’s EBITDA (earnings before interest, taxes, depreciation and amortization) as included in their respective unlevered free cash flows. J.P. Morgan also calculated a range of terminal values of Fuel Systems and Westport, respectively, at the end of the 11-year period ending December 31, 2025 by applying a perpetual growth rate ranging from 2.5% to 3.5% of the unlevered free cash flow of Fuel Systems and Westport, respectively, during the final year of the 11-year period. The unlevered free cash flows and the range of terminal values were then discounted to present values using the following ranges of discount rates:

 

		Discount Rate Range
Fuel Systems			9.0% – 11.0%
Westport—Operations			9.0% – 11.0%
Westport—HPDI			12.0% – 14.0%

These values were then added together in order to derive the implied firm value for each of Fuel Systems and Westport, both in the event Westport does not issue convertible debt and in the event it does for illustrative purposes. The range of discount rates were chosen based upon an analysis of the weighted average cost of capital of Fuel Systems and Westport, respectively, conducted by J.P. Morgan and were applied using the mid-year convention for discounting. In particular, Westport’s HPDI business was attributed a higher discount rate based upon a higher weighted average cost of capital due to a higher beta which is reflective of the riskier nature of the HPDI business, previously encountered delays and uncertainties concerning timing of market penetration. In calculating the estimated equity values per share for Fuel Systems and Westport on a standalone basis (i.e., without synergies), J.P. Morgan adjusted the firm value for Fuel Systems’ and Westport’s net cash, debt, and minority interest value as of June 30, 2015, and divided by the fully diluted common shares outstanding, calculated using the method described above.

The analysis indicated a range of implied equity values per share:

 

		Fuel Systems				Westport				Westport (C)
Low		$	14.60			$	6.80			$	6.35
High		$	20.60			$	11.30			$	10.05

 

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J.P. Morgan compared the results for Fuel Systems to Westport. For each comparison, J.P. Morgan compared (1) the highest implied equity value per share for Fuel Systems to the lowest implied equity value per share for Westport and (2) the lowest implied equity value per share for Fuel Systems to the highest implied equity value per share for Westport, in order to derive a range of the implied exchange ratios for each set of estimates. The implied exchange ratios were:

 

		Implied Exchange Ratio
Fuel Systems to Westport			1.292x – 3.029x
Fuel Systems to Westport (C)			1.454x – 3.252x

Selected Transaction Analysis

Using publicly available information and certain non-public information, J.P. Morgan examined selected transactions with respect to companies that engaged in businesses that J.P. Morgan judged to be similar to Fuel Systems’ businesses. The precedent transactions were selected, among other reasons, because the businesses involved in these transactions share similar business characteristics to Fuel Systems based on business sector participation, operational characteristics and financial metrics. It should be emphasized that none of the companies involved in the selected transactions (other than Fuel Systems) is identical to Fuel Systems and none of the selected transactions is identical to the merger.

J.P. Morgan calculated, for each selected transaction, the target company’s implied firm value as a multiple of EBITDA for the twelve-month period prior to the announcement date of the applicable transaction. The transactions considered the date each transaction was announced and the EBITDA multiple are as follows:

 

Month and Year Announced		Target		Acquiror		FV/EBITDA
May 2015		Wells Vehicle Electronics		NGK Spark Plug Co		9.5x
January 2015		TI Group Automotive Systems		Bain Capital		*
December 2014		Halla Visteon Climate Control		Hankook Tire Co		10.1x
June 2011		Emer SpA		Westport Innovations		N/A
June 2010		Inergy Automotive Systems SA		Plastic Omnium SA		N/A
November 2009		EMCON Technologies LLC		Faurecia SA		7.4x
February 2007		ArvinMeritor—Emissions Technology		One Equity Partners		3.9x
October 2006		Eaton (Transmission and Engine Control)		BorgWarner		5.9x
January 2005		JCEEG		Valeo SA		N/A
June 2004		Stanadyne (owned by American Industrial Partners)		Kolhlberg & Co., LLC		7.0x
November 1999		TRW’s Lucas Diesel Systems		Delphi Automotive Systems Corp.		5.9x
April 1999		Walbro Corp.		TI Group Plc.		7.2x

 

*	Not publicly available

J.P. Morgan’s analysis resulted in a range of EBITDA multiples of 3.9x to 10.1x for the selected transactions. J.P. Morgan applied a range of EBITDA multiples of 6.0x to 10.0x to Fuel Systems’ EBITDA for the last twelve months, and arrived at an estimated range of equity values for Fuel Systems’ common stock of between $7.05 and $9.75 per share.

 

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J.P. Morgan did not rely solely on the quantitative results of the selected transaction analysis in developing reference ranges or otherwise applying its analysis. Based on various judgments concerning relative comparability of each of the companies in the selected transactions to Fuel Systems and each of the selected transactions to the merger, as well its experience with mergers and acquisitions and the industry in which Fuel Systems and Westport participate, J.P. Morgan selected a range of EBITDA multiples that it believed reflected an appropriate range of multiples applicable to Fuel Systems.

Value Creation Analysis—Intrinsic Value Approach

J.P. Morgan prepared a value creation analysis that compared the implied equity value derived from J.P. Morgan’s discounted cash flow analysis of Fuel Systems on a standalone basis to Fuel Systems’ stockholders’ pro forma ownership of the implied equity value of the combined company. Unlike the other valuation analyses performed by J.P. Morgan, which are intended to estimate the standalone basis, the value creation analysis is intended to estimate the potential change in equity value per share as a result of the business combination. The pro forma combined company equity value was equal to: (1) Fuel Systems’ standalone discounted cash flow value of $309 million, plus (2) Westport standalone discounted cash flow value of $637 million, plus (3) Fuel Systems’ present value of Westport’s management expected after-tax synergies, less Fuel Systems’ management estimate of transaction expenses of $15.0 million. For purposes of the discounted cash flow values used in this analysis, J.P. Morgan used a perpetual growth rate of 3.0% for the unlevered free cash flow of Fuel Systems and Westport. A discount rate of 10.0% was used for Fuel Systems, while a 10.0% discount rate was used for cash flows from Westport’s operations and a 13.0% discount rate was used for Westport’s HPDI cash flows. J.P. Morgan then determined the implied pro forma equity value of the combined company attributable to Fuel Systems’ stockholders based on the economic equity ownership percentage of the combined company of approximately 34.7% to be owned by Fuel Systems’ stockholders implied by the exchange ratio provided for in the merger agreement. J.P. Morgan then compared the result to the implied equity value of Fuel Systems on a standalone basis derived from the discounted cash flow analysis described above. The value creation analysis indicated implied pro forma economic equity value of $1.05 billion and implied pro forma accretion in economic equity value to the holders of Fuel Systems’ common stock of 17.6%.

Other Information

Implied Premiums and Multiples

Based on the exchange ratio of 2.129x and the closing market price of Westport’s common shares of $3.54 on August 31, 2015, J.P. Morgan calculated that the implied value of the merger consideration to be paid to Fuel Systems’ stockholders was $7.54 per share. This implied value represents an approximately 10% premium to $6.85, the closing market price of Fuel Systems’ common stock on August 31. 2015. The implied firm value (which is the value of common equity, plus face value of debt and the minority interest value, minus cash and cash equivalents) as a multiple of estimated EBITDA for calendar year 2015 was 13.3x. J.P. Morgan also reviewed the premium represented by the implied value of the merger consideration to be paid to Fuel Systems’ stockholders to the following volume weighted average prices (VWAP) leading to August 31, 2015:

 

VWAP		Premium
10-day VWAP			10.5	%
20-day VWAP			13.7	%
30-day VWAP			23.9	%

 

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Historical Exchange Ratio Analysis

J.P. Morgan reviewed the per share daily closing market price of Fuel Systems’ common stock and Westport’s common shares and calculated the implied historical exchange ratios by dividing the daily closing prices per share of Fuel Systems’ common stock by those of Westport’s common shares for the dates and over the periods described in the table below. The analysis resulted in the following implied exchange ratios for the periods indicated:

 

Basis of Exchange Ratio		Exchange Ratio
As of August 31, 2015			1.935x
Average of trailing 3-month ratios			1.593x
Average of trailing 6-month ratios			1.898x
Average of trailing 1-year ratios			1.944x
Average of trailing 3-year ratios			1.069x
Average of trailing 5-year ratios			1.057x

J.P. Morgan noted that a historical exchange ratio analysis is not a valuation methodology and that such analysis was presented merely for illustrative purposes.

Historical Trading Range

J.P. Morgan reviewed the 52-week trading range, ending on August 31, 2015, of Fuel Systems’ common stock, which was $5.70 to $11.88 per share, and the 52-week trading range, ending August 31, 2015, of Westport’s common shares, which was $3.00 to $14.88 per share.

J.P. Morgan noted that any historical stock trading analysis is not a valuation methodology and that such analysis was presented merely for illustrative purposes.

Equity Research Analyst Price Targets

J.P. Morgan reviewed and discussed the most recent publicly available research analyst price targets for Fuel Systems’ common stock and Westport’s common shares that were prepared and published by selected equity research analysts. J.P. Morgan noted that the range of price targets for Fuel Systems’ common stock was $3.80 to $9.00 per share, and that the range of price targets for Westport’s common shares was $8.00 to $11.00 per share.

J.P. Morgan noted that implied premiums and multiples, historical exchange ratio, historical stock trading and analyst price targets analyses are not valuation methodologies but were presented merely for informational purposes.

The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion. Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be bought or sold. None of the selected companies reviewed as

 

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described in the above summary is identical to Fuel Systems or Westport, and none of the selected transactions reviewed was identical to the merger. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of Fuel Systems and Westport. The transactions selected were similarly chosen because their participants, size and other factors, for purposes of J.P. Morgan’s analysis, may be considered similar to the merger. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to Fuel Systems and Westport and the transactions compared to the merger.

As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for estate, corporate and other purposes. J.P. Morgan was selected to advise Fuel Systems with respect to the merger on the basis of such experience and its familiarity with Fuel Systems.

For services rendered in connection with the merger, Fuel Systems has agreed to pay J.P. Morgan a transaction fee of 2.00% of the fair market value of the consideration to be paid to Fuel Systems’ stockholders in the merger, which is to be no less than $3.5 million, $1.0 million of which was payable upon the delivery by J.P. Morgan of its opinion and the remainder of which is payable upon and is contingent upon the consummation of the merger. In addition, Fuel Systems has agreed to reimburse J.P. Morgan for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities, including liabilities arising under the Federal securities laws.

During the two years preceding the date of delivery of its opinion, J.P. Morgan and its affiliates maintained commercial or investment banking and other business relationships with Fuel Systems, for which J.P. Morgan and its affiliates have received customary compensation. Such services have included acting as financial advisor in connection with Fuel Systems’ strategic planning and evaluation of defensive strategies. During the two years preceding the date of delivery of its opinion, neither J.P. Morgan nor its affiliates have had any material financial advisory or other material commercial or investment banking relationships with Westport. In addition, J.P. Morgan or its affiliates are the beneficial owners of approximately 0.13% of Westport’s outstanding capital stock. In the ordinary course of their businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities of Fuel Systems or Westport for their own accounts or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities. During the two-year period preceding delivery of its opinion ending on September 1, 2015, the aggregate fees received by J.P. Morgan from Fuel Systems were $300,000.

Certain Unaudited Financial and Operating Forecasts

Fuel Systems Unaudited Prospective Financial Information

Fuel Systems, as a matter of course, does not generally publicly disclose long-term forecasts or internal projections as to its future performance, revenues, production, earnings or other results due to, among other reasons, the uncertainty of the underlying assumption and estimates. However, Fuel Systems is including the following summaries of certain unaudited financial and operating forecasts of Fuel Systems and Westport in this proxy statement/prospectus solely to give Fuel Systems stockholders access to the information that was made available to Fuel Systems, Westport and their respective financial advisors. The unaudited prospective financial data presented below includes (i) projections for Fuel Systems prepared by Fuel Systems’ management and certain advisors in connection with the Restructuring Plan, without giving effect to the merger, which we refer to as the Fuel Systems Projections, and (ii) projections for Westport, which were prepared by Westport’s management, without giving effect to the merger, which we refer to as the Westport Projections. Except to extent required by law, neither Fuel Systems nor Westport has any obligation to update prospective financial data included in this proxy statement/prospectus and has not done so and does not intend to do so.

 

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The inclusion of this information should not be regarded as an indication that any of Fuel Systems, Westport, J.P. Morgan, Rothschild, or any other recipient of this information considered, or now considers, it to be necessarily predictive of actual future results. There can be no assurance that the prospective results will be realized or that actual results will not be significantly higher or lower than estimated.

Since the unaudited prospective financial information covers multiple years, such information, by its nature, becomes less predictive with each successive year. Fuel Systems stockholders are urged to review the SEC filings of Fuel Systems and Westport for a description of risk factors with respect to the business of Fuel Systems and Westport. See the sections entitled “Cautionary Statement Regarding Forward-Looking Statements” and “Where You Can Find More Information” beginning on pages [●] and [●], respectively, of this proxy statement/prospectus. The accompanying unaudited prospective financial information was not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of Westport’s management, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of management’s knowledge and belief, the expected course of action and the expected future financial performance of Westport. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this proxy statement/prospectus are cautioned not to place undue reliance on the prospective financial information.

Neither Westport’s or Fuel Systems’ independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information.

The reports of the independent registered public accounting firms of Fuel Systems and Westport contained in the Annual Report of each of Fuel Systems and Westport on Form 10-K and second amended Annual Report on Form 40-F/A, respectively, for the year ended December 31, 2014, which is incorporated by reference into this document, relates to the historical financial information of Fuel Systems and Westport, respectively. Such reports do not extend to the unaudited prospective financial information and should not be read to do so. Furthermore, the unaudited prospective financial information does not take into account any circumstances or events occurring after the date it was prepared. The unaudited prospective financial information does not give effect to the proposed merger.

The following table presents selected unaudited projected financial data for Fuel Systems provided to Westport, J.P. Morgan and Rothschild in connection with the consideration of the proposed transaction.

 

($mm)		2015E				2016E				2017E
Revenue		$	274			$	328			$	345
Cost of goods sold		$	215			$	247			$	259
Gross profit		$	60			$	80			$	87
Adjusted EBITDA(1)		$	6			$	25			$	30

 

(1)

Non-GAAP measure. “EBITDA” mean earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is determined by adding the following items to Net Income/(Loss), the closest GAAP financial measure: Depreciation & Amortization; Interest income/expense, net; and Benefit (Provision) for Income Taxes, Impairments, Restructuring charges, Stock based compensation consulting fees related to restructuring and strategy and other non-operating expenses.

In addition, in connection with J.P. Morgan’s preparation of its fairness opinion described above in “Opinion of Fuel Systems’ Financial Advisor”, management of Fuel Systems provided extrapolated adjusted EBITDA for Fuel Systems’ fiscal years 2018 and 2025, calculated based on extrapolations from the Fuel

 

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Systems’ Projections, which were as follows (in millions): 2018E: $32; 2019E $36. 2020E $39; 2021E $44; 2022E $52; 2023E $58; 2024E $63; 2025E $66.

In connection with the proposed transaction, Fuel Systems also provided the 2018 through 2020 Fuel Systems’ management extrapolations discussed above to Westport and Rothschild.

Westport Unaudited Prospective Financial Information

Westport, as a matter of course, does not generally publicly disclose long-term forecasts or internal projections as to its future performance, revenues, production, earnings or other results due to, among other reasons, the uncertainty of the underlying assumption and estimates. However, Westport is including the following summaries of certain unaudited financial and operating forecasts of Westport in this proxy statement/prospectus solely to give Fuel Systems stockholders access to the information that was made available to Fuel Systems, Westport and their respective financial advisors. The unaudited prospective financial data presented below includes projections for Westport prepared by Westport management as part of its regular strategic planning process. Except to extent required by law, neither Fuel Systems nor Westport has any obligation to update prospective financial data included in this proxy statement/prospectus and has not done so and does not intend to do so.

The inclusion of this information should not be regarded as an indication that any of Fuel Systems, Westport, J.P. Morgan, Rothschild, or any other recipient of this information considered, or now considers, it to be necessarily predictive of actual future results. There can be no assurance that the prospective results will be realized or that actual results will not be significantly higher or lower than estimated.

Since the unaudited prospective financial information covers multiple years, such information, by its nature, becomes less predictive with each successive year. Fuel Systems stockholders are urged to review the SEC filings of Fuel Systems and Westport for a description of risk factors with respect to the business of Fuel Systems and Westport. See the sections entitled “Cautionary Statement Regarding Forward–Looking Statements” and “Where You Can Find More Information” beginning on pages [●] and [●], respectively, of this proxy statement/prospectus.

The accompanying unaudited prospective financial information was not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of Westport’s management, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of management’s knowledge and belief, the expected course of action and the expected future financial performance of Westport. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this proxy statement/prospectus are cautioned not to place undue reliance on the prospective financial information.

Neither Westport’s or Fuel Systems’ independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information.

The reports of the independent registered public accounting firms of Fuel Systems and Westport contained in the Annual Report of each of Fuel Systems and Westport on Form 10-K and second amended Annual Report on Form 40-F/A, respectively, for the year ended December 31, 2014, which is incorporated by reference into this document, relates to the historical financial information of Fuel Systems and Westport, respectively. Such reports do not extend to the unaudited prospective financial information and should not be read to do so. Furthermore, the unaudited prospective financial information does not take into account any circumstances or events occurring after the date it was prepared. The unaudited prospective financial information does not give effect to the proposed merger.

 

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The following table presents the Westport Projections provided to Fuel Systems and Rothschild in connection with the consideration of the proposed transaction.

 

($ mm)		2015E				2016E				2017E				2018E				2019E				2020E
Revenues		$	116.9			$	204.3			$	395.5			$	605.6			$	909.8			$	1,179.8
Cost of Goods Sold		$	87.5			$	134.3			$	274.9			$	459.9			$	740.5			$	984.5
Gross Margins		$	29.3			$	69.9			$	120.6			$	145.7			$	169.3			$	215.4
Operating Expenses		$	93.6			$	128.1			$	144.9			$	121.4			$	97.3			$	95.6
Adjusted EBITDA(1)		$	(42.9	)		$	(27.0	)		$	13.8			$	69.5			$	125.4			$	182.8

 

(1)

Non-GAAP measure. “EBITDA” mean earnings before interest, taxes, depreciation and amortization. Westport defines Adjusted EBITDA as net loss attributed to the business unit or the consolidated company excluding expenses for (a) income taxes, (b) depreciation and amortization, (c) interest expense, net, (d) non-cash and other unusual adjustments, (e) amortization of stock-based compensation, and (f) unrealized foreign exchange gain or loss. Adjusted EBITDA includes Westport’s share of income from the joint ventures.

In addition, in connection with J.P. Morgan’s preparation of its fairness opinion described above in “Opinion of Fuel Systems’ Financial Advisor”, Fuel Systems’ management, in consultations with its strategic advisors, applied certain downward adjustments and discounts and performed certain sensitivity analyses to the Westport Projections, which adjustments and discounts ranged between approximately 0% to 60%, depending on product line and certain profit and loss line items, and also took into account certain timing delays in anticipated market penetration.

Additional Information Regarding Prospective Financial Information

Although presented with numerical specificity, the above unaudited prospective financial information reflects numerous assumptions and estimates as to future events made by the management of Fuel Systems and Westport, as applicable.

At the time the unaudited prospective financial information was prepared, Fuel Systems’s management and Westport’s management believed such assumptions and estimates were reasonable. In preparing the foregoing unaudited projected financial information, Fuel Systems and Westport, as applicable, made assumptions regarding, among other things, sales volumes and pricing, interest rates, corporate financing activities, including with respect to the effective tax rate and the amount of Fuel System’s and Westport’s income taxes, the amount of selling, general and administrative costs and the amount of research and development spending.

No assurances can be given that the assumptions made in preparing the above unaudited prospective financial information will accurately reflect future conditions. The estimates and assumptions underlying the unaudited prospective financial information involve judgments with respect to, among other things, future economic, competitive, regulatory and financial market conditions and future business decisions that may not be realized and that are inherently subject to significant business, economic, competitive and regulatory uncertainties and contingencies, including, among others, risks and uncertainties described under the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” beginning on pages [●] and [●], respectively, of this proxy statement/prospectus all of which are difficult to predict and many of which are beyond the control of Fuel Systems and/or Westport and will be beyond the control of the combined company. There can be no assurance that the underlying assumptions will prove to be accurate or that the projected results will be realized, and actual results likely will differ, and may differ materially, from those reflected in the unaudited prospective financial information, whether or not the combination is completed.

 

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Fuel Systems stockholders are urged to review Westport’s and Fuel System’s most recent SEC filings for a description of Fuel System’s and Westport’s reported and anticipated results of operations and financial condition and capital resources during 2015, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Fuel System’s Quarterly Report on Form 10-Q for the second quarter ended June 30, 2015, which is incorporated by reference into this document, and Westport’s Quarterly Report on Form 6-K for the second quarter ended June 30, 2015, which is incorporated by reference into this document.

Readers of this document are cautioned not to place undue reliance on the unaudited prospective financial information set forth above. No representation is made by Fuel Systems, Westport or any other person to any Fuel Systems stockholder regarding the ultimate performance of Fuels Systems or Westport compared to the information included in the above unaudited prospective financial information. The inclusion of unaudited prospective financial information in this document should not be regarded as an indication that such prospective financial information will be an accurate prediction of future events, and such information should not be relied on as such.

FUEL SYSTEMS AND WESTPORT DO NOT INTEND TO UPDATE OR OTHERWISE REVISE THE ABOVE UNAUDITED PROSPECTIVE FINANCIAL INFORMATION TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING SUCH PROSPECTIVE FINANCIAL INFORMATION ARE NO LONGER APPROPRIATE, EXCEPT AS MAY BE REQUIRED BY LAW.

Board of Directors and Executive Officers of the Combined Company After Completion of the Merger; Headquarters and Name

Board of Directors. Upon completion of the merger, the board of directors of the combined company will consist of ten directors, including current Westport directors Warren J. Baker, Joseph P. Caron, David R. Demers, Brenda J. Eprile, Philip B. Hodge, Dezsö J. Horváth, Gottfried (Guff) Muench, current Fuel Systems director Mariano Costamagna, and [●] and [●] from the Fuel Systems board of directors to be designated by Fuel Systems prior to the closing.

Executive Officers. Upon completion of the merger, the current executive officers of Westport are expected to continue serving as executive officers of the combined company.

Headquarters. Upon completion of the merger, the headquarters of the combined company will remain in Vancouver, Canada.

Name. Upon completion of the merger, and if approved by the requisite number of votes cast by Westport shareholders, the name of the combined company will be “Westport Fuel Systems Inc.”

Accounting Treatment of the Merger

Westport will account for the merger under the acquisition method of accounting for business combinations pursuant to Accounting Standards Codification (“ASC”) No. 805—Business Combinations. ASC No. 805 requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the date of the merger. ASC No. 820—Fair Value Measurements, which establishes a framework for measuring fair values, defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”

Regulatory Approvals Required for the Merger

Westport and Fuel Systems have each agreed to (and to cause each of their subsidiaries to) take any and all actions necessary to obtain all necessary antitrust consents, clearances or approvals required to complete the

 

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merger, provided such actions would not materially reduce the anticipated benefits of the transactions contemplated by the merger agreement. The following is a summary of the regulatory approvals required for completion of the merger.

United States Antitrust Approval

Under the HSR Act, Westport and Fuel Systems cannot complete the merger until Westport and Fuel Systems have notified the Antitrust Division of the U.S. Department of Justice, which we refer to herein as the “DOJ,” and the U.S. Federal Trade Commission, which we refer to herein as the “FTC,” of the merger and furnished them with certain information and materials relating to the merger and the applicable waiting period has terminated or expired. The termination or expiration of the waiting period means the parties have satisfied the regulatory requirements under the HSR Act. Westport and Fuel Systems filed the required notifications with the DOJ and the FTC on September 16, 2015; accordingly, the termination or expiration of the waiting period occurred on October 16, 2015.

Other Jurisdictions

Westport and Fuel Systems derive revenues in other jurisdictions where merger or acquisition control filings or clearances are or may be required. The merger cannot be completed until after the relevant approvals have been obtained under the antitrust and competition laws of Turkey. Westport filed the required notification with the antitrust authority in Turkey on September 17, 2015, and clearance was granted on October 7, 2015. The transaction is also subject to review by the competition authority of Argentina. However, such review does not suspend closing of the transaction and a filing can be made post-closing. The parties intend to notify the competition authority of Argentina about the transaction following the closing of the transaction.

Appraisal Rights

Under Section 262 of the DGCL, holders of shares of Westport common shares and Fuel Systems common stock do not have appraisal rights in connection with the merger.

Restrictions on Sales of Shares of Westport Common Shares Received in the Merger

All Westport common shares received by Fuel Systems stockholders in the merger will be freely tradable for purposes of the Securities Act and the Exchange Act, except for Westport common shares received by any Fuel Systems stockholder who becomes an “affiliate” of Westport after completion of the merger (such as Fuel Systems directors or executive officers who become directors or executive officers of Westport after the Merger). This proxy statement/prospectus does not cover resales of Westport common shares received by any person upon completion of the merger, and no person is authorized to make any use of this proxy statement/prospectus in connection with any resale.

NASDAQ and TSX Listing of Westport Common Shares; Delisting and Deregistration of Fuel Systems Common Stock

It is a condition to the completion of the merger that the Westport common shares issuable in the merger be approved for listing on NASDAQ and the TSX. The application for approval of the listing of the Westport common shares issuable in the merger will be submitted to the TSX, and will be subject to fulfilling all of the listing requirements of the TSX. A supplemental listing application will be provided to NASDAQ in accordance with the requirements of the NASDAQ Stock Market Rules.

If the merger is completed, Fuel Systems common stock will cease to be listed on NASDAQ and its common stock will be deregistered under the Exchange Act.

 

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Interests of Directors and Executive Officers in the Merger

Interests of Directors and Executive Officers of Fuel Systems in the Merger

In considering the recommendation of the Fuel Systems board of directors that Fuel Systems stockholders vote “FOR” the Merger proposal, Fuel Systems stockholders should be aware that some of Fuel Systems’ executive officers and directors have financial interests in the merger that may be different from, or in addition to, those of Fuel Systems stockholders generally. The Fuel Systems board of directors was aware of these interests and considered them, among other matters, in approving the merger agreement and making its recommendations that the Fuel Systems stockholders approve the merger agreement. For purposes of all of the Fuel Systems agreements and plans described below, the completion of the merger will constitute a change in control.

As described under “Fuel Systems Proposals—Item 2. Amendments to Non-Employee Directors’ Restricted Stock Awards Proposal,” the Fuel Systems board of directors formally approved amendments to certain restricted stock awards (the “Awards”) held by non-employee directors. The amendments provide that the vesting date of any unvested restricted stock issued pursuant to each Award will be the earlier of (i) the vesting date set forth in the Award, or (ii) a change in control (as defined in the 2009 Restricted Stock Plan); provided, that the amendments will not be effective unless holders of a majority of the shares of Fuel Systems common stock present in person or by proxy and entitled to vote at the next shareholders’ meeting vote in favor of such amendment. The consummation of the proposed merger would constitute a “change in control” under the 2009 Restricted Stock Plan and the Awards. The table below sets forth the value to each of the non-employee directors of the acceleration of the awards, assuming shareholders approve the amendments as set forth in “Fuel Systems Proposals—Item 2. Amendments to Non-Employee Directors’ Restricted Stock Awards Proposal” and further assuming a merger completion date of October 9, 2015, upon which merger completion date the non-employee directors would be entitled to receive 2.129 Westport common shares for each share of Fuel Systems restricted stock.

 

Director		Restricted Stock Award (#)				Acceleration Value ($)
Joseph E. Pompeo			6,054				50,525
Marco Di Toro			6,054				50,525
James W. Nall			6,054				50,525
Troy A. Clarke			6,054				50,525
Colin Johnston			6,054				50,525
Steven R. Becker			6,054				50,525
Anthony Harris (1)			6,054				50,525
Anthony Harris (1)			1,442				12,034

Retirement Agreement

Fuel Systems entered into a retirement agreement with Mariano Costamagna on April 24, 2015 (the “Retirement Agreement”), under which Mr. Costamagna and Fuel Systems agreed that Mr. Costamagna will retire by December 31, 2015 as the Chief Executive Officer of Fuel Systems, relinquish all executive authority with regard to Fuel Systems’ wholly-owned subsidiary, MTM S.r.L. (“MTM”), and resign from all positions as director, officer, executive or employee of all other Fuel Systems subsidiaries. Following such retirement date, Mr. Costamagna will remain as a director of Fuel Systems and MTM and be entitled to compensation as a non-management director of such companies. Under the Retirement Agreement, Mr. Costamagna will be paid €450,000 by MTM on December 31, 2015, provided that Mr. Costamagna’s employment is not terminated for “cause” (as defined under the Retirement Agreement) prior to such date. In addition, Mr. Costamagna was granted 100,000 Fuel Systems restricted stock units, which vest on December 31, 2016, 60% of which will be settled in stock and 40% of which will be settled in cash, subject to Mr. Costamagna complying with the restrictive covenants contained in the agreement. Under the Retirement Agreement, Mr. Costamagna agreed to

 

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certain restrictive covenants, including non-solicitation and non-competition for the longer of (i) 12 months following the date he ceases to serve as chief executive officer of Fuel Systems and (ii) six months following the date he ceases to be a director of both MTM and Fuel Systems. Mr. Costamagna agreed that 100,000 Fuel Systems restricted stock units had a value on the date of the Retirement Agreement of €1,020,000 and that would be the liquidated damages for any violation of the restrictive covenants. Upon consummation of the merger, consistent with the treatment of all outstanding Fuel Systems RSUs, any outstanding RSUs awarded under the Retirement Agreement will be assumed by Westport, will be convertible into shares of Westport common shares and will continue to have the same terms and conditions, including vesting and payment terms, as were in effect prior to the merger.

The Retirement Agreement was not entered into in contemplation of the merger or any sale of Fuel Systems or any of its assets, but was part of succession planning for Fuel Systems. Under the Retirement Agreement, Mr. Costamagna agreed that the Fuel Systems board of directors would commence a search for his successor as CEO, and he would cooperate with that search and, in the interim period, the Fuel Systems board of directors would appoint a Chief Operating Officer for Fuel Systems and MTM with whom Mr. Costamagna would cooperate. Mr. Costamagna may elect to retire before December 31, 2015 without forfeiting any payment or benefit provided for under the Retirement Agreement.

Supplemental Employment Agreements

Fuel Systems entered into a Supplemental Employment Agreement with two named executive officers of Fuel Systems, Pietro Bersani and Michael Helfand on August 6, 2015. Under the terms of these agreements, each of Mr. Bersani and Mr. Helfand will receive a bonus payment on the closing date of the merger or upon any earlier termination by Fuel Systems without “cause” (as defined under the Supplemental Employment Agreements) or due to death or disability that occurs prior to the closing date of the merger. In addition, the Supplemental Employment Agreements provide that if the employment of Mr. Bersani or Mr. Helfand is terminated by Fuel Systems without cause or by the executive for “good reason” (as defined under the Supplemental Employment Agreements) or due to death or disability within 12 months following a change in control (which would include the closing of the merger), then the executive will receive (i) a lump sum severance payment equal to 100% of the executive’s annual base salary in effect immediately prior to either (a) the change in control or (b) the executive’s termination, whichever is greater; (ii) 100% vesting of the restricted stock units granted to the executive on April 24, 2015, the value of which will be paid in cash and (iii) continued coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) (or coverage under an individual policy to the extent continuation COBRA coverage is not available) for the executive and his dependents for 18 months following the termination date at Fuel Systems’ expense, which coverage will terminate earlier if the executive becomes covered by a medical plan offered by a new employer. Entitlement to such payments and benefits are conditioned upon the execution and non-revocation of a release of claims.

The chart below sets forth the amounts payable to Messrs. Bersani and Helfand under the respective agreements, assuming a merger completion date of October 9, 2015, and that employment of each executive is terminated without cause immediately following the completion of the merger. The first column sets forth the amounts payable to Messrs. Bersani and Helfand on the closing date of the merger, whereas the amounts in columns two through four comprise the value of benefits receivable by Messrs. Bersani and Helfand upon a qualifying termination following the completion of the merger, in each case pursuant to the terms of their respective Supplementary Employment Agreement.

 

		Merger Closing Bonus				Cash Severance Payment				RSU Acceleration Value(1)				Value of COBRA Coverage				Total
Pietro Bersani		$	365,000			$	367,750			$	175,259			$	35,390			$	943,399
Michael Helfand		$	300,000			$	305,000			$	150,222			$	35,390			$	790,612

 

(1)	Amount reflects the value derived by multiplying the number of restricted stock units subject to accelerated vesting by the value of 2.129 Westport common shares, based on the closing trading price of such shares on the presumed employment termination date of October 9, 2015.

 

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Equity Compensation Awards

Stock Options

Under the terms of the merger agreement, all Fuel Systems stock options with an exercise price that is less than the per share dollar value of the merger consideration immediately prior to completion of the merger (referred to herein as an “in-the-money option”) will vest in full and become exercisable and will be assumed by Westport and be exercisable for shares of Westport common shares from and following the completion of the merger and are more fully described below under “—Treatment of Fuel Systems Stock Options and Other Equity Based Awards”. All stock options with a per share exercise price that is greater than or equal to the per share dollar value of the merger consideration immediately prior to the completion of the merger will automatically be cancelled and forfeited for no consideration paid to the option holder. Assuming a merger closing date of October 9, 2015, the per share dollar value of the merger consideration would be $8.35. Based on such price, none of the stock options held by Fuel Systems’ executive officers would be in-the-money options and, thus, all unexercised stock options held by such individuals would be cancelled upon the completion of the merger for no consideration.

Restricted Stock Units and Restricted Stock

The merger agreement provides that all outstanding Fuel Systems restricted stock units (“RSUs”), including those held by executive officers, will be assumed by Westport and will be convertible into shares of Westport common shares from and following the completion of the merger. The assumed RSUs will continue to have the same terms and conditions, including vesting terms, as such RSUs had immediately prior to the completion of the merger, except that the number of shares subject to each RSU award will be adjusted in accordance with the exchange ratio.

Each share of Fuel Systems restricted stock, including those held by executive officers, also will be assumed by Westport and will become shares of Westport restricted stock from and following the completion of the merger, subject to the same terms and conditions, including applicable restrictions and vesting terms, as were applicable to the shares of Fuel Systems restricted stock immediately prior to the completion of the merger, except that the number of shares of restricted stock subject to each restricted stock award will be adjusted in accordance with the exchange ratio.

Phantom Shares

Each outstanding Fuel Systems phantom share, including those held by executive officers, will vest in full and all restrictions applicable thereto will lapse immediately prior to the completion of the merger, and each award of Fuel Systems phantom shares will be converted into an amount in cash equal to the product of (i) the number of shares of Fuel Systems common stock subject to the award of Fuel Systems phantom shares and (ii) the difference between (x) the per share dollar value of the merger consideration and (y) the exercise price applicable to the Fuel Systems phantom shares and thereafter will be cancelled. All Fuel Systems phantom shares with a per share exercise price that is greater than or equal to the per share dollar value of the merger consideration will automatically be cancelled and forfeited for no consideration paid to the holder of such Fuel Systems phantom share. Assuming a merger closing date of October 9, 2015, the per share dollar value of the merger consideration would be $8.35. Based on such price, none of the Fuel Systems phantom shares held by Fuel Systems executive officers would be in-the-money and, thus, all Fuel Systems phantom shares held by such persons would be cancelled at the effective time for no consideration.

Compensation Related to the Merger

The tabular disclosure below sets forth the information required by Item 402(t) of Regulation S-K and assumes that each of the listed named executive officers is terminated without “cause” in connection with the proposed merger under circumstances that entitle such individual to severance payments and benefits as of October 9, 2015 (the latest

 

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practicable date, determined pursuant to Item 402(t) of Regulation S-K). The tabular disclosure further assumes that each listed named executive officer becomes entitled to the accelerated vesting and cash payment for their restricted stock units as provided under certain executives’ Supplemental Employment Agreements described above under “—Supplemental Employment Agreements,” based on a price of $6.34 per share with respect to Fuel Systems common stock (the average per share closing price of Fuel Systems common stock over the first five business days following the date the parties announced the execution of the merger agreement, determined pursuant to Item 402(t) of Regulation S-K).

 

		Cash ($)(1)				Equity ($)(2)				Perquisites/ Benefits ($)(3)				Total
Pietro Bersani		$	732,750			$	133,140			$	35,390				901,280
Michael Helfand		$	605,000			$	114,120			$	35,390				754,510

 

(1)

Amount represents (a) the cash severance payable to each of Mr. Bersani and Mr. Helfand ($367,750 and $305,000, respectively) under their respective Supplemental Employment Agreements in the event their employment is terminated for qualifying reasons under such agreements and (b) the transaction bonus payment payable to each of Mr. Bersani and Mr. Helfand ($365,000 and $300,000, respectively) upon the closing of the merger. The cash severance amount in each case is a “double-trigger” payment (meaning the amount is payable only upon a qualifying termination that follows a change in control), and the transaction bonus payments are “single-trigger” (meaning they become payable by virtue of a change in control alone).

(2)

Amount reflects the value of the accelerated vesting of restricted stock units granted to each of Mr. Bersani and Mr. Helfand, as provided for under their respective Supplemental Employment Agreements, assuming their employment is terminated for qualifying reasons under such agreements and further assuming the purchase price of Fuel Systems Common Stock discussed above. Such payments are double-trigger payments.

(3)	Amount reflects the value of the COBRA continuation coverage provided to each of Mr. Bersani and Mr. Helfand in the event their employment terminates for qualifying reasons under their respective Supplemental Employment Agreements. Such payments are double-trigger.

Messrs. Bersani and Helfand are the only named executive officers included in the table above because no other named executive officer is a party to any agreement or understanding concerning any type of compensation that is based on or otherwise relates to the merger. Mr. Costamagna’s Retirement Agreement was entered into in April 2015 as part of Fuel Systems’ succession planning and not in contemplation of the merger or any sale of Fuel Systems or any of its assets. The compensation to which Mr. Costamagna is entitled under such agreement in connection with his retirement is fully described above under “—Retirement Agreement.”

Treatment of Fuel Systems Stock Options and Other Equity-based Awards

Stock Options. Upon completion of the merger, each outstanding in-the-money option (whether or not then vested or exercisable) to purchase shares of Fuel Systems common stock will automatically vest and become exercisable, and will be assumed by Westport and will otherwise continue to have, and be subject to, the same terms and conditions as were applicable to such options prior to the completion of the merger, except that (i) each such in-the-money option will be exercisable for that number of shares of Westport equal to the product (rounded down to the nearest whole) of the number of shares of Fuel Systems common stock subject to such in-the-money option immediately prior to the completion of the merger and 2.129, and (ii) the per share exercise price for shares of Westport issuable upon exercise of such assumed in-the-money option will be equal to the quotient (rounded up to the nearest whole cent) determined by dividing the per share exercise price of each Fuel Systems common stock at which such assumed in-the-money option was exercisable immediately prior to the completion of the merger by 2.129. Any outstanding option that has an exercise price per share of Fuel Systems common stock greater than or equal to the per share dollar value of the merger consideration will automatically be cancelled and forfeited for no consideration and all rights with respect to such option will terminate. Based on a price assuming a merger closing date as of October 9, 2015, none of the outstanding stock options would be in-the-money options and, thus, all unexercised stock options would be cancelled upon the completion of the merger for no consideration.

 

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Restricted Stock Units. Upon completion of the merger, each outstanding Fuel Systems RSU will be assumed by Westport and will continue to have, and be subject to, the same terms and conditions (including vesting terms), as were applicable prior to the completion of the merger, except that each such Fuel Systems RSU will be converted into a number of RSUs convertible into that number of whole shares of Westport equal to the product (rounded down to the nearest whole number) of the number of shares of Fuel Systems common stock subject to such RSU immediately prior to the completion of the merger multiplied by 2.129.

Restricted Stock. Upon completion of the merger, each outstanding share of Fuel Systems restricted stock will be assumed by Westport and will continue to have, and be subject to, the same terms and conditions (including applicable restrictions and vesting terms) as were applicable immediately prior to the completion of the merger, except that each such share of Fuel Systems restricted stock will be converted into a number of restricted shares of Westport equal to the product (rounded down to the nearest whole number) of the number of shares of Fuel Systems restricted stock immediately prior to the closing of the merger multiplied by 2.129.

Phantom Shares. Upon completion of the merger, each outstanding Fuel Systems phantom share will become fully vested and all restrictions will lapse and each such phantom share will be converted into an amount, payable in cash, equal to the product of (i) the number of shares of Fuel Systems common stock subject to the Fuel Systems phantom share multiplied by (ii) the difference between (x) the per share dollar value of the merger consideration and (y) the applicable “exercise price” for the Fuel Systems phantom share. Any outstanding phantom share that has an exercise price per share of Fuel Systems common stock greater than or equal to the per share dollar value of the merger consideration will automatically be cancelled and forfeited for no consideration and all rights with respect to such phantom share will terminate. Assuming a merger closing date of October 9, 2015, the per share dollar value of the merger consideration would be $8.35. Based on such price, none of the outstanding Fuel Systems phantom shares would be in-the-money and, thus, all Fuel Systems phantom shares would be cancelled at the effective time for no consideration.

 

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U.S. FEDERAL INCOME TAX CONSIDERATIONS

In General

The following discussion is a summary of (i) U.S. federal income tax consequences of the merger generally applicable to U.S. Holders and non-U.S. Holders (each as defined below) of Fuel Systems common stock and (ii) U.S. federal income tax considerations generally applicable to U.S. Holders of owning and disposing of Westport common shares received in the merger. The discussion is based on and subject to the Code, the U.S. Treasury Regulations promulgated thereunder, administrative guidance and court decisions, in each case, as of the date hereof, all of which are subject to change, possibly with retroactive effect, and to differing interpretations. The discussion assumes that Fuel Systems stockholders hold their Fuel Systems common stock, and will hold their Westport common shares received in the merger, as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment). The discussion also assumes that Westport will not be treated as a U.S. corporation under Section 7874 of the Code. The discussion does not constitute tax advice and does not address all aspects of U.S. federal income taxation that may be relevant to particular holders of Fuel Systems common stock or Westport common shares in light of their personal circumstances, or to any holders subject to special treatment under the Code, such as:

 

•

banks, thrifts, mutual funds and other financial institutions;

 

•

real estate investment trusts and regulated investment companies;

 

•

traders in securities who elect to apply a mark-to-market method of accounting;

 

•

brokers or dealers in securities;

 

•

tax-exempt organizations or governmental organizations;

 

•

insurance companies;

 

•

dealers or brokers in securities or foreign currency;

 

•

individual retirement and other deferred accounts;

 

•

U.S. Holders whose functional currency is not the U.S. dollar;

 

•

U.S. expatriates and former citizens or long-term residents of the United States;

 

•

“passive foreign investment companies” or “controlled foreign corporations”, and corporations that accumulate earnings to avoid U.S. federal income tax;

 

•

persons subject to the alternative minimum tax;

 

•

U.S. Holders who own or are deemed to own 10% or more of Westport’s voting stock;

 

•

persons who hold their shares as part of a straddle, hedging, conversion, constructive sale or other risk reduction transaction;

 

•

persons who purchase or sell their shares as part of a wash sale for tax purposes;

 

•

“S corporations”, partnerships or other entities or arrangements classified as partnerships for U.S. federal income tax purposes, or other pass-through entities (and investors therein); and

 

•

persons who received their shares through the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan.

In addition, there can be no assurance that the IRS or a court will not take a contrary position regarding the tax consequences described herein. The discussion does not address any non-income tax considerations or any foreign, state or local tax consequences. For purposes of this discussion, a “U.S. Holder” means a beneficial owner of Fuel Systems common stock or, after the completion of the merger, Westport common shares, that for U.S. federal income tax purposes is:

 

•

an individual who is a citizen or resident of the United States;

 

•

a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States, any state thereof or the District of Columbia;

 

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•

an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

 

•

a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (ii) the trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person for U.S. federal income tax purposes.

A “Non-U.S. Holder” means a beneficial owner of Fuel Systems common stock or, after the completion of the merger, Westport common shares who is an individual, corporation, estate or trust, in each case, that is not a U.S. Holder.

If a partnership, including for this purpose any arrangement or entity that is treated as a partnership for U.S. federal income tax purposes, holds Fuel Systems common stock or, after the completion of the merger, Westport common shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A holder that is a partnership for U.S. federal income tax purposes and the partners in such partnership are urged to consult their tax advisors about the U.S. federal income tax consequences of the merger and the ownership and disposition of the Westport common shares.

THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. HOLDERS OF FUEL SYSTEMS COMMON STOCK OR, AFTER THE COMPLETION OF THE MERGER, WESTPORT COMMON SHARES SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND THE OWNERSHIP AND DISPOSITION OF WESTPORT COMMON SHARES TO THEM IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS ANY TAX CONSEQUENCES OF SUCH MATTERS ARISING UNDER THE U.S. FEDERAL TAX LAWS OTHER THAN THOSE PERTAINING TO INCOME TAX, INCLUDING ESTATE OR GIFT TAX LAWS, OR UNDER ANY STATE, LOCAL OR NON-U.S. TAX LAWS OR UNDER ANY APPLICABLE INCOME TAX TREATY.

U.S. Federal Income Tax Consequences of the Merger to U.S. Holders of Fuel Systems Common Stock

The following discussion regarding the U.S. federal income tax consequences of the merger assumes that the merger will be consummated as described in the merger agreement and this proxy statement/prospectus. For U.S. federal income tax purposes, subject to the discussion below in “—Application of Section 367(a)(1),” the receipt of Westport common shares for Fuel Systems common stock pursuant to the merger should qualify as a reorganization within the meaning of Section 368(a) of the Code. However, neither the obligation of Fuel Systems nor the obligation of Westport to complete the merger is conditioned upon the receipt of an opinion from counsel confirming that the merger will so qualify. In addition, this discussion is not binding on the IRS or any court and does not preclude the IRS or a court from reaching a contrary conclusion. Therefore, while Fuel Systems believes that the merger will be treated as a tax-free reorganization under Section 368(a) of the Code, no assurance can be provided that the IRS will agree with this conclusion.

Receipt of Westport Common Shares in a Section 368(a) Reorganization

Subject to the discussion below in “—Application of Section 367(a)(1),” if the receipt of Westport common shares for Fuel Systems common stock qualifies as a reorganization within the meaning of Section 368(a) of the Code, then, except as described below with respect to a U.S. Holder of Fuel Systems common shares that owns, directly or by attribution, 5% or more of the Westport common shares immediately after the merger (a “5% U.S. Holder”), the merger should have the following U.S. federal income tax consequences to you:

 

•

You will not recognize any gain or loss with respect to your Fuel Systems common stock (except with respect to cash received in lieu of a fractional Westport common share, as discussed below).

 

•

The aggregate tax basis of any Westport common shares you receive in exchange for your Fuel Systems common stock in the merger (including fractional shares for which cash is received, as discussed below) will be the same as the aggregate adjusted tax basis of your Fuel Systems common stock.

 

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•

The holding period of any shares of Westport common shares you receive in the merger (including fractional shares for which cash is received, as discussed below) generally will include the holding period of the shares of Fuel Systems common stock you exchanged for such Westport common shares.

 

•

If you receive cash in lieu of a fractional Westport common share in the merger, you will be treated as having received such fractional share in the merger and then having received cash in redemption of such fractional share. You generally will recognize capital gain or loss equal to the difference between the amount of cash received with respect to such fractional share and the ratable portion of the adjusted tax basis of the Fuel Systems common stock surrendered that is allocated to the fractional share. Capital gain or loss generally will be long-term capital gain or loss if your holding period in the Fuel Systems common stock surrendered that is allocated to the fractional share is more than one year on the date of completion of the merger. The deductibility of capital losses is subject to limitations.

U.S. Holders should consult their own tax advisors about reporting requirements and information statements that could be applicable to the merger and any potential penalties associated with a failure to satisfy such requirements.

A 5% U.S. Holder that receives Westport common shares pursuant to the merger will generally qualify for the treatment described above only if the 5% U.S. Holder timely files a “gain recognition agreement,” as defined in applicable U.S. Treasury Regulations promulgated under Section 367(a) of the Code, with the IRS. A 5% U.S. Holder who fails to file a gain recognition agreement with the IRS will not qualify for the treatment described above, and instead will recognize gain (but not loss) in the merger in the amount, if any, by which the value of the Westport common shares (including fractional shares) received by the 5% U.S. Holder exceeds such holder’s adjusted tax basis in its Fuel Systems common stock exchanged therefor. Any gain so recognized would generally be treated as capital gain. Capital gains of non-corporate 5% U.S. Holders (including individuals) may be eligible for the preferential U.S. federal income tax rates applicable to long-term capital gains if the U.S. Holder has held its Fuel Systems common stock for more than one year as of the closing date of the merger. Each such 5% U.S. Holder should consult its own tax advisor concerning the decision to file a gain recognition agreement, the procedures to be followed in connection with that filing, and other applicable considerations.

Receipt of Westport Common Shares in a Taxable Exchange

If the IRS were to successfully challenge the qualification of the merger as a reorganization, a U.S. Holder of Fuel Systems common stock would recognize gain or loss in an amount equal to the difference, if any, between (i) the sum of the fair market value as of the closing date of the merger of Westport common shares (including fractional shares) received in the merger, and (ii) such holder’s adjusted tax basis in the shares of Fuel Systems common stock surrendered in the merger. A U.S. Holder’s adjusted tax basis in its Fuel Systems common stock generally will equal such holder’s purchase price for such Fuel Systems common stock, as adjusted to take into account stock dividends, stock splits or similar transactions.

A U.S. Holder’s gain or loss on receipt of the Westport common shares generally will be a capital gain or loss. Capital gains of non-corporate U.S. Holders (including individuals) may be eligible for the preferential U.S. federal income tax rates applicable to long-term capital gains if the U.S. Holder has held its Fuel Systems common stock for more than one year as of the closing date of the merger. The deductibility of capital losses is subject to limitations. If a U.S. Holder acquired different blocks of Fuel Systems common stock at different times and at different prices, such holder must determine its adjusted tax basis and holding period separately with respect to each block of Fuel Systems common stock.

A U.S. Holder’s tax basis in Westport common shares received in the merger would equal its fair market value as of the date of the merger, and the U.S. Holder’s holding period for such Westport common shares would begin on the date after the merger.

Application of Section 367(a)(1)

Section 367(a)(1) of the Code and the applicable Treasury Regulations thereunder provide that where a U.S. shareholder exchanges stock in a U.S. corporation for stock in a non-U.S. corporation in a transaction that would

 

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otherwise qualify as a reorganization under Section 368(a) of the Code, the U.S. shareholder is required to recognize gain, but not loss, realized on such exchange unless certain requirements are met. While Fuel Systems and Westport generally expect such requirements to be met, one such requirement is that the value of Westport equal or exceed the value of Fuel Systems, as specifically determined for purposes of Section 367 of the Code, as of the closing date of the merger. Whether this requirement is met cannot be known until the closing date of the merger. In determining the value of Westport for these purposes, acquisitions of assets by Westport made outside of the ordinary course of business during the 36 months preceding the merger will be disregarded unless such acquisitions either (i) consist of interests in certain foreign corporations or partnerships or (ii) do not consist of passive assets (including cash) and are not undertaken with a principal purpose of satisfying such requirement. In addition, the IRS has announced its intention to issue regulations effective prior to the date of the merger whereby, for purposes of determining the value of Fuel Systems, certain distributions made by Fuel Systems during the 36 months preceding the merger will be added back to the value of Fuel Systems for purposes of this requirement. Under such regulations, distributions (including share repurchases) made by Fuel Systems over the 36 months preceding the merger would be added back to the value of Fuel Systems to the extent that amounts distributed during a given year exceed 110 percent of the average amounts distributed over the 3 preceding years. Regulations addressing the specific method for determining the amount that would be added back for this purpose have not been issued.

If the application of Section 367(a)(1) results in recognition of gain to a holder of Fuel Systems common stock in the merger, such holder would recognize gain (but not loss) in an amount equal to the excess, if any, of the fair market value as of the closing date of the merger of any shares of Westport common shares (including fractional shares) received in the merger, over such holder’s tax basis in the shares of Fuel Systems common stock surrendered in the merger. Any gain so recognized would generally be long-term capital gain if such holder has held the shares of Fuel Systems common stock for more than one year at the time the merger is completed. If you do not expect that the value of Westport will equal or exceed the value of Fuel Systems, as specifically determined for purposes of Section 367 of the Code (as discussed above), as of the closing date of the merger, you should assume, for purposes of deciding how to vote, that the merger will be treated in such manner.

IRS Ruling Request

Fuel Systems is seeking a ruling from the IRS providing that the transfer of shares of Fuel Systems common stock to Westport by Fuel Systems stockholders pursuant to the merger agreement will not be subject to Section 367(a)(1) of the Code. Such ruling request will be based on certain facts, representations, covenants and assumptions, including representations of Fuel Systems and Westport, and will assume that the parties will comply with certain reporting obligations under the Code. If any of these representations and assumptions are inconsistent with the actual facts, the U.S. federal income tax treatment of the merger could be adversely affected. The obligation of Fuel Systems and Westport to consummate the merger is not conditioned upon the receipt of a ruling from the IRS, and there can be no assurance that Fuel Systems will obtain such a ruling from the IRS. In addition, such ruling, if any, will not be issued prior to the date of the Fuel Systems special meeting, and might not be issued prior to the closing date of the merger. Failure to receive the ruling does not necessarily mean that the merger will be subject to Section 367(a) of the Code.

U.S. Federal Income Tax Considerations to U.S. Holders of Owning and Disposing of Westport Common Shares Received in the Merger

Taxation of Dividends and Other Distributions on Westport Common Shares

Subject to the passive foreign investment company rules discussed below, the U.S. dollar amount of the gross amount of any distribution Westport makes to you with respect to Westport common shares (including the amount of any taxes withheld therefrom) will generally be includible in your gross income, in the year actually or constructively received, as dividend income, but only to the extent that such distribution is paid out of Westport’s current or accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent that the amount of the distribution exceeds Westport’s current and accumulated earnings and profits (as

 

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determined under U.S. federal income tax principles), such excess will be treated first as a tax-free return of your tax basis in the Westport common shares you hold, and then, to the extent such excess amount exceeds your tax basis in such Westport common shares, as capital gain. Westport, however, may not calculate its earnings and profits under U.S. federal income tax principles. In that case, you should expect that any distribution Westport makes to you will be reported as a dividend even if such distribution would otherwise be treated as a tax-free return of capital or as capital gain under the rules described above. Any dividends Westport pays will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations.

With respect to certain non-corporate U.S. Holders, including individual U.S. Holders, dividends will be taxed at the lower capital gains rate applicable to “qualified dividend income,” provided that (i) the Westport common shares are readily tradable on an established securities market in the United States, (ii) Westport is neither a passive foreign investment company nor treated as such with respect to you (as discussed below under “—Passive Foreign Investment Company Status”) for its taxable year in which the dividend is paid and the preceding taxable year, and (iii) certain holding period requirements are met. Under IRS authority, stock is considered for the purpose of clause (i) above to be readily tradable on an established securities market in the United States if the stock is listed on NASDAQ, as Westport common shares are. You should consult your tax advisors regarding the availability of the lower capital gains rate applicable to qualified dividend income for any dividends Westport pays with respect to the Westport common shares.

The amount of any dividend paid in Canadian dollars will be the U.S. dollar value of the Canadian dollars distributed by Westport, calculated by reference to the exchange rate on the date the dividend is includible in the U.S. Holder’s income, regardless of whether the payment is in fact converted to U.S. dollars on the date of receipt. Generally, a U.S. Holder should not recognize any foreign currency gain or loss if the Canadian dollars are converted to U.S. dollars on the date the payment is received. However, any gain or loss resulting from currency exchange fluctuations during the period from the date the U.S. Holder includes the dividend payment in income to the date such U.S. Holder actually converts the payment into U.S. dollars will be treated as ordinary income or loss. That currency exchange gain or loss (if any) generally will be income or loss from U.S. sources for foreign tax credit limitation purposes.

For foreign tax credit purposes, the limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, any dividends Westport pays with respect to the Westport common shares will generally constitute “passive category income” but could, in the case of certain U.S. Holders, constitute “general category income.” Any dividends Westport pays to you will generally constitute foreign source income for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will be limited to the gross amount of the dividend, multiplied by the reduced tax rate applicable to qualified dividend income and divided by the highest tax rate normally applicable to dividends. The rules relating to the determination of the foreign tax credit are complex, and you should consult your tax advisors regarding the availability of a foreign tax credit in your particular circumstances.

Taxation of Dispositions of Westport Common Shares

Subject to the passive foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of a Westport common share equal to the difference between the amount realized (in U.S. dollars) for such Westport common share and your tax basis (in U.S. dollars) in such share. The gain or loss will generally be capital gain or loss. Capital gains of non-corporate U.S. Holders (including individuals) may be eligible for the preferential U.S. federal income tax rates applicable to long-term capital gains if the U.S. Holder’s holding period for the Westport common share exceeds one year. The deductibility of capital losses is subject to limitations. Any gain or loss that you recognize on a disposition of Westport common shares will generally be treated as U.S. source income or loss for foreign tax credit limitation purposes. You should consult your tax advisors regarding the proper treatment of gain or loss in your particular circumstances.

 

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Passive Foreign Investment Company Status

Based on the current and anticipated valuation of its assets, including goodwill and other unbooked intangibles, and composition of its income and assets, Westport does not expect to be a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes for its 2015 taxable year or any future taxable year. However, the application of the PFIC rules is subject to ambiguity in several respects. In addition, Westport’s actual PFIC status for the current taxable year or any future taxable year will not be determinable until after the close of each such year. Accordingly, Westport cannot assure you that Westport will not be a PFIC for its current taxable year or any future taxable year. Because PFIC status is a factual determination for each taxable year that cannot be made until after the close of each such year, Willkie Farr & Gallagher, LLP, Westport’s special U.S. counsel, expresses no opinion with respect to Westport’s PFIC status and also expresses no opinion with respect to Westport’s expectations set forth in this paragraph.

A non-U.S. corporation will be a PFIC for any taxable year if, applying certain look-through rules, either:

 

•

at least 75% of its gross income for such year is passive income; or

 

•

at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income (the “asset test”).

Westport must make a separate determination each taxable year as to whether it is a PFIC. As a result, Westport’s PFIC status may change. In particular, because the value of Westport’s assets for purposes of the asset test will generally be determined by reference to the market price of Westport common shares, fluctuations in the market price of Westport common shares may cause Westport to become a PFIC. In addition, changes in the composition of Westport’s income and assets may cause it to become a PFIC. If Westport is a PFIC for any taxable year during which you hold Westport common shares, Westport will continue to be treated as a PFIC with respect to you for all succeeding years during which you hold Westport common shares, unless Westport ceases to be a PFIC and you make a “deemed sale” election with respect to your Westport common shares. If such election is timely made, you will be deemed to have sold the Westport common shares you hold at their fair market value on the last day of the last taxable year for which Westport was a PFIC and any gain from such deemed sale would be subject to the rules described in the following paragraph. In addition, a new holding period would be deemed to begin for the Westport common shares for purposes of the PFIC rules. After the deemed sale election, so long as Westport does not become a PFIC in a subsequent taxable year, your Westport common shares with respect to which such election was made will not be treated as shares in a PFIC.

For each taxable year that Westport is treated as a PFIC with respect to you, you will be subject to special tax rules with respect to any “excess distribution” that you receive and any gain you recognize from a sale or other disposition (including a pledge) of the Westport common shares, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the Westport common shares will be treated as an excess distribution. Under these special tax rules:

 

•

the excess distribution or recognized gain will be allocated ratably over your holding period for the Westport common shares;

 

•

the amount allocated to the current taxable year, and any taxable years in your holding period prior to the first taxable year in which Westport was a PFIC, will be treated as ordinary income; and

 

•

the amount allocated to each other taxable year will be subject to the highest tax rate in effect for individuals or corporations, as applicable, for each such year, and the interest charge generally applicable to under-payments of tax will be imposed on the resulting tax attributable to each such year.

A U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the PFIC rules described above regarding excess distributions and recognized gains. If

 

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you make a mark-to-market election for Westport common shares, you will include in gross income for each year that Westport is a PFIC an amount equal to the excess, if any, of the fair market value of the Westport common shares you hold as of the close of your taxable year over your adjusted basis in such Westport common shares. You will be allowed a deduction for the excess, if any, of the adjusted basis of Westport common shares over their fair market value as of the close of the taxable year. However, deductions will be allowable only to the extent of any net mark-to-market gains on the Westport common shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as any gain on the actual sale or other disposition of the Westport common shares, will be treated as ordinary income. If you make a valid mark-to-market election, any distributions that Westport makes would generally be subject to the tax rules discussed above under “—Taxation of Dividends and Other Distributions on Westport Common Shares,” except that the lower tax rate applicable to qualified dividend income generally would not apply.

The mark-to-market election is available only for “marketable stock,” which is stock that is traded in other than de minimis quantities on at least 15 days during each calendar quarter (“regularly traded”) on a qualified exchange or other market, as defined in applicable U.S. Treasury Regulations. Westport common shares are listed on NASDAQ, which is a qualified exchange or other market for these purposes. Consequently, Westport expects that, provided the Westport common shares are regularly traded and you are a holder of the Westport common shares, the mark-to-market election would be available to you if Westport becomes a PFIC. You should consult your tax advisors as to the availability and desirability of a mark-to-market election.

Alternatively, a U.S. Holder of stock in a PFIC may make a “qualified electing fund” election with respect to such PFIC to elect out of the PFIC rules described above regarding excess distributions and recognized gains. A U.S. Holder that makes a valid qualified electing fund election with respect to a PFIC will generally include in gross income for a taxable year such holder’s pro rata share of PFIC’s earnings and profits for the taxable year. However, the qualified electing fund election is available only if the PFIC provides such U.S. Holder with certain information regarding its earnings and profits as required under applicable U.S. Treasury Regulations. Westport currently does not intend to prepare or provide the information that would enable you to make a qualified electing fund election.

Unless otherwise provided by the U.S. Treasury, each U.S. shareholder of a PFIC is required to file an annual report containing such information as the U.S. Treasury may require. If Westport becomes a PFIC, you should consult your tax advisors regarding any reporting requirements that may apply to you.

You should consult your tax advisors regarding the application of the PFIC rules to your investment in Westport common shares and the elections discussed above or any other elections that may be available to you.

Medicare Tax

A U.S. person that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, will be subject to a 3.8% tax on the lesser of (i) the U.S. person’s “net investment income” (or “undistributed net investment income” in the case of an estate or trust) for the relevant taxable year and (ii) the excess of the U.S. person’s modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals will be between $125,000 and $250,000, depending on the individual’s circumstances). A holder’s net investment income will generally include its dividend income and its net gains from the disposition of Westport common shares, unless such dividend income or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). If you are a U.S. Holder that is an individual, estate or trust, you are urged to consult your tax advisors regarding the applicability of the Medicare tax to your income and gains in respect of your investment in Westport common shares.

 

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U.S. Information Reporting and Backup Withholding

Dividend payments with respect to Westport common shares and proceeds received on the disposition of Westport common shares (including cash received in lieu of a fractional share) will generally be subject to information reporting to the IRS and possible U.S. backup withholding (currently at a rate of 28%). Backup withholding will not apply, however, to a U.S. Holder that furnishes a correct taxpayer identification number and makes any other required certification on IRS Form W-9 or that is otherwise exempt from backup withholding. U.S. Holders that are exempt from backup withholding should still complete IRS Form W-9 to avoid possible erroneous backup withholding. Certain individuals holding Westport common shares other than in an account at certain financial institutions may be subject to additional information reporting requirements. You should consult your tax advisors regarding the application of the U.S. information reporting and backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing an appropriate claim for refund with the IRS and furnishing any required information in a timely manner.

U.S. Federal Income Tax Consequences of the Merger for Non-U.S. Holders of Fuel Systems Common Stock

A Non-U.S. Holder of Fuel Systems common stock generally will not be subject to U.S. federal income tax on any gain realized in the merger unless (i) the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such gain is attributable); (ii) the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met; or (iii) Fuel Systems common stock constitutes a U.S. real property interest (“USRPI”) by reason of Fuel Systems’ status as a U.S. real property holding corporation (“USRPHC”) for U.S. federal income tax purposes.

Gain described in (i) above generally will be subject to U.S. federal income tax on a net income basis at the regular graduated rates, unless an applicable income tax treaty provides otherwise, in the same manner as if the Non-U.S. Holder were a U.S. Holder. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on its effectively connected earnings and profits that are attributable to such gain, as adjusted for certain items.

Gain described in (ii) above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which may be offset by U.S. source capital losses of the Non-U.S. Holder (even though the individual is not considered a resident of the United States), provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses.

With respect to (iii) above, Fuel Systems is not currently, has not been during the preceding five years, and prior to or at the time of the merger does not expect to become, a USRPHC. Because the determination of whether Fuel Systems is a USRPHC depends on the fair market value of Fuel Systems’ USRPIs relative to the fair market value of Fuel Systems’ non-USPRIs and other business assets, there can be no assurance that Fuel Systems is not or will not become a USRPHC. Even if Fuel Systems is or were to become a USRPHC, gain arising from the sale or other taxable disposition by a Non-U.S. Holder of Fuel Systems common stock will not be subject to U.S. federal income tax if Fuel Systems common stock is considered “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market at the time of the merger, and such Non-U.S. Holder owned, actually and constructively, 5% or less of Fuel Systems common stock throughout the shorter of the five-year period ending on the date of the sale or other taxable disposition and the Non-U.S. Holder’s holding period. You should consult your own tax advisor about the consequences that could result if Fuel Systems is or were to become a USRPHC.

 

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MATERIAL CANADIAN FEDERAL TAX CONSEQUENCES

Certain Canadian Federal Income Tax Consequences

The following is a general summary of the material Canadian federal income tax considerations under the Tax Act of the merger and of holding and disposing of Westport common shares generally applicable to a holder who, at all relevant times, for purposes of the Tax Act: (i) is not, and is not deemed to be, resident in Canada; (ii) does not use or hold the Fuel Systems common stock and will not use or hold the Westport common shares in connection with carrying on a business in Canada; (iii) holds the Fuel Systems common stock and will hold the Westport common shares as beneficial owner; (iv) holds the Fuel Systems common stock and will hold the Westport common shares as capital property; (v) deals at arm’s length with Westport and Merger Sub; and (vi) is not affiliated with Westport or Merger Sub (a “Non-Resident Holder”). This summary does not apply to a Non-Resident Holder that carries on, or is deemed to carry on, an insurance business in Canada and elsewhere, and such holders should consult their own tax advisors.

The Fuel Systems common stock and the Westport common shares will generally be considered to be capital property to a Non-Resident Holder unless either (i) the Non-Resident Holder holds such shares in the course of carrying on a business of buying and selling securities or (ii) the Non-Resident Holder has acquired such shares in one or more transactions considered to be an adventure in the nature of trade.

This summary is based on the current provisions of the Tax Act and the regulations thereunder (the “Regulations”) in force as of the date hereof, an understanding of the current administrative policies and assessing practices of the Canada Revenue Agency (the “CRA”) publicly available prior to the date hereof, and all specific proposals to amend the Tax Act and Regulations publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Proposed Amendments”). No assurances can be given that the Proposed Amendments will be enacted in the form proposed or at all. Other than the Proposed Amendments, this summary does not take into account or anticipate any changes in law or the administrative policies or assessing practice of CRA, whether by judicial, legislative, governmental or administrative decision or action, nor does it take into account provincial, territorial or foreign tax legislation or considerations, which may differ significantly from those discussed herein.

For purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of the Westport common shares, including interest, dividends, adjusted cost base and proceeds of disposition, must be converted into Canadian dollars based on the relevant exchange rate (as determined in accordance with the Tax Act) applicable on the date the particular amount arose.

This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular Non-Resident Holder and no representations with respect to the income tax consequences to any particular Non-Resident Holder are made. This summary is not exhaustive of all Canadian federal income tax considerations. Accordingly, prospective investors in Westport common shares should consult their own tax advisors with respect to their own particular circumstances.

Disposition of Fuel Systems Common Stock

A Non-Resident Holder will not be subject to tax under the Tax Act on any capital gains realized on the disposition of Fuel Systems common stock pursuant to the merger.

Dividends

Under the Tax Act, dividends on Westport common shares paid or credited to a Non-Resident Holder will be subject to Canadian withholding tax at the rate of 25% of the gross amount of the dividends, subject to any reduction in the rate of withholding to which the Non-Resident Holder is entitled under any applicable income tax treaty or convention between Canada and the country in which the Non-Resident Holder is resident. For example, where a Non-Resident Holder is a resident of the United States, is fully entitled to the benefits under

 

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the Canada—United States Income Tax Convention (1980) (the “Treaty”) and is the beneficial owner of the dividend, the applicable rate of Canadian withholding tax is generally reduced to 15% of the amount of such dividend.

Disposition of Westport Common Shares

A Non-Resident Holder will not be subject to tax under the Tax Act in respect of any capital gain realized by such Non-Resident Holder on a disposition of Westport common shares, unless such shares constitute “taxable Canadian property” (as defined in the Tax Act) of the Non-Resident Holder at the time of disposition and the Non-Resident Holder is not entitled to relief under an applicable income tax treaty or convention.

As long as the Westport common shares are then listed on a designated stock exchange (which currently includes the TSX and NASDAQ), a Westport common share generally will not constitute taxable Canadian property of a Non-Resident Holder, unless (a) at any time during the 60 month period immediately preceding the disposition or deemed disposition of such Westport common share: (i) 25% or more of the issued Westport common shares was owned by one or any combination of the Non-Resident Holder and persons with whom the Non-Resident Holder did not deal at arm’s length (within the meaning of the Tax Act); and (ii) more than 50% of the fair market value of a Westport common share was derived directly or indirectly from one or any combination of: (A) real or immovable property situated in Canada; (B) Canadian resource property (as defined in the Tax Act); (C) timber resource property (as defined in the Tax Act); or (D) options in respect of, or interest in, or for civil law rights in, property described in any of (A) through (C) above, whether or not such property exists; or (b) the Westport common shares are otherwise deemed under the Tax Act to be taxable Canadian property.

Even if the Westport common shares are taxable Canadian property to a Non-Resident Holder, any capital gain realized on the disposition or deemed disposition of such Westport common shares may not be subject to Canadian federal income tax pursuant to the terms of an applicable income tax treaty or convention between Canada and the country of residence of a Non-Resident Holder. For example, the Treaty will generally exempt a Non-Resident Holder who is a U.S. resident for the purposes of, and who is entitled to full benefits of, the Treaty from tax under the Tax Act on any capital gain arising on the disposition of Westport common shares, unless the value of the Westport common shares at the time of disposition is derived principally (i.e., more than 50%) from real property situated in Canada.

NON-RESIDENT HOLDERS WHOSE WESTPORT COMMON SHARES MAY BE TAXABLE CANADIAN PROPERTY SHOULD CONSULT THEIR OWN ADVISORS.

 

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THE MERGER AGREEMENT

This section of this proxy statement/prospectus describes the material provisions of the merger agreement, but does not describe all of the terms of the merger agreement and may not contain all of the information about the merger agreement that is important to you. The following summary is qualified by reference to the complete text of the merger agreement, which is attached as Annex A to this proxy statement/prospectus and incorporated by reference herein. You are urged to read the full text of the merger agreement because it is the legal document that governs the merger.

The merger agreement and this summary of its terms have been included to provide you with information regarding the terms of the merger agreement. Factual disclosures about Westport, Fuel Systems or any of their respective subsidiaries or affiliates contained in this proxy statement/prospectus or their respective public reports filed with the SEC may supplement, update or modify the factual disclosures contained in the merger agreement and described in this summary. The representations, warranties, and covenants contained in the merger agreement were made only for purposes of the merger agreement, as of a specific date. These representations were made solely for the benefit of the parties to the merger agreement and may be subject to important qualifications and limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purpose of allocating risk between parties to the merger agreement rather than the purpose of establishing these matters as facts, and may apply standards of materiality in ways that are different from those generally applicable to reports filed with the SEC or from what may be viewed as material by investors. These representations do not survive completion of the merger. For the foregoing reasons, one should not read these representations or any description thereof as characterizations of the actual state of facts or condition of Westport or Fuel Systems, which are disclosed in the other information provided elsewhere in this proxy statement/prospectus or incorporated by reference herein.

Terms of the Merger Agreement

The merger agreement provides that, upon the terms and subject to the conditions of the merger agreement, and in accordance with the DGCL, at the effective time, Merger Sub will merge with and into Fuel Systems, with Fuel Systems continuing as the surviving corporation and a direct, wholly owned subsidiary of Westport. At the completion of the merger, each share of Fuel Systems common stock issued and outstanding immediately prior to the completion of the merger, other than treasury shares and shares held by Fuel Systems, Westport or their respective wholly owned subsidiaries, will be converted into the right to receive 2.129 Westport common shares, which we refer to as new common shares. The exchange ratio will be adjusted appropriately to fully reflect the effect of any subdivisions, reclassifications, splits, share distributions, combinations or exchanges of shares of Fuel Systems common stock or Westport common shares. Any shares of Fuel Systems common stock owned directly or indirectly by Fuel Systems or any of its wholly owned subsidiaries or by Westport or any of its wholly-owned subsidiaries as of immediately prior to the completion of the merger (other than those held in a fiduciary capacity) will be cancelled and will receive no consideration.

Westport will not issue fractional shares of new common shares in the merger. Instead, each holder of Fuel Systems common stock who would otherwise be entitled to receive fractional shares of Westport common shares in the merger will receive, in lieu thereof, a cash payment, without interest, an amount equal to such fractional part of a share of new common shares multiplied by the volume weighted average price of Westport common shares on NASDAQ for thirty trading days ending on and including, the date of the merger agreement, as reported by Bloomberg. The aggregate amount to be paid with respect to fractional shares will be deposited with the exchange agent to be held for the benefit of the Fuel Systems stockholders. For holders of certificates of Fuel Systems’ common stock, upon surrender of a certificate of Fuel Systems’ common stock and an executed letter of transmittal according to the steps described below under “—Exchange of Fuel Systems Stock Certificates,” the holder of a certificate shall be entitled to receive the merger consideration and any cash in lieu of fractional shares. Holders of book-entry shares will automatically receive merger consideration and cash in lieu of fractional shares by check or wire transfer as soon as practicable following the close of business on the closing date (and in no event later than two days following).

 

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Westport and the exchange agent are entitled to deduct and withhold from any amount payable pursuant to the merger agreement to any holder of Fuel Systems’ common shares, options, restricted stock units, shares of restricted stock, or phantom shares such amounts or securities as Westport or the exchange agent reasonably deems to be required to deduct and withhold under the Code or any provision of state, local, or foreign tax law, with respect to the making of such payment or issuance.

Westport has agreed to cause the exchange agent to invest the cash held by the exchange agent as directed by Westport. Further, any portion of such cash held by the exchange agent that remains undistributed to the Fuel Systems stockholders on the first anniversary of the closing of the merger will be delivered to Westport, and after such delivery, any former Fuel Systems stockholders who have not complied with the steps described below under “—Exchange of Fuel Systems Stock Certificates” will thereafter look only to the surviving company for the merger consideration, any cash in lieu of fractional new common shares, or any distributions with respect to new common shares, in each case, without any interest thereon.

Exchange of Fuel Systems Stock Certificates

Promptly after the completion of the merger, if you are a Fuel Systems stockholder, Westport’s exchange agent will mail you a letter of transmittal and instructions for use in effecting the surrender of your Fuel Systems common stock (including any stock certificates if you hold shares in certificated form) in exchange for Westport common shares and cash in lieu of any fractional new common shares and distributions. When you surrender the certificates for cancellation together with letters of transmittal and any other required documents (including in respect of book-entry shares), you will be entitled to receive (a) new common shares and (b) a check in an amount equal to the aggregate amount of cash that you have the right to receive, if any, including cash payable in lieu of any fractional new common shares and cash distributions in respect of new common shares.

Holders of Fuel Systems common stock will not receive physical stock certificates for the new Westport common shares they are entitled to receive in the merger. Rather, they will receive statements indicating book-entry ownership of Westport common shares.

PLEASE DO NOT SUBMIT YOUR FUEL SYSTEMS STOCK CERTIFICATES FOR EXCHANGE UNTIL YOU RECEIVE THE TRANSMITTAL INSTRUCTIONS AND LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.

If you hold Fuel Systems stock certificates, you will not be entitled to receive any dividends or other distributions on Westport common shares until the merger is completed and you have surrendered your Fuel Systems stock certificates, together with validly completed letters of transmittal and other required documents, in exchange for Westport common shares. If Westport effects any dividend or other distribution on the Westport common shares with a record date occurring after the time the merger is completed and a payment date before the date you surrender your Fuel Systems stock certificates, you will receive the dividend or distribution, without interest, with respect to the whole shares of Westport common shares issued to you after you surrender your Fuel Systems stock certificates, together with validly completed letters of transmittal and other required documents, and the shares of Westport common shares are issued in exchange. If Westport effects any dividend or other distribution on the Westport common shares with a record date after the time the merger is completed and a payment date after the date you surrender your Fuel Systems stock certificates, you will receive the dividend or distribution, without interest, on that payment date with respect to the whole shares of Westport common shares issued to you. The exchange agent may deduct and withhold amounts required under federal, state or local tax law.

Treatment of Fuel Systems Stock Options and Other Equity-based Awards

Stock Options

At the effective time of the merger, each in-the-money Fuel Systems option that is outstanding immediately prior to the effective time of the merger (whether or not then vested or exercisable) will become vested and

 

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exercisable and will thereafter be assumed by Westport and otherwise continue to have, and be subject to, the same terms and conditions as were applicable to the Fuel Systems option immediately prior to the effective time of the merger, except that, from and after the effective time of the merger, (i) each such in-the-money option will be exercisable for that number of whole shares of Westport common shares equal to the product (rounded down to the nearest whole number) of (x) the number of shares of Fuel Systems common stock subject to such in-the-money option as of immediately prior to the effective time of the merger and (y) 2.129 and (ii) the per share exercise price for the shares of Westport common shares issuable upon exercise of such assumed in-the-money options will be equal to the quotient (rounded up to the nearest whole cent) determined by dividing (x) the exercise price of each share of Fuel Systems common stock at which such assumed in-the-money option was exercisable immediately prior to the effective time of the merger by (y) the exchange ratio. Any Fuel Systems options outstanding as of the effective time that have an exercise price per share of Fuel Systems common stock that is greater than or equal to the per share dollar value of the merger consideration immediately prior to the effective time of the merger shall automatically be cancelled and forfeited for no consideration without any further action on the part of the holder of such Fuel Systems option, and all rights with respect to such Fuel Systems option will terminate as of the effective time of the merger.

Restricted Stock Units

At the effective time of the merger, each Fuel Systems RSU that is outstanding immediately prior to the effective time will be assumed by Westport and will otherwise continue to have, and be subject to, the same terms and conditions, including vesting terms, as were applicable immediately prior to the effective time, except that, from and after the effective time of the merger, each such Fuel Systems RSU award will be converted into a number of restricted stock units of Westport (convertible into shares of Westport common shares on vesting) equal to the product (rounded down to the nearest whole number) of (i) the number of Fuel Systems shares subject to the Fuel Systems RSU award as of immediately prior to the effective time of the merger and (ii) the exchange ratio.

Restricted Stock

At the effective time of the merger, each share of Fuel Systems restricted stock that is outstanding immediately prior to the effective time will be assumed by Westport and will otherwise continue to have, and be subject to, the same terms and conditions, including applicable restrictions and vesting terms, as were applicable immediately prior to the effective time of the merger, except that, from and after the effective time of the merger, each share of Fuel Systems restricted stock will be converted into a number of restricted shares of Westport common shares equal to the product (rounded down to the nearest whole number) of (i) the number of shares of Fuel Systems restricted stock as of immediately prior to the effective time of the merger and (ii) the exchange ratio.

Phantom Shares

Each Fuel Systems phantom share outstanding immediately prior to the effective time of the merger will become fully vested and all restrictions with respect thereto will lapse immediately prior to the effective time of the merger, and each such Fuel Systems phantom share will be converted into a cash payment equal to the product of (i) the number of shares of Fuel Systems common stock subject to such Fuel Systems phantom shares and (ii) the difference between (x) the per share dollar value of the merger consideration and (y) the applicable “exercise price” for such Fuel Systems phantom shares, and the holders of Fuel Systems phantom shares will cease to have any rights with respect thereto, except the right to receive the such cash payment. Any Fuel Systems phantom shares outstanding as of the effective time of the merger that have an exercise price per share of Fuel Systems common stock that is greater than or equal to the per share dollar value of the merger consideration will automatically be cancelled and forfeited for no consideration without any further action by the holder of such Fuel Systems phantom share, and all rights with respect to such Fuel Systems phantom share will terminate as of the effective time of the merger.

 

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Completion of the Merger

Unless Westport and Fuel Systems agree otherwise to another date, the parties are required to complete the merger no later than the third business day after satisfaction or waiver of all the conditions described under “—Conditions to Completion of the Merger” below. The merger will be effective at the time the certificate of merger is filed with the Secretary of State of the State of Delaware or at such later time as may be specified therein.

Conditions to Completion of the Merger

Each party’s obligation to consummate the merger is conditioned upon the satisfaction (or waiver by such party) at or prior to the closing of the merger of each of the following:

 

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approval of the Merger proposal by vote of the holders of a majority of outstanding shares of Fuel Systems;

 

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approval of the issuance of the merger consideration and the assumption by Westport of Fuel Systems’ restricted stock units and restricted stock by a majority of total votes cast of Westport common shares;

 

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absence of any law, order, judgment or injunction which has the effect of making the merger illegal or otherwise restricting, preventing, or prohibiting consummation of the merger or otherwise restraining, enjoining, preventing, prohibiting or making illegal the acquisition of some or all of the shares of Fuel Systems’ common stock by Westport;

 

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termination or expiration of any waiting period (and any extension thereof) applicable to the merger under the HSR Act;

 

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the required consent of the Competition Board of the Turkish Competition Authority;

 

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effectiveness of the registration statement of which this proxy statement/prospectus is a part under the Securities Act and no stop order suspending the effectiveness of the registration statement having been issued and no proceedings for that purpose having been initiated or threatened by the SEC;

 

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authorization of the new shares of Westport common shares deliverable to the holders of shares of Fuel Systems common stock for listing on NASDAQ, subject to official notice of issuance;

 

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the receipt of conditional acceptance of the TSX in respect of the merger transactions;

 

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the truth and correctness of certain representations and warranties of the other party as of the date of the merger agreement and as of the closing date of the merger, other than those failures that would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the other party;

 

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performance of and compliance with, in all material respects, each and all of the agreements and covenants of the other party required to be performed and complied with by such other party pursuant to the merger agreement;

 

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receipt of a certificate signed by the chief executive officer or other senior officer of the other party, dated as of the closing date, certifying that the two preceding conditions have been satisfied; and

 

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absence of any event, change or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect (as defined below in “—Representations and Warranties”) on the other party.

Representations and Warranties

Each of Westport and Merger Sub, on the one hand, and Fuel Systems, on the other hand, has made representations and warranties with respect to itself and its subsidiaries regarding, among other things:

 

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organizational power and good standing, necessary to operate its business as presently being conducted;

 

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•

its organizational documents and the organizational documents of its subsidiaries;

 

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capital structure;

 

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corporate authority to enter into and perform the merger agreement, enforceability of the merger agreement, and approval of the merger agreement by each party’s board of directors;

 

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absence of conflicts with or defaults under organizational documents, other contracts, and applicable laws;

 

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required regulatory filings and consents and approvals of governmental entities;

 

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no consents or approvals necessary;

 

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permits and compliance with laws;

 

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SEC filings since January 1, 2013, including financial information contained in the filings, internal controls, and compliance with the Sarbanes-Oxley Act of 2002;

 

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absence of undisclosed liabilities;

 

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accuracy of the information supplied for inclusion in, and compliance with applicable securities laws by, this proxy statement/prospectus;

 

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the absence of material changes;

 

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employee benefit plans;

 

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labor and other employment matters;

 

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matters with respect to material contracts;

 

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litigation matters;

 

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environmental matters;

 

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intellectual property matters;

 

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title to real and personal properties;

 

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tax matters;

 

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maintenance of insurance policies;

 

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receipt of opinion of financial advisor;

 

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vote of shareholders required;

 

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broker, finder or investment banker fees and expenses;

 

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no requirement to be registered as an investment company under the Investment Company Act of 1940, as amended;

 

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no affiliate transactions; and

 

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absence of other representations and warranties.

The merger agreement also contains representations and warranties made only by Fuel Systems regarding, among other things:

 

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absence of takeover or anti-takeover statutes applicable to the transaction, including restrictions on business combinations contained in Section 203 of the DGCL; and

 

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absence of products liability claims or lawsuits, including claims regarding material express and implied warranties and injury to individuals or property.

 

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Additionally, the merger agreement contains representations and warranties made only by Westport and Merger Sub regarding, among other things:

 

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TSX and the Canadian provincial securities commissions filings since January 1, 2013;

 

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sole purpose of and lack of business engagement by Merger Sub; and

 

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neither Westport nor Merger Sub, nor any of their respective “affiliates” and “associates,” being or in the past three years having been an “interested stockholder” of Fuel Systems, as defined in Section 203 of the DGCL.

Many of the representations and warranties in the merger agreement are qualified by a “materiality” or “material adverse effect” standard (that is, they will not be deemed to be untrue or incorrect unless their failure to be true or correct, individually or in the aggregate, would be material or reasonably be expected to have a material adverse effect). For purposes of the merger agreement, a “material adverse effect” means, when used with respect to a party to the merger agreement any event, circumstance, change or effect (1) that is material and adverse to the business, assets, properties, liabilities, condition (financial or otherwise) or results of operations of such party and its subsidiaries, taken as a whole or (2) that would, or would reasonably be expected to, prevent or materially impair the ability of the relevant party to consummate the merger before April 30, 2016 (or August 31, 2016 in the event of a delay caused by an antitrust waiting period or required consent); provided, however, that a material adverse effect will not include any event, circumstance, change or effect to the extent occurring from and after the date of the merger agreement and arising out of or resulting from:

 

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failure to meet projections or forecasts or any decrease in market price of common stock or common shares;

 

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changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates;

 

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changes in the legal or regulatory conditions of the geographic regions in which each party and its subsidiaries operate;

 

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the commencement, escalation or worsening of a war or armed hostilities or the occurrence of acts of terrorism or sabotage;

 

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the public announcement of the merger agreement, or any transactions contemplated thereby, including the impact on relationships, contractual or otherwise, with tenants, suppliers, lenders, investors, future partners or employees;

 

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for each party, the taking of any action expressly required by, or the failure to take any action expressly prohibited by, the merger agreement, or the taking of any action at the written request of the other party;

 

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earthquakes, hurricanes or other natural disasters; or

 

•

changes in any laws or GAAP or the interpretations or enforcement thereof;

except that, with respect of bullets two, three, four and eight above, any such change, event, development, circumstance, condition, occurrence or effect will be taken into account if and to the extent it disproportionately affects such party, taken as a whole, relative to other participants in the industry in which such party operates or the markets for any such party’s products or services in general.

Covenants and Agreements

Each of Westport and Fuel Systems has undertaken customary covenants in the merger agreement restricting the conduct of its respective business between the date of the merger agreement and the completion of the merger.

 

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In general, Fuel Systems has agreed to (i) conduct its and its subsidiaries’ business in the ordinary course and in a manner consistent with past practice in all material respects and (ii) use commercially reasonable efforts to preserve intact in all material respects its current business organization, goodwill, ongoing businesses and relationships with third parties that have material business dealings with Fuel Systems and its subsidiaries, and keep available the services of its present officers and key employees.

In addition, between the date of the merger agreement and the completion of the merger, Fuel Systems has agreed, with respect to itself and its subsidiaries, not to, among other things, undertake any of the following (except as required by law and subject in each case to certain other exceptions specified in the merger agreement or set forth in the disclosure letter to the merger agreement delivered by Fuel Systems to Westport), without Westport’s written agreement:

 

•

Amend or propose to amend the Fuel Systems’ charter or bylaws (or such equivalent organizational or governing documents of any Fuel Systems subsidiary);

 

•

Declare or pay any dividend on or make any other distribution (whether in cash, stock or property) in respect of any of its capital stock, or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any of its capital stock, or any repurchase or otherwise acquire, directly or indirectly, any of its capital stock;

 

•

Issue, sell, deliver, redeem or purchase any of its equity securities, or grant or enter into any options, warrants, rights, agreements or commitments with respect to the issuance of its securities, or amend any terms of any such equity securities or agreements;

 

•

Grant, issue, confer, award, or modify the terms of any options, convertible securities, restricted stock, phantom shares, equity-based compensation or other rights to acquire, or denominated in, capital stock of Fuel Systems or any of its subsidiaries;

 

•

Acquire or agree to acquire (including by merger, consolidation or acquisition of stock or assets) any real property, corporation, partnership, limited liability company, other business organization or any division or material amount of assets thereof, for a purchase price in excess of $1,000,000;

 

•

Sell, pledge, lease, dispose of, abandon, permit to lapse or encumber any material property or assets;

 

•

Incur, create or assume any indebtedness for borrowed money or issue or amend the terms of any debt securities or assume, guarantee or endorse, or otherwise become responsible for the indebtedness of any other person or entity;

 

•

Make any loans, advances or capital contributions to, or investments in, any other person, or make any change in its existing borrowing or lending arrangements for or on behalf of any of such persons, whether pursuant to a Fuel Systems benefit plan or otherwise;

 

•

Materially amend, modify or consent to the termination of any material Fuel Systems contract, or amend, waive, modify or consent to the termination of Fuel Systems’ or any Fuel Systems subsidiary’s material rights thereunder;

 

•

Hire or terminate (other than for cause) any employee, officer, director or consultant (that is an individual) of Fuel Systems or any Fuel Systems subsidiary with an annual salary or wage rate or consulting fee in excess of $150,000 or who is not terminable “at will” without the payment of any severance or other payment or promote or appoint any person to a position of officer or director of Fuel Systems or any Fuel Systems subsidiary;

 

•

Increase or promise to increase the compensation, bonus, perquisites or pension, welfare, severance or other benefits payable or to become payable to any current or former employees, officers, directors or consultants (that are individuals) of Fuel Systems or any Fuel Systems subsidiary;

 

•

Grant or promise to grant any severance, retention, termination or similar payments to, or enter into any severance or similar agreement with, any employee, officer, director or consultant (that is an individual) of Fuel Systems or any Fuel Systems subsidiary;

 

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•

Enter into any employment, change of control, severance or retention agreement with any current or former employee, officer, director or consultant (that is an individual) of Fuel Systems or any Fuel Systems subsidiary;

 

•

Accelerate the vesting or payment, or fund or in any way secure the payment, of the compensation payable or the benefits provided to or to become payable or provided to any current or former employees, officers, directors or consultants (that are individuals) of Fuel Systems or any Fuel Systems subsidiary;

 

•

Establish, adopt, enter into or amend any Fuel Systems benefit plan, collective bargaining agreement, plan, trust, fund, policy or arrangement with, or for the benefit of, any current or former directors, officers, employees or consultants (that are individuals) of Fuel Systems or any Fuel Systems subsidiary or any of their beneficiaries, or any agreement, plan, policy or arrangement that would constitute a Fuel Systems benefit plan if it were in existence on the date of the merger agreement;

 

•

Forgive or promise to forgive any loans to any current or former directors, officers, employees or consultants (that are individuals) of Fuel Systems or any Fuel Systems subsidiary;

 

•

Change any actuarial or other assumptions used to calculate funding obligations with respect to any Fuel Systems benefit plan, or change the manner in which contributions to such plans are made or the basis on which such contributions are determined;

 

•

Make any material change to its methods of accounting in effect at December 31, 2014;

 

•

Fail to duly and timely file all material reports and other material documents required to be filed with all governmental authorities and other authorities (including NASDAQ), subject to extensions permitted by law;

 

•

In connection with tax matters: make, change or rescind any election relating to taxes; change a material method of tax accounting, amend any material tax return; settle or compromise any material federal, state, local or foreign income tax liability, audit, claim or assessment, enter into any material closing agreement related to taxes, or knowingly surrender any right to claim any material tax refund; and take any action that could, or fail to take any action, the failure of which could, reasonably be expected to prevent the merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code;

 

•

Take any action that could, or fail to take any action, the failure of which could, reasonably be expected to prevent the merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code;

 

•

Adopt a plan of merger, arrangement or amalgamation, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization;

 

•

Enter into any contract or transaction with (including the making of any payment to) a director or officer of Fuel Systems or members of their “immediate family” (as such terms are defined in Rule 16a-1 of the Exchange Act) (each of the foregoing, a “Related Person”) or an affiliate of a related person, in each case of a type that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act;

 

•

Waive, release, assign, settle or compromise any action, including any state or federal regulatory proceeding seeking damages or injunction or other equitable relief, that would: (x) require the payment of monetary damages by Fuel Systems or any Fuel Systems subsidiary after the date of the merger agreement of $500,000 per action or $1,000,000 in the aggregate, or (y) involve any injunctive or other non-monetary relief which, in either case, imposes material restrictions on the business operations of Fuel Systems and Fuel Systems’ subsidiaries, taken as a whole;

 

•

Fail to use commercially reasonable efforts to maintain, with financially responsible insurance companies, insurance in such amounts and against such risks and losses as is maintained by it at present;

 

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•

Take, or agree in writing or otherwise to take any other action that would prevent Fuel Systems from performing, or cause Fuel Systems not to perform, any of its covenants and agreements under the merger agreement;

 

•

Take, or agree to commit to take, any action that would reasonably be expected to result in any of the conditions to closing the merger not being satisfied; or

 

•

Authorize, or enter into any contract, commitment or arrangement to do any of the foregoing.

In general, Westport has agreed to (i) conduct its and its subsidiaries’ business in the ordinary course and in a manner consistent with past practice in all material respects and (ii) use commercially reasonable efforts to preserve intact in all material respects its current business organization, goodwill, ongoing businesses and relationships with third parties that have material business dealings with Fuel Systems and its subsidiaries, and keep available the services of its present officers and key employees.

In addition, between the date of the merger agreement and completion of the merger, Westport has agreed, with respect to itself and its subsidiaries, not to, among other things, undertake any of the following (except as required by law and subject in each case to certain additional exceptions specified in the merger agreement or set forth in the disclosure letter to the merger agreement delivered by Westport to Fuel Systems) without Fuel Systems’ written agreement:

 

•

Amend or propose to amend Westport’s charter or bylaws (or such equivalent organizational or governing documents of any Westport subsidiary);

 

•

Adopt a plan of merger, arrangement or amalgamation, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization;

 

•

Declare or pay any dividend on or make any other distribution (whether in cash, stock or property) in respect of any of its capital stock, or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any of its capital stock, or any repurchase or otherwise acquire, directly or indirectly, any of its capital stock;

 

•

Issue, sell, deliver, redeem or purchase any of its equity securities, or grant or enter into any options, warrants, rights, agreements or commitments with respect to the issuance of its securities, or amend any terms of any such equity securities or agreements;

 

•

Grant, issue, confer, award, or modify the terms of any options, convertible securities, restricted stock, phantom shares, equity-based compensation or other rights to acquire, or denominated in, capital stock of Westport or any Westport subsidiary;

 

•

Fail to duly and timely file all material reports and other material documents required to be filed with all governmental authorities and other authorities (including NASDAQ and TSX), subject to extensions permitted by law;

 

•

Take, or agree in writing or otherwise to take any other action that would prevent Westport from performing, or cause Westport not to perform, any of its covenants and agreements under the merger agreement;

 

•

Take, or agree to commit to take, any action that would reasonably be expected to result in any of the conditions to closing the merger not being satisfied;

 

•

Take any action that could, or fail to take any action, the failure of which could, reasonably be expected to prevent the merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code;

 

•

Make, or agree to, an acquisition that would reasonably be expected to prevent, delay or materially impair the ability of Westport or Merger Sub to consummate the merger;

 

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•

Incur, create or assume any indebtedness for borrowed money or issue or amend the terms of any debt securities or assume, guarantee or endorse, or otherwise become responsible for the indebtedness of any other person or entity (other than a wholly owned subsidiary of Westport); or

 

•

Authorize, or enter into any contract, commitment or arrangement to do any of the foregoing.

No Solicitations of Other Offers

Fuel Systems has agreed that neither it nor its subsidiaries nor any of its or its subsidiaries’ respective officers, directors, employees or other representatives, and Fuel Systems has agreed that it will use its reasonable best efforts to ensure that any other representatives of Fuel Systems or its subsidiaries will not, directly or indirectly:

 

•

solicit, initiate, knowingly encourage or knowingly facilitate any inquiry, discussion, offer or request that constitutes, or would reasonably be expected to lead to, a Fuel Systems alternative proposal (as defined below);

 

•

engage in any discussions or negotiations regarding, or furnish to any third party any non-public information in connection with, or otherwise cooperate in any way with, or knowingly facilitate in any way any effort by, any third party in connection with a Fuel Systems alternative proposal;

 

•

approve or recommend any Fuel Systems alternative proposal or enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, share purchase agreement, asset purchase agreement, share exchange agreement, option agreement or similar definitive agreement, except an acceptable confidentiality agreement, providing for or relating to a Fuel Systems alternative proposal; or

 

•

propose or agree to do any of the foregoing.

A “Fuel Systems alternative proposal” means (i) any unsolicited bona fide indication of interest, inquiry, proposal or offer from any third party for (or expression by a third party that it is considering or may engage in), whether in one transaction or a series of related transactions, (ii) any sale, lease, exchange, mortgage, pledge, license, transfer or other disposition, directly or indirectly, by merger, consolidation, sale of equity interests, share exchange, joint venture, business combination or otherwise, of any assets of Fuel Systems or any of its subsidiaries representing twenty percent (20%) or more of the consolidated assets of Fuel Systems and its subsidiaries, taken as a whole as determined on a book-value basis, or to which twenty percent (20%) or more of the consolidated revenues or earnings are attributable, (iii) any issue, sale or other disposition of (including by way of merger, consolidation, joint venture, business combination, share exchange or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into, such securities) representing twenty percent (20%) or more of the voting power of Fuel Systems or any of its subsidiaries whose business constitutes 20% or more of the net revenue, net income or assets of Fuel Systems and its subsidiaries, taken as a whole, (iv) any tender offer or exchange offer in which any person or “group” (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) shall seek to acquire beneficial ownership (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), or the right to acquire beneficial ownership, of twenty percent (20%) or more of the outstanding shares of any class of voting securities of Fuel Systems, (v) any recapitalization, restructuring, liquidation, dissolution or other similar type of transaction with respect to Fuel Systems in which a third party shall acquire beneficial ownership of twenty percent (20%) or more of the outstanding shares of any class of voting securities of Fuel Systems or any its subsidiaries whose business constitutes 20% or more of the net revenue, net income or assets of Fuel Systems and its subsidiaries, taken as a whole, or (vi) any transaction which is similar in form, substance or purpose to any of the foregoing transactions.

Notwithstanding the restrictions described above, if, at any time prior to approval of the Merger proposal by Fuel Systems’ stockholders, Fuel Systems receives a bona fide written Fuel Systems alternative proposal from a third party made after the date of the merger agreement, Fuel Systems may (i) furnish non-public information to such third party (provided that prior to furnishing such information, Fuel Systems receives an executed

 

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acceptable confidentiality agreement from the third party and that any non-public information provided to the third party also be provided to Westport and Merger Sub) and (ii) engage in discussions or negotiations with such third party and such third party’s representatives with respect to the Fuel Systems alternate proposal if the Fuel Systems board determines in good faith, after consultation with its financial advisors and outside legal counsel, that such alternative proposal constitutes or could reasonably be expected to lead to or result in a superior proposal (as defined below), and the Fuel Systems board determines in good faith, after consultation with legal counsel, that the failure to participate in such negotiations or discussions or to furnish such information or data to such third party would be inconsistent with the Fuel Systems board’s fiduciary duties under applicable law.

The merger agreement requires Fuel Systems to promptly, and in any event no later than 24 hours after receipt, provide notice to Westport of the receipt of a Fuel Systems alternative proposal, any request for nonpublic information relating to Fuel Systems or its subsidiaries by a third party, or any inquiry seeking to have discussions or negotiations regarding any Fuel Systems alternative proposal. The required notice must indicate the identity of the third party making the Fuel Systems alternative proposal or inquiry and all of the material terms and conditions of any Fuel Systems alternative proposal or inquiry. Fuel Systems is also obligated to promptly notify Westport if it enters into discussions or negotiations concerning any Fuel Systems alternative proposal or provides nonpublic information or data to any third party in accordance with the above terms. Fuel Systems must also keep Westport informed of the status and terms of any such proposals, offers, discussions or negotiations on a current basis, including by providing a copy of all material documentation or correspondence relating to any Fuel Systems alternative proposal.

The merger agreement also requires Westport to notify Fuel Systems promptly, and in any event no later than 24 hours after receipt of any Westport acquisition proposal (defined below) or any request for nonpublic information relating to Westport or its subsidiaries by any third party, or any inquiry from any person seeking to have discussions or negotiations with Westport relating to a possible Westport acquisition proposal. Such notice must indicate the identity of the third party making the Westport acquisition proposal or inquiry and the material terms and conditions of any Westport acquisition proposal or inquiries. Westport shall also promptly notify Fuel Systems if it enters into discussions or negotiations concerning any Westport acquisition proposal or provides nonpublic information or data to any person in accordance with the merger agreement and keep Fuel Systems informed of the status and terms of any such proposals, offers, discussions or negotiations on a current basis, including by providing a copy of all material documentation or correspondence relating thereto.

A “Westport alternative proposal” means any proposal or offer from any third party for (or expression by a third party that it is considering or may engage in), whether in one transaction or a series of related transactions, (i) any sale, lease, exchange, mortgage, pledge, license, transfer or other disposition, directly or indirectly, by merger, consolidation, sale of equity interests, share exchange, joint venture, business combination or otherwise, of any assets of Westport or any Westport subsidiary (other than Cummins Westport Inc.) representing fifty percent (50%) or more of the consolidated assets of Westport and its subsidiaries (other than Cummins Westport Inc.), taken as a whole as determined on a book-value basis, (ii) any issue, sale or other disposition of (including by way of merger, consolidation, joint venture, business combination, share exchange or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into, such securities) representing fifty percent (50%) or more of the voting power of Westport or its subsidiaries (other than Cummins Westport Inc.) whose business constitutes fifty percent (50)% or more of the net revenue, net income or assets of Westport and its subsidiaries, taken as a whole, (iii) any tender offer or exchange offer in which any person or “group” (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) seeks to acquire beneficial ownership (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), or the right to acquire beneficial ownership, of fifty percent (50%) or more of the outstanding shares of any class of voting securities of Westport, (iv) any recapitalization, restructuring, liquidation, dissolution or other similar type of transaction with respect to Westport in which a third party acquires beneficial ownership of fifty percent (50%) or more of the outstanding shares of any class of voting securities of Westport or (v) any transaction which is similar in form, substance or purpose to any of the foregoing transactions. The term “Westport alternative proposal” does not, however, include (x) the merger or the other transactions contemplated by the merger agreement, or (y) any proposal or

 

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offer relating to any existing purchase option, right of first offer, right of first refusal or buy/sell provision contained in any agreement to which Westport or any of its subsidiaries is a party.

Board Recommendation

The Fuel Systems board has resolved to recommend that Fuel Systems stockholders vote in favor of the Merger proposal, which is referred to as the Fuel Systems board recommendation. Subject to the provisions described below, the merger agreement provides that the Fuel Systems board of directors, directly or indirectly, will not:

 

•

withhold, withdraw, qualify or modify, or publicly propose to withhold, withdraw, qualify or modify, in any manner adverse to Westport or Merger Sub, the Fuel Systems board recommendation;

 

•

approve, adopt or recommend, or publicly propose to approve, adopt or recommend, any Fuel Systems alternative proposal;

 

•

fail to include the Fuel Systems board recommendation in the proxy statement or any Schedule 14D-9, as applicable;

 

•

fail to publicly recommend against any Fuel Systems alternative proposal within 5 business days of the request of Westport and reaffirm the Fuel Systems board recommendation within 5 business days; or

 

•

approve, adopt, declare advisable or recommend (or agree to, resolve or propose to approve, adopt, declare advisable or recommend), or cause or permit Fuel Systems to enter into, any agreement related to a Fuel Systems alternative proposal (other than an acceptable confidentiality agreement entered into in accordance with the terms of the merger agreement).

Each of the foregoing actions is referred to as a “change in recommendation.” Notwithstanding these restrictions, before Fuel Systems obtains its stockholder approval, the Fuel Systems board of directors may make a change in recommendation and terminate the merger agreement to enter into an alternative definitive agreement if:

 

•

the Fuel Systems board has received a Fuel Systems alternative proposal and, after consultation with its financial advisors and outside legal counsel, concludes that such alternative proposal constitutes a superior proposal;

 

•

following consultation with outside legal counsel, the Fuel Systems board determines that the failure of the Fuel Systems board to make a change in recommendation would be inconsistent with its fiduciary duties under applicable law; and

 

•

within two business days of such termination, Fuel Systems has paid Westport the termination fee, as further described below.

The merger agreement further provides that the Fuel Systems board may not make a change of recommendation and terminate the merger agreement to enter into an alternative definitive agreement unless: (i) Fuel Systems has provided prior written notice to Westport that Fuel Systems intends to take such action and describing the material terms and conditions of, and attaching a complete copy of, the superior proposal that is the basis of such action (it being understood that such material terms need not include the identity of the third party making the superior proposal); (ii) during the five business day period following Westport and Merger Sub’s receipt of such notice, Fuel Systems negotiates with Westport and Merger Sub in good faith (to the extent Westport and Merger Sub desire to negotiate) to make such adjustments in the terms and conditions of the merger agreement such that the superior proposal ceases to be a superior proposal; and (iii) the Fuel Systems board concludes in good faith, after consultation with its financial advisors and outside legal counsel, and taking into account any changes to the merger agreement proposed by Westport or Merger Sub after notice of the superior proposal, that the superior proposal giving rise to the notice delivered to Westport and Merger Sub in accordance with (i) of this paragraph continues to constitute a superior proposal.

 

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A “superior proposal” means a bona fide written Fuel Systems alternative proposal (except “twenty percent (20%)” is replaced by “fifty percent (50%)”) on its most recently amended or modified terms, if amended or modified, made by a third party on terms that the Fuel Systems board determines in good faith, after consultation with financial and legal advisors, taking into account all financial, legal, regulatory and any other aspects of the transaction described in such proposal (including the identity of the person making such proposal, any termination or break-up fees, expense reimbursement provisions, and conditions to, and timing and likelihood of consummation as well as post-closing synergies and pro forma economics, to the extent applicable), as well as any changes to the financial terms of the merger agreement proposed by Westport and Merger Sub in response to such proposal or otherwise, to be more favorable to Fuel Systems and Fuel Systems’ stockholders (solely in their capacity as such) from a financial point of view than the transactions contemplated by the merger agreement.

Notwithstanding these restrictions, before Fuel Systems obtains its stockholder approval, the Fuel Systems board may make a change in recommendation in response to an intervening event (defined below) to the extent that the Fuel Systems board determines in good faith, after consultation with the outside legal counsel, that the failure of the Fuel Systems board to effect a change in recommendation would be inconsistent with its fiduciary duties under applicable law, and:

 

•

Fuel Systems provides Westport 5 business days written notice of its intention to take such action and the reasons for such action;

 

•

Fuel Systems negotiates in good faith with Westport during such 5 day period to make such revisions to the terms of the merger agreement as would permit the Fuel Systems board not to make a change in recommendation; and

 

•

the Fuel Systems board has considered in good faith any changes to the merger agreement offered in writing by Westport, and following such 5 day period, has determined in good faith, after consultation with its outside legal counsel and financial advisors, that the Fuel Systems board’s fiduciary duties under applicable law would continue to require a change in recommendation with respect to such intervening event.

An “intervening event” means a material event, fact, circumstance, development or occurrence that (i) affects the business, assets or operations of Fuel Systems that was not known by the Fuel Systems board as of the date of the merger agreement (or, if known, the consequences of which were not reasonably foreseeable to the Fuel Systems board as of the date of the merger agreement), which event, fact, circumstance, development or occurrence becomes known to or by the Fuel Systems board prior to obtaining the stockholder approval and (ii) does not relate to a Fuel Systems alternative proposal. In no event will changes in the market price or trading volume of the Fuel Systems common stock or the Westport common shares, or the fact that a party meets or exceeds internal or published projections, forecasts or revenue or earnings predictions for any period be an intervening event; but the underlying causes of such change or fact is not excluded from the definition of an intervening event.

Notwithstanding the restrictions described above, the merger agreement does not prohibit Fuel Systems from (i) taking and disclosing to its respective stockholders a position required by Rule 14e-2 under the Exchange Act or (ii)  complying with Rule 14d-9 under the Exchange Act.

Reasonable Best Efforts to Obtain Required Stockholder Approval

Fuel Systems has agreed to, as soon as reasonably practicable after the date of the merger agreement, establish a record date for and, as soon as reasonably practicable after the effectiveness of the registration statement of which this proxy statement/prospectus is a part, duly call, give notice of, convene and hold a meeting of its stockholders to consider the Merger proposal. Without the prior written consent of Westport, the adoption of the merger agreement by Fuel Systems stockholders, approval of any adjournment of the Fuel Systems special meeting, if necessary to solicit additional proxies if there are not sufficient votes to adopt the

 

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merger agreement at the time of the Fuel Systems special meeting and an advisory vote on compensation payable to executive officers of Fuel Systems are the only proposals permitted to be submitted to, or voted on by, the Fuel Systems stockholders.

Westport has agreed to, as soon as reasonably practicable after the date of the merger agreement, establish a record date for and, as soon as reasonably practicable after the effectiveness of the registration statement of which this proxy statement/prospectus is a part, duly call, give notice of, convene and hold a meeting of its stockholders to consider the Merger proposal and the proposed name change of Westport to “Westport Fuel Systems Inc.” Unless a change in recommendation occurs in compliance with the terms of the merger agreement, Westport’s board will recommend approval of the transaction to its shareholders and use its reasonable best efforts to solicit and obtain adoption.

Agreement to Take Further Action and to Use Reasonable Best Efforts

Each of Westport, Merger Sub, and Fuel Systems agree to make an appropriate filing of a notification and report form pursuant to the HSR Act and to make all other filings required to be made prior to close of business on the closing date by applicable foreign antitrust laws with respect to the transactions contemplated by the merger agreement and in any event prior to the expiration of any applicable legal deadline and to supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act and any other filings required in connection with the Foreign Antitrust Approvals or any other Antitrust Law.

In addition, each of Westport, Merger Sub, and Fuel Systems, respectively, agree to take any and all actions necessary to obtain any consents, clearances or approvals required under or in connection with any antitrust laws, and to enable all waiting periods under applicable antitrust laws to expire, and to avoid or eliminate each and every impediment under applicable antitrust laws asserted by a governmental authority, in each case, to cause the merger and the other transactions contemplated by the merger to occur as promptly as practicable prior to April 30, 2016, or August 31, 2016 in the event of a delay caused by an antitrust waiting period or required consent. This includes: (i) promptly complying with or modifying any request for additional information (including any second request) by a government authority, (ii) if necessary, obtaining clearance by any governmental authority before April 30, 2016, or August 31, 2016 in the event of a delay caused by an antitrust waiting period or required consent, offering, negotiating, committing to, taking and effecting, by consent decree, hold separate order or otherwise, the sale, divestiture, license or other disposition of any and all of the share capital, assets, rights, products or business of Fuel Systems and Westport and their respective subsidiaries, and any other actions that limit the freedom of action with respect to, or the ability to retain, any of the businesses of Fuel Systems and Westport and their respective subsidiaries, (iii) contesting, defending, and appealing any lawsuit or other legal proceedings, whether judicial or administrative, threatened or pending preliminary or permanent injunction or other order, decree or ruling or statute, rule, regulation or executive order that would adversely affect the ability of each party to consummate the transactions contemplated by the merger agreement and (iv) taking any and all other actions to prevent the entry, enactment or promulgation of such order or decree. In no event, however, will Fuel Systems or Westport or any of their respective subsidiaries be obligated to commit to any actions that would, individually or in combination, materially reduce the reasonably anticipated benefits of the transactions contemplated by the merger agreement.

Furthermore, each party must use its reasonable best efforts to take all actions and assist and cooperate with the other party to do all things necessary, proper or advisable under applicable law or pursuant to any contract to consummate and make effective, as promptly as practicable, the merger and the other transactions contemplated by the merger agreement, including to (i) take all actions necessary to cause the conditions to close the merger to be satisfied, (ii) obtain of all necessary actions or nonactions, waivers, consents and approvals from governmental authorities or other persons necessary in connection with the consummation of the merger and the other transactions contemplated by the merger agreement and the making of all necessary registrations and filings (including filings with governmental authorities, if any) and the taking of all reasonable steps as may be

 

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necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any governmental authority or other persons necessary in connection with the consummation of the merger and the other transactions contemplated by the merger agreement, (iii) defend any lawsuits or other legal proceedings, whether judicial or administrative, challenging the merger agreement or the consummation of the merger or the other transactions contemplated by merger agreement, including seeking to have any stay or temporary restraining order entered by any court or other governmental authority vacated or reversed, and (iv) execute and deliver any additional instruments necessary to consummate the merger and the other transactions contemplated by the merger agreement and to fully carry out the purposes of the merger agreement.

Westport, Merger Sub and Fuel Systems agreed to give any notices to third parties and Westport agreed to use its reasonable best efforts, and Fuel Systems will use its reasonable best efforts to cooperate with Westport in its efforts, to obtain any additional third party consents that are necessary, proper or advisable to consummate the merger.

Westport, Merger Sub, and Fuel Systems also agreed to furnish to each other such necessary information and reasonable assistance as the other may request in connection with the preparation of any required governmental filings or submissions and will cooperate in responding to any inquiry from a governmental authority, including promptly (and in any event within twenty-four (24) hours) informing the other party of such inquiry, consulting in advance before making any presentations or submissions to a governmental authority, and supplying each other with copies of all material correspondence, filings or communications between either party and any governmental authority with respect to the merger agreement. To the extent practicable, and permitted by a governmental authority, each party hereto is required to permit representatives of the other party to participate in meetings (whether by telephone or in person) with such governmental authority.

Employee Benefits Matters

Westport has agreed that it will provide to each Fuel Systems employee who remains employed during the one-year period following the closing of the merger (i) a base salary (or wage rate) and target cash incentive compensation opportunity at least equal to such employee’s base salary (or wage rate) and target cash incentive compensation opportunity in effect as of immediately prior to the closing of the merger and (ii) employee benefits (excluding equity arrangements, deferred compensation arrangements, retiree health and welfare benefits and defined benefit pension plans) that are, in the aggregate, no less favorable than the employee benefits provided to employees as of immediately prior to the closing of the merger. Westport also agreed to provide Fuel Systems employees who experience an involuntary severance-qualifying termination during the one-year period following the closing of the merger with severance benefits that are no less favorable, in the aggregate, than the severance benefits, if any, that the employee would have received pursuant to the terms of the severance pay arrangements maintained by Fuel Systems upon such an involuntary severance-qualifying termination of employment immediately prior to the closing of the merger.

Westport has also agreed generally to give Fuel Systems employees credit for their years of service with Fuel Systems and its subsidiaries for purposes of determining eligibility and vesting, benefit accrual and determination of level of benefits (but excluding for purposes of benefit accruals under any defined benefit plan or for purposes of vesting in any new equity-based compensation plan, program, agreement or arrangement) under Westport’s compensation and benefit plans and arrangements that such employees participate in after the closing of the merger. In addition, Westport will use commercially reasonable efforts to cause: (i) each employee to be immediately eligible to participate, without any waiting time, in Westport benefit plans to the extent coverage under such plans replaces coverage under a comparable Fuel Systems benefit plan the employee participated in immediately before such replacement by Westport; and (ii) for purposes of each Westport plan that provides medical, dental, pharmaceutical and/or vision benefits to any Fuel Systems employee, all pre-existing condition exclusions and actively-at-work requirements under any Westport plan to be waived for Fuel Systems employees and their dependents (except to the extent such restrictions were applicable and not satisfied by the Fuel Systems employee under the comparable Fuel Systems benefit plan as of immediately prior to the

 

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closing of the merger) and any eligible expenses incurred by such Fuel Systems employee (and any dependents) under an Fuel Systems benefit plan during the portion of the plan year prior to the closing of the merger to be taken into account under such Westport Plan for purposes of satisfying all deductible, co-insurance, co-payment and maximum out-of-pocket requirements applicable to such employee and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such Westport benefit plan.

Other Covenants and Agreements

The merger agreement contains additional agreements relating to, among other matters:

Access to Information; Confidentiality

Until completion of the merger, each of Westport and Fuel Systems have agreed to afford the other party and its representatives reasonable access, during normal business hours and on certain conditions, to all of its and its subsidiaries’ respective properties, books, contracts, commitments, personnel and records. Also, each of Westport and Fuel Systems have agreed to keep confidential any nonpublic information in accordance with the terms of the confidentiality agreement.

Notification of Certain Matters

Each of Westport and Fuel Systems has agreed to give prompt notice to the other party of (i) any notice or other communication from any governmental authority in connection with the merger or from any party alleging that its consent is or may be required in connection with the merger, (ii) any actions, suits, claims, investigations or proceedings commenced or threatened against, relating to or involving or otherwise affecting such party and that relate to the merger, (iii) any inaccuracy of any representation or warranty of Fuel Systems or Westport, as applicable, contained in the merger agreement, (iv) the discovery of any fact or circumstance that, or the occurrence or non-occurrence of any event the occurrence or non-occurrence of which, would result in the failure to be satisfied of any of the conditions to the closing of merger, and (v) any material failure of such party to comply with or satisfy any covenant or agreement to be complied with or satisfied by it hereby which would result in the failure to be satisfied of any of the conditions to the closing of the merger.

Transaction Litigation

Each of Fuel Systems and Westport have agreed to give the other party the opportunity to participate in the defense or settlement of any security holder litigation against Fuel Systems or Westport, respectively, and/or its directors relating to the merger, and no settlement can be agreed to without the prior written consent of the other party, which consent must not be unreasonably withheld, conditioned or delayed, except that no such consent is required for Westport to enter into a settlement if such settlement involves only the payment of money and the amount of such settlement shall be fully covered by insurance proceeds.

Public Announcements

Westport, Merger Sub and Fuel Systems will not issue any public announcements or make other public disclosures regarding the merger or the merger agreement, unless mutually approved by Fuel Systems and Westport; provided, however, that each of Westport and Fuel Systems may make a public announcement or other public disclosure required by law or any applicable stock exchange, provided that the disclosing party has used reasonable best efforts to afford the other party with the opportunity to review and provide reasonable comment.

Indemnification and Insurance

Westport and Merger Sub agree that all indemnification rights for acts or omissions occurring at or prior to close of business on the closing date, regardless of when asserted or claimed that exist in the Fuel Systems charter or the Fuel Systems bylaws (or its subsidiaries), will survive the merger and will continue in full force

 

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and effect in accordance with their terms. The surviving company of the merger will (i) indemnify, defend and hold harmless, and advance expenses to, any officer or director of Fuel Systems or person served on behalf of Fuel Systems as an officer or director (or the equivalent) of any Fuel Systems’ subsidiaries prior to the effective time, which we refer to as an indemnitee, with respect to all acts or omissions by them in their capacities as such at any time prior to close of business on the closing date, to the fullest extent required by the Fuel Systems’ or any of Fuel Systems’ subsidiaries organizational or governing documents, in each case, as in effect on the date of the merger agreement, or applicable law, and (ii) not amend, repeal or otherwise modify any such provisions in any manner that would adversely affect the rights thereunder of any indemnitees.

Until the sixth anniversary of the closing date, Westport and the surviving company will also indemnify indemnitees against and from any costs or expenses (including attorney’s fees) judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative (hereinafter referred to as a “claim”) to the extent such claim arises out of or pertains to action or omission or alleged action or omission in such indemnitee’s capacity as a director, officer, partner, member, trustee or employee of Fuel Systems or its subsidiaries, or the merger agreement and related transactions. Westport and the surviving company will pay in advance of the final disposition of a claim, upon receipt of the undertaking that the indemnitee will repay such amount if it is ultimately determined that the indemnitee not entitled to be indemnified. Westport and the surviving company will not settle, compromise, or consent to the entry of any judgment or seek termination with respect to any claim unless the settlement, compromise, consent or termination includes an unconditional release of all indemnities of all liability arising out of such claim with certain exceptions stated in the merger agreement and will not be obligated to indemnify any indemnitee if a court determines that such indemnification is prohibited by applicable law.

In addition, Fuel Systems will, or if Fuel Systems is unable to, Westport will cause the surviving company as of close of business on the closing date to obtain and fully pay the premium for the non-cancellable extension of the directors’ and officers’ liability coverage of Fuel Systems’ existing directors’ and officers’ insurance policies and Fuel Systems’ existing fiduciary liability insurance policies, in each case, for a claims reporting or discovery period of at least six years from and after the close of business on the closing date with respect to any claim related to any period or time at or prior to the close of business on the closing date, provided that Westport and the surviving company are not required to pay an annual premium for the directors’ and officers’ insurance in excess of 300% of the annual premium currently paid by Fuel Systems.

Certain Tax Matters

Fuel Systems, Westport and Merger Sub intend that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code, and each has agreed to use reasonable best efforts to cause the merger to so qualify.

Fuel Systems, Westport and Merger Sub have agreed to use reasonable best efforts to provide information, including officer’s certificates, reasonably requested by Fuel Systems in connection with Fuel Systems’ request for an IRS private letter ruling and/or an opinion of Skadden, as applicable, regarding the application of Sections 368 and/or 367(a) of the Code to the merger. If Fuel Systems obtains a favorable IRS private letter ruling or believes based on advice from counsel that it is more likely than not that the merger is not subject to Section 367(a)(1) of the Code, Westport has agreed to make commercially reasonable arrangements with each 5% U.S. Holder, if any, to ensure that such shareholder will be informed of any “triggering event” within the meaning of Treasury Regulations Section 1.367(a)-8(j)(1) or (2). In addition, Westport has agreed (and has agreed to cause Fuel Systems following the merger) to file all required information with its tax returns and maintain all records required for tax purposes, including, if applicable, the reporting requirements contained in Treasury Regulations Section 1.367(a)-3(c)(6).

Westport and Fuel Systems have agreed to cooperate in the preparation, execution and filing of all tax returns, questionnaires, applications or other documents regarding any real property transfer or gains, sales, use,

 

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transfer, value added, stock transfer and stamp taxes, and transfer, recording, registration and other fees and similar taxes which become payable in connection with the merger and which are required or permitted to be filed on or before the effective time. Westport has agreed to pay (without reimbursement and without deduction from any amount payable to Fuel Systems’ stockholders) any such taxes or fees imposed on it by any governmental authority (or for which Westport’s shareholders are primarily liable) which become payable in connection with the merger.

Section 16 Matters

Prior to the completion of the merger, Westport, Merger Sub and Fuel Systems have agreed to take all steps as may be required to cause (i) any dispositions of shares of Fuel Systems common stock resulting from the merger by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Fuel Systems to be exempt under Rule 16b-3 promulgated under the Exchange Act and (ii) any acquisitions of Westport common shares resulting from the merger by each individual who may become subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Westport to be exempt under Rule 16b-3 promulgated under the Exchange Act.

Listing

Westport has agreed to cause the new common shares to be approved for listing on NASDAQ, subject to official notice of issuance and the TSX, prior to the completion of the merger, subject to fulfilling all of the listing requirements of the TSX.

Voting of Westport Common Shares

Westport has agreed to vote all shares of Fuel Systems common stock beneficially owned by it or any of the Westport subsidiaries as of the record date for the Fuel Systems special meeting in favor of adoption of the merger agreement and approval of the merger.

Fuel Systems has agreed to vote all shares of Westport common shares beneficially owned by it or any Fuel Systems subsidiaries as of the record date for the Westport special meeting in favor of adoption of the merger agreement, approval of the merger, and issuance of Westport common shares in connection with the merger.

Governance Matters

Westport has agreed to take all necessary corporate actions to cause, concurrent with the closing of the merger (i) the name of Westport to be changed to “Westport Fuel Systems Inc.,” (ii) three members of the Westport board to resign, (iii) the appointment to Westport’s board of directors of Mariano Costamagna, and [●] and [●], who will fill the vacancies resulting from such resignations and (iv) to have each committee of the Westport board to include such number of continuing Fuel Systems directors as determined by Westport after taking into account each such director’s relevant experience and expertise.

From and after the closing of the merger, the Westport board of directors will take all necessary actions to nominate, and to cause the Nominating and Corporate Governance Committee of Westport to recommend that the Westport board of directors nominate, the continuing Fuel Systems directors for election to the Westport board of directors at the 2016 annual meeting of shareholders of Westport, the 2017 annual meeting of shareholders of Westport and the 2018 annual meeting of shareholders of Westport. Notwithstanding the above, no continuing Fuel Systems director will be subject to re-nomination in accordance with the merger agreement in the event such continuing Fuel Systems director fails (i) to comply in all material respects with the governance guidelines and policies of Westport applicable to Westport directors during the fiscal year immediately preceding such continuing Fuel Systems director’s re-nomination or (ii) to attend in-person at least seventy-five percent (75%) of the duly called meetings of the Westport board of directors for the Westport fiscal year immediately

 

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preceding such re-nomination. Notwithstanding anything in the merger agreement to the contrary, in the event of the death, resignation or removal for cause of a continuing Fuel Systems director, Westport and the Westport board of directors will have no obligation to nominate or appoint a replacement Fuel Systems director to fill the vacancy created by such death, resignation or removal. The continuing Fuel Systems directors are third party beneficiaries of the section of the merger agreement providing for continued nomination, and Westport agrees to pay all reasonable expenses, including attorney’s fees, that may be incurred by any continuing Fuel Systems director in seeking the enforcement of the rights and obligations provided for by such section of the merger agreement.

No Solicitation of Employees

Prior to the closing of the merger, each of Fuel Systems and Westport have agreed not to solicit the other party’s employees, subject to certain exceptions set forth in the merger agreement.

Amendment to Rights Agreement

Fuel Systems has agreed to take all necessary action so that none of the performance by the respective parties to the merger agreement of their obligations under the merger agreement will cause (i) rights to become exercisable under the Stockholder Protection Rights Agreement, dated as of June 27, 2006, as amended, between Fuel Systems and Mellon Investor Services LLC, as Rights Agent, referred to as the rights agreement, (ii) Westport, Merger Sub or any of their affiliates to be deemed to be an “acquiring person” (as defined in the rights agreement), (iii) the “stock acquisition date” (as defined in the rights agreement) to occur upon any such event or (iv) the “separation time” (as defined in the rights agreement) to occur upon any such event.

State Takeover Laws

If any takeover statute may become applicable to the transactions contemplated by the merger agreement, Westport and Fuel Systems and the members of its respective board of directors, to the extent permissible under applicable law, are required to grant such approvals and take such actions, in accordance with the terms of the merger agreement, as are necessary so that the transactions contemplated by the merger agreement may be consummated as promptly as practicable, and in any event prior to April 30, 2016, or August 31, 2016 in the event of a delay caused by an antitrust waiting period or required consent, on the terms and conditions contemplated by the merger agreement and otherwise, to the extent permissible under applicable law, act to eliminate the effect of any takeover statute on any of the transactions contemplated by the merger agreement.

Automotive and Industrial Operations

Representatives of Westport and Fuel Systems jointly have developed an agreed upon business plan for the Automotive, Industrial and Operations combined company project to be named the “Fuel Systems Automotive and Industrial Group”, which they intend to implement within 36 months following the closing of the merger. The headquarters of the Automotive and Industrial Group, and its associated operations, will be in Cherasco, Italy. An exhibit to the merger agreement sets forth the management team for the group. Westport has agreed to use commercially reasonable efforts to assist the implementation of the project by maintaining sufficient capital in the group, consistent with the group’s needs to achieve the project.

Termination of the Merger Agreement

The merger agreement may be terminated prior to the closing of the merger, whether before or after approval of the Merger proposal by Fuel Systems’ stockholders and Westport’s shareholders approval is received (except as otherwise provided below), as follows:

 

•

by the mutual written agreement of Westport and Fuel Systems; or

 

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•

by either Fuel Systems or Westport:

 

•

if the closing does not occur on or before April 30, 2016, or August 31, 2016 in the event of a delay caused by an antitrust waiting period or required consent; provided that this termination right will not be available to any party if the failure of such party to perform any of its obligations under the merger agreement has been a principal cause of, or resulted in, the failure of the merger to be consummated on or before such date;

 

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if there is in effect a final nonappealable order of a governmental authority of competent jurisdiction restraining, enjoining or otherwise prohibiting the merger; provided that this termination right is not available to a party whose failure to perform its obligations under the merger agreement is the primary cause of such order;

 

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if the other party breached or failed to perform any of its representations, warranties, covenants or agreements in the merger agreement in a way that the related condition to closing would not be satisfied, and this breach is either incurable or not cured within 20 days, provided that neither party has the right to terminate in the event such party is then in breach of any of its representations, warranties, covenants or agreements in the merger agreement in a way that a condition to closing would not be satisfied;

 

•

if the Fuel Systems and Westport stockholder meetings have occurred and the required Fuel Systems stockholder and Westport shareholder approvals are not obtained; provided that the right to terminate the merger agreement will not be available if the failure to obtain its stockholder/shareholder approval is primarily due to such party’s failure to perform any of its obligations under the merger agreement.

 

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by Fuel Systems:

 

•

if Fuel Systems is terminating the merger agreement to enter into a definitive agreement relating to a superior proposal in accordance with the terms of the merger agreement;

 

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If the Westport board authorizes, approves or recommends, enters into a written agreement, or consummates a transaction relating to a Westport alternative proposal.

 

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by Westport:

 

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if Fuel Systems’ board makes a change in recommendation;

 

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if Fuel Systems materially and willfully breaches its obligations contained in the “no-shop” provision contained in the merger agreement; or

 

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if Fuel Systems or any of its subsidiaries or the Fuel Systems board approves, recommends, adopts or enters into an agreement relating to a Fuel Systems alternative proposal.

Effect of Termination; Termination Fees

If the merger agreement is validly terminated, then, except as described below, each of the parties will be relieved of its duties and obligations and such termination will be without liability to either party. However, termination will not relieve either party of any liability for willful or intentional breach of any covenant or agreement contained in the merger agreement prior to termination, or as provided in the confidentiality agreement entered into between Westport and Fuel Systems, in which case the aggrieved party is entitled to all rights and remedies available at law or in equity.

The merger agreement contains a termination fee of $5.5 million, which is referred to as the termination fee, payable by Fuel Systems to Westport under the circumstances described below:

 

•

if (i) the merger agreement is terminated by Westport because of a change in recommendation by the Fuel Systems board, (ii) Fuel Systems’ materially or willfully breaches its obligations with respect to Fuel Systems alternative proposals under the merger agreement, or (iii) Fuel Systems approves,

 

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recommends, adopts, enters into or publicly announces the intention to approve, recommend, adopt or enter into, a definitive agreement with respect to a Fuel Systems alternative proposal, then Fuel Systems will pay Westport the termination fee within 2 business days after the date of termination;

 

•

if the merger agreement is terminated by Fuel Systems in order to enter into a definitive agreement relating to a superior proposal, then Fuel Systems will pay Westport the termination fee within 2 business days after the date of termination; or

 

•

if (i) a Fuel Systems alternative proposal is publicly proposed or publicly disclosed prior to the date of the Fuel Systems special meeting and the merger agreement is terminated (a) by Westport due to (x) Fuel Systems’ willful breach or failure to perform any of its representations, warranties, covenants or agreements where such breach, failure to perform or untruth is incapable of being cured or is not cured within 20 days following receipt by Fuel Systems of notice of such breach or (y) a change in recommendation by the Fuel Systems board, or (b) by either party, due to failure to obtain the approval of the Merger proposal by Fuel Systems stockholders at the special meeting, then Fuel Systems shall pay the expenses of Westport within 2 days after the receipt following such termination of documentation supporting such expenses of Westport. If Fuel Systems enters into a definitive agreement with respect to, or consummates, a Fuel Systems alternative proposal (substituting 50% for the 20% threshold set forth in the definition of Fuel Systems alternative proposal) concurrently or within 12 months after the date the merger agreement is terminated, then Fuel Systems will pay to Westport the termination fee within 2 days following the consummation of such Fuel Systems alternative proposal.

The termination fee will be payable by Westport to Fuel Systems under the circumstances described below:

 

•

if the merger agreement is terminated by Fuel Systems because the Westport board authorizes, enters into an agreement, or consummates a transaction relating to a Westport alternative proposal, then Westport will pay Fuel Systems the termination fee within 2 business days after the date of termination; or

 

•

if (i) a Westport alternative proposal is publicly proposed or publicly disclosed prior to the date of the Westport special meeting, (ii) the third party making the Westport alternative proposal has publicly indicated to the Westport shareholders to the effect that they should not vote in favor of the matters required to obtain Westport shareholder approval and (iii) the merger agreement is terminated (a) by Fuel Systems due to Westport’s willful breach of any of its representations, warranties, covenants or agreements where such breach is incapable of being cured or is not cured within 20 days following receipt by Westport of notice of such breach or (b) by either party, due to failure to obtain the approval of the Merger proposal by Westport stockholders at the special meeting, then Westport shall pay the expenses of Fuel Systems within 2 business days after the receipt following such termination of documentation supporting such expenses of Fuel Systems. If Westport enters into a definitive agreement with respect to, or consummates, a Westport alternative proposal within 12 months after the date the merger agreement is terminated then Westport will pay to Fuel Systems the termination fee within 2 business days following the consummation of such Westport alternative proposal.

The one-time payment of a termination fee will be each party’s sole and exclusive remedy available under the circumstances described above.

Amendment and Waiver

Amendment. At any time prior to the closing of the merger, the merger agreement may be amended, whether before or after the approval of the Merger proposal by Fuel Systems stockholders, by written agreement of the parties to the merger agreement, by action taken or authorized by their respective boards of directors; provided, however, that following receipt of the Fuel Systems’ stockholder approval, there will not be (a) any amendment of the merger agreement that changes the amount or the form of the consideration to be delivered under the

 

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merger agreement to the holders of Fuel Systems common stock, or which by applicable law or in accordance with the rules of any stock exchange requires the further approval of the stockholders of Fuel Systems or Westport without such further approval of such stockholders, or (b) any amendment or change not permitted under applicable law.

Waiver. At any time prior to the close of business on the closing date, the parties may (i) extend the time for the performance of any of the obligations or other acts of the other parties, (ii) waive any inaccuracies in the representations and warranties of the other parties, or (iii) waive compliance with any of the agreements or covenants of the other parties. Any agreement on the part of any party to any such extension or waiver is valid only if set forth in an instrument in writing signed on behalf of such party.

Fees and Expenses

All expenses incurred in connection with the merger agreement and the transactions contemplated by the merger agreement shall be paid by the party incurring such expenses, whether or not the transactions contemplated by the merger agreement are consummated; provided, however, that Fuel Systems and Westport will share equally all expenses related to the printing and filing of this proxy statement/prospectus and the printing, filing and distribution of the proxy statement and the information circular in connection with the Westport shareholder meeting, other than attorneys’ and accountants’ fees.

Assignment

The merger agreement and any interests, rights or obligations under the merger agreement are not assignable, by operation of law or otherwise, by any of the parties without the prior written consent of the other party.

Specific Performance

The parties to the merger agreement have agreed that each party will be entitled to an injunction, specific performance, or other equitable relief to prevent breaches of the merger agreement and to enforce specifically the terms and provisions of the merger agreement. Each of the parties has agreed that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that (i) either party has an adequate remedy at law, or (ii) an award of specific performance is not an appropriate remedy for any reason at law or equity. Each party has further agreed that no party is required to provide any bond or other security in connection with any such order or injunction.

Governing Law

The merger agreement is governed by and will be construed and enforced in accordance with the laws of the State of Delaware.

 

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THE VOTING AGREEMENTS

The following is a summary of only the voting agreements entered into in connection with the merger agreement and may not contain all of the information that is important to you. The following description is subject to, and is qualified in its entirety by reference to, the voting agreements, copies of which are attached as Annex C, Annex D and Annex E to this proxy statement/prospectus and are incorporated herein by reference. We urge you to read the voting agreements in their entirety. In the event of any discrepancy between the terms of the voting agreement and the following summary, the voting agreements will control.

Douglas Voting Agreement

Concurrently with the execution of the merger agreement on September 1, 2015, and as a condition to Fuel Systems’ and Westport’s willingness to enter into the merger agreement, Fuel Systems and Westport entered into a voting agreement with K&M Douglas Trust, James Douglas and Jean Douglas Irrevocable Descendants’ Trust, Douglas Family Trust and James E. Douglas, III. We collectively refer to those non-Fuel Systems, non-Westport parties to the voting agreement as the “Douglas Parties”. As of the date the voting agreement was executed, the Douglas Parties beneficially owned, collectively, 2,671,684 shares of Fuel Systems common stock, or approximately 14.8% of Fuel Systems common stock issued and outstanding at that time, and 10,045,657 common shares of Westport common shares, or approximately 15.7% of Westport common shares issued and outstanding at the time.

Each of the Douglas Parties has agreed to vote, and has granted Westport an irrevocable proxy to vote its beneficially owned shares of Fuel Systems common stock, including any shares acquired after the date of the voting agreement, in favor of the adoption and approval of the merger agreement and the transactions contemplated thereby, at every meeting of the stockholders of Fuel Systems at which such matters are considered and to vote against (i) any action or agreement that has or would reasonably be likely to result in any conditions to Fuel Systems’ obligations to close the merger not being satisfied, (ii) any Fuel Systems alternative proposal and (iii) any amendments to the Fuel Systems charter and/or the Fuel Systems bylaws if such amendment would reasonably be expected to prevent or materially delay the closing of the merger.

In addition, each of the Douglas Parties has agreed to vote, and has granted Fuel Systems an irrevocable proxy to vote its beneficially owned Westport common shares, including any shares acquired after the date of the voting agreement, in favor of the approval of the merger consideration, at every meeting of the stockholders of Westport at which such matters are considered and to vote its shares against any action or agreement that would reasonably be likely to result in any conditions to Westport’s obligations to close the merger not being satisfied (other than in the case of the Westport acquisition proposal).

Subject to certain exceptions described in the voting agreement, each of the Douglas Parties that is a party to the voting agreement has agreed not to sell, pledge, encumber, grant options with respect to, transfer or dispose of the shares of Westport or Fuel Systems common stock beneficially owned by such party or to enter into any agreement related to any of the foregoing transfers or dispositions, in each case to anyone other than Fuel Systems or Westport, respectively.

Subject to certain exceptions described in the voting agreements, each of the Douglas Parties has made representations and warranties to Fuel Systems and Westport, respectively, regarding, among other things, such party’s power and authority to enter into the voting agreement and deliver the proxy, such party’s unencumbered beneficial ownership of the shares of Westport and Fuel Systems common stock, respectively, subject to the voting agreements.

The voting agreement will terminate at the earlier to occur of (i) the mutual written consent of Westport and Fuel Systems, (ii) the effective time of the merger, (iii) the termination of the merger agreement, or (iv) the

 

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delivery of written notice of termination by each of the Douglas Parties to Westport and Fuel Systems following any fundamental amendment effected without the prior written consent of each of the Douglas Parties. “Fundamental amendment” means the execution by Westport, Merger Sub and Fuel Systems of a written amendment to, or written waiver by Westport, Merger Sub, and Fuel Systems, of any provision of the merger agreement that reduces the amount of the merger consideration or changes the form of, or decreases the exchange ratio of the merger consideration of 2.129 Westport common shares per share of Fuel Systems common stock, amends the conditions to close the merger or would result in additional monetary liability to such Douglas Party.

Costamagna Voting Agreement

Concurrently with the execution of the merger agreement on September 1, 2015, and as a condition to Westport’s willingness to enter into the merger agreement, Westport entered into a voting agreement with Mariano Costamagna. As of the date the voting agreement was executed, Mr. Costamagna beneficially owned 1,634,185 shares of Fuel Systems common stock, or approximately 9.0% of Fuel Systems common stock issued and outstanding at that time.

Mr. Costamagna has agreed to vote, and has granted Westport an irrevocable proxy to vote, his beneficially owned shares of Fuel Systems common stock, including any shares acquired after the date of the voting agreement, in favor of the adoption and approval of the merger agreement and the transactions contemplated thereby, at every meeting of the stockholders of Fuel Systems at which such matters are considered, and to not vote his shares in favor of, or approve or otherwise support (i) any action or agreement that would reasonably be likely to result in any conditions to Fuel Systems’ obligations to close the merger not being satisfied, (ii) any Fuel Systems alternative proposal and (iii) any amendments to the Fuel Systems charter and/or the Fuel Systems bylaws if such amendment would reasonably be expected to prevent or materially delay the consummation of the closing of the merger.

Subject to certain exceptions described in the voting agreement, Mr. Costamagna has agreed not to sell, pledge, encumber, grant options with respect to, transfer or dispose of the shares of Fuel Systems common stock beneficially owned by him or to enter into any agreement related to any of the foregoing transfers or dispositions, in each case to anyone other than Westport.

Subject to certain exceptions described in the voting agreements, Mr. Costamagna has made representations and warranties to Westport regarding, among other things, his power and authority to enter into the voting agreement and deliver the proxy and his unencumbered beneficial ownership of the shares of Fuel Systems common stock subject to the voting agreements.

The voting agreement and the proxy granted thereunder will terminate at the earlier to occur of (i) the valid termination of the merger agreement pursuant to its terms, (ii) the effective time of the merger or (iii) any change to the terms of the merger without the prior written consent of Mr. Costamagna that (a) reduces the exchange ratio (subject to adjustments in compliance with Section 3.2 of the merger agreement) or (b) changes the form of consideration payable in the merger.

Becker Voting Agreement

Concurrently with the execution of the merger agreement on September 1, 2015, and as a condition to Westport’s willingness to enter into the merger agreement, Westport entered into a voting agreement with Becker Drapkin Management, L.P., Becker Drapkin Partners (QP), L.P., Becker Drapkin Partners, L.P. and Steven R. Becker. We collectively refer to those non-Westport parties to the voting agreement as the “Becker Parties”. As of the date the voting agreement was executed, the Becker Parties beneficially owned, collectively, 1,900,619 shares of Fuel Systems common stock, or approximately 10.5% of Fuel Systems common stock issued and outstanding at that time.

 

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Each of the Becker Parties has agreed to vote, and has granted Westport an irrevocable proxy to vote, its beneficially owned shares of Fuel Systems common stock, including any shares acquired after the date of the voting agreement, in favor of the adoption and approval of the merger agreement and the transactions contemplated thereby, at every meeting of the stockholders of Fuel Systems at which such matters are considered, and to not vote its shares in favor of, or approve or otherwise support (i) any action or agreement that would reasonably be likely to result in any conditions to Fuel Systems’ obligations to close the merger not being satisfied, (ii) any Fuel Systems alternative proposal and (iii) any amendments to the Fuel Systems charter and/or the Fuel Systems bylaws if such amendment would reasonably be expected to prevent or materially delay the consummation of the closing of the merger.

Subject to certain exceptions described in the voting agreement, each of the Becker Parties that is a party to the voting agreement has agreed not to sell, pledge, encumber, grant options with respect to, transfer or dispose of the shares of Fuel Systems common stock beneficially owned by such party or to enter into any agreement related to any of the foregoing transfers or dispositions, in each case to anyone other than Westport.

Subject to certain exceptions described in the voting agreements, each of the Becker Parties has made representations and warranties to Westport regarding, among other things, such party’s power and authority to enter into the voting agreement and deliver the proxy, such party’s unencumbered beneficial ownership of the shares of Fuel Systems common stock subject to the voting agreements.

The voting agreement and the proxy granted thereunder will terminate at the earlier to occur of (i) the valid termination of the merger agreement pursuant to its terms, (ii) the effective time of the merger or (iii) any change to the terms of the merger without the prior written consent of the Becker Parties that (a) reduces the exchange ratio (subject to adjustments in compliance with Section 3.2 of the merger agreement) or (b) changes the form of consideration payable in the merger.

 

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INFORMATION ABOUT WESTPORT

Westport is a leading provider of high-performance, low-emission engine and fuel system technologies utilizing gaseous fuels. Westport’s technology and products enable light- (less than 5.9 litre), medium- (5.9 to 10 litre), heavy-duty (10 to 16 litre) and high-horsepower (greater than 16 litre) petroleum-based fuel engines and vehicles to use primarily gaseous fuels such as natural gas, giving users a cleaner and generally less expensive alternative fuel based on a more abundant natural resource. Through Westport’s partnerships and direct sales efforts, it sells natural gas and propane engines, fuel systems, and components to customers globally. Westport’s strategic relationships with original equipment manufacturers, or OEMs, provide it with access to their manufacturing capacity, supply chain and global distribution networks without incurring the considerable investment associated with these assets. Westport commercializes its technology throughout the world where demand for clean, low emission engines exists.

For the year ended December 31, 2014, Westport had total revenues of approximately $131 million and net loss of approximately $150 million.

Westport’s common shares are traded on the TSX under the symbol “WPT” and on NASDAQ under the symbol “WPRT”.

Westport’s principal offices are located at 101—1750 West 75^th Avenue, Vancouver, British Columbia V6P 6G2 and its telephone number is (604) 718-2000.

Security Ownership of Certain Beneficial Owners

Except as otherwise indicated, all of the shares indicated in the table are common shares of Westport and each beneficial owner has sole voting and investment power with respect to the shares set forth opposite his or its name. For the purposes of calculating percentage ownership as of September 1, 2015, 64,183,191 shares were outstanding. In preparing the following table, Westport relied upon filings made with the System for Electronic Disclosure of Insiders, unless it knew or had reason to believe that the information contained in such filings was not complete or accurate, in which case Westport relied upon information that it considered to be accurate and complete. Unless otherwise indicated, the address of each of the individuals and entities named below is: c/o Westport Innovations Inc., 101—1750 West 75^th Avenue, Vancouver, British Columbia V6P 6G2.

 

Name and Address of Beneficial Owner		Amount and Nature of Beneficial Ownership				Percent of Class
Kevin Douglas, K&M Douglas Trust, James Douglas And Jean Douglas Irrevocable Descendants’ Trust, Douglas Family Trust and James E. Douglas, III			10,045,657				15.7	%

 

(1)

Amendment No. 1 to a Schedule 13D Beneficial Ownership Report filed on September 1, 2015 by Kevin Douglas, Michelle Douglas, K&M Douglas Trust, James Douglas and Jean Douglas Irrevocable Descendants’ Trust and Douglas Family Trust discloses that (i) Kevin Douglas and his wife, Michelle Douglas, hold 3,614,020 shares jointly as the beneficiaries and co-trustees of the K&M Douglas Trust; (ii) Kevin Douglas and Michelle Douglas are co-trustees of the James Douglas and Jean Douglas Irrevocable Descendants’ Trust which holds 3,527,906 shares; (iii) Kevin Douglas, as the settlor of the KGD 2012 Trust, has the right to substitute property of equivalent value in return for the shares held by the KGD 2012 Trust and may be deemed to have shared voting and dispositive power over 52,902 shares held by the KGD 2012 Trust; and (iv) Kevin Douglas has dispositive power with respect to 1,061,846 shares held by James E Douglas, III and 1,841,885 shares held by the Douglas Family Trust.

 

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INFORMATION ABOUT FUEL SYSTEMS

Business Overview

Fuel Systems designs, manufactures and supplies alternative fuel components and systems for use in the transportation and industrial markets on a global basis. Fuel Systems components and systems control the pressure and flow of gaseous alternative fuels, such as propane and natural gas used in internal combustion engines. Fuel Systems’ products improve efficiency, enhance power output and reduce emissions by electronically sensing and regulating the proper proportion of fuel and air required by the internal combustion engine. Fuel Systems also provides engineering and systems integration services to address its individual customer requirements for product performance, durability and physical configuration. For over 50 years, Fuel Systems has developed alternative fuel products. Fuel Systems supplies its products and systems to the market place through a global distribution network of distributors and dealers in more than 60 countries and numerous original equipment manufacturers, or OEMs.

For the year ended December 31, 2014, Fuel Systems had total revenues of approximately $339.1 million and net loss of approximately $53.4 million.

Fuel Systems common stock is traded on NASDAQ under the symbol “FSYS.”

Fuel Systems’ principal offices are located at 780 Third Avenue, 25th Floor, New York, New York 10017 and its telephone number is (646) 502-7170.

Security Ownership of Certain Beneficial Owners

Except as otherwise indicated, all of the shares indicated in the table are shares of Fuel Systems’ common stock and each beneficial owner has sole voting and investment power with respect to the shares set forth opposite his or its name. For the purposes of calculating percentage ownership as of October 9, 2015, 18,093,562 shares were outstanding. In preparing the following table, we relied upon statements filed with the SEC by beneficial owners of more than 5% of the outstanding shares of Fuel Systems common stock pursuant to Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended, unless we knew or had reason to believe that the information contained in such statements was not complete or accurate, in which case we relied upon information that we considered to be accurate and complete. Unless otherwise indicated, the address of each of the individuals and entities named below is: c/o Fuel Systems Solutions, Inc., 780 Third Avenue, 25th Floor, New York, NY 10017.

 

Name and Address of Beneficial Owner		Amount and Nature of Beneficial Ownership				Percent of Class
Mariano Costamagna, Pier Antonio Costamagna, Bruna Giachino, Carla Borgogno (1)			3,218,774				17.8	%
Kevin Douglas, Michelle Douglas, James E. Douglas, III, K&M Douglas Trust, Douglas Family Trust, James Douglas and Jean Douglas Irrevocable Descendants’ Trust (2)			2,671,684				14.8	%
Becker Drapkin Management, L.P. (3)			1,894,565				10.5	%
Royce & Associates, LLC (4)			1,167,700				6.5	%
Dimensional Fund Advisors, LP (5)			929,519				5.1	%

 

(1)

Based on Amendment No. 3 to a Schedule 13D Beneficial Ownership Report filed on September 4, 2015 by Mariano Costamagna, Pier Antonio Costamagna, Bruna Giachino, and Carla Borgogno. The report discloses that the total shares beneficially owned by Mr. Mariano Costamagna include 1,584,589 shares held by Mariano Costamagna’s brother, Pier Antonio Costamagna, and his wife, to which he disclaims beneficial ownership. Total shares beneficially owned by Mr. Pier Antonio Costamagna include 1,634,185 shares held by Mr. Mariano Costamagna, and his wife, to which he disclaims beneficial ownership. Mr. Pier Antonio Costamagna retired as an executive officer of Fuel Systems and as General Manager of MTM S.r.L. effective February 5, 2014.

 

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(2)

Based on a Schedule 13D Beneficial Ownership Report filed on September 2, 2015 by Kevin Douglas, Michelle Douglas, James E. Douglas, III, K&M Douglas Trust, Douglas Family Trust, and James Douglas and Jean Douglas Irrevocable Descendants’ Trust. The Schedule 13D discloses that Kevin Douglas and his wife, Michelle Douglas, hold 1,056,671 shares jointly and as co-trustees of the K&M Douglas Trust. In addition, Kevin Douglas and Michelle Douglas are co-trustees of the James Douglas and Jean Douglas Irrevocable Descendants’ Trust, which holds 901,758 shares. The Schedule 13D also discloses that Kevin Douglas shares dispositive power with respect to 264,167 shares held by James E. Douglas, III and 449,088 shares held by the Douglas Family Trust, in addition to the shares previously listed. The principal business office of the Filers is located at 125 E. Sir Francis Drake Blvd., Suite 400, Larkspur, CA 94939.

(3)

Based on Amendment No. 4 to a Schedule 13D Beneficial Ownership Report filed on September 2, 2015 by Becker Drapkin Management, L.P., Becker Drapkin Partners (QP), L.P., Becker Drapkin Partners, L.P., BC Advisors, LLC, Steven R. Becker, and Matthew A. Drapkin. The report discloses that BC advisors, LLC, Steven R. Becker, and Matthew A. Drapkin have shared voting power and shared dispositive power on 1,894,565 shares. The report also discloses that: (i) Becker Drapkin Partners (QP), L.P. has sole voting power and sole dispositive power on 1,369,436 shares; (ii) Becker Drapkin Partners L.P. has sole voting power and sole dispositive power on 156,483 shares; and (iii) Becker Drapkin Management, L.P. has sole voting power and sole dispositive power on 368,646 shares, and shared voting power and shared dispositive power on 1,525,919 shares. The principal business office of the Filers is located at 500 Crescent Court, Suite 230, Dallas, TX 75201.

(4)	Based on a Schedule 13G Information Statement filed on January 9, 2015 by Royce & Associates, LLC. The schedule discloses that Royce & Associates, LLC holds 1,167,700 shares. The principal business office of the Filer is located at 745 Fifth Avenue, New York, NY 10151.

(5)	Based on a Form 13F Information Statement filed on August 14, 2015 by Dimensional Fund Advisors, LP. The schedule discloses that Dimensional Fund Advisors, LP holds 929,519 shares. The principal business office of the Filer is located at 6300 Bee Cave Road, Building One, Austin, TX 78746.

INFORMATION ABOUT MERGER SUB

Merger Sub, a direct, wholly owned subsidiary of Westport, is a Delaware corporation formed on August 28, 2015 for the purpose of effecting the merger. Upon completion of the merger, Merger Sub will merge with and into Fuel Systems, with Fuel Systems continuing as the surviving entity and a direct, wholly owned subsidiary of Westport. Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement, including the preparation of applicable regulatory filings in connection with the merger.

FUEL SYSTEMS SPECIAL MEETING

Date, Time and Place

The special meeting of Fuel Systems stockholders will be held on [●], 2015, at [●] a.m., Eastern time, at the offices of Day Pitney LLP, 7 Times Square, 20th Floor, New York, New York 10036. On or about [●], 2015, Fuel Systems commenced mailing this proxy statement/prospectus and the enclosed form of proxy to its stockholders entitled to vote at the Fuel Systems special meeting.

Purpose of the Fuel Systems Special Meeting

At the Fuel Systems special meeting, Fuel Systems stockholders will be asked to consider and vote solely on the following proposals:

 

•

Merger proposal: To approve the merger and adopt the merger agreement;

 

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•

Amendments to Non-Employee Directors’ Restricted Stock Awards proposal: To approve amendments to awards of restricted stock issued to Fuel Systems’ non-employee directors providing that the vesting date shall be the earlier of the vesting date set forth in the award or a change in control of the Fuel Systems;

 

•

Advisory Compensation proposal: To consider and vote on a proposal to approve, on an advisory (non-binding) basis, the payments that will or may be paid by Fuel Systems to its named executive officers in connection with the merger; and

 

•

Adjournment proposal: To consider and vote on a proposal to approve the adjournment of the Fuel Systems special meeting, if necessary to solicit additional proxies if there are not sufficient votes to approve the Merger proposal at the time of the Fuel Systems special meeting.

Recommendation of the Fuel Systems Board

The Fuel Systems board has unanimously determined that the merger is advisable and in the best interests of Fuel Systems and its stockholders and unanimously recommends that Fuel Systems stockholders vote:

 

•

“FOR” the Merger proposal;

 

•

“FOR” the Amendments to Non-Employee Directors’ Restricted Stock Awards proposal;

 

•

“FOR” the Advisory Compensation proposal; and

 

•

“FOR” the Adjournment proposal, if necessary.

See “The Merger—Fuel Systems Board of Directors’ Recommendation and its Reasons for the Merger.”

Fuel Systems Record Date; Stock Entitled to Vote

Only Fuel Systems stockholders of record at the close of business on [●], 2015, which is referred to as the Fuel Systems record date, will be entitled to notice of, and to vote at, the Fuel Systems special meeting or any adjournments thereof.

As of                     , 2015, the last practicable day before the filing of this proxy statement/prospectus, there were             shares of Fuel Systems common stock outstanding. Each share of Fuel Systems common stock outstanding on the Fuel Systems record date is entitled to one vote on each proposal to be considered at the Fuel Systems special meeting, in person or by proxy through the Internet or by telephone or by a properly executed and delivered proxy with respect to the Fuel Systems special meeting.

A complete list of stockholders entitled to vote at the Fuel Systems special meeting will be available for examination by any Fuel Systems stockholder at Fuel Systems’ headquarters, located at 780 Third Avenue, 25th Floor, New York, New York, 10017, for any purpose germane to the Fuel Systems special meeting, during ordinary business hours for a period of 10 days before the Fuel Systems special meeting and at the Fuel Systems special meeting.

Please also note that if you hold your shares in “street name” (that is, through a broker, bank or other nominee), you will need to bring a copy of a brokerage statement reflecting your stock ownership as of the record date and check in at the registration desk at the meeting.

Quorum

The presence at the meeting, in person or by proxy, of the holders of one-third of the aggregate voting power of the common stock outstanding on the record date will constitute a quorum, permitting the conduct of business at the special meeting. Abstentions and broker non-votes, if any, which are described below, will be treated as present for the purposes of determining the presence or absence of a quorum for each special meeting.

 

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Required Vote

 

1.

Merger proposal: The affirmative vote of holders of a majority of the outstanding shares of common stock entitled to vote. Abstentions and broker non-votes would have the same effect as a vote “AGAINST” the proposal.

 

2.

Amendments to Non-Employee Directors’ Restricted Stock Awards proposal: The affirmative vote of holders of a majority of the shares of common stock present in person or by proxy and entitled to vote at the special meeting. Abstentions would have the same effect as a vote “AGAINST” the proposal. Broker non-votes will have no effect on the outcome of this proposal.

 

3.

Advisory Compensation proposal: The affirmative vote of holders of a majority of the shares of common stock present in person or by proxy and entitled to vote at the special meeting. This vote is advisory and therefore not binding on the Fuel Systems board of directors. In reviewing the results of this advisory vote, the Board expects to consider votes cast “FOR” or “AGAINST” the proposal. Due to the unique nature of this advisory vote, the Board does not expect to consider abstentions as votes cast either in favor of or against the proposal in determining the outcome of this advisory vote. Broker non-votes will have no effect on the outcome of this proposal.

 

4.

The Adjournment proposal: The affirmative vote of holders of a majority of the shares of common stock present in person or by proxy and entitled to vote at the special meeting. Abstentions would have the same effect as a vote “AGAINST” the proposal. Broker non-votes will have no effect on the outcome of this proposal.

Voting of Proxies; Incomplete Proxies

Stockholders may vote by attending the special meeting and voting in person. We urge you to vote by proxy even if you plan to attend the special meeting so that we will know as soon as possible that enough votes will be present for us to hold the meeting. If you attend the meeting in person, you may vote at the special meeting and your proxy will not be counted.

You may also vote your shares without attending the special meeting. Stockholders may vote by using one of these alternative methods:

(1) Via the Internet at www.proxyvote.com;

(2) By telephone at 1-800-690-6903 and follow the instructions for telephone voting; or

(3) By completing and mailing a proxy card to Voting Processing c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

You may submit your vote by completing, signing, dating and returning the proxy card or voting instruction card in the postage-paid envelope enclosed with the paper copies of the materials. Sign your name exactly as it appears on the proxy card. If you provide specific voting instructions, your shares will be voted as you have instructed. Proxy cards submitted by mail must be received by Broadridge no later than [●], 2015 to be voted at the special meeting.

If you hold your shares in “street name” and you plan to vote in person at the special meeting, you must obtain a proxy from the bank, broker or other record holder to vote at the meeting. Please refer to the voter instruction cards used by your bank, broker or other record holder for specific instructions on methods of voting, including by telephone or using the Internet.

Your shares will be voted as you indicate. If you submit your proxy but you do not indicate your voting preferences, then the individuals named on the proxy will vote your shares in accordance with the recommendations of the Fuel Systems board of directors. The Fuel Systems board of directors and management

 

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do not currently intend to present any matters at the special meeting other than those outlined in the notice of the special meeting. Should any other matter requiring a vote of stockholders arise, stockholders submitting their proxy confer upon the individuals named in the proxy discretionary authority to vote the shares represented by such proxy on any such other matter in accordance with their best judgment.

Revocability of Proxies and Changes to a Fuel Systems’ Stockholder’s Vote

You may change your vote at any time before your proxy is voted at the Fuel Systems special meeting.

You may do this by:

 

•

sending a written notice, which is received prior to your vote being cast at the Fuel Systems special meeting, to the Secretary of Fuel Systems;

 

•

submitting a valid, later-dated proxy by mail, telephone or via the Internet that is received prior to your vote being cast at the Fuel Systems special meeting; or

 

•

attending the Fuel Systems special meeting and voting by ballot in person (your attendance at the special meeting will not, by itself, revoke any proxy that you have previously given).

If you hold your shares of Fuel Systems common stock through a broker or other nominee, you must follow the directions you receive from your broker or other nominee in order to revoke your proxy or change your voting instructions.

Solicitation of Proxies

Fuel Systems is soliciting this proxy on behalf of its board of directors by mail and will pay all expenses associated with this solicitation. Fuel Systems has engaged Laurel Hill Advisory Group to assist in the solicitation of proxies for the meeting and Fuel Systems estimates it will pay Laurel Hill Advisory Group a fee of approximately $7,500 (plus reimbursement of expenses) for these services. In addition to mailing or providing access to these proxy materials, certain of Fuel Systems’ officers, directors and other employees may, without compensation other than their regular compensation, solicit proxies by further mailing or personal conversations, or by e-mail, telephone, facsimile or other electronic means. Fuel Systems will also, upon request, reimburse brokers and other persons holding stock in their names, or in the names of nominees, for their reasonable out-of-pocket expenses for forwarding proxy materials to the beneficial owners of Fuel Systems common stock and obtaining proxies.

Voting by Fuel Systems’ Directors and Executive Officers

On [●], 2015, the Fuel Systems’ record date, directors and executive officers of Fuel Systems and their affiliates owned and were entitled to vote [●] shares of Fuel Systems common stock, or approximately     % of the total voting power of the shares of Fuel Systems common stock outstanding on that date. It is currently expected that Fuel Systems’ directors and executive officers will vote their shares of Fuel Systems’ common stock in favor of each of the proposals to be considered at the Fuel Systems special meeting, although none of them (other than Mr.  Costamagna) have entered into any agreements obligating them to do so.

Stockholders Should Not Send Certificates with Their Proxies

A letter of transmittal and instructions for the surrender of Fuel Systems common stock certificates or book-entry shares in exchange for the merger consideration will be mailed to Fuel Systems stockholders shortly after the completion of the merger.

 

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Attending the Fuel Systems Special Meeting

Subject to space availability, all Fuel Systems stockholders as of the Fuel Systems record date, or their duly appointed proxies, may attend the Fuel Systems special meeting. Since seating is limited, admission to the Fuel Systems special meeting will be on a first-come, first-served basis. Registration and seating will begin at [●], Eastern Time.

If you hold your shares of Fuel Systems common stock in your name as a stockholder of record and you wish to attend the Fuel Systems special meeting, please bring your proxy and evidence of your stock ownership, such as your most recent account statement, to the Fuel Systems special meeting. You should also bring valid picture identification.

If your shares of Fuel Systems common stock are held in “street name” in a stock brokerage account or by a bank or nominee and you wish to attend the Fuel Systems special meeting, you need to bring a copy of a bank or brokerage statement to the Fuel Systems special meeting reflecting your stock ownership as of the Fuel Systems record date. You should also bring valid picture identification.

No Other Business

Under Fuel Systems’ bylaws, the business to be conducted at the Fuel Systems special meeting will be limited to the purposes stated in the notice to Fuel Systems’ stockholders provided with this proxy statement/prospectus and any matters reasonably related thereto.

 

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FUEL SYSTEMS PROPOSALS

Item 1. The Merger Proposal

(Item 1 on Proxy Card)

As discussed throughout this proxy statement/prospectus, Fuel Systems is asking Fuel Systems’ stockholders to approve the Merger proposal. Fuel Systems stockholders should carefully read this proxy statement/prospectus in its entirety, including the annexes, for more detailed information concerning the merger agreement and the merger. In particular, Fuel Systems’ stockholders are directed to the merger agreement, a copy of which is attached as Annex A to this proxy statement/prospectus.

The Fuel Systems Board of Directors recommends a vote “FOR” the Merger proposal.

Item 2. Amendments to Non-Employee Directors’ Restricted Stock Awards Proposal

(Item 2 on Proxy Card)

On an annual basis after the Fuel Systems’ annual meeting of stockholders, the board of directors grants to each non-employee director a restricted stock award under the stockholder approved 2009 Restricted Stock Plan (the “Plan”). The award serves as a lump sum payment for a director’s services for the following year and represents approximately 40% of a director’s annual director compensation.

Under the terms of the award, a director that ceases to serve as a director of Fuel Systems for any reason before the vesting date (which is typically on or around the next annual meeting date) forfeits the award.

In light of the proposed merger, a Fuel Systems’ director who will not become a director of Westport would forfeit his award. During the period after the 2015 annual meeting of stockholders, the evaluation of strategic alternatives and the activities of the board in connection with the contemplated merger required a significant time commitment for directors.

In light of the consequence of the award being forfeited upon a change in control, the compensation committee asked its independent compensation consultant to review the situation and make a recommendation. The compensation consultant advised that the more common practice is for director equity grants to vest upon grant to encourage immediate alignment of interests with stockholders as well as the fostering of independence and objectivity for the director. The compensation consultant also advised that, based on its findings, in circumstances where director equity grants have deferred vesting terms, it is generally common practice for such grants to provide for accelerated vesting upon a change in control. Consequently, the compensation consultant recommended to the compensation committee that Fuel Systems’ existing unvested non-employee director restricted stock grants be amended to automatically vest upon a change in control and that, for future grants, the compensation committee consider granting restricted stock awards with immediate vesting to align with common practice. Based upon the report of the compensation consultant, the compensation committee recommended to the board of directors that the awards be amended to vest upon a change in control.

The Fuel Systems board of directors approved the amendment but made its effectiveness subject to stockholder approval. The approval of the amendment is not required by the terms of the Plan, stock exchange rules or otherwise. While the board agreed with the recommendation and reasoning of the compensation committee, it determined it was appropriate under the circumstances of a pending merger to seek stockholder approval for the vesting of the annual restricted stock award upon a change in control and determined to submit the amendment to stockholders for their consideration at the Fuel Systems special meeting.

The Fuel Systems board of directors formally approved the amendments, dated August 21, 2015 (the “Amendments”), to each applicable award set forth below (the “Awards”), which provide that the vesting date of

 

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any unvested restricted stock issued pursuant to each Award will be the earlier of (i) the vesting date set forth in the Award, or (ii) a change in control (as defined in the Plan); provided, that the Amendments will not be effective unless holders of a majority of the shares of Fuel Systems common stock present in person or by proxy and entitled to vote at the next shareholders’ meeting vote in favor of such amendment. The consummation of the proposed merger would constitute a “change in control” under the Plan and the Awards.

The unvested Awards to which the Amendments relate are described below:

 

Director

Restricted Stock Award

Issue Date

Vesting Schedule

Joseph E. Pompeo

6,054

May 28, 2015

May 18, 2016

Marco Di Toro

6,054

May 28, 2015

May 18, 2016

James W. Nall

6,054

May 28, 2015

May 18, 2016

Troy A. Clarke

6,054

May 28, 2015

May 18, 2016

Colin Johnston

6,054

May 28, 2015

May 18, 2016

Steven R. Becker

6,054

May 28, 2015

May 18, 2016

Anthony Harris (1)

6,054

May 28, 2015

May 18, 2016

Anthony Harris (1)

1,442

Dec. 31, 2013

1/3 vested on Dec. 31, 2014; 1/3 vests on Dec. 31, 2015; 1/3 vests on Dec. 31, 2016

 

(1)

In addition to the annual award issued to Mr. Harris on May 28, 2015 at the Fuel Systems 2015 Annual Meeting of Stockholders, Mr. Harris also holds 961 unvested shares as a result of the issuance of restricted stock on December 31, 2013 granted to Mr. Harris in connection with his appointment to the Fuel Systems board of directors.

If the Fuel Systems stockholders do not approve this proposal, the Awards will not vest as a result of the merger and (i) with respect to Fuel Systems’ non-employee directors that do not continue as directors of Westport following the closing of the merger, the Awards would be forfeited upon closing of the merger, and (ii) with respect to the Fuel Systems’ non-employee directors that continue as directors of Westport, the Awards would be converted to Westport common shares, as adjusted by the exchange ratio, and will vest on May 18, 2016 so long as that director continues as a director of Westport until that date.

If the Fuel Systems stockholders approve the Amendments, no Awards will be forfeited and all awards will vest for the non-employee directors upon the closing of the merger with Westport.

The Fuel Systems board of directors recommends a vote “FOR” the Amendments to Non-Employee Directors’ Restricted Stock Awards proposal.

Item 3. The Advisory Compensation Proposal

(Item 3 on Proxy Card)

In this proposal, Fuel Systems is asking its stockholders to approve, on an advisory (non-binding) basis, specified compensation that may be payable to Fuel Systems’ named executive officers in connection with the merger and therefore is asking stockholders to adopt the following resolution:

“RESOLVED, that the compensation that may be paid or become payable to Fuel Systems’ named executive officers in connection with the merger, as disclosed in the table in the section of the proxy statement/prospectus entitled “The Merger—Interests of Directors and Executive Officers in the Merger—Compensation Related to the Merger,” including the preceding narrative discussion, and the agreements pursuant to which such compensation may be paid or become payable, are hereby APPROVED.”

 

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The advisory vote on executive compensation payable in connection with the merger is a vote separate and apart from the vote to approve the merger and adopt the merger agreement, and approval of such executive compensation is not a condition to completion of the merger. Accordingly, you may vote to approve the merger and adopt the merger agreement and vote not to approve the advisory executive compensation and vice versa. Because the vote is advisory in nature only, it will not be binding on either Fuel Systems or Westport. Accordingly, to the extent Fuel Systems or Westport is contractually obligated to pay the compensation, the compensation will be payable to the named executive officers, subject only to the conditions applicable thereto, if the merger agreement is adopted and the merger completed, regardless of the outcome of the advisory vote.

The Fuel Systems board of directors recommends a vote “FOR” the Advisory Compensation proposal.

Item 4. The Adjournment Proposal

(Item 4 on Proxy Card)

The Fuel Systems’ special meeting may be adjourned to another time or place, if necessary to solicit additional proxies if there are insufficient votes at the time of the Fuel Systems’ special meeting to approve the Merger proposal.

If, at the Fuel Systems’ special meeting, the number of shares of Fuel Systems common stock present or represented by proxy and voting in favor of the merger and merger agreement is insufficient to approve the Merger proposal, Fuel Systems intends to move to adjourn the Fuel Systems special meeting in order to enable the Fuel Systems board of directors to solicit additional proxies for approval of the Merger proposal. In that event, Fuel Systems will ask its stockholders to vote only upon the Adjournment proposal, and not upon any other proposal.

In this proposal, Fuel Systems is asking Fuel Systems’ stockholders to authorize the holder of any proxy solicited by the Fuel Systems board of directors to vote in favor of granting discretionary authority to the proxy holders, and each of them individually, to adjourn the Fuel Systems’ special meeting to another time and place for the purpose of soliciting additional proxies. If the Fuel Systems’ stockholders approve the Adjournment proposal, Fuel Systems could adjourn the Fuel Systems’ special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from Fuel Systems’ stockholders who have previously voted.

The Fuel Systems’ board of directors recommends a vote “FOR” the Adjournment proposal, if necessary.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED

FINANCIAL INFORMATION

The unaudited pro forma condensed combined financial information (the “Pro Forma Financial Information”) of Westport and Fuel Systems reflect various adjustments to give effect to the following transaction, and the resulting tax effects:

 

•

Westport plans to acquire Fuel Systems, pursuant to the terms of the merger agreement, for approximately $151.6 million. The $151.6 million is the market value of the Westport common shares at October 9, 2015 to be issued in exchange for shares of Fuel Systems common stock as at the closing date of the merger. Each Fuel Systems share will convert into 2.129 Westport shares. The final purchase price will be based on the value of Westport’s common shares at the closing date of the merger.

The merger will be accounted for under the acquisition method of accounting for business combinations under U.S. GAAP, with Westport being the accounting and legal acquirer.

The unaudited pro forma condensed combined balance sheet as at June 30, 2015 (the “Pro Forma Balance Sheet”) is based on the historical consolidated balance sheets of Westport and Fuel Systems after giving effect to the merger as if it had occurred on June 30, 2015. Similarly, the unaudited pro forma condensed combined statements of operations and comprehensive (loss) income (the “Pro Forma Statements of Operations”) for the year ended December 31, 2014 and six months ended June 30, 2015 are based on the historical consolidated statements of operations and comprehensive loss of Westport and Fuel Systems after giving effect to the merger as if it had occurred on January 1, 2014.

The historical consolidated financial information has been adjusted in the Pro Forma Financial Information to give effect to pro forma events that are (i) directly attributable to the merger, (ii) factually supportable and (iii) with respect to the Pro Forma Statements of Operations, are expected to have a continuing impact on the results of operations.

The Pro Forma Financial Information and adjustments have been prepared based upon currently available information and certain assumptions, which are described in the accompanying notes thereto. Given that the acquisition method of accounting is dependent upon certain valuations and other analyses that have yet to be completed; the assumptions, estimates and adjustments reflected in the Pro Forma Financial Information are preliminary and subject to change. The determination of the final acquisition accounting and actual results may differ materially from the assumptions, estimates and adjustments reflected in the Pro Forma Financial Information. Furthermore, the accompanying Pro Forma Statements of Operations do not reflect the financial impact of any expected costs savings, synergies, integration costs or non-recurring activities and one-time transaction costs that may be realized or incurred in subsequent reporting periods.

The Pro Forma Financial Information are provided for information purposes only and are not intended to represent, or be indicative of, future anticipated financial results or the results that would have occurred had the merger been consummated on the dates indicated. The Pro Forma Financial Information and notes thereto should be read in conjunction with: (i) the historical audited and unaudited consolidated financial information and related notes of Westport, which are incorporated by reference into this proxy statement/prospectus, and (ii) the historical audited and unaudited consolidated financial information and related notes of Fuel Systems that are included in this proxy statement/prospectus.

 

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Westport Innovations Inc.

Unaudited Pro Forma Condensed Combined Balance Sheet

As At June 30, 2015

(In thousands, except per share data)

 

		Westport				Fuel Systems (as amended, Note 7)				Pro Forma Adjustments				Note Reference				Pro Forma Combined Westport/Fuel Systems
Assets
Current assets:
Cash and cash equivalents		$	59,937			$	48,583			$	—							$	108,520
Short-term investments			709				7,615				—								8,324
Accounts receivable			43,546				46,875				—								90,421
Inventories			37,517				72,782				—				4	(b)			110,299
Current portion of deferred income tax assets			2,924				1,861				—								4,785
Related party receivables			303				4,062				—								4,365
Other Assets			5,983				19,468				—				4	(a)			25,451
			150,919				201,246				—								352,165
Long-term investments			29,815				—				—								29,815
Other assets			2,980				1,393				—								4,373
Property, plant and equipment			47,771				43,588				—				4	(c)			91,359
Intangible assets			24,348				5,691				—				4	(d)			30,039
Deferred income tax assets			251				3,626				—				4	(a)			3,877
Goodwill			21,671				7,116				(7,116	)			4	(e)			21,671
			277,755				262,660				(7,116	)							533,299
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities			49,191				47,413				—								96,604
Assumed Liabilities			—				—				17,031				4	(f)			17,031
Current portion of deferred revenue			1,951				10,921				—								12,872
Current portion of deferred income tax liabilities			185				44				—								229
Current portion of long-term debt			19,272				97				—								19,369
Current portion of warranty liability			8,266				3,392				—								11,658
Related party payables			—				1,509				—								1,509
			78,865				63,376				17,031								159,272
Warranty liability			10,172				1,746				—								11,918
Long-term debt			52,389				—				—								52,389
Deferred revenue			2,594				2,080				—								4,674
Deferred income tax liabilities			4,276				783				—								5,059
Other long-term liabilities			1,398				5,906				—								7,304
			149,694				73,891				17,031								240,616
Shareholders’ equity:
Share capital:
Authorized:
Unlimited common shares, no par value
Unlimited preferred shares in series, no par value
Issued:
(102,867,947 post merger) Common shares			935,966				20				151,624				4	(g)			1,087,610
Shares held in treasury			—				(20,801	)			20,801				4	(h)			—
Other equity instruments			11,225				—				—								11,225
Additional paid in capital			9,837				321,286				(321,286	)			4	(i)			9,837
Accumulated deficit			(802,653	)			(72,020	)			84,871				4	(j)			(789,802	)
Accumulated other comprehensive (loss) income			(26,314	)			(39,843	)			39,843				4	(k)			(26,314	)
			128,061				188,642				(24,147	)							292,556
Non-Controlling Interest			—				127				—								127
Total stockholders’ equity			128,061				188,769				(24,147	)							292,683
Total liabilities and stockholders’ equity		$	277,755			$	262,660			$	(7,116	)						$	533,299

 

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Westport Innovations Inc.

Unaudited Pro Forma Condensed Combined Statement Of Operations And Comprehensive Loss

For the Year Ended December 31, 2014

(In thousands, except per share data)

 

		Westport				Fuel Systems (as amended, see Note 8)				Pro Forma Adjustments				Note Reference				Pro Forma Combined Westport/Fuel Systems
Product revenue		$	118,015			$	336,508			$	—							$	454,523
Service and other revenue			12,554				2,620				—								15,174
			130,569				339,128				—								469,697
Cost of revenue and expenses:
Cost of product and parts revenue			97,923				257,208				—								355,131
Research and development			76,580				23,051				—								99,631
General and administrative			40,319				37,718				—								78,037
Sales and marketing			25,489				18,020				—								43,509
Foreign exchange (gain) loss			(3,434	)			(1,061	)			—								(4,495	)
Depreciation and amortization			18,666				13,009				—								31,675
Bank charges, interest and other			703				829				—								1,532
Loss on disposal of assets			5,238				—				—								5,238
Provision for inventory purchase commitments			4,106				—				—								4,106
Intangible impairment			5,823				1,725				—								7,548
Goodwill impairment			18,543				39,938				—								58,481
Property, plant and equipment impairment			—				2,678				—								2,678
			289,956				393,115				—								683,071
Loss from operations			(159,387	)			(53,987	)			—								(213,374	)
Income from investments accounted for by the equity method			14,222				—				—								14,222
Interest on long-term debt and amortization of discount			(5,849	)			—				—								(5,849	)
Interest and other income			817				1,185				—								2,002
Bargain Purchase			—				—				—				5	(a)			—
Loss before income taxes			(150,197	)			(52,802	)			—								(202,999	)
Income tax expense (recovery) (note 20):																			—
Current			606				3,398				—								4,004
Deferred			(1,185	)			(2,788	)			—								(3,973	)
			(579	)			610				—								31
Net loss for the period		$	(149,618	)		$	(53,412	)		$	—							$	(203,030	)
Net loss (income) attributable to non-controlling interest			—				(4	)			—								(4	)
Net loss attributable to Westport Fuel Systems			(149,618	)			(53,416	)			—								(203,034	)
Other comprehensive (loss)			(15,201	)			(25,983	)			—								(41,184	)
Comprehensive loss		$	(164,819	)		$	(79,395	)		$	—							$	(244,214	)
Less: net comprehensive loss (income) attributable to the non-controlling interest			—				15				—								15
Comprehensive loss attributable to Westport Fuel Systems			(164,819	)			(79,380	)			—								(244,199	)
Loss per share:
Basic and diluted		$	(2.37	)		$	(2.66	)		$	—							$	(1.92	)
Weighted average common shares outstanding:
Basic and diluted			63,130,022				20,074,773				—								105,869,214

 

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Westport Innovations Inc.

Unaudited Pro Forma Condensed Combined Statement Of Operations And Comprehensive Loss

For the Six Months Ended June 30, 2015

(In thousands, except per share data)

 

		Westport				Fuel Systems (as amended, see Note 9)				Pro Forma Adjustments				Note Reference				Pro Forma Combined Westport/Fuel Systems
Product revenue		$	51,534			$	128,464			$	—							$	179,998
Service and other revenue			4,334				2,014				—								6,348
			55,868				130,478				—								186,346
Cost of revenue and expenses:
Cost of product and parts revenue			40,707				97,996				—								138,703
Research and development			26,237				9,442				—								35,679
General and administrative			17,001				19,225				(980	)			5	(b)			35,246
Sales and marketing			8,873				7,961				—								16,834
Foreign exchange (gain) loss			(4,049	)			(493	)			—								(4,542	)
Depreciation and amortization			7,082				5,573				—								12,655
Bank charges, interest and other			191				206				—								397
Impairment			3,419				—				—								3,419
			99,461				139,910				(980	)							238,391
Loss from operations			(43,593	)			(9,432	)			980								(52,045	)
Income from investments accounted for by the equity method			9,841				—				—								9,841
Interest on long-term debt and amortization of discount			(2,958	)			—				—								(2,958	)
Interest and other income			111				615				—								726
Loss before income taxes			(36,599	)			(8,817	)			980								(44,436	)
Income tax expense (recovery)			1,094				9,046				—								10,140
Net loss for the period		$	(37,693	)		$	(17,863	)		$	980							$	(54,576	)
Net loss (income) attributable to non-controlling interest			—				(6	)			—								(6	)
Net loss attributable to Westport Fuel Systems			(37,693	)			(17,869	)			980								(54,582	)
Other comprehensive (loss)			(10,821	)			(13,460	)			—								(24,281	)
Comprehensive loss		$	(48,514	)		$	(31,323	)		$	980							$	(78,857	)
Less: net comprehensive loss (income) attributable to the non-controlling interest			—				14				—								14
Comprehensive loss attributable to Westport Fuel Systems			(48,514	)			(31,309	)			980								(78,843	)
Loss per share:
Basic and diluted		$	(0.59	)		$	(0.95	)		$	—							$	(0.53	)
Weighted average common shares outstanding:
Basic and diluted			63,985,492				18,885,109				—								102,882,519

 

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Westport Innovations Inc.

Notes to the Unaudited Pro Forma Condensed Combined Financial Information

 

1.	Basis of Presentation

All financial data in these Pro Forma Financial Information are presented in U.S. dollars and have been prepared in accordance with accounting policies that conform to U.S. GAAP and the rules and regulations of SEC Regulation S-X.

Financial information in the Westport and Fuel Systems columns in the Pro Forma Balance Sheet represents the historical condensed consolidated balance sheets of Westport and Fuel Systems as at June 30, 2015. Financial information presented in the Westport and Fuel Systems columns in the Pro Forma Statement of Operations and Comprehensive Loss represents the historical consolidated statements of operations of Westport and Fuel Systems for the year ended December 31, 2014 and the six months ended June 30, 2015.

The proposed merger will be accounted for under the acquisition method of accounting for business combinations pursuant to Accounting Standards Codification (“ASC”) No. 805—Business Combinations. ASC No. 805 requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the proposed Merger date. ASC No. 820—Fair Value Measurements, which establishes a framework for measuring fair values, defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”

 

2.	Preliminary Purchase Consideration

Pursuant to the terms of the merger agreement, each share of Fuel Systems common stock issued and outstanding immediately prior to consummation of the proposed merger will be converted into 2.129 validly issued, fully paid and non-assessable Westport common shares. The exchange ratio will be adjusted appropriately to fully reflect the effect of any reclassification, stock split, reverse stock split or combination, exchange or readjustment of shares, or any stock dividend or distribution with respect to the shares of either Westport common shares or Fuel Systems common stock with a record date prior to completion of the merger as well in the event of certain other dilutive issuances by Westport. Based on this exchange ratio, the accompanying Pro Forma Financial Information reflect the preliminary purchase price for the proposed merger using Westport’s share price on the announcement date of October 9, 2015 as follows:

 

Purchase Consideration (in thousands, except share data)						Note Reference
Number of Fuel Systems common shares outstanding as of October 9, 2015			18,093,562				2	(iv)
Fuel Systems Restricted Stock Units			76,826				2	(i)
Fuel Systems Options			—				2	(ii)
Total number of Fuel Systems common shares outstanding as of close			18,170,388
Exchange ratio pursuant to the merger agreement			2.129
Number of Westport common shares to be issued to Fuel Systems shareholders			38,684,756
Add: Number of Westport shares outstanding and issued as of close			64,197,763				2	(iv)
Estimated number of common shares of the combined company			102,882,519
Westport USD stock price as at October 9, 2015		$	3.92
Implied consideration per share paid to Fuel Systems shareholders		$	8.35				2	(iii)
Total Preliminary Purchase Consideration		$	151,644

 

(i)

A total of 344,340 restricted stock units will be assumed by Westport and are subject to, the same terms and conditions, including vesting terms, as were applicable immediately prior to the Merger. Of those 344,340 restricted stock units, 76,826 are attributed to pre-combination services and will convert at the exchange ratio of 2.129 pursuant to the merger agreement. The pre-combination restricted stock units are measured at fair value.

 

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(ii)

Represents the estimated number of Fuel System options that are “in-the money” as at October 9, 2015. Fuel Systems stock price as assessed under the Treasury Stock Method. Pursuant to the terms of the merger agreement, options that are out of the money immediately prior to the Merger shall automatically be cancelled and forfeited for no consideration without any further action, and all rights with respect to such options shall terminate. As of October 6, 2015 all options are out of the money and are not expected to impact the pro-rata ownership of Westport and Fuel Systems upon consummation of the Merger.

(iii)

The preliminary purchase price assumes a per share market value of Westport common shares of $3.92, which was the last reported sale price of the Westport common shares on the NASDAQ on October 9, 2015. The preliminary purchase price is subject to change based on fluctuations in Westport’s stock price. A 10% difference in the market value of Westport’s common stock would change the preliminary estimated purchase price by approximately $15.2 million with a corresponding change to the resulting bargain purchase price.

(iv)	Fuel Systems common shares as of close are reconciled as follows:

 

Common shares outstanding as of June 30, 2015			18,093,562
Common shares issued between July 1, 2015 and close			—
Common shares outstanding as of close			18,093,562

Westport common shares of close are reconciled as follows:

 

Common shares outstanding as of June 30, 2015			64,172,920
Common shares issued between July 1, 2015 and close			24,843
Common shares outstanding as of close			64,197,763

 

3.	Preliminary Purchase Price Allocation

Assuming an acquisition date of June 30, 2015, the following is a preliminary estimate of the fair values of the assets to be acquired and the liabilities to be assumed by Westport from Fuel Systems in connection with the proposed merger:

 

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Initial Accounting for a Business Combination Is Incomplete and Amounts Recognized Have Been Determined Only Provisionally

The estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed. Westport believes that information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but Westport is waiting for additional information necessary to finalize those fair values. Therefore, the provisional measurements of fair value reflected are subject to change and such changes could be significant. Westport expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date.

 

Preliminary Purchase Price Allocation		June 30, 2015 Estimated Fair Values				Note Reference
Cash and cash equivalents		$	48,583			(i)
Short-term investments			7,615			(i)
Accounts receivable			46,875			(i)
Related Party Receivable			4,062			(i)
Inventories			72,782			(ii)
Deferred income tax assets			5,487
Other Assets			20,861			(i)
Property, plant and equipment			43,588			(iii)
Intangible assets			5,691			(iv)
Total Assets acquired			255,544
Accounts payable and accrued liabilities			47,413			(i)
Related Party Payables			1,509			(i)
Assumed Liabilities			10,031			(vi)
Deferred revenue			13,001			(v)
Deferred income tax liabilities			827
Long-term debt			97
Warranty liability			5,138			(v)
Other long-term liabilities			5,906			(i)
Total Liabilities Assumed			83,922
Net Assets acquired			171,622
Bargain Purchase			19,978
Estimated Preliminary Purchase Price		$	151,644

 

(i)

The book values of working capital accounts, such as cash and cash equivalents, accounts receivable, related party receivables, other assets, short-term investments, accounts payable, related party payables, accrued liabilities, deferred revenue, and other long-term liabilities, are assumed to be representative of their estimated fair values given the short time frame until settlement.

(ii)

A fair value estimate of $72.8 million has been allocated to inventories acquired. The fair value of inventories is estimated based on the retail value less the sum of costs of disposal and a reasonable profit allocation for the selling effort of a market participant. For purposes of these unaudited Pro Forma Financial Information, the preliminary fair value estimate is determined by Westport using its current information of Fuel Systems’. The current estimate of fair value could vary materially from the fair value recorded upon acquisition and once a full valuation and analysis is completed.

(iii)

A fair value estimate of $43.6 million has been allocated to property, plant and equipment. For purposes of these unaudited Pro Forma Financial Information, Westport has estimated the fair value based on its current knowledge of Fuel Systems’ property, plant and equipment. Accordingly, this estimate of fair value and the remaining useful lives of the property, plant and equipment could vary initially from the final fair value recorded upon acquisition and once a full valuation and analysis is completed.

 

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(iv)

A fair value estimate of $5.7 million has been allocated to intangible assets, primarily consisting of customer relationships, core technology and other intangibles. Westport has estimated the fair value and weighted-average useful lives based on its current knowledge of Fuel Systems. Accordingly, this estimate of fair value and the remaining useful lives of these intangibles could vary materially from the final fair value recorded upon acquisition and once a full valuation and analysis is completed,

(v)	Warranty liabilities of approximately $5.1 million and deferred revenue of $13.0 million on the historical financial information approximates the fair value of these financial obligations.

(vi)

The $10.0 million assumed liability is comprised of $1.1 million of compensation costs related to the change of control that will be triggered upon consummation of the merger, and $6.9 million of estimated transaction costs expected to be incurred by Fuel Systems subsequent to June 30, 2015 to complete the merger. An additional $2.0 million of assumed liabilities relate to the fair value post-combination services of 267,514 Fuel Systems restricted stock units discussed in footnote (i) under the “—Preliminary Purchase Consideration” section. The restricted stock units will convert at the exchange ratio of 2.129 pursuant to the merger agreement. Upon consummation of the merger, the 267,614 Fuel Systems restricted stock units will convert into 569,537 Westport restricted stock units.

 

4.	Notes to Pro Forma Balance Sheet Adjustments

The following summarizes the adjustments included in the “Pro Forma Adjustments” column in the accompanying Pro Forma Balance Sheet as of June 30, 2015:

 

(a)	Represents the estimated fair value assigned to other assets and deferred income tax assets acquired.

 

(b)	Represents the estimated fair value assigned to inventory acquired. See footnote (ii) under the “—Preliminary Purchase Price Allocation” section above for further discussion.

 

(c)	Represents the estimated fair value assigned to property, plant and equipment. See footnote (iii) under the “—Preliminary Purchase Price Allocation” section above for further discussion.

 

(d)	Represents the estimated fair value assigned to the intangible assets acquired. See footnote (iv) under the “—Preliminary Purchase Price Allocation” section above for further discussion.

 

(e)	Represents the estimated fair value assigned of $nil to goodwill acquired.

 

(f)	Represents $7.0 million of estimated transaction costs expected to be incurred by Westport subsequent to June 30, 2015 to complete the merger and $10.0 million of the assumed liabilities as described under note 3(vi) of the “—Preliminary Purchase Price Allocation” section above.

 

		(in thousands)
Accrual for Westport Merger related transaction fees		$	7,000
Accrual for Fuel Systems Merger related transaction fees and assumed liabilities			10,031
Net pro forma adjustment to assumed liabilities		$	17,031

 

(g)	Reflects adjustments to Westport and Fuel Systems combined common stock as follows:

 

		(in thousands)
Preliminary estimated purchase consideration		$	151,644
Elimination of Fuel Systems’ historical common stock			(20	)
Net pro forma adjustment to common stock		$	151,624

 

(h)	Reflects the elimination of Fuel Systems’ shares held in treasury of $20.8 million upon consummation of the Merger.

 

(i)	Reflects the elimination of Fuel Systems’ additional paid-in capital of $321.3 million upon consummation of the Merger.

 

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(j)	Reflects adjustments to Westport and Fuel Systems’ combined accumulated deficit as follows:

 

		(in thousands)
Elimination of Fuel Systems’ historical accumulated deficit		$	72,020
Add back portion of Fuel Systems’ historical accumulated deficit that relates to non-controlling interests			(127	)
Accumulated deficit adjustment related to Westport merger related transaction fees (see footnote 4(f))			(7,000	)
Bargain Purchase (see footnote 3)			19,978
Net pro forma adjustment to common stock		$	84,871

 

(k)	Reflects the elimination of Fuel Systems’ historical accumulated other comprehensive loss of $39.8 million upon consummation of the merger.

 

5.	Notes to the Pro Forma Statements of Operations and Comprehensive Loss

Adjustments included in the Pro forma Adjustments column are described as follows:

 

(a)	In accordance with SEC Regulation S-X, the bargain purchase of $20.0 million recognized as a result of the preliminary purchase allocation (note 3) has not been recognized given that it is not expected to have a continuing impact on the future results of operations.

 

(b)

The tax rules for each separate jurisdiction may require a different treatment for bargain purchases than that required under U.S. GAAP. Tax rules often require the allocation of negative goodwill to certain assets through the use of the residual method, resulting in decreased tax bases. In the United States, for example, for tax purposes, the acquisition price is assigned to assets categorized in seven distinct asset classes, first to the assets in Class I and then successively through to Class VII. The consideration transferred is not allocated to a successive class until it has been allocated to the assets in the previous class based on their full fair values. This methodology can result in several classes of assets without tax bases and in temporary differences for a significant portion of all assets. The allocation of negative goodwill to reduce the tax bases of acquired net assets causes the book bases to exceed their respective tax bases, resulting in the recognition of deferred tax liabilities. The recognition of deferred tax liabilities then results in a reduction in the bargain purchase gain for financial reporting, and may result in the recognition of goodwill.

 

(c)

Represents the elimination of $1.0 million of Westport and Fuel System transaction costs incurred during the six months ended June 30, 2015. In accordance with SEC Regulation S-X, these transaction costs have been removed given that they are not expected to have a continuing impact on the future results of operations.

 

6.	Earnings per Share (“EPS”)

The pro forma combined basic and diluted EPS metrics have been adjusted to reflect the pro forma combined net loss for the six months ended June 30, 2015 and the pro forma combined net loss for the year ended December 31, 2014. In addition, the number of shares used in calculating the pro forma combined basic and diluted net loss per share has been adjusted to reflect the estimated total number of shares of common stock of Westport that would be outstanding as of the closing of the proposed merger. The pro forma amount of Westport shares is calculated by multiplying each Fuel Systems share by the exchange ratio of 2.129.

The pro forma total number of shares of common stock of the combined company that would be outstanding after the closing of the proposed Merger is 102,882,519. See the “—Preliminary Purchase Consideration” section above for additional information.

 

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Following the consummation of the merger, Westport shareholders are expected to hold 62.4% of the shares of the combined company and Fuel systems is expected to hold 37.6% of the shares of the combined company.

 

		June 30, 2015								December 31, 2014
		No. of shares used to compute net loss per share				Net loss per common share				No. of shares used to compute net loss per share				Net loss per common share
		(in thousands)								(in thousands)
Westport Historical			63,985			$	(0.59	)			63,130			$	(2.37	)
Fuel Systems Historical			18,885				(0.95	)			20,075				(2.66	)
Pro Forma Combined Westport/Fuel Systems			102,883			$	(0.53	)			105,869			$	(1.92	)

 

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7.	Amended Fuel Systems historical balance sheet to conform to Westport’s presentation

Fuel Systems Solutions, Inc.

Unaudited Condensed Consolidated Balance Sheets

As at June 30, 2015

(in thousands, except share data)

Reclassification adjustments represent adjustments to conform the presentation of Fuel Systems’ historical statements of operations to Westport’s historical balance sheet.

 

		Fuel Systems (as reported)				Adjustments				Note		Fuel Systems (as amended)
Assets
Current assets:
Cash and cash equivalents		$	48,583			$	—					$	48,583
Short-term investments			7,615				—						7,615
Accounts receivable			46,875				—						46,875
Inventories			72,782				—						72,782
Current portion of deferred income tax assets			1,861				—						1,861
Related party receivable			4,062				—						4,062
Other Assets			19,468				—						19,468
			201,246				—						201,246
Other assets			1,393				—						1,393
Property, plant and equipment			43,588				—						43,588
Intangible assets			5,691				—						5,691
Deferred income tax assets			3,626				—						3,626
Goodwill			7,116				—						7,116
		$	262,660			$	—					$	262,660

 

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7.	Amended Fuel Systems historical balance sheet to conform to Westport’s presentation (continued):

 

Reclassification adjustments represent adjustments to conform the presentation of Fuel Systems’ historical statements of operations to Westport’s historical balance sheet.

 

		Fuel Systems (as reported)				Adjustments				Note		Fuel Systems (as amended)
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities		$	27,800			$	19,613			7(i)		$	47,413
Accrued expenses			33,284				(33,284	)		7(i)			—
Income taxes payable			642				(642	)		7(i)			—
Current portion of deferred revenue			—				10,921			7(i)			10,921
Current portion of deferred income tax liabilities			44				—						44
Current portion of long-term debt			97				—						97
Related party payables			1,509				—						1,509
Current portion of warranty liability			—				3,392			7(i)			3,392
			63,376				—						63,376
Warranty liability			—				1,746			7(ii)			1,746
Long-term debt			—				—						—
Deferred revenue			—				2,080			7(ii)			2,080
Deferred income tax liabilities			783				—						783
Other long-term liabilities			9,732				(3,826	)		7(ii)			5,906
			73,891				—						73,891
Shareholders’ equity:
Share capital:
Authorized:
Unlimited common shares, no par value
Unlimited preferred shares in series, no par value
Issued:
Common shares			20				—						20
Shares held in treasury			(20,801	)			—						(20,801	)
Other equity instruments							—						—
Additional paid in capital			321,286				—						321,286
Accumulated deficit			(72,020	)			—						(72,020	)
Accumulated other comprehensive income			(39,843	)			—						(39,843	)
			188,642				—						188,642
Non-controlling interest			127				—						127
Total Equity			188,769				—						188,769
Total Liabilities and Equity		$	262,660			$	—					$	262,660

 

(i)

Accrued Expenses includes $3.4 million of accrued warranty, $19.0 million of accounts payable and accrued liabilities, and $10.9 million of deferred revenue, and have been reclassified to conform with Westport’s presentation. $0.6 million of income tax payable has been reclassified to accounts payable and accrued liabilities.

(ii)	Other liabilities include $1.7 million of accrued warranty, $2.1 million of deferred revenue, and have been reclassified to conform with Westport’s presentation.

 

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8.	Amended Fuel Systems financial information to conform to Westport’s presentation

Fuel Systems Solutions, Inc.

Unaudited Statement of Operations and Comprehensive Loss

For the Year Ended December 31, 2014

(in thousands, except share data)

Reclassification adjustments represent adjustments to conform the presentation of Fuel Systems’ historical statements of operations to Westport’s historical statements of operations.

 

		Fuel Systems				Reclassification Adjustments				Note Reference		Fuel Systems (as amended)
Product revenue		$	339,128			$	(2,620	)		8(i)		$	336,508
Service and other revenue			—				2,620			8(i)			2,620
			339,128				—						339,128
Cost of revenue and expenses:
Cost of product and parts revenue			264,471				(7,263	)		8(ii)			257,208
Research and development			26,194				(3,143	)		8(iii)			23,051
General and administrative			—				37,718			8(iv)			37,718
Sales and marketing			—				18,020			8(iv)			18,020
Selling, general and administrative expense			58,341				(58,341	)		8(iv)			—
Foreign exchange (gain) loss			—				(1,061	)		8(vii)			(1,061	)
Depreciation and amortization			—				13,009			8(ii), (iii), (iv) and (v)			13,009
Bank charges, interest and other			—				829			8(viii)			829
Intangible impairment			—				1,725			8(x)			1,725
Goodwill impairment			—				39,938			8(x)			39,938
Property, plant and equipment impairment			—				2,678			8(x)			2,678
Impairments			44,341				(44,341	)		8(x)			—
			393,347				(232	)					393,115
Loss from operations			(54,219	)			232						(53,987	)
Interest income			980				(980	)		8(ix)			—
Interest expense			(829	)			829			8(viii)			—
Other income (expenses), net			1,266				(1,266	)		8(vi)			—
Interest and other income			—				1,185			8(vii), (ix), (vi)			1,185
Loss before income taxes			(52,802	)			—						(52,802	)
Income tax expense (recovery) (note 20):
Current			610				2,788						3,398
Deferred							(2,788	)					(2,788	)
			610				—						610
Net loss for the period			(53,412	)			—						(53,412	)
Net loss (income) attributable to non-controlling interest			(4	)			—						(4	)
Net loss attributable to Fuel Systems Solutions, Inc.			(53,416	)			—						(53,416	)
Other comprehensive loss, net of tax except for foreign currency items			(25,983	)			—						(25,983	)
Comprehensive loss			(79,395	)			—						(79,395	)
Less: net comprehensive loss attributable to the non-controlling interest			15				—						15
Comprehensive loss attributable to Fuel Systems Solutions, Inc.		$	(79,380	)		$	—					$	(79,380	)

 

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(i)	Fuel Systems does not disaggregate its revenue into product revenue and service and other revenue. Within Fuel Systems’ revenue is $2.6 million of service and other revenue which has been reclassified to conform with Westport’s historical statement of operations.

(ii)	Fuel Systems includes depreciation and amortization within cost of product and parts revenue. $7.3 million of depreciation and amortization has been reclassified from cost of product and parts revenue to conform with Westport’s historical statement of operations.

(iii)

Fuel Systems includes depreciation and amortization within research and development expenses. $3.1 million of depreciation and amortization has been reclassified from research and development to conform with Westport’s historical statement of operations.

(iv)

Fuel Systems records all general and administrative and sales and marketing expenses in selling, general and administrative expenses. To conform with Westport’s historical statement of operations $39.7 million has been reclassified to general and administrative expenses and $18.6 million to sales and marketing. General and administrative expenses includes $2.0 million of depreciation and amortization which has been reclassified to conform with Westport’s historical statement of operations. Sales and marketing includes $0.6 million of depreciation and amortization which has been reclassified to conform with Westport’s historical statement of operations.

(v)

Fuel Systems uses function based presentation whereas depreciation and amortization are consolidated into each associated financial information line item. As Westport used nature presentation, Westport has reclassified Fuel Systems depreciation and amortization from these associated financial information line items to one consolidated line (“Depreciation and Amortization”) to conform with Westport’s historical statement of operations. Depreciation and amortization is made up of the following:

 

 

(vi)	Fuel Systems recognized $1.3 million of other income (expenses), net. To conform with Westport’s historical statement of operations $1.3 million of other income (expenses), net has been reclassified to interest and other income.

(vii)

Fuel Systems recognized $1.1 million of net gains on foreign exchange in other income (expenses), net. To conform with Westport’s presentation $1.1 million of net gains on foreign exchange has been reclassified to foreign exchange (gain) loss.

(viii)

Fuel Systems recognized $0.8 million of interest expense. To conform with Westport’s historical statement of operations $0.8 million of interest expense has been reclassified to bank charges, interest and other.

(ix)	Fuel Systems recognized $1.0 million of interest income. To conform with Westport’s historical statement of operations $1.0 million of interest expense has been reclassified to interest and other income.

(x)	Fuel Systems recognized $44.3 million of impairments. To conform with Westport’s historical statement of operations $1.7 million of intangible impairment, $39.9 million of goodwill impairment, and $2.7 million of property, plant and equipment impairment have been reclassified.

 

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9.	Amended Fuel Systems financial information to conform to Westport’s presentation

Fuel Systems

Unaudited Statement of Operations and Comprehensive Loss

For the six months ended June 30, 2015

(in thousands, except share data)

Reclassification adjustments represent adjustments to conform the presentation of Fuel Systems’ historical statements of operations to Westport’s historical statements of operations.

 

		Fuel Systems				Reclassification Adjustments				Note Reference		Fuel Systems (as amended)
Product revenue		$	130,478			$	(2,014	)		9(i)		$	128,464
Service and other revenue			—				2,014			9(i)			2,014
			130,478				—						130,478
Cost of revenue and expenses:
Cost of product and parts revenue			101,001				(3,005	)		9(ii)			97,996
Research and development			10,815				(1,373	)		9(iii)			9,442
General and administrative			—				19,225			9(iv)			19,225
Sales and marketing			—				7,961			9(iv)			7,961
Selling, general and administrative expense			28,381				(28,381	)		9(iv)			—
Foreign exchange (gain) loss			—				(493	)		9(vii)			(493	)
Depreciation and amortization			—				5,573			9(ii),(iii),(iv),(v)			5,573
Bank charges, interest and other			—				206			9(viii)			206
			140,197				(287	)					139,910
Loss from operations			(9,719	)			287						(9,432	)
Interest income (expense), net			28				(28	)		9(viii)			—
Other income (expenses), net			874				(874	)		9(vi)			—
Interest and other income			—				615			9(vii),(viii),(vi)			615
Loss before income taxes			(8,817	)			0						(8,817	)
Income tax expense (recovery)			9,046				—						9,046
Net loss for the period			(17,863	)			—						(17,863	)
Net loss (Income) attributable to non-controlling interest			(6	)			—						(6	)
Net loss attributable to Fuel Systems Solutions, Inc.			(17,869	)			—						(17,869	)
Other comprehensive loss, net of tax except for foreign currency items			(13,460	)			—						(13,460	)
Comprehensive loss			(31,323	)			—						(31,323	)
Less: net comprehensive loss attributable to the non-controlling interest			14				—						14
Comprehensive loss attributable to Fuel Systems Solutions, Inc.		$	(31,309	)		$	—					$	(31,309	)

 

(i)	Fuel Systems does not disaggregate its revenue into product revenue and service and other revenue. Within Fuel Systems’ revenue is $2.0 million of service and other revenue which has been reclassified to conform with Westport’s historical statement of operations.

(ii)	Fuel Systems includes depreciation and amortization within cost of product and parts revenue. $3.0 million of depreciation and amortization has been reclassified from cost of product and parts revenue to conform with Westport’s historical statement of operations.

 

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(iii)

Fuel Systems includes depreciation and amortization within research and development expenses. $1.4 million of depreciation and amortization has been reclassified from research and development to conform with Westport’s historical statement of operations.

(iv)

Fuel Systems records all general and administrative and sales and marketing expenses in selling, general and administrative expenses. To conform with Westport’s historical statement of operations $20.2 million has been reclassified to general and administrative expenses and $8.2 million to sales and marketing. General and administrative expenses includes $1.0 million of depreciation and amortization which has been reclassified to conform with Westport’s historical statement of operations. Sales and marketing includes $0.2 million of depreciation and amortization which has been reclassified to conform with Westport’s historical statement of operations

(v)

Fuel Systems uses function based presentation whereas depreciation and amortization are consolidated into each associated financial information line item. As Westport used nature presentation, Westport has reclassified Fuel Systems depreciation and amortization from these associated financial information line items to one consolidated line (“Depreciation and Amortization”) to conform with Westport’s historical statement of operations. Depreciation and amortization is made up of the following:

 

 

(vi)	Fuel Systems recognized $0.9 million of other income (expenses), net. To conform with Westport’s historical statement of operations $0.9 million of other income (expenses), net has been reclassified to interest and other income.

(vii)

Fuel Systems recognized $0.5 million of net gains on foreign exchange in other income (expenses), net. To conform with Westport’s presentation $0.5 million of net gains on foreign exchange has been reclassified to foreign exchange (gain) loss.

(viii)

Fuel Systems recognized $0.2 million of bank charges, interest, other within interest income (expense), net. To conform with Westport’s historical statement of operations $0.2 million of interest income (expense), net has been reclassified to bank charges, interest and other. Fuel Systems recognized $0.2 million of interest income within interest income (expense). To conform with Westport’s historical statement of operations $0.2 million of interest income (expense) has been reclassified to interest and other income.

 

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COMPARISON OF RIGHTS OF STOCKHOLDERS

OF FUEL SYSTEMS AND SHAREHOLDERS OF WESTPORT

Fuel Systems is incorporated under the laws of the State of Delaware and, accordingly, the rights of the stockholders of Fuel Systems are currently governed by the DGCL. Westport is incorporated under the laws of Alberta, Canada and, accordingly, the rights of the shareholders of Westport are currently governed by the Business Corporations Act (Alberta) (the “ABCA”).

Upon completion of the merger, the Fuel Systems stockholders will become Westport stockholders. The rights of the former Fuel Systems stockholders and the Westport shareholders will therefore be governed by the ABCA and the certificate and articles of incorporation and the bylaws of Westport, each as amended from time to time.

The following description summarizes the material differences that may affect the rights of the stockholders of Fuel Systems and the shareholders of Westport, but is not a complete statement of all those differences, or a complete description of the specific provisions referred to in this summary. Stockholders of Fuel Systems should read carefully the relevant provisions of the DGCL and ABCA and the respective certificates and articles of incorporation and bylaws of Fuel Systems and Westport. For more information on how to obtain the documents that are not attached to this proxy statement/prospectus, see “Where You Can Find More Information” beginning on page [●].

 

		Rights of Fuel Systems Stockholders		Rights of Westport Stockholders
Outstanding Capital Stock		Fuel Systems has outstanding 18,093,562 shares of common stock as of October 9, 2015. Holders of Fuel Systems’ common stock are entitled to all of the respective rights and obligations provided to common stockholders under Delaware law and Fuel Systems’ Certificate of Incorporation and Bylaws.		Westport has outstanding 64,197,763 common shares as of October 9, 2015. Holders of Westport’s common shares are entitled to all of the respective rights and obligations provided to common shareholders under Alberta law and Westport’s Articles of Incorporation and Bylaws.
Authorized Capital Stock		The authorized capital stock of Fuel Systems consists of 200,000,000 shares of common stock, $0.001 par value per share, and 1,000,000 shares of preferred stock, $0.001 par value per share. As of October 9, 2015, no shares of Fuel Systems preferred stock were outstanding and Fuel Systems has no present plans to issue any shares of Fuel Systems preferred stock.		The authorized share capital of Westport includes an unlimited number of common shares and an unlimited number of preferred shares, issuable in series. As of October 9, 2015, no preferred shares of Westport had been issued.

 

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		Rights of Fuel Systems Stockholders		Rights of Westport Stockholders
Voting Rights		The holders of shares of common stock, on the basis of one vote per share, can vote to elect members of Fuel Systems’ Board of Directors and on other matters.		Each holder of Westport common shares is entitled to receive notice of and attend all meetings of Westport shareholders and shall have one vote for each common share held at all meetings of Westport shareholders, and can vote to elect members of the Westport Board of Directors and on other matters, except on matters for which, pursuant to the ABCA, only holders of another specified class or series of shares of Westport are entitled to vote separately as a class or series.
Dividend Rights		The holders of shares of common stock are entitled to receive dividends, at the rate and time as may be provided by Fuel Systems’ Board of Directors. The holders of shares of common stock are entitled to receive dividends to the extent provided by Fuel Systems’ Board of Directors.		Subject to any rights, privileges, restrictions and conditions which may have been determined by the Board of Directors of Westport, the Board of Directors has discretion to pay dividends on any class or classes of shares or on any series within a class of shares that are issued and outstanding, to the exclusion of any other class or classes of shares or any series within a class of shares. Westport may pay dividends unless there are reasonable grounds for believing that (1) Westport is, or would after such payment be, unable to pay its liabilities as they become due or (2) the realizable value of Westport’s assets would, as a result of the dividend, be less than the aggregate of its liabilities and stated capital of all classes of shares.
Special Meetings of Stockholders		Under the DGCL, a special meeting of stockholders may be called by the board of directors or by any other person authorized to do so in the certificate of incorporation or bylaws.   Under the ABCA, a special meeting of shareholders may be called by a corporation’s board of directors at any time. The registered holders or beneficial owners of not less than 5% of the issued common shares of a corporation that carry the right to vote at a meeting sought to be held may requisition the directors to call a meeting of shareholders for the purposes stated in the requisition, but the beneficial owners of shares do not acquire the direct right to vote at the meeting that is the subject of the requisition. Subject to specific exemptions set out in the ABCA, if the directors do not call the meeting within 21 days after receiving a request in compliance with this provision, any shareholder who signed the request may call the meeting.
		Fuel Systems’ Bylaws provide that a special meeting of stockholders may be called by an officer of Fuel Systems when directed by the Board of Directors or the Chief Executive Officer.		Westport’s Bylaws provide that a special meeting of shareholders may be called by the chairman of the Board of Directors or the President of Westport.

 

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		Rights of Fuel Systems Stockholders		Rights of Westport Stockholders
Quorum Requirements		Under Section 216 of the DGCL, the certificate of incorporation or bylaws of a corporation authorized to issue stock may specify the number of shares and/or other securities required to be present or represented by proxy at any meeting to transact business in order to constitute a quorum. Under the DGCL, in no event can a quorum consist of less than one-third of the shares entitled to vote at a meeting, except that, where a separate vote by a class or series is required, a quorum shall consist of no less than one-third of the shares of such class or series.
		Fuel Systems’ Bylaws provide that holders of one-third of the voting power of the issued and outstanding stock entitled to vote and present in person or by proxy at a meeting constitutes a quorum. If less than a quorum is present or represented at a meeting, those stockholders present may adjourn the meeting until a quorum is present or represented.		Westport’s Bylaws provide that two persons present and holding or representing by proxy at least 25% of shares entitled to vote at a shareholder meeting is a quorum.   Westport’s Bylaws also provide that a majority of the number of directors constitutes a quorum at any meeting of Westport’s Board of Directors.
Stockholder Proposals and Nominations of Candidates for Election to the Board of Directors		Fuel Systems’ Bylaws allow stockholders to propose business to be brought before an annual meeting and allow stockholders who are entitled to vote in the election of directors to nominate candidates for election to Fuel Systems’ Board of Directors.   Such proposals and nominations, however, may only be brought by a stockholder who has given timely notice in proper written form to Fuel Systems’ Secretary prior to the meeting.   In connection with an annual meeting, to be timely, notice of such proposals and nominations must be received by Fuel Systems’ Secretary not less than 70 days nor more than 90 days prior to the first anniversary of the preceding year’s annual meeting of stockholders; provided, however, that in the event the date of the annual meeting is advanced by more than 20 days or delayed by more than 70 days from such anniversary date, notice by the stockholder, to be timely, must be delivered not earlier than the ninetieth day prior to the annual meeting and not later than the close of business on the later of the seventieth day prior to the annual meeting or the tenth day following the day on which a public announcement of the date of the meeting is made.		Under the ABCA, a shareholder proposal may be made by an eligible registered holder of shares entitled to vote at an annual meeting of shareholders, or an eligible beneficial owner of shares, subject to certain conditions. A shareholder proposal may include nominations for the election of directors if such proposal is signed by one or more registered shareholders representing not less than 5% of the outstanding voting shares.   To be eligible to make a proposal, a shareholder must be the registered or beneficial owner of (i) at least 1% of all issued voting shares of the corporation or (ii) shares whose fair market value is at least C$2,000 on the close of business on the day before the shareholder submits the proposal, and those registered or beneficial holders must have held the shares for at least six months immediately prior to the submission of the proposal and continue to hold the shares up to and including the day of the meeting at which the proposal is to be made. The shareholder must also have the support of other registered or beneficial owners of shares representing at least 5% of the issued voting shares of the corporation.

 

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		Rights of Fuel Systems Stockholders		Rights of Westport Stockholders
		In connection with a special meeting, if the Fuel Systems’ Board of Directors has determined that directors are to be elected at a special meeting, notice for nominations by stockholders must be received not earlier than the opening of business on the ninetieth day prior to such special meeting and not later than the close of business on the later of the seventieth day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by Fuel Systems’ Board of Directors to be elected at such meeting.		Westport must set out a shareholder proposal in its management proxy circular, provided that notice of such proposal is given at least 90 days before the anniversary date of the previous annual meeting of shareholders.   Shareholders are not precluded from raising proposals, including nominations for directors, at shareholder meetings, except where: (i) a proposal has clearly been submitted by a shareholder primarily for the purpose of enforcing a personal claim or redressing a personal grievance against the corporation, its directors, officers or shareholders or any of them, or primarily for the purpose of promoting general economic, political, racial, religious, social or similar causes; (ii) the same shareholder had made a proposal within the previous two years which the shareholder failed to present at the meeting; (iii) within the previous two years substantially the same proposal had been set out in a circular relating to a shareholder meeting and the proposal was defeated; or (iv) a shareholder has submitted a proposal to secure publicity.
Stockholder Action by Written Consent		The DGCL allows action by written consent to be made by the holders of the minimum number of votes that would be needed to approve such a matter at an annual or special meeting of stockholders if all shares entitled to vote thereat were present and voted, unless this right to act by written consent is denied in the certificate of incorporation.   The ABCA allows that a resolution in writing by all of the shareholders entitled to vote on that resolution is as valid as if it had been passed at a meeting of shareholders.
		Fuel Systems’ Certificate of Incorporation and Bylaws provide that any action required or permitted to be taken by the stockholders of Fuel Systems must be effected at a duly called annual or special meeting of the stockholders and may not be effected by any written consent, unanimous or otherwise.
Number of Directors		The DGCL provides that the board of directors of a Delaware corporation must consist of one or more directors as fixed by the corporation’s certificate of incorporation or bylaws.

 

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		Rights of Fuel Systems Stockholders		Rights of Westport Stockholders
		An ABCA corporation’s articles of incorporation must set out the number of directors, or a minimum and maximum number of directors of the corporation, subject to certain restrictions. The ABCA provides that a board of directors of an ABCA corporation that is a distributing corporation and whose shares are held by more than one person must have no fewer than three directors, at least two of whom are not officers or employees of the corporation or its affiliates. The ABCA provides that at least 25% of the directors of an ABCA corporation must be resident Canadians.
		Fuel Systems’ Bylaws provide that the number of directors constituting the whole Fuel Systems Board of Directors is nine or such other number but not less than three, as determined by the Fuel Systems; Board of Directors from time to time. There are currently eight directors serving on the Fuel Systems Board of Directors.   Fuel Systems’ directors are divided into three classes, each class is elected for a three year term.   One-third of the total number of directors shall constitute a quorum.		Westport’s Articles of Incorporation provide that the number of directors constituting its Board of Directors must be not less than one and not more than 10. A majority of the directors constitutes a quorum.   Westport’s Bylaws specify that: (i) a director not elected for an expressly stated term ceases to hold office at the close of the first annual meeting of shareholders following his or her election; and (ii) if directors are not elected at a meeting of shareholders, the incumbent directors continue in office until their successors are elected.
Election of Directors		The DGCL provides that, unless the certificate of incorporation or bylaws provide otherwise, directors will be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote thereon.   The ABCA provides that, subject to a corporation’s articles of incorporation, shareholders of a corporation will, by ordinary resolution at the first meeting of shareholders and at each succeeding annual meeting at which an election of directors is required, elect directors to hold office for a term expiring not later than the close of the next annual meeting of shareholders following the election.
		Fuel Systems’ Bylaws provide that a director nominee is elected if a quorum is present at the meeting and there is an affirmative vote of the holders of a plurality of the voting power. There is not a right to cumulative votes in the election of Fuel Systems directors.		There is not a right to cumulative votes in the election of Westport’s directors under Westport’s Articles of Incorporation.
Filling Vacancies on the Board of Directors		Any vacancy on the Fuel Systems Board of Directors (whether resulting from an increase in the total number of directors or the departure of any director) may be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a		A quorum of the Westport Board of Directors may fill a vacancy on the Board of Directors, except a vacancy resulting from an increase in the fixed number or minimum number of directors or from a failure to elect the fixed number or minimum number of directors required

 

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		Rights of Fuel Systems Stockholders		Rights of Westport Stockholders
		quorum, or by the sole remaining director. Directors hold office until their successors are duly elected and qualified.		by Westport’s Articles of Incorporation. In the absence of a quorum, the directors then in office will forthwith call a special meeting of shareholders to fill the vacancy and if they fail to call such meeting or if there are no directors then in office, any shareholder may call the meeting.
Removal of Directors		Any Fuel Systems director may be removed from office at any time for cause, at a meeting called for that purpose, by the affirmative vote of the holders of at least 80 percent of the outstanding shares entitled to vote generally in the election of directors, voting as a single class.		The shareholders of Westport may by ordinary resolution passed at a special meeting remove any director or directors from office and the vacancy created by such removal may be filled at the same meeting, failing which it may be filled by a quorum of directors.
Limitation on Liability of Directors		Fuel Systems’ Certificate of Incorporation provides that no director will be personally liable to Fuel Systems or any of its stockholders for monetary damages for breach of fiduciary duty as a director of Fuel Systems, notwithstanding any provision of law imposing such liability, except for liability (i) for any breach of such director’s duty of loyalty to Fuel Systems or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which such director derived an improper personal benefit.   Such limitation of liability for Fuel Systems’ directors will not eliminate or limit the liability of a director for any act or omission occurring prior to June 22, 2006. Any amendment or repeal to such limitation of liability in Fuel Systems’ Certificate of Incorporation will not adversely affect any right or protection of a director under the DGCL existing at the time of such repeal or modification, and will not apply to or have any effect on the liability or allegedly liability of any director with respect to any acts or omissions of such director occurring prior to such amendment or repeal.		Westport’s Bylaws provide that no director for the time being of Westport will be liable for the acts, receipts, neglects or defaults of any other director, officer or employee, or for joining in any receipt or act for conformity, or for any loss, damage or expense happening to Westport through the insufficiency of title to any property acquired by Westport or for or on behalf of Westport or for the insufficiency or deficiency of any security in or upon which any of the moneys of or belonging to Westport will be placed or invested, or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person, firm or corporation including any person, firm or corporation with whom or with which moneys, securities or effects will be lodged or deposited for any loss, conversation, misapplication or misappropriation of or any damage resulting from any dealings with moneys, securities or other assets of or belonging to Westport or for any other loss, damage or misfortune whatsoever which may happen in the execution of the duties of his or her respective office or trust or in relation thereto unless the same will happen by or through his or her failure to exercise the powers and to discharge the duties of his or her office honestly and in good faith with a view to the best

 

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		Rights of Fuel Systems Stockholders		Rights of Westport Stockholders
				interests of Westport and through a failure to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
Indemnification of Directors and Officers		Under the DGCL, a Delaware corporation must indemnify its present or former directors and officers against expenses (including attorneys’ fees) actually and reasonably incurred to the extent that the officer or director has been successful on the merits or otherwise in defense of any action, suit or proceeding brought against him or her by reason of the fact that he or she is or was a director or officer of the corporation.   The DGCL generally permits a Delaware corporation to indemnify directors and officers against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement of any action or suit for actions taken in good faith and in a manner they reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action, which they had no reasonable cause to believe was unlawful; provided, that in an action by or in the right of the corporation such indemnification is limited to expenses (including attorneys’ fees).   Under the ABCA, except in respect of an action by or on behalf of the corporation to procure a judgment in its favor, a corporation may indemnify a director or officer of the corporation, a former director or officer of the corporation, or a person who acts or has acted at the corporation’s request as a director or officer of a corporation of which the corporation is or was a shareholder or creditor, and the director’s or officer’s heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the director or officer in respect of any civil, criminal or administrative action or proceeding to which the director or officer is made a party by reason of being or having been a director or officer of that corporation, if (i) the director or officer acted honestly and in good faith with a view to the best interests of the corporation, and (ii) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the director or officer had reasonable grounds for believing that his or her conduct was lawful.
		Fuel Systems’ Bylaws provide that Fuel Systems will, to the fullest extent permitted by law, indemnify any person made party or threatened to be made a party to any action or proceeding by reason of the fact that the person is or was a director or officer of Fuel Systems or is or was serving at Fuel Systems’ request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. Fuel Systems may indemnify any person made party to a proceeding by reason of the fact that the person is or was an employee or agent of Fuel Systems.		The ABCA also permits a corporation to advance funds to a person to defray the costs, charges and expenses of a proceeding to which indemnification may relate, provided that any such advances are repaid if the director or officer is not successful on the merits in their defense of the action or proceeding.   Westport’s Bylaws provide that Westport will indemnify the directors and officers, former directors and officers, and persons who act or acted at Westport’s request as directors or officers of a corporation of which Westport is or was a shareholder

 

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		Rights of Fuel Systems Stockholders		Rights of Westport Stockholders
		The DGCL and Fuel Systems’ Bylaws permit Fuel Systems to maintain insurance to protect any such person against any such expense, liability or loss, whether or not Fuel Systems would have the power to indemnify such person against such expense, liability or loss under applicable law, Fuel Systems’ Certificate of Incorporation or Bylaws.		or creditor, and his or her heirs and legal representatives, as set out in the ABCA.
Amendments to Certificate of Incorporation		Under the DGCL, an amendment to the certificate of incorporation requires (i) the approval of the board of directors, (ii) the approval of a majority of the outstanding stock entitled to vote upon the proposed amendment and (iii) the approval of the holders of a majority of the outstanding stock of each class entitled to vote thereon as a class.   Under the ABCA, an amendment to the Articles of Incorporation of Westport generally requires the approval of not less than two-thirds of the votes cast by shareholders entitled to vote upon the proposed amendment. The ABCA may also require separate approval by the holders of a class or series of shares for certain amendments. If the amendment is of a nature affecting a particular class or series in a manner requiring a separate class or series vote, that class or series is entitled to vote on the amendment whether or not it otherwise carries the right to vote.
		Fuel Systems’ Certificate of Incorporation generally provides that it may be amended or repealed by the affirmative vote of the holders of a majority of the outstanding shares and to the extent, if any, provided by a resolution of the Fuel Systems Board of Directors providing for the issuance of a series of common or preferred stock, a majority of the outstanding shares of each series entitled to vote on the amendment or repeal of any provision contained in the Fuel Systems Certificate of Incorporation, subject to certain limitations.
Amendments to Bylaws		Fuel Systems’ Bylaws provide that the Bylaws may be amended, added to, rescinded or repealed at any meeting of the Board of Directors or the stockholders; provided, however, that notwithstanding any other provisions of Fuel Systems’ Bylaws, the affirmative vote of the holders of at least 80 percent in voting power of all shares of Fuel Systems entitled to vote generally in the election of directors, voting together as a		The ABCA provides that the directors may, by resolution, make, amend or repeal any bylaws that regulate the business or affairs of the corporation. The directors must submit the bylaw, or an amendment or a repeal of a bylaw, to the shareholders at the next shareholder meeting and the shareholders may, by ordinary resolution, confirm, reject or amend the bylaw, amendment or repeal.

 

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		Rights of Fuel Systems Stockholders		Rights of Westport Stockholders
		single class, is required for stockholders to alter, amend or repeal provisions of Fuel Systems’ Bylaws regarding amendments, the stockholder special meetings, stockholder nominations and proposals, annual meeting of stockholders, board of director number and classes, board of director vacancies or removal of directors.
Certain Business Combinations		Section 203 of the DGCL prohibits a Delaware corporation from engaging in a business combination with a stockholder that owns more than 15% of the outstanding voting stock, or a stockholder acquiring more than 15% but less than 85% of the corporation’s outstanding voting stock, for three years following the time that person becomes an “interested stockholder” unless (i) prior to such time, the board of directors approves either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder, or (ii) the business combination is approved by the board of directors and by the affirmative vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder.   The ABCA does not contain a prohibition on business combinations with certain shareholders. Rules or policies of certain Canadian securities regulatory authorities, including Multilateral Instrument 61-101 —Protection of Minority Security Holders in Special Transactions (“MI 61-101”) of the Canadian Securities Administrators contain requirements in connection with “related party transactions.” A related party transaction means, generally, any transaction by which an issuer, directly or indirectly: (i) acquires, sells, leases or transfers an asset; (ii) acquires or issues securities; (iii) assumes or becomes subject to a liability; or (iv) borrows money or lends money from or to, as the case may be, a related party by any means in any one or any combination of transactions. “Related party” (as defined in MI 61-101) includes (i) directors and senior officers of the issuer, (ii) holders of voting securities of the issuer carrying more than 10% of the voting rights attached to all the issuer’s outstanding voting securities, and (iii) holders of a sufficient number of any securities of the issuer to materially affect control of the issuer.   MI 61-101 provides that, in connection with a “related party transaction” (in addition to any other required shareholder approval), Westport is required, subject to the availability of certain exceptions, to: (i) provide specific disclosure in the proxy circular sent to security holders in connection with a related party transaction where a meeting is required; (ii) obtain a formal valuation of the subject matter of the related party transaction and any non-cash consideration offered in connection therewith and provide a summary thereof in the proxy circular; and (iii) obtain the approval of a majority of the votes cast by shareholders other than the related party involved in the transaction.
		Fuel Systems has opted out of Section 203 of the DGCL.
Preemptive Rights of Stockholders		Preemptive rights do not exist with respect to shares of stock or securities convertible into shares of Fuel Systems stock.		Preemptive rights do not exist with respect to shares of Westport or securities convertible into shares of Westport.

 

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		Rights of Fuel Systems Stockholders		Rights of Westport Stockholders
Rights of Inspection		Section 219 of the DGCL requires a corporation to prepare, at least ten days before a meeting of stockholders, an alphabetically arranged list of stockholders entitled to vote at the meeting showing the address of each stockholder and the number of shares registered in the name of each stockholder. The list must be open to stockholders, for any purpose germane to the meeting for a period of at least ten days before the meeting, on a reasonably accessible electronic network or during ordinary business hours at the principal place of business of the corporation. The list must also be available for inspection by any stockholder present at the meeting of stockholders.   Section 220 of the DGCL provides a stockholder with the right to inspect and make copies and extracts, during ordinary business hours, of the corporation’s stock ledger, the list of the corporation’s stockholders and other books and records of the corporation, after making a written demand under oath stating his purpose, so long as the purpose is reasonably related to the person’s interest as a stockholder.
		Fuel Systems’ Bylaws require that an officer prepare an alphabetized list of the stockholders entitled to vote, and the number of shares that each stockholder owns, at an upcoming meeting and make the list available to Fuel Systems’ stockholders for examination, for any purpose germane to the meeting, during business hours on the ten days preceding the meeting at a place in the city where the meeting is to be held, as well as at the meeting.		The ABCA provides that directors and shareholders of a corporation, and their agents and legal representatives, may, during the usual business hours of the corporation and free of charge, inspect (i) the articles, bylaws and any unanimous shareholder agreement of the corporation and any amendments thereto, (ii) minutes of meetings and resolutions of shareholders, (iii) copies of notices of directors and notices of change of directors, (iv) the securities register maintained by the corporation which shows (a) the names and addresses of each securityholder, (b) the number of securities held by each securityholder, and (c) the date and particulars of the issue and transfer of each security, (v) copies of financial statements, reports and related information, and (vi) a register of disclosures made by directors or officers who are parties to or have material interests in actual or proposed material contracts or material transactions of the corporation.
Stockholder Rights Agreement		Fuel Systems has a stockholder protection rights agreement, originally dated as of June 27, 2006, pursuant to which the Board of Directors authorized and declared a dividend of one right in respect of each share of Fuel Systems’ common stock held as of the close of business on August 23, 2006, or issued thereafter and prior to the “Separation Time” under the rights agreement. The		Westport does not have a shareholder rights agreement.

 

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		Rights of Fuel Systems Stockholders		Rights of Westport Stockholders
		rights agreement was amended by Amendment No. 1 on July 21, 2009 to extend the expiration date to July 22, 2019. The rights agreement was further amended by Amendment No. 2 on September 11, 2015 in connection with the contemplated merger with Westport in order to provide that none of Westport, the newly formed merger subsidiary that is a wholly-owned subsidiary of Westport, or any of their affiliates or associates would be deemed to have triggered any provisions of the rights agreement by reason of the merger agreement and the transactions contemplated thereby. Pursuant to its terms, the rights agreement, as amended, would expire immediately prior to the consummation of the merger.
Shareholder Suits		Section 327 of the DGCL allows stockholders to bring derivative actions on behalf of the corporation to enforce the rights of the corporation. Before bringing an action, a stockholder plaintiff is required to make a demand on the directors of the corporation to assert the claim, unless the stockholder is able to show that making such demand would be futile. To maintain a derivative suit, a person must have been a stockholder at the time of the transaction that is the subject of the suit and must also generally maintain status as a stockholder throughout the duration of the suit. In certain circumstances, class action lawsuits are available to stockholders.   The ABCA provides that a complainant may apply to a court for permission to (i) bring an action in the name and on behalf of a corporation or any of its subsidiaries, or (ii) intervene in an action to which a corporation or any of its subsidiaries is a party, for the purpose of prosecuting, defending or discontinuing the action on behalf of the corporation or subsidiary.   Under the ABCA, no action may be brought and no intervention in an action may be made unless a court is satisfied that (i) the shareholder has given the requisite notice to the directors of the corporation or its subsidiary of the shareholder’s intention to apply to the court if the directors do not bring, diligently prosecute or defend or discontinue the action, (ii) the shareholder is acting in good faith, and (iii) it appears to be in the interests of the corporation or its subsidiary that the action be brought, prosecuted, defended or discontinued.   Additionally, the ABCA provides that in connection with such an action or intervention, the court may make any order it thinks fit, including (i) an order authorizing the complainant or any other person to control the conduct of the action, (ii) an order giving directions for the conduct of the action, (iii) an order directing that any amount adjudged payable by a defendant in the action shall be paid directly to former and present shareholders of the corporation or its subsidiary, or (iv) an order requiring the corporation or its subsidiary to pay reasonable legal fees incurred by the

 

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		Rights of Fuel Systems Stockholders		Rights of Westport Stockholders
		complainant in connection with the action. For these purposes, a complainant includes:   •    a registered holder or beneficial owner, or a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates,   •    a director or an officer or a former director or officer of a corporation or of any of its affiliates,   •    a creditor, or   •    any other person who, in the discretion of the court, is a proper person to make an application.
		Fuel Systems’ Bylaws provide that, unless otherwise consented to in writing, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the corporation, (ii) any action asserting a claim of breach of fiduciary duty owed by a director, officer or employee of Fuel Systems to the corporation or its shareholders, (iii) any action asserting a claim against Fuel Systems or any director, officer or employee of Fuel Systems arising pursuant to any provision of the DGCL or the Fuel Systems Certificate of Incorporation or Bylaws, or (iv) any action asserting a claim against Fuel Systems or any director, officer or employee of Fuel Systems governed by the internal affairs doctrine, shall be a state court located in Delaware, or a federal district court in Delaware if a state court does not have jurisdiction.

 

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LEGAL MATTERS

The validity of the Westport common shares will be passed upon for Westport by Bennett Jones LLP.

EXPERTS

The consolidated financial statements of Westport as of December 31, 2014 and for the year ended December 31, 2014, incorporated by reference in this Prospectus from the Company’s Annual Report on Form 40-F for the year ended December 31, 2014, and the effectiveness of Westport’s internal control over financial reporting, have been audited by Deloitte LLP, an independent registered public accounting firm, as stated in their reports, which is incorporated herein by reference (which reports (1) express an unqualified opinion on the financial statements and (2) express an adverse opinion on the effectiveness of internal control over financial reporting because of a material weakness which is described in the Management’s Annual report on Internal Control over financial reporting(revised)),. Such financial statements have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

The consolidated financial statements of Westport as of December 31, 2013 and for each of the years in the two-year period ended December 31, 2013, have been incorporated by reference herein in reliance upon the report of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.

The financial statements and management’s assessment of the effectiveness of internal control over financial reporting (which is included in Management’s Annual Report on Internal Control over Financial Reporting) incorporated in this proxy statement/prospectus by reference to Fuel Systems Solutions, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2014 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

SHAREHOLDER PROPOSALS

FOR NEXT ANNUAL MEETING

Westport

Westport will hold a regular annual general meeting of shareholders in 2016 regardless of whether the merger is completed, and may decide to hold a special meeting of its shareholders prior to that time (in addition to the meeting required to approve the issuance of the merger consideration) to the extent there is required business to be addressed.

A shareholder who is entitled to vote at the annual meeting of shareholders of Westport in respect of the fiscal year ending December 31, 2015 (to be held in 2016), may raise a proposal for consideration at such annual meeting. Westport will consider such proposal for inclusion in the proxy materials for the annual meeting in 2016 only if Westport’s Corporate Secretary receives such proposal (at 1750 West 75th Avenue, Suite 101, Vancouver, British Columbia) properly submitted pursuant to section 136 of the Business Corporations Act (Alberta), on or before the date in 2016 that is 90 days prior to April 30, 2016. The use of certified mail, return receipt, is advised.

Fuel Systems

Fuel Systems held its 2015 annual meeting of stockholders on May 27, 2015. If the merger is completed, Fuel Systems does not expect to hold an annual meeting of stockholders in 2016. In that case, stockholder proposals must be submitted to the Corporate Secretary of Westport in accordance with the procedures described above.

 

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If the merger is not completed, Fuel Systems will hold a 2016 annual meeting of stockholders. Fuel Systems expects that it would hold its 2016 annual meeting of stockholders during the spring of 2016. Fuel Systems will inform its stockholders of the date and time for the 2016 annual meeting through a filing with the SEC. Proposals of stockholders which are eligible under the rules of the SEC to be included in the Fuel Systems’ 2016 proxy materials must be received by Fuel Systems’ Secretary no later than December 16, 2015. If Fuel Systems change its 2016 annual meeting date to a date more than 30 days from the date of its 2015 annual meeting, then that deadline will be changed to a reasonable time before Fuel Systems begins to print and mail its proxy materials. If the date of the 2016 annual meeting is changed in a manner that alters the deadline, Fuel Systems will inform its stockholders through a filing with the SEC. In addition, according to the terms of Fuel Systems’ bylaws, any nominations for director at the 2016 annual meeting or any other business to be properly brought before the annual meeting by a stockholder should be officially submitted to Fuel Systems between February 27, 2016 and March 18, 2016. Any proposals or director nominations that are received in accordance with Fuel Systems’ bylaws but are not included in the proxy statement for the 2016 annual meeting may be voted on by the proxy holders at that meeting in their discretion. All proposals should be submitted by certified mail, return receipt requested. A stockholder wishing to present a nomination for election of a director or to bring any other matter before an annual meeting of stockholders should request a copy of Fuel Systems’ bylaws from the Secretary in order to conform to the requirements set forth in those bylaws.

WHERE YOU CAN FIND MORE INFORMATION

Westport and Fuel Systems file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any of this information at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or 202-942-8090 for further information on the public reference room. The SEC also maintains an Internet website that contains reports, proxy statements and other information regarding issuers, including Westport and Fuel Systems, who file electronically with the SEC. The address of that site is www.sec.gov. The information contained on the SEC’s website is expressly not incorporated by reference into this proxy statement/prospectus.

Westport also files reports, statements and other information with the applicable Canadian securities regulatory authorities. Westport’s filings are electronically available to the public from the Canadian System for Electronic Document Analysis and Retrieval, or SEDAR, the Canadian equivalent of the SEC’s EDGAR system, at www.sedar.com. The information contained on SEDAR is expressly not incorporated by reference into this proxy statement/prospectus.

Westport has filed with the SEC a registration statement on Form F-4 of which this proxy statement/prospectus forms a part. The registration statement registers the shares of Westport common shares to be issued to Fuel Systems stockholders in connection with the merger. The registration statement, including the attached exhibits and annexes, contains additional relevant information about Westport and Fuel Systems, respectively. The rules and regulations of the SEC allow Westport and Fuel Systems to omit certain information included in the registration statement from this proxy statement/prospectus.

In addition, the SEC allows Westport and Fuel Systems to disclose important information to you by referring you to other documents filed separately with the SEC. This information is considered to be a part of this proxy statement/prospectus, except for any information that is superseded by information included directly in this proxy statement/prospectus or incorporated by reference subsequent to the date of this proxy statement/prospectus as described below.

This proxy statement/prospectus incorporates by reference the documents listed below that Westport and Fuel Systems have previously filed with the SEC. They contain important information about the companies and their financial condition.

 

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Westport SEC Filings

 

•

Annual Report on Form 40-F for the fiscal year ended December 31, 2014, filed with the SEC on March 9, 2015, as amended by Form 40-F/A filed with the SEC on July 23, 2015 and as further amended by Form 40-F/A filed with the SEC on October 16, 2015;

 

•

Quarterly Report on Form 6-K for the quarter ended March 31, 2015, filed with the SEC on May 8, 2015;

 

•

Quarterly Report on Form 6-K for the quarter ended June 30, 2015, filed with the SEC on July 29, 2015;

 

•

Registration Statement on Form F-10, filed with the SEC on July 24, 2015, as amended by Form F-10/A filed with the SEC on August 6, 2015; and

 

•

Current Reports on Form 6-K filed with the SEC on March 27, 2015, May 1, 2015, July 29, 2015, September 10, 2015 and October 16, 2015 (other than the portions of those documents not deemed to be filed pursuant to the rules promulgated under the Exchange Act).

Fuel Systems SEC Filings

 

•

Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed with the SEC on March 12, 2015;

 

•

Quarterly Reports on Form 10-Q for the quarterly periods ending March 31, 2015 and June 30, 2015, filed with the SEC on May 7, 2015 and August 10, 2015, respectively;

 

•

Current Reports on Form 8-K filed with the SEC on April 28, 2015, April 30, 2015, May 28, 2015, July 27, 2015, September 1, 2015, September 2, 2015 and September 14, 2015 (other than the portions of those documents not deemed to be filed pursuant to the rules promulgated under the Exchange Act); and

 

•

Definitive Proxy Statement on Schedule 14A filed with the SEC on April 14, 2015.

To the extent that any information contained in any report on Form 8-K, or any exhibit thereto, was furnished to, rather than filed with, the SEC, such information or exhibit is specifically not incorporated by reference.

In addition, Westport and Fuel Systems incorporate by reference any future filings they make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement/prospectus and before the date of the Fuel Systems special meeting (excluding any current reports on Form 8-K to the extent disclosure is furnished and not filed). Those documents are considered to be a part of this proxy statement/prospectus, effective as of the date they are filed. In the event of conflicting information in these documents, the information in the latest filed document should be considered correct.

You can obtain any of the other documents listed above from the SEC, through the SEC’s web site at the address indicated above, or from Westport or Fuel Systems, as applicable, by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers:

 

By Mail:		By Mail:
Westport Innovations Inc.		Fuel Systems Solutions Inc.
Suite 101 – 1750 West 75th Avenue		780 Third Avenue
Vancouver, British Columbia V6P 6G2		New York, NY 10017
Attention: Investor Relations		Attention: Secretary
(604) 718-2046		(212) 502-7170

 

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These documents are available from Westport or Fuel Systems, as the case may be, without charge, excluding any exhibits to them unless the exhibit is specifically listed as an exhibit to the registration statement of which this proxy statement/prospectus forms a part. You can also find information about Westport and Fuel Systems at their Internet websites at www.westport.com and www.fuelsystemsolutions.com, respectively. Information contained on these websites does not constitute part of this proxy statement/prospectus.

If you are a stockholder of Fuel Systems, you may also obtain documents incorporated by reference into this document by requesting them in writing or by telephone from Laurel Hill Advisory Group, Fuel Systems’ proxy solicitor, at the following address and telephone numbers:

2 Robbins Lane, Suite 201

Jericho, New York 11753

Banks and Brokers Call (516) 933-3100

All Others Call Toll-Free (888) 742-1305

If you are a stockholder of Fuel Systems and would like to request documents, please do so by [●] to receive them before Fuel Systems’ special meeting. If you request any documents from Westport or Fuel Systems, Westport or Fuel Systems will mail them to you by first class mail, or another equally prompt means, within one business day after Westport or Fuel Systems, as the case may be, receives your request.

This document is a prospectus of Westport and is a proxy statement of Fuel Systems for the Fuel Systems special meeting. Neither Westport nor Fuel Systems has authorized anyone to give any information or make any representation about the merger or Westport or Fuel Systems that is different from, or in addition to, that contained in this proxy statement/prospectus or in any of the materials that Westport or Fuel Systems has incorporated by reference into this proxy statement/prospectus. Therefore, if anyone does give you information of this sort, you should not rely on it. The information contained in this document speaks only as of the date of this document unless the information specifically indicates that another date applies.

 

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Annex A—Merger Agreement

 

AGREEMENT AND PLAN OF MERGER

By and Among

WESTPORT INNOVATIONS INC.,

WHITEHORSE MERGER SUB INC.

And

FUEL SYSTEMS SOLUTIONS, INC.

Dated as of September 1, 2015

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TABLE OF CONTENTS

 

				Page
ARTICLE I. DEFINITIONS					2
Section 1.1		Definitions			2
ARTICLE II. THE MERGER					13
Section 2.1		Merger			13
Section 2.2		Closing			13
Section 2.3		Effective Time			13
Section 2.4		Organizational Documents			13
Section 2.5		Surviving Entity Directors			14
Section 2.6		Tax Consequences			14
ARTICLE III. EFFECT OF THE MERGER					14
Section 3.1		Effect on Shares			14
Section 3.2		Adjustments			14
Section 3.3		Exchange Fund; Exchange Agent			15
Section 3.4		Stock Options; Restricted Stock Units; Restricted Stock; Phantom Shares			18
Section 3.5		Withholding Rights			19
Section 3.6		Lost Certificates			19
Section 3.7		Dissenters’ Rights			19
Section 3.8		Fractional Shares			20
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY					20
Section 4.1		Organization and Qualification; Subsidiaries			20
Section 4.2		Organizational Documents			21
Section 4.3		Capital Structure			21
Section 4.4		Authority			22
Section 4.5		No Conflict; Required Filings and Consents			23
Section 4.6		Permits; Compliance with Law			23
Section 4.7		SEC Filings; Company Financial Statements			25
Section 4.8		Disclosure Documents			26
Section 4.9		Absence of Certain Changes or Events			27
Section 4.10		Employee Benefit Plans			27
Section 4.11		Labor and Other Employment Matters			28
Section 4.12		Material Contracts			28
Section 4.13		Litigation			29
Section 4.14		Environmental Matters			30
Section 4.15		Intellectual Property			30
Section 4.16		Properties			31
Section 4.17		Taxes			32
Section 4.18		Insurance			33
Section 4.19		Opinion of Financial Advisor			33
Section 4.20		Takeover Statutes			33
Section 4.21		Vote Required			34
Section 4.22		Brokers			34
Section 4.23		Investment Company Act			34
Section 4.24		Affiliate Transactions			34
Section 4.25		Products Liability			34
Section 4.26		No Other Representations or Warranties			34

 

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				Page
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB					35
Section 5.1		Organization and Qualification; Subsidiaries			35
Section 5.2		Organizational Documents			36
Section 5.3		Capital Structure			36
Section 5.4		Authority			37
Section 5.5		No Conflict; Required Filings and Consents			37
Section 5.6		Permits; Compliance with Law			38
Section 5.7		SEC Filings; Canadian Filings; Financial Statements			40
Section 5.8		Disclosure Documents			42
Section 5.9		Absence of Certain Changes or Events			42
Section 5.10		Employee Benefit Plans			42
Section 5.11		Labor and Other Employment Matters			43
Section 5.12		Material Contracts			43
Section 5.13		Litigation			44
Section 5.14		Environmental Matters			44
Section 5.15		Intellectual Property			44
Section 5.16		Properties			45
Section 5.17		Taxes			46
Section 5.18		Insurance			47
Section 5.19		Opinion of Financial Advisor			47
Section 5.20		Vote Required			47
Section 5.21		Brokers			47
Section 5.22		Investment Company Act			47
Section 5.23		Ownership of Merger Sub; No Prior Activities			48
Section 5.24		Ownership of Company Common Stock			48
Section 5.25		Affiliate Transactions			48
Section 5.26		No Other Representations or Warranties			48
ARTICLE VI. COVENANTS AND AGREEMENTS					48
Section 6.1		Conduct of Business by the Company			48
Section 6.2		Conduct of Business by Parent			51
Section 6.3		Preparation of Form F-4 , Circular and Proxy Statement; Stockholder Meetings			53
Section 6.4		Access to Information; Confidentiality			54
Section 6.5		Acquisition Proposals			55
Section 6.6		Appropriate Action; Consents; Filings			59
Section 6.7		Notification of Certain Matters; Transaction Litigation			61
Section 6.8		Public Announcements			61
Section 6.9		Directors’ and Officers’ Indemnification and Insurance			61
Section 6.10		Employee Benefit Matters			63
Section 6.11		Certain Tax Matters			64
Section 6.12		Dividends			65
Section 6.13		Merger Sub			65
Section 6.14		Section 16 Matters			65
Section 6.15		Stock Exchange Listing			66
Section 6.16		Voting of Shares			66
Section 6.17		Post-Closing Directors and Officers			66
Section 6.18		Solicitation of Employees			66
Section 6.19		Amendment to Rights Agreement			67
Section 6.20		Financial Statement Cooperation			67
Section 6.21		Takeover Statutes			67

 

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				Page
Section 6.22		Confidentiality			67
Section 6.23		Automotive and Industrial Operations			67
Section 6.24		Sales and Distribution Contracts			68
ARTICLE VII. CONDITIONS					68
Section 7.1		Conditions to the Obligations of Each Party			68
Section 7.2		Conditions to the Obligations of Parent and Merger Sub			68
Section 7.3		Conditions to the Obligations of the Company			69
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER					70
Section 8.1		Termination			70
Section 8.2		Effect of Termination			72
Section 8.3		Termination Fee			72
Section 8.4		Amendment			73
Section 8.5		Waiver			73
Section 8.6		Fees and Expenses			74
ARTICLE IX. GENERAL PROVISIONS					74
Section 9.1		Non-Survival of Representations and Warranties			74
Section 9.2		Notices			74
Section 9.3		Interpretation; Certain Definitions			75
Section 9.4		Severability			75
Section 9.5		Assignment; Delegation			75
Section 9.6		Entire Agreement			76
Section 9.7		No Third-Party Beneficiaries			76
Section 9.8		Specific Performance			76
Section 9.9		Counterparts			76
Section 9.10		Governing Law			76
Section 9.11		Consent to Jurisdiction			76
Section 9.12		WAIVER OF JURY TRIAL			77

Exhibits

 

Exhibit A:		Amended and Restated Certificate of Incorporation of the Surviving Entity
Exhibit B:		Form of Amended and Restated Bylaws of the Surviving Entity
Exhibit C:		List of Appointed Directors of Parent
Exhibit D:		Officers of the New Fuel Systems Automotive and Industrial Group Business Unit – a Wholly Owned Business Unit of Westport Fuel Systems

 

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER, dated as of September 1, 2015 (this “Agreement”), is made by and among Westport Innovations Inc., an Alberta, Canada corporation (“Parent”), Whitehorse Merger Sub Inc., a Delaware corporation and a direct wholly owned subsidiary of Parent (“Merger Sub”), and Fuel Systems Solutions, Inc., a Delaware corporation (the “Company”). Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in Section 1.1.

W I T N E S S E T H:

WHEREAS, the parties hereto wish to effect a business combination transaction in which the Merger Sub will be merged with and into the Company, with the Company being the surviving entity (the “Merger”), and each outstanding share of common stock, par value $0.001 per share (the “Company Common Stock”), of the Company will be converted into the right to receive the applicable Merger Consideration (as defined herein), upon the terms and subject to the conditions set forth in this Agreement and in accordance with the DGCL;

WHEREAS, the respective boards of directors of the Company and Parent have approved this Agreement, the Merger and the other transactions contemplated by this Agreement and declared that this Agreement, the Merger and the other transactions contemplated by this Agreement are advisable;

WHEREAS, the respective board of directors of the Company, Parent and Merger Sub, have directed that this Agreement, the Merger and the other transactions contemplated by this Agreement be submitted for consideration at meetings of their respective stockholders and have resolved to recommend that their respective stockholders vote to approve this Agreement and the Merger and the other transactions contemplated by this Agreement;

WHEREAS, for United States federal income tax purposes (and, where applicable, state and local income tax purposes), the parties intend that the Merger will (i) qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and that this Agreement be, and is hereby adopted as, a plan of reorganization for purposes of Sections 354 and 361 of the Code;

WHEREAS, as a condition to each of Parent and the Company entering into this Agreement and incurring the obligations set forth herein, concurrently with the execution and delivery of this Agreement, (i) Parent is entering into Voting Agreements with certain stockholders of the Company, and (ii) the Company is entering into Voting Agreements with certain shareholders of Parent (each, a “Voting Agreement” and together, the “Voting Agreements”), pursuant to which inter alia each of those stockholders and shareholders has agreed, subject to the terms thereof, to vote all shares of the Company Common Stock or Parent Common Shares, as the case may be, owned by such stockholder or shareholder in accordance with the terms of such Voting Agreement; and

WHEREAS, three members of the Parent Board shall resign from the Parent Board, effective simultaneously with the consummation of the Merger, and the remaining members of the Parent Board shall elect three directors designated by the Company to fill the vacancies on the Parent Board resulting from such resignations.

 

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NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties and covenants and subject to the conditions herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

ARTICLE I.

DEFINITIONS

Section 1.1     Definitions.

(a)     For purposes of this Agreement:

“2009 Plan” shall mean the Company’s 2009 Restricted Stock Plan.

“2011 Phantom Plan” shall mean the Company’s 2011 Phantom Stock Option Plan.

“2011 Plan” shall mean the Company’s 2011 Stock Option Plan.

“Acceptable Confidentiality Agreement” shall mean a customary confidentiality agreement containing terms no less restrictive than the terms set forth in the Confidentiality Agreement; provided, however, that such confidentiality agreement shall not prohibit compliance by the Company with any of the provisions of Section 6.5, and shall not include any standstill provisions.

“Action” shall mean any claim, action, suit, proceeding, arbitration, mediation or other investigation.

“Affiliate” of a specified Person shall mean a Person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.

“Antitrust Laws” shall mean the HSR Act, the Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade Commission Act, as amended, and any other federal, state or foreign law, regulation or decree designed to prohibit, restrict or regulate actions for the purpose or effect of monopolization or restraint of trade or the significant impediment of effective competition.

“Assets” means, with respect to any Person, all of the assets, rights, interests and other properties, real, personal and mixed, tangible and intangible, owned by such Person.

“Business Day” shall mean any day other than a Saturday, Sunday or a day on which all banking institutions in New York, New York are authorized or obligated by Law or executive order to close.

“Company Benefit Plan” shall mean each “employee pension benefit plan” (as defined in Section 3(2) of ERISA), each “employee welfare benefit plan” (as defined in Section 3(1) of ERISA), in each case whether or not subject to ERISA, each employment, termination or severance agreement and each other material plan, arrangement or policy (written or oral) relating to stock options, stock purchases, deferred compensation, bonus, profit-sharing, employment, severance, retention, fringe benefits, cash- or equity-based incentive, commission, health, medical, dental, disability, accident, life insurance, vacation, paid time off, perquisite, change of control, separation, non-competition, retirement, pension, or savings or other employee benefits, in each case maintained or contributed to, or required to be maintained or contributed to, by the Company or the Company Subsidiaries, other than any plan, arrangement or policy mandated by applicable Law.

“Company Intervening Event” shall mean a material event, fact, circumstance, development or occurrence that (i) affects the business, assets or operations of Company that was not known by the Company Board as of the date of this Agreement (or, if known, the consequences of which were not reasonably foreseeable to the

 

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Company Board as of the date of this Agreement), which event, fact, circumstance, development or occurrence becomes known to or by the Company Board prior to obtaining the Company Stockholder Approval and (ii) does not relate to a Company Acquisition Proposal; provided, however, that in no event shall changes in the market price or trading volume of the Company Common Stock or the Parent Common Shares, or the fact that a party meets or exceeds internal or published projections, forecasts or revenue or earnings predictions for any period be a Company Intervening Event; provided, further, however, that the underlying causes of such change or fact shall not be excluded by the preceding proviso.

“Company Material Adverse Effect” shall mean any event, circumstance, change or effect (a) that is material and adverse to the business, assets, properties, liabilities, condition (financial or otherwise) or results of operations of the Company and the Company Subsidiaries, taken as a whole or (b) that will, or would reasonably be expected to, prevent or materially impair the ability of the Company, Parent or Merger Sub to consummate the Merger before the Outside Date; provided, however, that for purposes of clause (a) “Company Material Adverse Effect” shall not include any event, circumstance, change or effect to the extent occurring from and after the date of this Agreement and arising out of or resulting from (i) any failure of the Company to meet any projections or forecasts or any decrease in the market price of the Company Common Stock (it being understood and agreed that any event, circumstance, change or effect giving rise to such failure or decrease shall be taken into account in determining whether there has been a Company Material Adverse Effect), (ii) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates, (iii) any changes in the legal or regulatory conditions in the geographic regions in which the Company and the Company Subsidiaries operate, (iv) the commencement, escalation or worsening of a war or armed hostilities or the occurrence of acts of terrorism or sabotage, (v) the public announcement of this Agreement, or other transactions contemplated hereby, including the impact on relationships, contractual or otherwise, with tenants, suppliers, lenders, investors, future partners or employees, (vi) the taking of any action expressly required by, or the failure to take any action expressly prohibited by, this Agreement, or the taking of any action at the written request of Parent, (vii) earthquakes, hurricanes or other natural disasters, or (viii) changes in Law or GAAP or the interpretation or enforcement thereof, which in the case of each of clauses (ii), (iii), and (viii) do not disproportionately affect the Company and the Company Subsidiaries, taken as a whole, relative to other participants in the industry in which such party operates or the markets for any of such party’s products or services in general.

“Company Option” shall mean any outstanding option to purchase shares of Company Common Stock granted pursuant to the Company Plans.

“Company Phantom Share” shall mean any phantom share awards granted pursuant to the Company Plans.

“Company Plans” shall mean the 2009 Plan, the 2011 Plan and the 2011 Phantom Plan.

“Company Restricted Stock” shall mean restricted stock award granted pursuant to the Company Plans.

“Company Restricted Stock Unit” shall mean any outstanding restricted stock unit covering shares of Company Common Stock granted pursuant to the Company Plans.

“Company Stockholder Meeting” shall mean the meeting of the holders of shares of Company Common Stock for the purpose of seeking the Company Stockholder Approval, including any postponement and adjournment thereof.

“Company Subsidiary” shall mean a Subsidiary of the Company.

“Confidentiality Agreement” shall mean the letter agreement, dated March 16, 2015, as amended from time to time, between the Company and Parent.

 

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“Contract” shall mean any contract, agreement, license, note, bond, mortgage, indenture, commitment, lease or other instrument or obligation, whether written or oral.

“control” (including the terms “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, as trustee or executor, by Contract or otherwise.

“CWI” shall mean Cummins Westport Inc.

“CWI Joint Venture Agreement” shall mean that certain second and amended and restated joint venture agreement among Cummins Inc. and Parent, dated effective as of February 19, 2012.

“Data Site” shall mean the “Project Engine” electronic data site established and maintained by the Company at .sharefile.com.

“Delaware Secretary” shall mean the Secretary of State of the State of Delaware.

“DGCL” shall mean the Delaware General Corporation Law, Title 8, Chapter 1 of the Delaware Code.

“Environmental Law” shall mean any Law relating to the pollution or protection of the environment (including air, surface water, groundwater, wildlife, land surface or subsurface land, and natural resources), or human health or safety (as such matters relate to Hazardous Materials), including Laws relating to (i) Releases or threatened Releases of, or exposure to, Hazardous Materials, (ii) the manufacture, processing, distribution, use, treatment, generation, storage, containment (whether above ground or underground), transport or handling of Hazardous Materials, (iii) recordkeeping, notification, disclosure, or reporting requirements regarding Hazardous Materials, and (iv) endangered or threatened species of fish, wildlife and plants, and the management or use of natural resources.

“Environmental Permit” shall mean any permit, approval, license or other authorization required under any applicable Environmental Law.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” shall mean, with respect to any entity, trade or business, any other entity, trade or business that is, or was at the relevant time, a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes or included the first entity, trade or business, or that is, or was at the relevant time, a member of the same “controlled group” as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Expenses” shall mean all expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a party hereto and its affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement, the preparation, printing, and filing of the Form F-4, the preparation, printing, filing and mailing of the Proxy Statement and Circular and all SEC and Canadian Securities Commissions and other regulatory filing fees incurred in connection with the Form F-4, the Proxy Statement and the Circular, the solicitation of stockholder approvals, engaging the services of the Exchange Agent, obtaining third-party consents, any other filings with the SEC and Canadian Securities Commissions and all other matters related to the closing of the Merger and the other transactions contemplated by this Agreement.

“Fractional Share Consideration” shall mean the aggregate amount paid with respect to fractional shares in accordance with Section 3.8.

 

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“GAAP” shall mean the United States generally accepted accounting principles.

“Governmental Authority” shall mean any United States (federal, state or local) or foreign government, arbitration panel, or any governmental or quasi-governmental, regulatory, judicial or administrative authority, board, bureau, agency, commission or self-regulatory organization.

“Hazardous Materials” shall mean (i) those substances listed in, defined in or regulated under any Environmental Law, including the following federal statutes and their state counterparts, as each may be amended from time to time, and all regulations thereunder: the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Toxic Substances Control Act, the Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act and the Clean Air Act; (ii) petroleum and petroleum products, including crude oil and any fractions thereof; and (iii) polychlorinated biphenyls, methane, asbestos, or asbestos-containing materials, toxic mold, radon, or other substances that are regulated under Environmental Law due to possible adverse effects on human health or the environment.

“HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“In-The-Money Company Option” shall mean a Company Option with an exercise price that is less than the per share dollar value of the Merger Consideration immediately prior to the Effective Time.

“Indebtedness” shall mean, with respect to any Person, (i) all indebtedness, notes payable, accrued interest payable or other obligations for borrowed money, whether secured or unsecured, (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (iii) all obligations issued, undertaken or assumed as the deferred purchase price for any property, assets or services, (iv) all obligations under capital leases, (v) all obligations in respect of bankers acceptances or letters of credit, (vi) all obligations under interest rate cap, swap, collar or similar transaction or currency hedging transactions, (vii) the deferred purchase price of property or services (excluding trade payables and accrued expenses arising in the ordinary course of business), and (viii) any guarantee of any of the foregoing, whether or not evidenced by a note, mortgage, bond, indenture or similar instrument.

“Indemnitee” shall mean any individual who, on or prior to the Effective Time, was an officer or director of the Company or served on behalf of the Company as an officer or director (or the equivalent) of any of the Company Subsidiaries.

“Intellectual Property” shall mean all United States and foreign (i) patents, patent applications, invention disclosures, and all related continuations, continuations-in-part, divisionals, reissues, re-examinations, substitutions and extensions thereof, (ii) trademarks, service marks, trade dress, logos, trade names, corporate names, Internet domain names, design rights and other source identifiers, together with the goodwill symbolized by any of the foregoing, (iii) copyrightable works and copyrights, (iv) confidential and proprietary information, including trade secrets, know-how, ideas, formulae, models and methodologies, (v) all rights in the foregoing and in other similar intangible assets, and (vi) all applications and registrations for the foregoing.

“Investment Company Act” shall mean the Investment Company Act of 1940, as amended.

“IRS” shall mean the United States Internal Revenue Service.

“Knowledge” shall mean the actual knowledge of the following officers and employees of the Company and Parent, as applicable, after inquiry reasonable under the circumstances: (i) for the Company: Mariano Costamagna, Pietro Bersani, Michael Helfand, Massimiliano Fissore, Peter Chase and Andrea Alghisi; and (ii) for Parent: David R. Demers, Nancy S. Gougarty, Ashoka Achuthan and Salman Manki; provided that with respect to matters relating to Weichai Westport, “Knowledge” shall mean the actual knowledge of the foregoing individuals without inquiry.

 

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“Law” shall mean any and all domestic (federal, state or local) or foreign laws, rules, regulations, orders, judgments or decrees promulgated by any Governmental Authority.

“Lien” shall mean with respect to any asset (including any security), any mortgage, deed of trust, hypothecation, claim, condition, covenant, lien, pledge, charge, security interest, preferential arrangement, option or other third party right (including right of first refusal or first offer), restriction, right of way, easement, title defect or encumbrance of any kind in respect of such asset, including any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.

“Multiemployer Plan” shall mean any “multiemployer plan” within the meaning of Section 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code.

“NASDAQ” shall mean The NASDAQ Stock Market.

“Occurrence” shall mean any accident, happening or event which is caused or allegedly caused by any alleged hazard or alleged defect in manufacture, design, materials or workmanship of any Product that can reasonably be expected to result in an Action or loss.

“Order” shall mean a judgment, order or decree of a Governmental Authority.

“Parent Acquisition Proposal” shall mean any proposal or offer from any Third Party for (or expression by a Third Party that it is considering or may engage in), whether in one transaction or a series of related transactions, (i) any sale, lease, exchange, mortgage, pledge, license, transfer or other disposition, directly or indirectly, by merger, consolidation, sale of equity interests, share exchange, joint venture, business combination or otherwise, of any assets of Parent or any Parent Subsidiary (other than CWI) representing fifty percent (50%) or more of the consolidated assets of Parent and the Parent Subsidiaries (other than CWI), taken as a whole as determined on a book-value basis, (ii) any issue, sale or other disposition of (including by way of merger, consolidation, joint venture, business combination, share exchange or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into, such securities) representing fifty percent (50%) or more of the voting power of Parent or any of the Parent Subsidiaries (other than CWI) whose business constitutes fifty percent (50)% or more of the net revenue, net income or assets of Parent and the Parent Subsidiaries, taken as a whole, (iii) any tender offer or exchange offer in which any Person or “group” (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) shall seek to acquire beneficial ownership (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), or the right to acquire beneficial ownership, of fifty percent (50%) or more of the outstanding shares of any class of voting securities of Parent, (iv) any recapitalization, restructuring, liquidation, dissolution or other similar type of transaction with respect to Parent in which a Third Party shall acquire beneficial ownership of fifty percent (50%) or more of the outstanding shares of any class of voting securities of Parent or (v) any transaction which is similar in form, substance or purpose to any of the foregoing transactions; provided, however, that the term “Parent Acquisition Proposal” shall not include (x) the Merger or the other transactions contemplated by this Agreement, or (y) any proposal or offer relating to any existing purchase option, right of first offer, right of first refusal or buy/sell provision contained in any agreement to which Parent or any Parent Subsidiary is a party.

“Parent Benefit Plan” shall mean each “employee pension benefit plan” (as defined in Section 3(2) of ERISA), each “employee welfare benefit plan” (as defined in Section 3(1) of ERISA), in each case whether or not subject to ERISA, each employment, termination or severance agreement and each other plan, arrangement or policy (written or oral) relating to stock options, stock purchases, deferred compensation, profit-sharing, bonus, employment, severance, retention, fringe benefits, cash- or equity-based incentive, commission, health, medical, dental, disability, accident, life insurance, vacation, paid time off, perquisite, change of control, separation, non-competition, retirement, pension, or savings or other employee benefit, in each case maintained or contributed to, or required to be maintained or contributed to, by Parent or Parent Subsidiaries, other than any plan, arrangement or policy mandated by applicable Law.

 

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“Parent Intervening Event” shall mean a material event, fact, circumstance, development or occurrence that (i) affects the business, assets or operations of Parent that was not known by the Parent Board as of the date of this Agreement (or, if known, the consequences of which were not reasonably foreseeable to the Parent Board as of the date of this Agreement), which event, fact, circumstance, development or occurrence becomes known to or by the Parent Board prior to obtaining the Parent Shareholder Approval, and (ii) does not relate to a Parent Acquisition Proposal; provided, however, that in no event shall changes in the market price or trading volume of the Company Common Stock or the Parent Common Shares, or the fact that a party meets or exceeds internal or published projections, forecasts or revenue or earnings predictions for any period be a Parent Intervening Event; provided, further, however, that the underlying causes of such change or fact shall not be excluded by the preceding proviso.

“Parent Material Adverse Effect” shall mean any event, circumstance, change or effect (a) that is material and adverse to the business, assets, properties, liabilities, condition (financial or otherwise) or results of operations of Parent, Merger Sub and the other Parent Subsidiaries, taken as a whole or (b) that will, or would reasonably be expected to, prevent or materially impair the ability of the Company, Parent or Merger Sub to consummate the Merger before the Outside Date; provided, however, that for purposes of clause (a) “Parent Material Adverse Effect” shall not include any event, circumstance, change or effect to the extent occurring from and after the date of this Agreement and arising out of or resulting from (i) any failure of Parent to meet any projections or forecasts or any decrease in the market price of Parent Common Shares (it being understood and agreed that any event, circumstance, change or effect giving rise to such failure or decrease shall be taken into account in determining whether there has been a Parent Material Adverse Effect), (ii) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates, (iii) any changes in the legal or regulatory conditions in the geographic regions in which Parent and the Parent Subsidiaries operate, (iv) the commencement, escalation or worsening of a war or armed hostilities or the occurrence of acts of terrorism or sabotage, (v) the public announcement of this Agreement or other transactions contemplated hereby, including the impact on relationships, contractual or otherwise, with tenants, suppliers, lenders, investors, future partners or employees, (vi) the taking of any action expressly required by, or the failure to take any action expressly prohibited by, this Agreement, or the taking of any action at the written request of the Company, (vii) earthquakes, hurricanes or other natural disasters, or (viii) changes in Law, GAAP or the interpretation or enforcement thereof, which in the case of each of clauses (ii), (iii), (iv), and (viii) do not disproportionately affect Parent and the Parent Subsidiaries, taken as a whole, relative to other participants in the industry in which such party operates or the markets for any of such party’s products or services in general.

“Parent Material Contract” shall mean (i) each Contract in effect as of the date of this Agreement to which Parent or any Parent Subsidiary is a party that is required to be filed as an exhibit to the Parent SEC Filings pursuant to Items 601(b)(2), (4), (9) and (10) of Regulation S-K promulgated by the SEC, excluding (x) any Contract that will no longer be in effect following the Closing and (y) any Contract that is, or at the Closing will be, terminable-at-will (as defined below) or terminable upon not more than ninety (90) days’ notice by Parent or any Parent Subsidiary without penalty, (ii) the CWI Joint Venture Agreement and (iii) each Contract that is required to be filed by Parent with the Canadian Securities Commissions pursuant to Part 12 of National Instrument 51-102 of such administrators. A Contract is “terminable-at-will”, as that expression is used in this definition if it expressly provides that it is terminable-at-will, regardless of whether any covenant of good faith and fair dealing may be implied as a matter of law in connection with the termination thereof.

“Parent Shareholder Meeting” shall mean the meeting (including any postponement and adjournment thereof) of the holders of shares of Parent Common Shares for the purpose of seeking the Parent Shareholder Approval and the Parent Name Change Approval.

“Parent Subsidiary” shall mean a Subsidiary of Parent; provided, that for the avoidance of doubt, Weichai Westport shall not be deemed to be a “Parent Subsidiary” hereunder.

 

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“Permitted Liens” means only (a) Liens for Taxes that are (1) not yet delinquent, or (2) being contested in good faith by appropriate proceedings; provided that adequate reserves have been established in the applicable financial statements for such contested Liens; (b) workers or unemployment compensation Liens arising in the ordinary course of business consistent with past practice; (c) mechanic’s, materialman’s, supplier’s, vendor’s or similar Liens arising in the ordinary course of business consistent with past practice securing amounts that are not delinquent or past due or being contested in good faith and that are not material to the business, operations and financial condition of the Company or the Company Subsidiaries; (d) licenses of Intellectual Property arising in the ordinary course of business consistent with past practices; (e) zoning ordinances, easements and similar requirements affecting real property; and (f) in the case of any Leased Real Property, (i) the rights of any lessor and (ii) any Lien granted by any lessor of such Leased Real Property or any such lessor’s predecessors in title, which with respect to (e) and (f) would not, individually or in the aggregate, be reasonably expected to materially interfere with the present use, intended use, occupancy or value of such real property to the business of the Company or the Company Subsidiaries.

“Person” shall mean an individual, corporation, partnership, limited partnership, limited liability company, person (including, without limitation, a “person” as defined in Section 13(d)(3) of the Exchange Act), trust, association or other entity or a government or a political subdivision, agency or instrumentality of a government.

“Release” means any release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal, dispersal, leaching or migration into the environment or into or out of any property, including the movement of Hazardous Materials through or in the air, soil, surface water, groundwater or property.

“Representative” shall mean, with respect to any Person, any of such Person’s directors, officers, employees, consultants, advisors (including, without limitation, attorneys, accountants, consultants, investment bankers, and financial advisors), agents and other representatives.

“Sarbanes-Oxley Act” shall mean the Sarbanes-Oxley Act of 2002, as amended.

“SEC” shall mean the United States Securities and Exchange Commission (including the staff thereof).

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Securitization Documents” shall mean that certain Committed Credit Facility dated July 10, 2009 between the Company/IMPCO Technologies, Inc. and Intesa SanPaolo S.p.A. and (ii) that certain Loan Agreement between MTM, S.r.L. and Unicredit Banca Medio Credito S.p.A., dated December 2, 2004.

“Subsidiary” shall mean, with respect to any Person (a) any corporation of which at least fifty percent (50%) of the outstanding voting securities is directly or indirectly owned by such Person (b) any partnership, limited liability company, joint venture or other entity of which at least fifty percent (50%) of the total equity interest is directly or indirectly owned by such Person or of which such Person or any of its Subsidiaries is a general partner, manager, managing member or the equivalent.

“Tax” or “Taxes” shall mean all foreign and domestic federal, state, local and other taxes, assessments, charges, duties, tariffs, deficiencies, fees, levies or other governmental charges (including interest, fines, penalties or additions associated therewith), including, without limitation, income, franchise, capital stock, real property, personal property, tangible, withholding, employment, payroll, social security, social contribution, unemployment compensation, disability, transfer, sales, use, excise, gross receipts, value-added, alternative, estimated and all other taxes of any kind for which a Person may have any liability imposed by any Governmental Authority, whether disputed or not, or payable (i) pursuant to any tax sharing arrangement or any other Contract relating to sharing or payment or such tax, assessment, charge, duty, tariff, deficiency, fee, levy or other governmental charge or (ii) as a result of being a member of an affiliated, consolidated, combined or unitary group (in each case together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties).

 

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“Tax Return” shall mean any report, return (including any information return), statement, schedule, notice, form, declaration, claim for refund or other statement, document or information (including any schedule or attachment thereto or amendment thereof) required to be supplied to a Governmental Authority in connection with the determination, assessment, collection or payment of any Taxes or in connection with the administration, implementation or enforcement of or compliance with any applicable Law relating to Taxes, including any estimated returns and reports of every kind, with respect to Taxes.

“Termination Fee” shall mean $5,500,000.

“Third Party” shall mean any Person or group of Persons other than Parent, Merger Sub and their respective Affiliates.

“TSX” shall mean the Toronto Stock Exchange.

“VWAP of Parent Common Shares” shall mean the volume weighted average price of Parent Common Shares on NASDAQ for the thirty (30) trading days ending on and including the trading day immediately prior to, but not including, the date hereof, as reported by Bloomberg.

“Weichai Westport” shall mean Weichai Westport Inc.

“WPI” shall mean Westport Power Inc.

 

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The following terms shall have the respective meanings set forth in the Section set forth below opposite such term:

 

2009 Plan		Section 1.1(a)
2011 Phantom Plan		Section 1.1(a)
2011 Plan		Section 1.1(a)
Acceptable Confidentiality Agreement		Section 1.1(a)
Action		Section 1.1(a)
Affiliate		Section 1.1(a)
Aggregate Merger Consideration		Section 3.3(a)
Agreement		Preamble
Alternative Acquisition Agreement		Section 6.5(a)
Antitrust Laws		Section 1.1(a)
Assets		Section 1.1(a)
Book-Entry Share		Section 3.1(b)
Business Day		Section 1.1(a)
Canadian Securities Commissions		Section 5.7(f)
Canadian Securities Laws		Section 5.7(f)
Certificate		Section 3.1(b)
Certificate of Merger		Section 2.3(a)
Closing		Section 2.2
Closing Date		Section 2.2
Code		Recitals
Combined Company Project		Section 6.23
Company		Preamble
Company Acquisition Proposal		Section 8.3(c), Section 6.5(j)(i)
Company Adverse Recommendation Change		Section 6.5(d)
Company Benefit Plan		Section 1.1(a)
Company Board		Section 4.4(a)
Company Bylaws		Section 4.2
Company Charter		Section 4.2
Company Common Stock		Recitals
Company Disclosure Letter		Article IV
Company Employee		Section 6.10(a)
Company Financial Information		Section 6.20
Company Financial Statements		Section 4.7(b)
Company Intervening Event		Section 1.1(a)
Company Material Adverse Effect		Section 1.1(a)
Company Material Contract		Section 4.12(a)(ix)
Company Option		Section 1.1(a)
Company Permits		Section 4.6(a)
Company Phantom Share		Section 1.1(a)
Company Plans		Section 1.1(a)
Company Preferred Stock		Section 4.3(a)
Company Recommendation		Section 4.4(a)
Company Restricted Stock		Section 1.1(a)
Company Restricted Stock Unit		Section 1.1(a)
Company SEC Filings		Section 4.7(a)
Company Stockholder Approval		Section 4.21
Company Stockholder Meeting		Section 1.1(a)
Company Subsidiary		Section 1.1(a)
Confidentiality Agreement		Section 1.1(a)

 

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Continuing Company Directors		Section 6.17(a)
Contract		Section 1.1(a)
control		Section 1.1(a)
CWI		Section 1.1(a)
CWI Joint Venture Agreement		Section 1.1(a)
D&O Insurance		Section 6.9(c)
Data Site		Section 1.1(a)
Delaware Secretary		Section 1.1(a)
DGCL		Section 1.1(a)
dollars		Section 9.3
Effective Time		Section 2.3(a)
Environmental Law		Section 1.1(a)
Environmental Permit		Section 1.1(a)
ERISA		Section 1.1(a)
ERISA Affiliate		Section 1.1(a)
Exchange Act		Section 1.1(a)
Exchange Agent		Section 3.3(a)
Exchange Fund		Section 3.3(a)
Exchange Ratio		Section 3.1(b)
Expenses		Section 1.1(a)
Foreign Antitrust Approvals		Section 6.6(a)
Form F-4		Section 4.5(b)
Fractional Share Consideration		Section 1.1(a)
GAAP		Section 1.1(a)
Governmental Authority		Section 1.1(a)
Hazardous Materials		Section 1.1(a)
HSR Act		Section 1.1(a)
Indebtedness		Section 1.1(a)
Indemnitee		Section 1.1(a)
Inquiry		Section 6.5(a)
Intellectual Property		Section 1.1(a)
Interim Period		Section 6.1(a)
Investment Company Act		Section 1.1(a)
IRS		Section 1.1(a)
J.P. Morgan		Section 4.19
Knowledge		Section 1.1(a)
Law		Section 1.1(a)
Leased Real Properties		Section 4.16(a)
Leased Real Property		Section 4.16(a)
Letter of Transmittal		Section 3.3(c)(i)
Lien		Section 1.1(a)
Losses		Section 9.13
Merger		Recitals
Merger Consideration		Section 3.1(b)
Merger Sub		Preamble
Merger Sub Common Shares		Section 3.1(c)
Multiemployer Plan		Section 1.1(a)
NASDAQ		Section 1.1(a)
New Plans		Section 6.10(c)
Notice of Superior Proposal		Section 6.5(f)
Occurrence		Section 1.1(a)
Order		Section 1.1(a)

 

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Organizational Documents		Section 2.4
Outside Date		Section 8.1(b)(i)
Parent		Preamble
Parent Acquisition Proposal		Section 1.1(a)
Parent Adverse Recommendation Change		Section 6.5(e)
Parent Articles		Section 5.2
Parent Benefit Plan		Section 1.1(a)
Parent Board		Section 5.4(a)
Parent Bylaws		Section 5.2
Parent Canadian Filings		Section 5.7(f)
Parent Common Shares		Section 3.1(b)
Parent Disclosure Letter		Article V
Parent Intervening Event		Section 1.1(a)
Parent Material Adverse Effect		Section 1.1(a)
Parent Material Contract		Section 1.1(a)
Parent Name Change Approval		Section 5.20
Parent Permits		Section 5.6(a)
Parent Preferred Shares		Section 5.3(a)
Parent Recommendation		Section 5.4(a)
Parent SEC Filings		Section 5.7(a)
Parent Securities Documents		Section 5.7(f)
Parent Shareholder Approval		Section 5.20
Parent Shareholder Meeting		Section 1.1(a)
Parent Stock		Section 5.3(a)
Parent Subsidiary		Section 1.1(a)
Permitted Liens		Section 1.1(a)
Person		Section 1.1(a)
Phantom Share Payment		Section 3.4(d)
Products		Section 4.25(a)
Prohibited Payment		Section 4.6(c)
Proxy Statement		Section 4.5(b)
Real Property Lease		Section 4.16(a)
Real Property Leases		Section 4.16(a)
Related Person		Section 6.1(b)(xvi)
Release		Section 1.1(a)
Released Parties		Section 9.13
Representative		Section 1.1(a)
Rights		Section 4.3(c)
Rights Agreement		Section 4.3(c)
Sarbanes-Oxley Act		Section 1.1(a)
SEC		Section 1.1(a)
Securities Act		Section 1.1(a)
Securitization Documents		Section 1.1(a)
SEDAR		Article V
Skadden		Section 6.11(a)
Stock Award Payment		Section 3.2
Subsidiary		Section 1.1(a)
Superior Proposal		Section 6.5(j)(ii)
Surviving Entity		Section 2.1
Takeover Statutes		Section 4.20
Tax		Section 1.1(a)
Tax Return		Section 1.1(a)

 

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Taxes		Section 1.1(a)
Termination Fee		Section 1.1(a)
Third Party		Section 1.1(a)
TSX		Section 1.1(a)
Voting Agreement		Recitals
Voting Agreements		Recitals
VWAP of Parent Common Shares		Section 1.1(a)
Weichai Westport		Section 1.1(a)

ARTICLE II.

THE MERGER

Section 2.1     Merger. Upon the terms and subject to the conditions of this Agreement, and in accordance with the DGCL, at the Effective Time, the Merger Sub shall be merged with and into the Company, whereupon the separate existence of the Merger Sub shall cease, and the Company shall continue under the name “Fuel Systems Solutions, Inc.” as the surviving entity in the Merger (the “Surviving Entity”) and shall be governed by the laws of the State of Delaware. The Merger shall have the effects specified in the DGCL.

Section 2.2     Closing. The closing of the Merger (the “Closing”) shall occur as promptly as practicable (but in no event later than the third (3rd) Business Day) after all of the conditions set forth in ARTICLE VII (other than those conditions that by their terms are required to be satisfied or waived at the Closing, but subject to the satisfaction or waiver of such conditions) shall have been satisfied or waived by the party entitled to the benefit of the same and, subject to the foregoing, shall take place at such time and on a date to be specified by the parties (the “Closing Date”). The Closing shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New York, New York, 10036, or at such other place as agreed to by the parties hereto.

Section 2.3     Effective Time.

(a)     At the Closing, the Company, Parent and Merger Sub shall (i) cause a certificate of merger with respect to the Merger (the “Certificate of Merger”) to be duly executed and filed with the Delaware Secretary as provided under the DGCL and (ii) make any other filings, recordings or publications required to be made by the Company or Merger Sub under the DGCL in connection with the Merger. The Merger shall become effective following the close of business on the Closing Date, with such date and time specified in the Certificate of Merger, or on such other date and time as shall be agreed to by the Company and Parent and specified in the Certificate of Merger, following acceptance for record by the Delaware Secretary (the “Effective Time”).

(b)     The Merger shall have the effects set forth in the DGCL and this Agreement. Without limiting the generality of the foregoing, and subject thereto, from and after the Effective Time, the Surviving Entity shall possess all properties, rights, privileges, powers and franchises of the Company and Merger Sub, and all of the claims, obligations, liabilities, debts and duties of the Company and Merger Sub shall become the claims, obligations, liabilities, debts and duties of the Surviving Entity.

Section 2.4     Organizational Documents. Subject to Section 6.9, at the Effective Time, the Amended and Restated Certificate of Incorporation and Amended Bylaws of the Company (the “Organizational Documents”), as in effect immediately prior to the Effective Time, shall be amended and restated in their entirety to be substantially in the form attached hereto as Exhibit A and Exhibit B, respectively, and such amended Company organizational documents shall be the articles of incorporation and bylaws of the Surviving Entity, until thereafter amended in accordance with applicable Law and the applicable provisions of such articles of incorporation and bylaws.

 

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Section 2.5     Surviving Entity Directors. From and after the Effective Time, until successors are duly elected, appointed or otherwise designated in accordance with applicable Law, the directors of Merger Sub at the Effective Time shall be the directors of the Surviving Entity, each such initial director to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Entity as in effect from and after the Effective Time.

Section 2.6     Tax Consequences. It is intended that, for U.S. federal income tax purposes, the Merger shall qualify as a reorganization within the meaning of Section 368(a) of the Code, and that this Agreement be, and is hereby adopted as, a plan of reorganization for purposes of Sections 354 and 361 of the Code.

ARTICLE III.

EFFECT OF THE MERGER

Section 3.1     Effect on Shares. At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent, Merger Sub or the holder of any securities of the Company, Parent or Merger Sub:

(a)     Cancellation of Company Securities. Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time that is held by the Company as treasury stock or by any wholly owned Company Subsidiary or by Parent or by any Parent Subsidiary shall automatically be canceled and retired and shall cease to exist, and no payment shall be made with respect thereto.

(b)     Conversion of Company Securities. Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than shares to be canceled in accordance with Section 3.2) shall automatically be converted into the right to receive 2.129 common shares of Parent (the “Parent Common Shares”) (such number of Parent Common Shares, the “Exchange Ratio”), subject to adjustment as provided in Section 3.2 (the “Merger Consideration”). All shares of Company Common Stock, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate (a “Certificate”) or book-entry share registered in the transfer books of the Company (a “Book-Entry Share”) that immediately prior to the Effective Time represented shares of Company Common Stock shall cease to have any rights with respect to such Company Common Stock other than the right to receive the Merger Consideration, in accordance with Section 3.3, including the right, if any, to receive, pursuant to Section 3.8, cash in lieu of fractional shares of Parent Common Shares into which such shares of Company Common Stock have been converted pursuant to this Section 3.1(b), together with the amounts, if any, payable pursuant to Section 3.3(d).

(c)     Treatment of Merger Sub Securities. All issued and outstanding shares of common stock, par value $0.001 per share of Merger Sub (the “Merger Sub Common Shares”) issued and outstanding immediately prior to the Effective Time shall be converted into one fully-paid and nonassesable share of common stock, par value $0.001 per share, of the Surviving Entity.

(d)     Parent Common Shares. Each share of Parent Common Shares outstanding immediately prior to the Effective Time shall remain outstanding following the Effective Time.

Section 3.2     Adjustments. Without limiting the other provisions of this Agreement and subject to Section 6.1(b)(i) and Section 6.1(b)(ii), if at any time during the period between the date of this Agreement and the Effective Time, the Company should split, combine or otherwise reclassify the Company Common Stock, or make a distribution in Company Common Stock, or otherwise change the Company Common Stock into any other securities (including any dividend or other distribution of securities convertible into Parent Common Shares), or engage in a reclassification, reorganization, recapitalization or exchange or other like change, then

 

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(without limiting any other rights of Parent or Merger Sub hereunder), the Exchange Ratio shall be ratably adjusted to reflect fully the effect of any such change and any Phantom Share Payment to be received in the form of Parent Common Shares (each such payment, a “Stock Award Payment”) shall be ratably adjusted to reflect any such change. Without limiting the other provisions of this Agreement and subject to Section 6.2(b)(i) and Section 6.2(b)(ii), if at any time during the period between the date of this Agreement and the Effective Time, Parent should split, combine or otherwise reclassify the Parent Common Shares, or make a distribution in Parent Common Shares, or otherwise change the Parent Common Shares into other securities (including any dividend or other distribution of securities convertible into Parent Common Shares), or engage in a reclassification, reorganization, recapitalization or exchange or other like change, then the Exchange Ratio and all Stock Award Payments shall be ratably adjusted to reflect any such change. In addition, the Exchange Ratio and all Stock Award Payments shall be subject to adjustment as provided in Schedule 3.2.

Section 3.3     Exchange Fund; Exchange Agent.

(a)     Prior to the Effective Time, Parent shall appoint a bank or trust company reasonably satisfactory to the Company to act as exchange agent (the “Exchange Agent”) for the payment and delivery of the Merger Consideration, the Stock Award Payments and the Fractional Share Consideration, as provided in Section 3.1(b), Section 3.3 and Section 3.8. On or before the Effective Time, Parent shall deposit, or cause to be deposited, with the Exchange Agent (i) the shares of Parent Common Shares sufficient to pay the Merger Consideration and the Stock Award Payments, and (ii) cash in immediately available funds in an amount sufficient to pay the Fractional Share Consideration (such shares of Parent Common Shares and cash amounts, the “Aggregate Merger Consideration,” and such Aggregate Merger Consideration as deposited with the Exchange Agent, the “Exchange Fund”), in each case, for the benefit of the holders of shares of Company Common Stock, In-The-Money Company Options, Company Restricted Stock Units and shares of Company Restricted Stock, and Company Phantom Shares. In the event the Exchange Fund shall be insufficient to make the payments contemplated by Section 3.8, Parent shall promptly deposit, or cause to be deposited, additional funds with the Exchange Agent in an amount which is equal to the deficiency in the amount required to make such payments, without interest. Parent shall cause the Exchange Agent to make, and the Exchange Agent shall make, payments of the Merger Consideration, amounts in respect of In-The-Money Company Options, Company Restricted Stock Units, shares of Company Restricted Stock and Company Phantom Shares and any amounts payable in respect of dividends or distributions on shares of Parent Common Shares in accordance with Section 3.3(d) or otherwise payable pursuant to Section 3.8 out of the Exchange Fund in accordance with this Agreement and the Certificate of Merger. The Exchange Fund shall not be used for any other purpose. Any and all interest earned on cash deposited in the Exchange Fund shall be paid to Parent.

(b)     Share Transfer Books. At the Effective Time, the share transfer books of the Company shall be closed, and thereafter there shall be no further registration of transfers of shares of Company Common Stock. From and after the Effective Time, persons who held shares of Company Common Stock immediately prior to the Effective Time shall cease to have rights with respect to such shares, except as otherwise provided for herein. On or after the Effective Time, any Certificates presented to the Exchange Agent or the Surviving Entity for any reason shall be exchanged for the Merger Consideration with respect to the shares of Company Common Stock, formerly represented thereby.

(c)     Exchange Procedures.

(i)     As promptly as practicable following the Effective Time (but in no event later than two (2) Business Days thereafter), Parent or the Surviving Entity shall cause the Exchange Agent to mail (and to make available for collection by hand) (A) to each holder of record of a Certificate evidencing Company Common Stock, (x) a letter of transmittal (a “Letter of Transmittal”), which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass only upon proper delivery of the Certificates (or affidavits of loss in lieu thereof) to the Exchange Agent, and which Letter of Transmittal shall be in such form and have such other provisions as the Surviving Entity may

 

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reasonably specify, and (y) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration into which the number of shares of Company Common Stock previously represented by such Certificate shall have been converted pursuant to this Agreement, together with any amounts payable in respect of dividends or distributions on shares of Parent Common Shares in accordance with Section 3.3(d) (which instructions shall provide that, at the election of the surrendering holder, (1) Certificates may be surrendered by hand delivery or otherwise or (2) the Merger Consideration in exchange therefor, together with any amounts payable in respect of dividends or distributions on shares of Parent Common Shares in accordance with Section 3.3(d), may be collected by hand by the surrendering holder or by check or wire transfer to the surrendering holder), (B) to each holder of an In-The-Money Company Option, written evidence representing an option to acquire shares of Parent Common Shares in an amount due and payable to such holder pursuant to Section 3.4(a) in respect of such Company Option, (C) to each holder of a share of Company Restricted Stock, shares of Parent Common Shares in an amount due and payable to such holder pursuant to Section 3.4(b) in respect of such share of Company Restricted Stock, and (D) to each holder of a Company Phantom Share, shares of Parent Common Shares in an amount due and payable to such holder pursuant to Section 3.4(b) in respect of such Company Phantom Share.

(ii)     Upon surrender of a Certificate (or affidavit of loss in lieu thereof) for cancellation to the Exchange Agent, together with a Letter of Transmittal duly completed and validly executed in accordance with the instructions thereto, and such other documents as may reasonably be required by the Exchange Agent or Parent, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each share of Company Common Stock formerly represented by such Certificate pursuant to the provisions of this ARTICLE III plus any cash such holder is entitled to receive in lieu of fractional shares of Parent Common Shares that such holder has the right to receive pursuant to the provisions of Section 3.1(b) and any amounts that such holder has the right to receive in respect of dividends or distributions on shares of Parent Common Shares in accordance with Section 3.3(d), to be mailed, made available for collection by hand or delivered by wire transfer, within two (2) Business Days following the later to occur of (A) the Effective Time or (B) the Exchange Agent’s receipt of such Certificate (or affidavit of loss in lieu thereof), and the Certificate (or affidavit of loss in lieu thereof) so surrendered shall be forthwith canceled. The Exchange Agent shall accept such Certificates (or affidavits of loss in lieu thereof) upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. Until surrendered as contemplated by this Section 3.3, each Certificate shall be deemed, at any time after the Effective Time, to represent only the right to receive, upon such surrender, the Merger Consideration as contemplated by this ARTICLE III. No interest shall be paid or accrued for the benefit of holders of the Certificates on the Merger Consideration payable upon the surrender of the Certificates.

(iii)     As promptly as practicable following the Effective Time (but in no event later than two (2) Business Days thereafter), Parent or the Surviving Entity shall cause the Exchange Agent (A) to issue to each holder of Book-Entry Shares that number of uncertificated whole shares of Parent Common Shares that such holder is entitled to receive pursuant to Section 3.1(b) in respect of such Book-Entry Shares, and (B) to issue and deliver to each holder of Book-Entry Shares a check or wire transfer for any amounts payable in respect of dividends or distributions on shares of Parent Common Shares in accordance with Section 3.3(d) and any other amount such holder is entitled to receive in lieu of fractional shares of Parent Common Shares that such holder has the right to receive pursuant to the provisions of Section 3.1(b), in each case, without such holder being required to deliver a Certificate or an executed Letter of Transmittal to the Exchange Agent, and such Book-Entry Shares shall then be canceled. No interest shall be paid or accrued for the benefit of holders of Book-Entry Shares on the Merger Consideration in respect of the Book-Entry Shares.

 

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(iv)     In the event of a transfer of ownership of shares of Company Common Stock that is not registered in the transfer records of the Company, it shall be a condition of payment that any Certificate surrendered in accordance with the procedures set forth in this Section 3.3(c) shall be properly endorsed or shall be otherwise in proper form for transfer, or any Book-Entry Share shall be properly transferred, and that the Person requesting such payment shall have paid any transfer Taxes and other Taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate or Book-Entry Share surrendered or shall have established to the satisfaction of Parent that such Tax either has been paid or is not applicable.

(v)     All shares of Parent Common Shares to be issued in the Merger will be issued in book-entry form, without physical certificates.

(d)     Dividends with Respect to Parent Common Shares. No dividends or other distributions with respect to Parent Common Shares with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the shares of Parent Common Shares issuable hereunder, and all such dividends and other distributions shall be paid by Parent to the Exchange Agent and shall be included in the Exchange Fund, in each case until the surrender of such Certificate (or affidavit of loss in lieu thereof) in accordance with this Agreement. Following surrender of any such Certificate (or affidavit of loss in lieu thereof) there shall be paid to the holder thereof in addition to the other amounts payable hereunder (i) promptly after the time of such surrender, the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole shares of Parent Common Shares to which such holder is entitled pursuant to this Agreement and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to such surrender and with a payment date subsequent to such surrender payable with respect to such whole shares of Parent Common Shares.

(e)     Termination of Exchange Fund. Any portion of the Exchange Fund (including any interest and other income received with respect thereto) which remains undistributed to the former holders of shares of Company Common Stock on the first (1st) anniversary of the Effective Time shall be delivered to Parent, upon demand, and any former holders of shares of Company Common Stock who have not theretofore received any Merger Consideration to which they are entitled under this ARTICLE III shall thereafter look only to the Surviving Entity for payment of their claims with respect thereto.

(f)     No Liability. None of Parent, Merger Sub, the Company, the Surviving Entity or the Exchange Agent, or any employee, officer, director, agent or Affiliate of any of them, shall be liable to any holder of shares of Company Common Stock in respect of any part of the Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. Any amounts remaining unclaimed by holders of any such shares immediately prior to the time at which such amounts would otherwise escheat to, or become property of, any Governmental Authority shall, to the extent permitted by applicable Law, become the property of the Surviving Entity, free and clear of any claims or interest of any such holders or their successors, assigns or personal representatives previously entitled thereto.

(g)     Investment of Exchange Fund. The Exchange Agent shall invest any cash included in the Exchange Fund as directed by Parent or, after the Effective Time, the Surviving Entity; provided, however, that (i) no such investment shall relieve Parent or the Exchange Agent from making the payments required by this ARTICLE III and, to the extent that there are losses with respect to such investments, or the Exchange Fund diminishes for other reasons below the level required to make prompt payments of the Aggregate Merger Consideration as contemplated hereby, Parent shall promptly replace or restore the portion of the Exchange Fund lost through investments or other events, without interest, so as to ensure that the Exchange Fund is, at all times, maintained at a level sufficient to make such payments, (ii) no such investment shall have maturities that could prevent or delay payments to be made pursuant to this Agreement, and (iii) such investments shall be in short-term obligations of the United States of America with maturities of no more than thirty (30) days or guaranteed by the United States of America and backed by the full faith and credit of the United States of America. Any net profit resulting from, or interest or income produced by, such investments, shall be property of, and paid to, Parent.

 

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Section 3.4     Stock Options; Restricted Stock Units; Restricted Stock; Phantom Shares. All of the provisions of this Section 3.4 shall be effectuated without any action on the part of the holder of any Company Option, Company Restricted Stock and/or Company Phantom Shares.

(a)     Treatment of Company Options. At the Effective Time, each In-The-Money Company Option which is outstanding immediately prior to the Effective Time (whether or not then vested or exercisable) shall become vested and exercisable and shall thereafter be assumed by Parent and shall otherwise continue to have, and be subject to, the same terms and conditions as were applicable immediately prior to the Effective Time as set forth in the applicable Company Plan (including any applicable award agreement, other agreement or other document evidencing such Company Option) immediately prior to the Effective Time, except that, from and after the Effective Time, (i) each such In-The-Money Company Option will be exercisable for that number of whole shares of Parent Common Shares equal to the product (rounded down to the nearest whole number) of (x) the number of shares of Company Common Stock subject to such In-The-Money Company Option as of immediately prior to the Effective Time and (y) the Exchange Ratio, and (ii) the per share exercise price for the shares of Parent Common Shares issuable upon exercise of such assumed In-The-Money Company Option will be equal to the quotient (rounded up to the nearest whole cent) determined by dividing (x) the exercise price of each share of Company Common Stock at which such assumed In-The-Money Company Option was exercisable immediately prior to the Effective Time by (y) the Exchange Ratio. Any Company Option outstanding as of the Effective Time that has an exercise price per share of Company Common Stock that is greater than or equal to the per share dollar value of the Merger Consideration immediately prior to the Effective Time shall automatically be cancelled and forfeited for no consideration without any further action on the part of the holder of such Company Option, and all rights with respect to such Company Option shall terminate as of the Effective Time.

(b)     Treatment of Company Restricted Stock Units. At the Effective Time, each Company Restricted Stock Unit that is outstanding immediately prior to the Effective Time shall be assumed by Parent and shall otherwise continue to have, and be subject to, the same terms and conditions, including vesting terms, as were applicable immediately prior to the Effective Time as set forth in the applicable Company Plan (including any applicable award agreement, other agreement or other document evidencing such Company Restricted Stock Unit) immediately prior to the Effective Time, except that, from and after the Effective Time, each such Company Restricted Stock Unit will be converted into a number of restricted stock units covering that number of whole shares of Parent Common Shares equal to the product (rounded down to the nearest whole number) of (i) the number of shares of Company Common Stock subject to such Company Restricted Stock Unit as of immediately prior to the Effective Time and (ii) the Exchange Ratio.

(c)     Treatment of Company Restricted Stock. At the Effective Time, each share of Company Restricted Stock that is outstanding immediately prior to the Effective Time shall be assumed by Parent and shall otherwise continue to have, and be subject to, the same terms and conditions, including applicable restrictions and vesting terms, as were applicable immediately prior to the Effective Time as set forth in the applicable Company Plan (including any applicable award agreement, other agreement or other document evidencing such awards of Company Restricted Stock) immediately prior to the Effective Time, except that, from and after the Effective Time, each such share of Company Restricted Stock will be converted into a number of restricted shares of Parent Common Shares equal to the product (rounded down to the nearest whole number) of (i) the number of shares of Company Restricted Stock as of immediately prior to the Effective Time and (ii) the Exchange Ratio.

(d)     Treatment of Company Phantom Shares. Each Company Phantom Share outstanding immediately prior to the Effective Time shall become fully vested and all restrictions with respect thereto shall lapse immediately prior to the Effective Time, and each such Company Phantom Share shall be converted into an amount, payable in cash, equal to the product of (i) the number of shares of Company Common Stock subject to such Company Phantom Share and (ii) the difference between (x) the per share dollar value of the Merger Consideration and (y) the applicable “exercise price” for such Company Phantom Share (the “Phantom Share Payment”). As of the Effective Time, each holder of Company Phantom Shares shall cease to have any rights

 

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with respect thereto, except the right to receive the Phantom Share Payment. Any Company Phantom Share outstanding as of the Effective Time that has an exercise price per share of Company Common Stock that is greater than or equal to the per share dollar value of the Merger Consideration shall automatically be cancelled and forfeited for no consideration without any further action on the part of the holder of such Company Phantom Share, and all rights with respect to such Company Phantom Share shall terminate as of the Effective Time.

(e)     Company Assumed Awards. As soon as reasonably practicable after the Effective Time, but in no event later than five (5) Business Days following the Effective Time, Parent shall deliver to each holder of an In-The-Money Company Option, Company Restricted Stock Unit and share of Company Restricted Stock an appropriate notice setting forth such holder’s rights pursuant to such In-The-Money Company Option, Company Restricted Stock Unit or share of Company Restricted Stock, as applicable. Unless the shares of Parent Common Shares issuable upon exercise or settlement of the In-The-Money Company Option or upon vesting of the Company Restricted Stock Unit or share of Company Restricted Stock are otherwise covered by an existing registration statement on Form S-8 immediately upon the Effective Time, Parent shall prepare and file with the SEC such a registration statement with respect to such shares of Parent Common Shares no later than the Effective Time and Parent shall exercise reasonable best efforts to maintain the effectiveness of such registration statement for so long as such In-The-Money Company Options, Company Restricted Stock Units and shares of Company Restricted Stock remain outstanding (subject to blackout periods and similar restrictions in accordance with Parent’s policies). The Company and its counsel shall reasonably cooperate with and assist Parent in the preparation of any such registration statement.

(f)     Manner of Effecting. Prior to the Effective Time, the Company and Parent agree that the Company shall, and shall be permitted under this Agreement to take all corporate action necessary to effectuate the provisions of this Section 3.4. From and after the Effective Time, unless the compensation committee of the Parent Board determines otherwise, all references to the Company in the Company Plans and in each award or other agreement evidencing or relating to any In-The-Money Company Options, Company Restricted Stock Units, Company Restricted Stock or Company Phantom Shares or any other Company equity-based award, shall be deemed (i) for all purposes relating to employment, consultancy or directorship (or words of similar meaning) to refer to Parent and its Subsidiaries and (ii) for all other purposes, to refer to Parent.

Section 3.5     Withholding Rights. Parent, the Surviving Entity or the Exchange Agent, as applicable, shall be entitled to deduct and withhold from the Merger Consideration and any amounts otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock, Company Options, Company Restricted Stock Units, shares of Company Restricted Stock and Company Phantom Shares, such amounts as Parent, the Surviving Entity or the Exchange Agent is required to deduct and withhold with respect to the making of such payment under the Code, and the rules and regulations promulgated thereunder, or any provision of applicable Tax Law. To the extent that amounts are so deducted or withheld and paid over to the appropriate Governmental Authority by Parent, the Surviving Entity or the Exchange Agent, as applicable, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the person in respect of which such deduction and withholding was made by Parent, the Surviving Entity or the Exchange Agent, as applicable.

Section 3.6     Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, then upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Entity, the posting by such Person of a bond in such reasonable amount as the Surviving Entity may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration to which the holder thereof is entitled pursuant to this ARTICLE III.

Section 3.7     Dissenters’ Rights. No dissenters’ or appraisal rights shall be available with respect to the Merger or the other transactions contemplated by this Agreement, so long as the provisions of Section 262 of the DGCL are applicable to the transaction.

 

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Section 3.8     Fractional Shares. No certificate or scrip representing fractional shares of Parent Common Shares shall be issued upon the surrender for exchange of Certificates or with respect to Book-Entry Shares, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a stockholder of Parent. Notwithstanding any other provision of this Agreement, each holder of shares of Company Common Stock converted pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of Parent Common Shares shall receive, in lieu thereof, cash, without interest, in an amount equal to such fractional part of a share of Parent Common Shares multiplied by the VWAP of Parent Common Shares.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

OF THE COMPANY

Except (a) as set forth in the corresponding sections of the disclosure letter that has been prepared by the Company and delivered by the Company to Parent immediately prior to the execution and delivery of this Agreement (the “Company Disclosure Letter”) (it being agreed that disclosure of any item in any Section of the Company Disclosure Letter with respect to any Section or subsection of ARTICLE IV of this Agreement shall be deemed disclosed with respect to any other Section or subsection of ARTICLE IV of this Agreement to the extent such relationship is reasonably apparent on the face of such disclosure, provided that nothing in the Company Disclosure Letter is intended to broaden the scope of any representation or warranty of the Company made herein), or (b) as disclosed in Company SEC Filings publicly available, filed with, or furnished to, as applicable, the SEC on or after January 1, 2013 and prior to the date of this Agreement (excluding any disclosure set forth in any section of a Company SEC Filing entitled “Risk Factors” or “Cautionary Note Regarding Forward-Looking Statements” or similarly titled section in any other disclosures included in the Company SEC Filings, in each case, to the extent that such disclosure is cautionary, predictive or forward-looking in nature), the Company hereby represents and warrants to Parent and Merger Sub that:

Section 4.1     Organization and Qualification; Subsidiaries.

(a)     The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite organizational power and authority and any necessary governmental authorization to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. The Company is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.

(b)     Each Company Subsidiary is duly organized, validly existing and in good standing (to the extent such concept is recognized) under the Laws of the jurisdiction of its incorporation or organization, as the case may be, and has the requisite organizational power and authority and any necessary governmental authorization to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. Each Company Subsidiary is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.

(c)     Section 4.1(c) of the Company Disclosure Letter sets forth a true and complete list of the Company Subsidiaries, together with (i) the jurisdiction of incorporation or organization, as the case may be, of each Company Subsidiary, (ii) the type of and percentage of interest held, directly or indirectly, by the Company in each Company Subsidiary, (iii) the names of and the type of and percentage of interest held by any Person

 

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other than the Company or a Company Subsidiary in each Company Subsidiary, and (iv) the classification for United States federal income tax purposes of each Company Subsidiary.

(d)     Neither the Company nor any Company Subsidiary directly or indirectly owns any interest or investment (whether equity or debt) in any Person (other than in the Company Subsidiaries and investments in short-term investment securities).

Section 4.2     Organizational Documents. The Company has made available to Parent complete and correct copies of (i) the Company’s certificate of incorporation, as amended and supplemented to date (the “Company Charter”) and the Company’s Bylaws, as currently in effect (the “Company Bylaws”), and (ii) the organizational documents of each Company Subsidiary, each as in effect on the date hereof.

Section 4.3     Capital Structure.

(a)     The authorized capital stock of the Company consists of 200,000,000 shares of Company Common Stock and 1,000,000 shares of preferred stock, par value $.001 per share (the “Company Preferred Stock”). At the close of business on August 28, 2015, (i) 20,142,627 shares of Company Common Stock were issued and 18,093,562 shares of Company Common Stock were outstanding, (ii) no shares of Company Preferred Stock were issued and outstanding, (iii) 2,049,065 shares of Company Common Stock were held by the Company as treasury shares, (v) 117,020 shares of Company Common Stock were reserved for issuance pursuant to the terms of outstanding Company Options, 43,340 shares of Company Common Stock were reserved for issuance pursuant to the terms of outstanding Company Restricted Stock and 301,000 shares of Company Common Stock were reserved for issuance pursuant to the terms of outstanding Company Restricted Stock Units, in each case granted pursuant to the Company Plans, (vi) 570,876 shares of Company Common Stock are available for grant under the 2009 Plan and the 2011 Plan, and (vii) outstanding Company Phantom Shares representing the economic equivalent of 118,750 shares of Company Common Stock (none of which are reserved or issuable thereunder as of the date hereof). All issued and outstanding shares of the capital stock of the Company are duly authorized, validly issued, fully paid and non-assessable, and no class of capital stock is entitled to preemptive rights. There are no outstanding bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter on which holders of shares of Company Common Stock may vote. There are no other rights to purchase or receive shares of Company Common Stock granted under the Company Benefit Plans or otherwise other than the Company Options, Company Restricted Stock Units and Company Restricted Stock.

(b)     All of the outstanding shares of capital stock of each of the Company Subsidiaries that is a corporation are duly authorized, validly issued, fully paid and nonassessable. All equity interests in each of the Company Subsidiaries that is a partnership or limited liability company are duly authorized and validly issued. All shares of capital stock of (or other ownership interests in) each of the Company Subsidiaries which may be issued upon exercise of outstanding options or exchange rights are duly authorized and, upon issuance will be validly issued, fully paid and nonassessable.

(c)     Except as set forth in this Section 4.3 and the rights (the “Rights”) issued pursuant to the Stockholder Protection Rights Agreement, dated as of June 27, 2006, as amended, between the Company and Mellon Investor Services LLC, as Rights Agent (the “Rights Agreement”), as of the date of this Agreement, there are no securities, options, warrants, calls, rights, commitments, agreements, rights of first refusal, arrangements or undertakings of any kind to which the Company or any Company Subsidiary is a party or by which any of them is bound, obligating the Company or any Company Subsidiary to issue, deliver or sell or create, or cause to be issued, delivered or sold or created, additional shares of Company Common Stock, shares of Company Preferred Stock, or other equity securities or phantom stock or other contractual rights the value of which is determined in whole or in part by the value of any equity security of the Company or any of the Company Subsidiaries or obligating the Company or any Company Subsidiary to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, right of first refusal, arrangement or undertaking.

 

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As of the date of this Agreement, there are no outstanding contractual obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares of Company Common Stock or other equity securities of the Company or any Company Subsidiary (other than in satisfaction of withholding Tax obligations pursuant to certain awards outstanding under the Company Plans in the event the grantees fail to satisfy withholding Tax obligations). Neither the Company nor any Company Subsidiary is a party to or bound by any agreements or understandings concerning the voting (including voting trusts and proxies) of any capital stock of the Company or any of the Company Subsidiaries.

(d)     Section 4.3(d)(i) of the Company Disclosure Letter sets forth a true, complete and correct list of all Persons who, as of the close of business on August 28, 2015, held outstanding Company Options, Company Restricted Stock Units, Company Restricted Stock or Company Phantom Shares, indicating, with respect to each Company Option, Company Restricted Stock Unit, share of Company Restricted Stock or Company Phantom Share then outstanding, the type of award granted, the number of shares of Company Common Stock subject to such Company Option, Company Restricted Stock Unit, Company Restricted Stock award or Company Phantom Share, the name of the Company Plan under which such Company Option, Company Restricted Stock Unit, share of Company Restricted Stock or Company Phantom Share was granted and the exercise price (if applicable), date of grant, vesting schedule and expiration date thereof. All Company Options, Company Restricted Stock Units, shares of Company Restricted Stock and Company Phantom Shares, as applicable, were (i) granted, accounted for, reported and disclosed in accordance with the applicable Laws, accounting rules, stock exchange requirements and the terms and conditions of the applicable Company Plan and granted with an exercise price (if applicable) that is equal or greater than the fair market value of the Company Common Stock on the applicable grant date and (ii) validly issued and properly approved by the Company Board (or a duly authorized committee or subcommittee thereof) in compliance with all applicable Law and recorded on the Company’s financial statements in accordance with GAAP. Section 4.3(d)(ii) of the Company Disclosure Letter sets forth each employee or other Person with an offer letter or other contract or Company Benefit Plan that contemplates a grant of, or right to purchase or receive: (i) options or other equity awards with respect to the equity of the Company or (ii) other equity securities of the Company, that in each case, have not been issued or granted as of the date of this Agreement, together with the number of such options, other equity awards or other equity securities and any promised terms thereof.

Section 4.4     Authority.

(a)     The Company has the requisite organizational power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to receipt of the Company Stockholder Approval, to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or the Merger or to consummate the transactions contemplated hereby, subject, with respect to the Merger, to receipt of the Company Stockholder Approval and the filing and acceptance for record of the Certificate of Merger with the Delaware Secretary. The Company’s board of directors (the “Company Board”) at a duly held meeting has, by unanimous vote, (i) duly and validly authorized the execution and delivery of this Agreement and declared advisable the consummation of the Merger and the other transactions contemplated hereby, (ii) determined that the Merger and the transactions contemplated by this Agreement are fair and in the best interest of the Company and its stockholders, (iii) directed that the Merger be submitted for consideration at the Company Stockholder Meeting, and (iv) resolved to recommend that the stockholders of the Company vote in favor of the Agreement and the approval of the Merger and the other transactions contemplated hereby (the “Company Recommendation”) and to include such recommendation in the Proxy Statement, subject to Section 6.5.

(b)     This Agreement has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery by each of Parent and Merger Sub, constitutes a legally valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such

 

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enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).

Section 4.5     No Conflict; Required Filings and Consents.

(a)     The execution and delivery of this Agreement by the Company does not, and the performance of this Agreement and the consummation of the Merger and the other transactions contemplated hereby by the Company will not, (i) assuming receipt of the Company Stockholder Approval, conflict with or violate any provision of the Company Charter or Company Bylaws or any equivalent organizational or governing documents of any Company Subsidiary, (ii) assuming that all consents, approvals, authorizations and permits described in Section 4.5(b) have been obtained, all filings and notifications described in Section 4.5(b) have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound, or (iii) require any consent or approval under, result in any breach of or any loss of any benefit or material increase in any cost or obligation of the Company or any Company Subsidiary under, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, acceleration or cancellation (with or without notice or the lapse of time or both) of, or give rise to any right of purchase, first offer or forced sale under or result in the creation of a Lien on any property or asset of the Company or any Company Subsidiary pursuant to, any note, bond, debt instrument, indenture, Contract, ground lease, Real Property Lease, license, permit or other legally binding obligation to which the Company or any Company Subsidiary is a party, except, as to clauses (ii) and (iii), respectively, for any such conflicts, violations, breaches, defaults or other occurrences which, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.

(b)     The execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority, other than (i) the filing with the SEC of (A) a proxy statement in preliminary and definitive form relating to the Company Stockholder Meeting (together with any amendments or supplements thereto, the “Proxy Statement”) and of a registration statement on Form F-4 pursuant to which the offer and sale of shares of Parent Common Shares in the Merger will be registered pursuant to the Securities Act and in which the Proxy Statement will be included as a prospectus (together with any amendments or supplements thereto, the “Form F-4-”, and declaration of effectiveness of the Form F-4, and (B) such reports under, and other compliance with, the Exchange Act (and the rules and regulations promulgated thereunder) and the Securities Act (and the rules and regulations promulgated thereunder) as may be required in connection with this Agreement and the transactions contemplated hereby, (ii) as may be required under the rules and regulations of NASDAQ, (iii) as may be required under the HSR Act, other Antitrust Laws, (iv) the filing of the Certificate of Merger and the acceptance thereof for record by the Delaware Secretary pursuant to the DGCL, (v) such filings and approvals as may be required by any applicable state securities or “blue sky” Laws, and (vi) such filings as may be required in connection with state and local transfer Taxes, except where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect.

Section 4.6     Permits; Compliance with Law.

(a)     Except for the authorizations, licenses, permits, certificates, approvals, variances, exemptions, orders, franchises, certifications and clearances that are the subject of Section 4.14, which are addressed solely in that Section, the Company and each Company Subsidiary is in possession of all authorizations, licenses, permits, certificates, approvals, variances, exemptions, orders, franchises, certifications and clearances of any Governmental Authority and accreditation and certification agencies, bodies or other organizations, including building permits and certificates of occupancy, necessary for the Company and each Company Subsidiary to own, lease and, to the extent applicable, operate its properties or to carry on its respective business substantially

 

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as it is being conducted as of the date hereof (the “Company Permits”), and all such Company Permits are valid and in full force and effect, except where the failure to be in possession of, or the failure to be valid or in full force and effect of, any of the Company Permits, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. Neither the Company nor any Company Subsidiary has received any claim or notice nor has any Knowledge indicating that the Company or any Company Subsidiary is currently not in compliance with the terms of any such Company Permits, except where the failure to be in compliance with the terms of any such Company Permits, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.

(b)     Neither the Company nor any Company Subsidiary is or has, since January 1, 2013, been in conflict with, or in default or violation of (i) any Law applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound (except for Laws addressed in Section 4.10, Section 4.11, Section 4.14, Section 4.15 or Section 4.17, which are the subject of the representations and warranties made therein), or (ii) any Company Permits (except for the Company Permits addressed in Section 4.14, which are the subject of the representations and warranties made therein), except in each case for any such conflicts, defaults or violations that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.

(c)     Since January 1, 2013, none of the Company, any Company Subsidiary or, to the Knowledge of the Company, any of their respective officers or employees, directly or indirectly, has (i) made or received any payments in violation of any Law (including the U.S. Foreign Corrupt Practices Act), including any contribution, payment, commission, rebate, promotional allowance or gift of funds or property or any other economic benefit to or from any employee, official or agent of any Governmental Authority where either the contribution, payment, commission, rebate, promotional allowance, gift or other economic benefit, or the purpose thereof, was illegal under any Law (including the U.S. Foreign Corrupt Practices Act) (any such payment, a “Prohibited Payment”); (ii) provided or received any product or services in violation of any Law (including the U.S. Foreign Corrupt Practices Act); or (iii) been subject to any investigation by any Governmental Authority with regard to any Prohibited Payment.

(d)     Each of the Company and the Company Subsidiaries has conducted its business in all material respects in accordance with applicable provisions of the United States’ economic sanctions and export control laws and regulations, including, without limitation, the Arms Export Control Act, the International Traffic in Arms Regulations, the Export Administration Act, the International Emergency Economic Powers Act, the Trading with the Enemy Act, the Export Administration Regulations, and regulations administered by the Office of Foreign Assets Control (31 CFR Part V), and other applicable export laws of the countries where it conducts business. Without limiting the foregoing, during the past five (5) years:

(i)     each of the Company and the Company Subsidiaries has obtained all material export licenses, registrations, approvals, and other authorizations required for its exports of products, software and technology from the United States and reexports of products, software and technology subject to the laws of the United States;

(ii)     each of the Company and the Company Subsidiaries is and at all times has been in compliance in all material respects with the terms of such applicable export licenses, registrations, approvals, and other authorizations;

(iii)     none of the Company and the Company Subsidiaries has received any written communication alleging that it is not or may not be in compliance with, or has, or may have any, liability under any such applicable export licenses, registrations, approvals, and other authorizations;

(iv)     there are no pending or, to the Company’s Knowledge, threatened claims or Actions against or involving the Company or any of the Company Subsidiaries with respect to such export licenses, registrations, approvals, and other authorizations;

 

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(v)     there are no actions, conditions or circumstances pertaining to the Company’s or any Company Subsidiary’s export transactions that would reasonably be expected to give rise to any material future claims involving a Governmental Authority;

(vi)     to the Company’s Knowledge, neither the Company nor any Company Subsidiary is subject to United States trade sanctions or has participated directly or indirectly in any illegal transaction that involves any commodity, software, technical data, products or services with a Person that is (i) located in, organized under the laws of, or the government of a country that is subject to comprehensive United States trade sanctions, or owned or controlled by any such Person, or (ii) denied United States export privileges or otherwise specially designated or debarred by the government of the United States.

Section 4.7     SEC Filings; Company Financial Statements.

(a)     The Company has filed with, or furnished (on a publicly available basis) to, the SEC all forms, reports, schedules, statements and documents required to be filed or furnished by it under the Securities Act or the Exchange Act, as the case may be, including any amendments or supplements thereto, from and after January 1, 2013 (collectively, the “Company SEC Filings”). Each Company SEC Filing, as amended or supplemented, if applicable, (i) as of its date, or, if amended or supplemented, as of the date of the most recent amendment or supplement thereto, complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the applicable rules and regulations of the SEC thereunder, and (ii) did not, at the time it was filed (or became effective in the case of registration statements), or, if amended or supplemented, as of the date of the most recent amendment or supplement thereto, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. As of the date of this Agreement, no Company Subsidiary is separately subject to the periodic reporting requirements of the Exchange Act.

(b)     Each of the consolidated financial statements contained or incorporated by reference in the Company SEC Filings (as amended, supplemented or restated, if applicable), including the related notes and schedules (the “Company Financial Statements”), was prepared (except as indicated in the notes thereto) in accordance with GAAP applied on a consistent basis throughout the periods indicated, and each such consolidated financial statement presented fairly, in all material respects, the consolidated financial position, results of operations, stockholders’ equity and cash flows of the Company and its consolidated subsidiaries as of the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited quarterly financial statements, to normal year-end adjustments).

(c)     The Company is in compliance in all material respects with the provisions of the Sarbanes-Oxley Act and the provisions of the Exchange Act and Securities Act relating thereto which under the terms of such provisions (including the dates by which such compliance is required) have become applicable to the Company. Each of the principal executive officer of the Company and the principal financial officer of the Company has made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act or Sections 302 and 906 of the Sarbanes-Oxley Act and the rules and regulations of the SEC promulgated thereunder with respect to the Company SEC Filings. For purposes of the preceding sentence, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in the Sarbanes-Oxley Act. The records, systems, controls, data and information of the Company and the Company Subsidiaries that are used in the system of internal accounting controls described in the following sentence are recorded, stored, maintained and operated under means that are under the exclusive ownership and direct control of the Company or the Company Subsidiaries or accountants, except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a materially adverse effect on the system of internal accounting controls. The Company and the Company Subsidiaries have devised and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including that: (1) transactions are executed

 

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only in accordance with management’s authorization; (2) transactions are recorded as necessary to permit preparation of the financial statements of the Company and the Company Subsidiaries and to maintain accountability for the assets of the Company and the Company Subsidiaries; (3) access to such assets is permitted only in accordance with management’s authorization; (4) the reporting of such assets is compared with existing assets at regular intervals; and (5) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis. The Company’s principal executive officer and its principal financial officer have disclosed to the Company’s auditors and the audit committee of the Company Board (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial data, and (ii) any known fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls, and the Company has made available to Parent copies of any material written materials relating to the foregoing. The Company has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15 promulgated under the Exchange Act) designed to ensure that material information relating to the Company required to be included in reports filed under the Exchange Act, including its consolidated subsidiaries, is made known to the Company’s principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared, and, to the Knowledge of the Company, such disclosure controls and procedures are effective in timely alerting the Company’s principal executive officer and its principal financial officer to material information required to be included in the Company’s periodic reports required under the Exchange Act. Since the enactment of the Sarbanes-Oxley Act, none of the Company or any Company Subsidiary has made any prohibited loans to any director or executive officer of the Company (as defined in Rule 3b-7 promulgated under the Exchange Act).

(d)     None of the Company or its consolidated subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise), except for liabilities or obligations (i) expressly contemplated by or under this Agreement, including without limitation Section 6.1 hereof, (ii) incurred in the ordinary course of business consistent with past practice since the most recent balance sheet set forth in the Company SEC Filings made through and including the date of this Agreement, (iii) described in any section of the Company Disclosure Letter or (iv) that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.

(e)     To the Knowledge of the Company, none of the Company SEC Filings is the subject of ongoing SEC review and the Company has not received any comments from the SEC with respect to any of the Company SEC Filings since January 1, 2013 which remain unresolved, nor has it received any inquiry or information request from the SEC as to any matters affecting the Company which has not been adequately addressed. The Company has made available to Parent true and complete copies of all written comment letters from the staff of the SEC received since January 1, 2013 through the date of this Agreement relating to the Company SEC Filings and all written responses of the Company thereto through the date of this Agreement. None of the Company SEC Filings is the subject of any confidential treatment request by the Company.

Section 4.8     Disclosure Documents.

(a)     None of the information supplied or to be supplied by or on behalf of the Company or any Company Subsidiary for inclusion or incorporation by reference in (i) the Form F-4 will, at the time such document is filed with the SEC, at any time such document is amended or supplemented or at the time such document is declared effective by the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Circular will, at the time such document is filed with the applicable Canadian Securities Commissions, at any time such document is amended or supplemented, at the date it is first mailed to the shareholders of Parent, at the time of the Parent Shareholder Meeting or at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not

 

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misleading, or (iii) the Proxy Statement will, at the date it is first mailed to the stockholders of the Company, at the time of the Company Stockholder Meeting, at the time the Form F-4 is declared effective by the SEC or at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. All documents that the Company is responsible for filing with the SEC in connection with the transactions contemplated herein, to the extent relating to the Company or any Company Subsidiary or other information supplied by or on behalf of the Company or any Company Subsidiary for inclusion therein, will comply as to form, in all material respects, with the provisions of the Securities Act or Exchange Act, as applicable, and the rules and regulations of the SEC thereunder and each such document required to be filed with any Governmental Authority (other than the SEC) will comply in all material respects with the provisions of any applicable Law as to the information required to be contained therein.

(b)     The representations and warranties contained in this Section 4.8 will not apply to statements or omissions included in the Form F-4, the Circular or the Proxy Statement to the extent based upon information supplied to the Company by or on behalf of Parent or Merger Sub.

Section 4.9     Absence of Certain Changes or Events. Since June 30, 2015, except as contemplated by this Agreement or as set forth in Section 4.9 of the Company Disclosure Letter, (a) the Company and each Company Subsidiary has conducted its business in the ordinary course consistent with past practice, (b) except as set forth on Section 6.1(b) of the Company Disclosure Letter, neither the Company nor any Company Subsidiary has taken any action that it would not be permitted to take after the date of this Agreement without the prior written consent of Parent pursuant to Section 6.1(b)(i), Section 6.1(b)(ii), Section 6.1(b)(v),Section 6.1(b)(vi), Section 6.1(b)(vii), Section 6.1(b)(xi), or Section 6.1(b)(xv); or agreed to do any of the foregoing, and (c) there has not been any Company Material Adverse Effect or any effect, event, development or circumstance that, individually or in the aggregate with all other effects, events, developments and changes, would reasonably be expected to result in a Company Material Adverse Effect.

Section 4.10     Employee Benefit Plans.

(a)     Section 4.10(a) of the Company Disclosure Letter sets forth a true and complete list of each material Company Benefit Plan. Each Company Benefit Plan has been maintained and administered in all material respects in accordance with its terms and applicable Laws.

(b)     Each Company Benefit Plan that is intended to qualify under Section 401(a) of the Code has either received, or may rely upon, a favorable determination or opinion letter from the IRS as to its qualified status and, to the Company’s Knowledge, no event has occurred that could reasonably be expected to adversely affect the qualified status of any such Company Benefit Plan. To the Company’s Knowledge, neither the Company nor any Company Subsidiary has engaged in a non-exempt prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Company Benefit Plan that could result in material liability to the Company and the Company Subsidiaries, taken as a whole. No material suit, administrative proceeding, action or other litigation has been brought, or to the Knowledge of the Company, is threatened against or with respect to any such Company Benefit Plan (other than routine benefits claims) and no such Company Benefit Plan is under audit or investigation by any Governmental Authority.

(c)     None of the Company, any Company Subsidiaries or any of their ERISA Affiliates, maintains, contributes to, or participates in, or has ever during the past six (6) years maintained, contributed to, or participated in, or otherwise has any obligation or liability in connection with: (i) an employee pension benefit plan subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code, (ii) a “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA), a “multiple employer plan” (as defined in Section 413(c) of the Code) or a Multiemployer Plan, (iii) any plan or arrangement which provides post-employment retiree medical or welfare benefits, except as required by applicable Law; or (iv) any plan established or maintained outside of the United States or for the benefit of current or former employees of the Company or any Company Subsidiaries residing outside the United States.

 

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(d)     Except as set forth in Section 4.10(d) of the Company Disclosure Letter, neither the execution of this Agreement nor the consummation of the transactions contemplated hereby, either alone or in conjunction with another event, will: (A) accelerate the time of payment, vesting or funding or result in any payment of compensation or benefits to any current or former employee, officer, director or other service provider of any Company or Company Subsidiary; (B) give rise to any payment or benefit that, individually or in combination with any other such payment or benefit, will or may be made by the Company or any Company Subsidiary to any of their current or former employees or other service providers that could reasonably be expected to be characterized as a “parachute payment” within the meaning of Section 280G(b)(2) of the Code; (C) result in payments or benefits which would not be deductible under Section 280G of the Code; or (D) result in any severance or other payment becoming due, or increase the amount of any compensation or benefits due, to any current or former employee, officer, director, consultant or other service provider of the Company or any Company Subsidiary. No Person is entitled to receive any additional payment (including any tax gross-up or other payment) from the Company or any Company Subsidiary as a result of the imposition of the excise taxes required by Section 4999 of the Code or any taxes required by Section 409A of the Code.

Section 4.11     Labor and Other Employment Matters.

(a)     Neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement or similar agreement (other than national labor contracts). As of the date of this Agreement and except as would not reasonably be expected to have a Company Material Adverse Effect, or as set forth in Section 4.11(a) of the Company Disclosure Letter, with respect to employees of the Company or any of its Subsidiaries: (i) there is no labor-related strike, walkout or lockout pending or, to the Company’s Knowledge, threatened in writing, and (ii) there is no pending, or, to the Knowledge of the Company, threatened union organizing campaign and no labor union has made a pending written demand for recognition or certification.

(b)     Except as would not reasonably be expected to result in, either individually or in the aggregate, a Company Material Adverse Effect, (i) the Company and each of its Subsidiaries is in compliance with all Laws relating to hiring of employees and the employment of labor, including all such Laws relating to fair employment practices, employment discrimination, terms and conditions of employment, workers’ compensation, occupational safety and health, overtime, wages and hours, plant closures and layoffs, worker classification and immigration, and (ii) there is no charge, complaint, lawsuit or other proceeding pending, or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries before any Governmental Authority brought by or on behalf of any current or former employee or any class of the foregoing, alleging breach of any express or implied contract of employment, any applicable Law governing employment or the termination thereof or other discriminatory, wrongful or tortious conduct in connection with the employment relationship.

Section 4.12     Material Contracts.

(a)     Section 4.12(a) of the Company Disclosure Letter sets forth all of the following Contracts to which the Company or any Company Subsidiary is a party, or by which any of the assets of the Company or any Company Subsidiary are bound, in each case as of the date hereof:

(i)     each contract or agreement in effect as of the date of this Agreement to which the Company or any Company Subsidiary is a party that is required to be filed as an exhibit to the Parent SEC Filings pursuant to Items 601(b)(2), (4), (9) and (10) of Regulation S-K promulgated by the SEC, excluding (x) any contract or agreement that will no longer be in effect following the Closing and (y) any contract or agreement that is, or at the Closing will be, terminable-at-will (as defined below) or terminable upon not more than ninety (90) days’ notice by the Company or any Company Subsidiary without penalty;

(ii)     any Contract providing for any indemnification obligation or any guaranty by the Company or any Company Subsidiary, which indemnification or guaranty is material to the Company and its Subsidiaries, taken as a whole, other than (A) any Contract providing for indemnification of customers

 

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that is entered into in the ordinary course of business consistent with past practice and (B) any guaranty by the Company or a Company Subsidiary of any of the obligations of the Company or another Company Subsidiary;

(iii)     any Contract relating to the disposition (other than sales or distribution Contracts) or acquisition by the Company or any Company Subsidiary after the date of this Agreement of any material assets or properties, in each case involving consideration in excess of $500,000;

(iv)     any Contract providing that the Company or any Company Subsidiary shall not compete in any line of business or geographic area or that will restrict the Surviving Entity or any of its Affiliates from competing in any line of business or geographic area after the Closing Date;

(v)     any acquisition Contract pursuant to which the Company or any Company Subsidiary has “earn-out” or other contingent purchase price payment obligations, in each case, that have not been paid in full prior to the date hereof;

(vi)     any mortgages, indentures, guarantees, loans or credit agreements, security agreements or other Contracts, in each case, relating to indebtedness for borrowed money, whether as borrower or lender, in each case, in excess of $500,000, other than (A) accounts receivables and payables, and (B) loans to direct or indirect wholly-owned Subsidiaries of the Company;

(vii)     any Contract which requires the expenditure by the Company or any Company Subsidiary, or pursuant to which the Company or any Company Subsidiary reasonably believes that it will expend, more than $500,000 in the aggregate in any future 12-consecutive-month period and that is not terminable with notice of ninety (90) days or less without further liability to the Company or any Company Subsidiary;

(viii)     any material joint venture, strategic alliance, partnership or other similar agreement or arrangement involving a sharing of profits or expenses; and

(ix)     any sales or distribution Contract (or series of Contracts with a party or related parties) that provides for annual payments by or to the Company or any Company Subsidiary, or pursuant to which the Company or any Company Subsidiary is reasonably likely to receive or make annual payments, in excess of $1,000,000.

(x)     Each Contract set forth on (or required to be set forth on) Section 4.12 of the Company Disclosure Letter is referred to herein as a “Company Material Contract.”

(b)     Each Company Material Contract is in full force and effect and is valid, binding and enforceable against the Company and/or any Company Subsidiary party thereto, and, to the Knowledge of the Company, each other party thereto in accordance with its terms, except for such failures to be in such full force and effect or to be valid, binding and enforceable as are not reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect. None of the Company or any Company Subsidiary, nor, to the Knowledge of the Company, any other party thereto, is in material breach or violation of, or default under, any Company Material Contract, and no event has occurred that with notice or lapse of time or both would constitute a violation, breach or default under any Company Material Contract, except where in each case such breach, violation or default is not reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect. None of the Company or any Company Subsidiary has received any written notice of an event of default pursuant to the terms of any Company Material Contract.

Section 4.13     Litigation. Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect, or as set forth in Section 4.13 of the Company

 

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Disclosure Letter, as of the date of this Agreement, (a) there is no Action pending or, to the Knowledge of the Company, threatened by or before any Governmental Authority, nor, to the Knowledge of the Company, is there any investigation pending by any Governmental Authority, in each case, against the Company or any Company Subsidiary, and (b) neither the Company nor any Company Subsidiary, nor any of the Company’s or any Company Subsidiary’s respective property, is subject to any outstanding judgment, order, writ, injunction or decree of any Governmental Authority.

Section 4.14     Environmental Matters.

(a)     Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect:

(i)     The Company and each Company Subsidiary are in compliance with applicable Environmental Laws, have applied for all Environmental Permits necessary to conduct their current operations and are in compliance with their respective Environmental Permits.

(ii)     Neither the Company nor any Company Subsidiary has received any written notice, demand, letter or claim alleging that the Company or any such Company Subsidiary is in violation of, or liable under, any Environmental Law or that any judicial, administrative or compliance order has been issued against the Company or any Company Subsidiary which remains unresolved. There is no litigation, investigation, request for information or other proceeding pending, or, to the Knowledge of the Company, threatened against the Company and any Company Subsidiary under any applicable Environmental Law.

(iii)     Neither the Company nor any Company Subsidiary has entered into or agreed to any consent decree or order or is subject to any judgment, decree or judicial, administrative or compliance order relating to compliance with Environmental Laws, Environmental Permits or the investigation, sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous Materials and no investigation, litigation or other proceeding is pending or, to the Knowledge of the Company, threatened against the Company or any Company Subsidiary under any applicable Environmental Law.

(iv)     Neither the Company nor any Company Subsidiary has assumed, by Contract or operation of Law, any liability under any Environmental Law or relating to any Hazardous Materials, or is an indemnitor in connection with any threatened or asserted claim by any third-party indemnitee for any liability under any Environmental Law or relating to any Hazardous Materials.

(v)     Neither the Company nor any Company Subsidiary has caused, and to the Knowledge of the Company, no Third Party has caused any Release of a Hazardous Material that would be required to be investigated or remediated by the Company or any Company Subsidiary under any Environmental Law.

(b)     This Section 4.14 contains the exclusive representations and warranties of the Company with respect to environmental matters.

Section 4.15     Intellectual Property.

(a)     Section 4.15(a) of the Company Disclosure Letter sets forth a correct and complete list of all material Intellectual Property registrations and applications for registration owned by the Company or Company Subsidiary. The Company or a Company Subsidiary is the sole and exclusive owner of each such registration and application for Intellectual Property and each such item is subsisting and, to the Knowledge of the Company, valid and enforceable.

 

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(b)     Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect, as of the date of this Agreement, (i) the Company and the Company Subsidiaries own or are licensed or otherwise possess valid rights to use all Intellectual Property necessary to conduct the business of the Company and the Company Subsidiaries as it is currently conducted, (ii) the conduct of the business of the Company and the Company Subsidiaries as it is currently conducted does not infringe, misappropriate or otherwise violate the Intellectual Property rights of any Third Party, (iii) there are no pending or, to the Knowledge of the Company, threatened claims with respect to any of the Intellectual Property rights owned by the Company or any Company Subsidiary, (iv) to the Knowledge of the Company, no Third Party is currently infringing or misappropriating Intellectual Property owned by the Company or any Company Subsidiary, (v) there are no orders, writs, injunctions, or decrees to which the Company or any Company Subsidiary is subject with respect to any material Intellectual Property and (vi) the Merger will not alter in a manner materially adverse to the Company or any Company Subsidiary, or materially impair the Company’s or any Company Subsidiary’s rights in, any Intellectual Property described in Section 4.15(b)(i).

(c)     Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect, (i) neither the Company nor the Company Subsidiaries has ever been a member or promoter of, or a contributor to, any industry standards body or any similar organization that could reasonably be expected to require or obligate the Company or a Company Subsidiary to grant or offer to any other Person any license or right to Intellectual Property owned or purported to be owned by the Company or a Company Subsidiary, and (ii) to the Knowledge of the Company, no funding, facilities or personnel of any Governmental Authority or any university, college, research institute or other educational institution has been or is being used, directly or indirectly, to create, in whole or in part, any Intellectual Property owned or purported to be owned by the Company or a Company Subsidiary, except for any such funding or use of facilities or personnel that does not result in such Governmental Authority or institution obtaining ownership rights or any other similar right, title or interest (including any “march in” rights) in or to such Intellectual Property.

(d)     Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect, to the Knowledge of the Company, there have been no material security breaches in the information technology systems of the Company or the Company Subsidiaries or the information technology systems of a Third Party to the extent used by or on behalf of the Company or a Company Subsidiary.

Section 4.16     Properties.

(a)     Except as set forth in Section 4.16(a) of the Company Disclosure Letter, neither the Company nor the Company Subsidiaries own or has any options to purchase any real property. The Company has provided Parent true, correct and complete copies of all leases or Contracts (and all amendments, modifications, supplements, renewals, extensions and guarantees related thereto) under which the Company or the Company Subsidiaries lease, use, occupy, or have the right to lease, use or occupy any real property (such leases and Contracts together with all amendments, modifications, supplements, renewals, exhibits, schedules, extensions and guarantees related thereto, are hereby referred to individually as a “Real Property Lease” and collectively, as the “Real Property Leases”). Each Real Property Lease contains the street address of the real property that is leased pursuant to each Real Property Lease (each, a “Leased Real Property” and collectively, the “Leased Real Properties”). No Person other than the Company or the Company Subsidiaries has any option or right to terminate any of the Real Property Leases other than as expressly set forth in such Real Property Leases. The Company and the Company Subsidiaries own good, valid and marketable title, free and clear of all Liens (other than Permitted Liens), to all of their respective material tangible Assets. The Company and the Company Subsidiaries own, lease under valid leases or has use of and/or valid access under valid agreements to all material facilities, machinery, equipment and other material tangible Assets necessary for the conduct of their respective business as presently conducted. With respect to the material property and Assets they lease (including, without limitation, the Leased Real Properties), the Company and the Company Subsidiaries are in compliance in all material respects with such leases (including, without limitation, the Real Property Leases) and hold a valid and

 

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enforceable leasehold interest therein, free of any Liens, other than Permitted Liens. Each Real Property Lease is in full force and effect and there is no violation, breach, default, or any event or condition which, after notice or lapse of time or both, will constitute a violation, breach or default by the Company or a Company Subsidiary under any Real Property Lease, or, to the Knowledge of the Company or the Company Subsidiaries, by any other party thereto. There are no parties physically occupying or using any portion of any of the Leased Real Properties nor do any other parties have the right to physically occupy or use any portion of the Leased Real Properties, in each case, other than the Company or the Company Subsidiaries.

Section 4.17     Taxes.

(a)     The Company and each Company Subsidiary has filed with the appropriate Governmental Authority all Tax Returns required to be filed, taking into account any extensions of time within which to file such Tax Returns, and all such Tax Returns were complete and correct, subject in each case to such exceptions as, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. The Company and each Company Subsidiary has duly paid (or there has been paid on their behalf), or made adequate provisions for, all material Taxes required to be paid by them.

(b)     (i) There are no audits, investigations by any Governmental Authority or other proceedings pending with regard to any material Taxes or Tax Returns of the Company or any Company Subsidiary; (ii) no deficiency for Taxes of the Company or any Company Subsidiary has been claimed, proposed or assessed in writing or, to the Knowledge of the Company, threatened, by any Governmental Authority, which deficiency has not yet been settled, except for such deficiencies which are being contested in good faith or with respect to which the failure to pay, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect; (iii) neither the Company nor any Company Subsidiary has waived any statute of limitations with respect to Taxes or agreed to any extension of time with respect to any Tax assessment or deficiency for any open tax year; and (iv) neither the Company nor any of the Company Subsidiaries has entered into any “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law).

(c)     The Company and the Company Subsidiaries have complied, in all material respects, with all applicable Laws, rules and regulations relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446 and 3402 of the Code or similar provisions under any foreign Laws) and have duly and timely withheld and have paid over to the appropriate taxing authorities all material amounts required to be so withheld and paid over on or prior to the due date thereof under all applicable Laws.

(d)     There are no Tax Liens upon any property or assets of the Company or any Company Subsidiary except Liens for Taxes not yet due and payable or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established.

(e)     Neither the Company nor any Company Subsidiary has requested, has received or is subject to any written ruling of a Governmental Authority or has entered into any written agreement with a Governmental Authority with respect to any Taxes.

(f)     There are no Tax allocation or sharing agreements or similar arrangements with respect to or involving the Company or any Company Subsidiary, and after the Closing Date neither the Company nor any Company Subsidiary shall be bound by any such Tax allocation agreements or similar arrangements or have any liability thereunder for amounts due in respect of periods prior to the Closing Date.

(g)     Neither the Company nor any Company Subsidiary (A) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company) or (B) has any liability for the Taxes of any Person (other than the Company or any Company

 

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Subsidiary) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.

(h)     Neither the Company nor any Company Subsidiary has participated in any “listed transaction” or “substantially similar” transaction, within the meaning of Treasury Regulations Section 1.6011-4(b)(2).

(i)     The Company has not taken or agreed to take any action, and is not aware of any fact or circumstance, that would (i) prevent, or could reasonably be expected to prevent, the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code or (ii) result in gain recognition to holders of Company Common Stock in the Merger pursuant to Section 367(a) of the Code (assuming that, in the case of any holder who would be treated as a “five-percent transferee shareholder” within the meaning of Treasury Regulations Section 1.367(a)-3(c)(5)(ii), such holder enters into a five-year gain recognition agreement in the form provided in Treasury Regulations Section 1.367(a)-8, as provided for in Treasury Regulations Section 1.367(a)—3(c)(1)(iii)(B), and complies with the requirements of that agreement and Treasury Regulations Section 1.367(a)-8 for avoiding the recognition of gain.

(j)     Neither the Company nor any of the Company Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (A) in the two years prior to the date of this Agreement or (B) in a distribution which could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with transactions contemplated by this Agreement.

(k)     Neither the Company nor any Company Subsidiary will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in method of accounting for a taxable period ending on or prior to the Closing Date, (ii) installment sale or open transaction disposition made on or prior to the Closing Date, or (iii) prepaid amount received on or prior to the Closing Date or (iv) and election under Code Section 108(i).

(l)     This Section 4.17 contains the exclusive representations and warranties of the Company with respect to tax matters.

Section 4.18     Insurance. The Company maintains policies of fire and casualty, liability and other forms of insurance in such amounts, with such deductibles and against such risks and losses as are, in the Company’s judgment, reasonable for the business and Assets of the Company and the Company Subsidiaries. All such policies are in full force and effect, all premiums due and payable thereon have been paid (other than retroactive or retrospective premium adjustments that are not yet, but may be, required to be paid with respect to any period ending prior to the Closing Date), and no written notice of cancellation or termination has been received with respect to any such policy which has not been replaced on substantially similar terms prior to the date of such cancellation.

Section 4.19     Opinion of Financial Advisor. The Company has received the opinion of J.P. Morgan and & Co. (“J.P. Morgan”) that, as of the date of such opinion and subject to the assumptions and limitations set forth therein, the Exchange Ratio is fair from a financial point of view to the holders of shares of Company Common Stock.

Section 4.20     Takeover Statutes. Assuming the accuracy of the representations and warranties set forth in Section 5.24, the Company Board has taken all action necessary to render inapplicable to the Merger the restrictions on business combinations contained in Section 203 of the DGCL. No other “business combination,” “control share acquisition,” “fair price,” “moratorium” or other takeover or anti-takeover statute or similar federal or state Law (collectively, “Takeover Statutes”) are applicable to this Agreement, the Merger or the other transactions contemplated by this Agreement.

 

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Section 4.21     Vote Required. The affirmative vote or consent of holders of not less than a majority of all outstanding shares of Company Common Stock (the “Company Stockholder Approval”) is the only vote of the holders of any class or series of shares of capital stock of the Company necessary to adopt this Agreement and approve the Merger and the other transactions contemplated hereby.

Section 4.22     Brokers. No broker, finder or investment banker (other than J.P. Morgan) is entitled to any brokerage, finder’s or other fee or commission in connection with the Merger based upon arrangements made by or on behalf of the Company or any Company Subsidiary.

Section 4.23     Investment Company Act. Neither the Company nor any Company Subsidiary is required to be registered as an investment company under the Investment Company Act.

Section 4.24     Affiliate Transactions. Except as set forth in the Company SEC Filings made through and including the date of this Agreement or as permitted by this Agreement, from January 1, 2015 through the date of this Agreement there have been no transactions, agreements, arrangements or understandings between the Company or any Company Subsidiary, on the one hand, and any Affiliates (other than Company Subsidiaries) of the Company or other Persons, on the other hand, that would be required to be disclosed under Item 404 of Regulation S-K promulgated by the SEC.

Section 4.25     Products Liability.

(a)     Except as set forth in Section 4.25 of the Company Disclosure Letter and for those matters that would not be reasonably expected to result in, individually or in the aggregate, any material liability on the Company or any Company Subsidiary, (i) there is no Action before any Governmental Authority pending, or to the Knowledge of the Company, threatened against the Company or any Company Subsidiary involving any products manufactured, produced, distributed or sold by or on behalf of the Company or any Company Subsidiary (including any parts or components) (collectively, “Products”), or class of claims or lawsuits involving the same or similar Product which is pending or, to the Company’s Knowledge, threatened, resulting from an alleged defect in design, manufacture, materials or workmanship of any Product, or any alleged failure to warn, or from any breach of implied warranties or representations, and (ii) to the Knowledge of the Company, there has not been, within the past three (3) years, any Occurrence.

(b)     Except as set forth in Section 4.25 of the Company Disclosure Letter and for those matters that would not be reasonably expected to result in, individually or in the aggregate, any material liability on the Company or any Company Subsidiary, to the Company’s Knowledge, each Product manufactured, sold, leased, or delivered by the Company and any Company Subsidiary has been in conformity in all material respects with all applicable material contractual commitments and all applicable material express and implied warranties, and neither the Company nor any Company Subsidiary has any liability (and, to the Knowledge of the Company, there is no basis for any present or future proceeding against any of them giving rise to any liability) for replacement or repair thereof or other damages in connection therewith (excluding customary warranty claims with respect to individual defected products). The Company has previously provided Parent with copies of the standard terms and conditions of sale or lease for each Product sold or leased by the Company and any Company Subsidiary (containing applicable guaranty, warranty, and indemnity provisions).

(c)     Except as set forth in Section 4.25 of the Company Disclosure Letter, the Company and the Company Subsidiaries have no material liability (and, to the Company’s Knowledge, there is no basis for any present or future proceeding against any the Company or any Company Subsidiary giving rise to any material liability) arising out of any injury to individuals or property as a result of the ownership, possession, or use of any Product manufactured, sold, leased, or delivered by the Company or any Company Subsidiary.

Section 4.26     No Other Representations or Warranties. Except for the representations and warranties contained in ARTICLE V, the Company acknowledges that neither Parent nor any other Person or entity on

 

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behalf of Parent has made, and the Company has not relied upon, any representation or warranty, whether express or implied, with respect to Parent or any of the Parent Subsidiaries or their respective businesses, affairs, assets, liabilities, financial condition, results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, plans or prospects) or with respect to the accuracy or completeness of any other information provided or made available to the Company by or on behalf of Parent.

ARTICLE V.

REPRESENTATIONS AND WARRANTIES

OF PARENT AND MERGER SUB

Except (a) as set forth in the corresponding sections of the disclosure letter that has been prepared by Parent and delivered by Parent to the Company immediately prior to the execution and delivery of this Agreement (the “Parent Disclosure Letter”) (it being agreed that disclosure of any item in any Section of the Parent Disclosure Letter with respect to any Section or subsection of ARTICLE V of this Agreement shall be deemed disclosed with respect to any other Section or subsection of ARTICLE V of this Agreement to the extent such relationship is reasonably apparent, provided that nothing in the Parent Disclosure Letter is intended to broaden the scope of any representation or warranty of Parent or Merger Sub made herein), (b) as disclosed in Parent SEC Filings, publicly available, filed with, or furnished to, as applicable, the SEC on or after January 1, 2013 and prior to the date of this Agreement (excluding any disclosure set forth in any section of a Parent SEC Filing entitled “Risk Factors” or “Cautionary Note Regarding Forward-Looking Statements” or similarly titled section in any other disclosures included in the Parent SEC Filings, in each case to the extent that such disclosure is cautionary, predictive or forward-looking in nature), or (c) as disclosed by Parent and made publicly available under the profile of Parent on the System for Electronic Document Analysis Retrieval (“SEDAR”), Parent and Merger Sub hereby jointly and severally represent and warrant to the Company that:

Section 5.1     Organization and Qualification; Subsidiaries.

(a)     Parent is a corporation duly organized, validly existing and in good standing under the laws of Alberta, Canada, and has the requisite organizational power and authority and any necessary governmental authorization to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. Parent is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.

(b)     Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite organizational power and authority and any necessary governmental authorization to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. Merger Sub is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.

(c)     Each of Weichai Westport and each Parent Subsidiary (other than Merger Sub) is duly organized, validly existing and in good standing (to the extent such concept is recognized) under the Laws of the jurisdiction of its incorporation or organization, as the case may be, and has the requisite organizational power and authority and any necessary governmental authorization to own, lease and, to the extent applicable, operate its properties

 

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and to carry on its business as it is now being conducted. Each of Weichai Westport and each Parent Subsidiary is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.

(d)     Except as disclosed in Section 5.1(d) of the Parent Disclosure Letter, none of Parent, Merger Sub or any Parent Subsidiary directly or indirectly owns any interest or investment (whether equity or debt) in any Person (other than in the Parent Subsidiaries and investments in short-term investment securities).

Section 5.2     Organizational Documents. Parent has made available to the Company complete and correct copies of (i) Parent’s articles of incorporation, as amended (the “Parent Articles”) and Bylaws, as currently in effect (the “Parent Bylaws”), (ii) Merger Sub’s charter and bylaws, as currently in effect, and (iii) the organizational documents of each of Weichai Westport and each Parent Subsidiary, each as in effect on the date hereof.

Section 5.3     Capital Structure.

(a)     The authorized capital of Parent consists of an unlimited number of common shares and an unlimited number of preferred shares (the “Parent Preferred Shares” and, together with the Parent Common Shares, the “Parent Stock”). At the close of business on August 28, 2015, (i) 64,183,191 Parent Common Shares were issued and outstanding, (ii) no Parent Preferred Shares were issued and outstanding, and (iii) 9,650,493 Parent Common Shares were reserved for future issuance in respect of awards outstanding under the Parent Benefit Plans, consisting of 11,570 Parent Common Shares reserved for issuance upon exercise of outstanding options and 9,638,923 Parent Common Shares reserved for issuance upon conversion or settlement of outstanding performance and restricted share units under the Parent Benefit Plans. All issued and outstanding Parent Common Shares are duly authorized, validly issued, fully paid and non-assessable, and all Parent Common Shares to be issued as the Merger Consideration or as Stock Award Payments, when so issued in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid and non-assessable. Other than the Parent Preferred Shares, no class of Parent shares is entitled to preemptive rights. Except as disclosed in Section 5.3(a) of Parent Disclosure Letter, there are no outstanding bonds, debentures, notes or other indebtedness of Parent having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter on which holders of shares of Parent Common Shares may vote.

(b)     At the close of business on August 31, 2015, all of the Merger Sub Common Shares were owned by Parent. All of the Merger Sub Common Shares are duly authorized and validly issued, and are not entitled to preemptive rights. There are no outstanding bonds, debentures, notes or other indebtedness of Merger Sub having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter on which holders of Merger Sub Common Shares may vote.

(c)     All of the outstanding shares of capital stock of CWI that are owned directly or indirectly by Parent, and all of the outstanding shares of capital stock of each of the other Parent Subsidiaries that is a corporation, are duly authorized, validly issued, fully paid and nonassessable. All equity interests owned directly or indirectly by Parent in Weichai Westport and all equity interests of each of the Parent Subsidiaries that is a partnership or limited liability company are duly authorized and validly issued. All shares of capital stock of (or other ownership interests in) each of the Parent Subsidiaries (other than CWI) which may be issued upon exercise of outstanding options or exchange rights are duly authorized and, upon issuance will be validly issued, fully paid and nonassessable.

(d)     Except as set forth in this Section 5.3, as of the date of this Agreement, there are no securities, options, warrants, calls, rights, commitments, agreements, rights of first refusal, arrangements or undertakings of

 

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any kind to which Parent, Merger Sub or any other Parent Subsidiary is a party or by which any of them is bound, obligating Parent, Merger Sub or any other Parent Subsidiary to issue, deliver or sell or create, or cause to be issued, delivered or sold or created, additional shares of Parent Stock or Merger Sub Common Shares or other equity securities or phantom stock or other contractual rights the value of which is determined in whole or in part by the value of any equity security of Parent, Merger Sub or any of the other Parent Subsidiaries or obligating Parent, Merger Sub or any other Parent Subsidiary to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, right of first refusal, arrangement or undertaking. As of the date of this Agreement, there are no outstanding contractual obligations of Parent, Merger Sub or any other Parent Subsidiary to repurchase, redeem or otherwise acquire any shares of Parent Stock, or other equity securities or interests of Parent, Merger Sub or any other Parent Subsidiary (other than in satisfaction of withholding Tax obligations pursuant to certain awards outstanding under the Parent Benefit Plans). Neither Parent, Merger Sub nor any other Parent Subsidiary is a party to or bound by any agreements or understandings concerning the voting (including voting trusts and proxies) of any Merger Sub Common Shares or capital stock of Parent, or equity interests in any of the other Parent Subsidiaries.

Section 5.4     Authority.

(a)     Each of Parent and Merger Sub has the requisite organizational power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to receipt of the Parent Shareholder Approval and the Parent Name Change Approval, to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by each of Parent and Merger Sub and the consummation by each of Parent and Merger Sub of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of Parent or Merger Sub, as applicable, are necessary to authorize this Agreement or the Merger or to consummate the transactions contemplated hereby, subject with respect to the Merger, to receipt of the Parent Shareholder Approval and the filing and acceptance for record of the Certificate of Merger with the Delaware Secretary. Parent’s board of directors (the “Parent Board”) at a duly held meeting has, by unanimous vote, (i) duly and validly authorized the execution and delivery of this Agreement and declared advisable the consummation of the Merger and the other transactions contemplated hereby, (ii) determined that the Merger and the transactions contemplated by this Agreement are fair to and in the best interest of Parent and its shareholders, (iii) directed that the issuance of the Parent Common Shares as payment of the Merger Consideration be submitted for consideration at the Parent Shareholder Meeting, and (iv) resolved to recommend that the shareholders of Parent vote in favor of the payment of the Merger Consideration pursuant to this Agreement and the other transactions contemplated hereby (the “Parent Recommendation”) and to include such recommendation in the Circular.

(b)     This Agreement has been duly executed and delivered by each of Parent and Merger Sub and, assuming due authorization, execution and delivery by the Company, constitutes a legally valid and binding obligation of each of Parent and Merger Sub, enforceable against Parent and Merger Sub in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).

Section 5.5     No Conflict; Required Filings and Consents.

(a)     The execution and delivery of this Agreement by each of Parent and Merger Sub does not, and the performance of this Agreement and the consummation of the Merger and the other transactions contemplated hereby by each of Parent and Merger Sub will not (i) assuming receipt of the Parent Shareholder Approval and the Parent Name Change Approval, conflict with or violate any provision of the Parent Articles or Parent Bylaws, Merger Sub’s charter or bylaws or any equivalent organizational or governing documents of any other Parent Subsidiary, (ii) assuming that all consents, approvals, authorizations and permits described in Section 5.5(b) have been obtained, all filings and notifications described in Section 5.5(b) have been made and any waiting periods

 

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thereunder have terminated or expired, conflict with or violate any Law applicable to Parent, Merger Sub or any other Parent Subsidiary or by which any property or asset of Parent, Merger Sub or any other Parent Subsidiary is bound, or (iii) require any consent or approval under, result in any breach of or any loss of any benefit or material increase in any cost or obligation of Parent or any Parent Subsidiary under, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, acceleration or cancellation (with or without notice or the lapse of time or both) of, or give rise to any right of purchase, first offer or forced sale under or result in the creation of a Lien on any property or asset of Parent, Merger Sub or any other Parent Subsidiary pursuant to, any note, bond, debt instrument, indenture, Contract, ground lease, Real Property Lease, license, permit or other legally binding obligation to which Parent, Merger Sub or any other Parent Subsidiary is a party, except, as to clauses (ii) and (iii), respectively, for any such conflicts, violations, breaches, defaults or other occurrences which, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.

(b)     The execution and delivery of this Agreement by each of Parent and Merger Sub does not, and the performance of this Agreement by each of Parent and Merger Sub will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority, other than (i) the filing with the SEC of (A) the Form F-4, and the declaration of effectiveness of the Form F-4, and (B) such reports under, and other compliance with, the Exchange Act (and the rules and regulations promulgated thereunder) and the Securities Act (and the rules and regulations promulgated thereunder) as may be required in connection with this Agreement and the transactions contemplated hereby, (ii) as may be required under the rules and regulations of NASDAQ (including the filing of a Supplemental Listing Application with the NASDAQ, if applicable, in connection with the issuance of the Merger Consideration), (iii) as may be required under the HSR Act and other Antitrust Laws, (iv) the filing of the Certificate of Merger and the acceptance thereof for record by the Delaware Secretary pursuant to the DGCL, (v) such filings and approvals as may be required by any applicable state securities or “blue sky” Laws, (vi) such filings as may be required in connection with state and local transfer Taxes, (vii) the filings with the Canadian Securities Commissions and the furnishing of such filings to the SEC as may be required in connection with this Agreement and the transactions contemplated hereby, including the information circular in connection with the Parent Shareholder Meeting (the “Circular”), and (viii) the conditional acceptance of the TSX in respect of the transactions contemplated by this Agreement and the approval for listing on the TSX of the Merger Consideration issuable pursuant to this Agreement, except where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect.

Section 5.6     Permits; Compliance with Law.

(a)     Except for the authorizations, licenses, permits, certificates, approvals, variances, exemptions, orders, franchises, certifications and clearances that are the subject of Section 5.14, which are addressed solely in that Section, Parent, Merger Sub, each other Parent Subsidiary and, to the Knowledge of Parent, Weichai Westport is in possession of all authorizations, licenses, permits, certificates, approvals, variances, exemptions, orders, franchises, certifications and clearances of any Governmental Authority and accreditation and certification agencies, bodies or other organizations, including building permits and certificates of occupancy, necessary for Parent, Merger Sub, each other Parent Subsidiary and Weichai Westport to own, lease and, to the extent applicable, operate its properties or to carry on its respective business substantially as it is being conducted as of the date hereof (the “Parent Permits”), and all such Parent Permits are valid and in full force and effect, except where the failure to be in possession of, or the failure to be valid or in full force and effect of, any of the Parent Permits, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect. None of Parent, any Parent Subsidiary or, to the Knowledge of Parent, Weichai Westport has received any claim or notice nor has any Knowledge indicating that Parent or any Parent Subsidiary is currently not in compliance with the terms of any such Parent Permits, except where the failure to be in compliance with the terms of any such Parent Permits, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.

 

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(b)     None of Parent, Merger Sub, any other Parent Subsidiary or, to the Knowledge of Parent, Weichai Westport is or has, since January 1, 2013, been in conflict with, or in default or violation of (i) any Law applicable to Parent, Merger Sub, any other Parent Subsidiary or Weichai Westport or by which any property or asset of Parent, Merger Sub, any other Parent Subsidiary or Weichai Westport is bound (except for Laws addressed in Section 5.10, Section 5.11, Section 5.14, Section 5.15 or Section 5.17, which are the subject of the representations and warranties made therein), or (ii) any Parent Permits (except for Parent Permits addressed in Section 5.14, which are the subject of the representations and warranties made therein), except in each case for any such conflicts, defaults or violations that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.

(c)     Since January 1, 2013, none of Parent, any Parent Subsidiary or, the Knowledge of Parent, Weichai Westport, or, to the Knowledge of Parent, any of their respective officers or employees, directly or indirectly, has (i) made or received any Prohibited Payment; (ii) provided or received any product or services in violation of any Law (including the U.S. Foreign Corrupt Practices Act); or (iii) been subject to any investigation by any Governmental Authority with regard to any Prohibited Payment.

(d)     Each of Parent and the Parent Subsidiaries and, to the Knowledge of Parent, Weichai Westport has conducted its business in all material respects in accordance with applicable provisions of the United States’ economic sanctions and export control laws and regulations, including, without limitation, the Arms Export Control Act, the International Traffic in Arms Regulations, the Export Administration Act, the International Emergency Economic Powers Act, the Trading with the Enemy Act, the Export Administration Regulations, and regulations administered by the Office of Foreign Assets Control (31 CFR Part V), and other applicable export laws of the countries where it conducts business. Without limiting the foregoing, during the past five (5) years:

(i)     each of Parent and the Parent Subsidiaries has obtained all material export licenses, registrations, approvals, and other authorizations required for its exports of products, software and technology from the United States and reexports of products, software and technology subject to the laws of the United States;

(ii)     each of Parent and the Parent Subsidiaries is and at all times has been in compliance in all material respects with the terms of such applicable export licenses, registrations, approvals, and other authorizations;

(iii)     none of Parent and the Parent Subsidiaries has received any written communication alleging that it is not or may not be in compliance with, or has, or may have any, liability under any such applicable export licenses, registrations, approvals, and other authorizations;

(iv)     there are no pending or, to Parent’s Knowledge, threatened claims or Actions against or involving Parent or any of the Parent Subsidiaries with respect to such export licenses, registrations, approvals, and other authorizations;

(v)     there are no actions, conditions or circumstances pertaining to Parent’s or any Parent Subsidiary’s export transactions that would reasonably be expected to give rise to any material future claims involving a Governmental Authority;

(vi)     to Parent’s Knowledge, none of Parent, any Parent Subsidiary or, to the Knowledge of Parent, Weichai Westport is subject to United States trade sanctions or has participated directly or indirectly in any illegal transaction that involves any commodity, software, technical data, products or services with a Person that is (i) located in, organized under the laws of, or the government of a country that is subject to comprehensive United States trade sanctions, or owned or controlled by any such Person, or (ii) denied United States export privileges or otherwise specially designated or debarred by the government of the United States.

 

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Section 5.7     SEC Filings; Canadian Filings; Financial Statements.

(a)     Parent has filed with, or furnished (on a publicly available basis) to, the SEC all forms, reports, schedules, statements and documents required to be filed or furnished by it under the Securities Act or the Exchange Act, as the case may be, including any amendments or supplements thereto, from and after January 1, 2013 (collectively, the “Parent SEC Filings”). Each Parent SEC Filing, as amended or supplemented, if applicable, (i) as of its date, or, if amended or supplemented, as of the date of the most recent amendment or supplement thereto, complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the applicable rules and regulations of the SEC thereunder, and (ii) did not, at the time it was filed (or became effective in the case of registration statements), or, if amended or supplemented, as of the date of the most recent amendment or supplement thereto, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. As of the date of this Agreement, neither Merger Sub nor any other Parent Subsidiary is separately subject to the periodic reporting requirements of the Exchange Act.

(b)     Each of Parent’s consolidated financial statements contained or incorporated by reference in the Parent SEC Filings (as amended, supplemented or restated, if applicable), including the related notes and schedules, was prepared (except as indicated in the notes thereto) in accordance with GAAP applied on a consistent basis throughout the periods indicated, and each such consolidated financial statement presented fairly, in all material respects, the consolidated financial position, results of operations, stockholders’ equity and cash flows of Parent and its consolidated subsidiaries as of the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited quarterly financial statements, to normal year-end adjustments).

(c)     Parent is in compliance in all material respects with the provisions of the Sarbanes-Oxley Act and the provisions of the Exchange Act and Securities Act relating thereto which under the terms of such provisions (including the dates by which such compliance is required) have become applicable to Parent. Each of the principal executive officer of Parent and the principal financial officer of Parent has made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act or Sections 302 and 906 of the Sarbanes-Oxley Act and the rules and regulations of the SEC promulgated thereunder with respect to the Parent SEC Filings. For purposes of the preceding sentence, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in the Sarbanes-Oxley Act. The records, systems, controls, data and information of Parent and the Parent Subsidiaries that are used in the system of internal accounting controls described in the following sentence are recorded, stored, maintained and operated under means that are under the exclusive ownership and direct control of Parent or the Parent Subsidiaries or accountants, except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a materially adverse effect on the system of internal accounting controls. Parent and the Parent Subsidiaries have devised and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including that: (1) transactions are executed only in accordance with management’s authorization; (2) transactions are recorded as necessary to permit preparation of the financial statements of Parent and the Parent Subsidiaries and to maintain accountability for the assets of Parent and the Parent Subsidiaries; (3) access to such assets is permitted only in accordance with management’s authorization; (4) the reporting of such assets is compared with existing assets at regular intervals; and (5) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis. Parent’s principal executive officer and its principal financial officer have disclosed to Parent’s auditors and the audit committee of the Parent Board (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect Parent’s ability to record, process, summarize and report financial data, and (ii) any known fraud, whether or not material, that involves management or other employees who have a significant role in Parent’s internal controls, and Parent has made available to the Company copies of any material written materials

 

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relating to the foregoing. Parent has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15 promulgated under the Exchange Act) designed to ensure that material information relating to Parent required to be included in reports filed under the Exchange Act, including its consolidated subsidiaries, is made known to Parent’s principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared, and, to the Knowledge of Parent, such disclosure controls and procedures are effective in timely alerting Parent’s principal executive officer and its principal financial officer to material information required to be included in Parent’s periodic reports required under the Exchange Act. Since the enactment of the Sarbanes-Oxley Act, none of Parent, Merger Sub or any other Parent Subsidiary has made any prohibited loans to any director or executive officer of Parent (as defined in Rule 3b-7 promulgated under the Exchange Act).

(d)     None of Parent or its consolidated subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise), except for liabilities or obligations (i) expressly contemplated by or under this Agreement, including without limitation Section 6.2 hereof, (ii) incurred in the ordinary course of business consistent with past practice since the most recent balance sheet set forth in the Parent SEC Filings made through and including the date of this Agreement, (iii) described in any section of the Parent Disclosure Letter or (iv) that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect.

(e)     To the Knowledge of Parent, none of the Parent SEC Filings is the subject of ongoing SEC review and Parent has not received any comments from the SEC with respect to any of the Parent SEC Filings since January 1, 2013 which remains unresolved, nor has it received any inquiry or information request from the SEC as to any matters affecting Parent which has not been adequately addressed. Parent has made available to the Company true and complete copies of all written comment letters from the staff of the SEC received since January 1, 2013 through the date of this Agreement relating to the Parent SEC Filings and all written responses of Parent thereto through the date of this Agreement. None of the Parent SEC Filings is the subject of any confidential treatment request by Parent.

(f)     Parent has timely filed all reports, registrations, schedules, forms, statements and other documents, together with any amendments required to be made with respect thereto, including all reports, schedules, registration statements or other documents that it was required to file since January 1, 2013 with the TSX, the Canadian provincial securities commissions (collectively, the “Canadian Securities Commissions”), or with other Governmental Authorities or pursuant to applicable federal, state or provincial securities Laws (the “Parent Canadian Filings”), and has paid all fees and assessments due and payable in connection therewith, except in each case where the failure to file such report, registration, schedule, form, statement or other document, or to pay such fees and assessments, would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. No publicly available final registration statement, prospectus, report, form, schedule, release or proxy material (including any financial statements or schedules included or incorporated by reference therein) filed since January 1, 2013 and prior to the close of business on the date hereof by Parent with the Canadian Securities Commissions or pursuant to the applicable securities Laws of the provinces of Canada and the respective regulations and rules made thereunder, including the regulations and rules of the TSX, together with all applicable published policy statements, notices, blanket orders and rulings and all discretionary orders or rulings, if any, of the Canadian Securities Commissions and the TSX (collectively, “Canadian Securities Laws”) (collectively, the “Parent Securities Documents”), as of their respective dates or, if amended or superseded prior to the date of this Agreement, as of the date of such amendment or applicable subsequent filing, contained a misrepresentation (as defined under Canadian Securities Laws). As of their respective filing dates, or if amended or superseded prior to the date of this Agreement, as of the date of the last such amendment or applicable subsequent filing, all Parent Securities Documents complied as to form in all material respects with the applicable requirements of Canadian Securities Laws. Parent and its Subsidiaries are engaged in all material respects only in the business described in the Parent SEC Filings and the Parent Canadian Filings contain a complete and accurate description in all material respects of the business of Parent and its Subsidiaries, taken as a whole. Parent has not filed any confidential material change report with any Canadian Securities Commissions which as of the date hereof remains confidential.

 

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Section 5.8     Disclosure Documents.

(a)     None of the information supplied or to be supplied by or on behalf of Parent, Merger Sub or any other Parent Subsidiary for inclusion or incorporation by reference in (i) the Form F-4 will, at the time such document is filed with the SEC, at any time such document is amended or supplemented or at the time such document is declared effective by the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Circular will, at the time such document is filed with the applicable Canadian Securities Commissions, at any time such document is amended or supplemented, at the date it is first mailed to the shareholders of Parent, at the time of the Parent Shareholder Meeting or at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) the Proxy Statement will, at the date it is first mailed to the stockholders of the Company, at the time of the Company Stockholder Meeting, at the time the Form F-4 is declared effective by the SEC or at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. All documents that Parent is responsible for filing with the SEC in connection with the transactions contemplated herein, to the extent relating to Parent or any Parent Subsidiary or other information supplied by or on behalf of Parent or any Parent Subsidiary for inclusion therein, will comply as to form, in all material respects, with the provisions of the Securities Act or Exchange Act, as applicable and the rules and regulations of the SEC thereunder and each such document required to be filed with any Governmental Authority (other than the SEC) will comply in all material respects with the provisions of any applicable Law as to the information required to be contained therein.

(b)     The representations and warranties contained in this Section 5.8 will not apply to statements or omissions included in the Form F-4 or the Proxy Statement to the extent based upon information supplied to Parent by or on behalf of the Company.

Section 5.9     Absence of Certain Changes or Events. Since June 30, 2015, except as contemplated by this Agreement or as set forth in Section 5.9 of the Parent Disclosure Letter, (a) Parent and each Parent Subsidiary has conducted its business in the ordinary course consistent with past practice, (b), neither the Parent nor any Parent Subsidiary has taken any action that it would not be permitted to take after the date of this Agreement without the prior written consent of the Company pursuant to Section 6.2(b)(i), Section 6.2(b)(ii), or Section 6.2(b)(vii), or agreed to do any of the foregoing, and (c) there has not been any Parent Material Adverse Effect or any effect, event, development or circumstance that, individually or in the aggregate with all other effects, events, developments and changes, would reasonably be expected to result in a Parent Material Adverse Effect.

Section 5.10     Employee Benefit Plans.

(a)     Section 5.10(a) of the Parent Disclosure Letter sets forth a true and complete list of each material Parent Benefit Plan. Each Parent Benefit Plan has been administered in all material respects in accordance with its terms and applicable Laws.

(b)     Each Parent Benefit Plan that is intended to qualify under Section 401(a) of the Code has either received, or may rely upon, a favorable determination or opinion letter from the IRS as to its qualified status and, to Parent’s Knowledge, no event has occurred that could be reasonably expected to adversely affect the qualified status of any such Parent Benefit Plan. To Parent’s Knowledge, neither Parent nor any Parent Subsidiary has engaged in a non-exempt prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Parent Benefit Plan that could result in material liability to Parent and the Parent Subsidiaries, taken as a whole. No material suit, administrative proceeding, action or other litigation has been brought, or to the Knowledge of Parent, is threatened against or with respect to any such Parent Benefit Plan (other than routine benefits claims) and no such Parent Benefit Plan is under audit or investigation by any Governmental Authority.

 

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(c)     None of Parent, any Parent Subsidiaries or any of their ERISA Affiliates, has or could reasonably be expected to have material liability in connection with: (i) an employee pension benefit plan subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code, (ii) a “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA), a “multiple employer plan” (as defined in Section 413(c) of the Code) or a Multiemployer Plan, (iii) any plan or arrangement which provides post-employment retiree medical or welfare benefits, except as required by applicable Law.

(d)     Except as set forth in Section 5.10(d) of the Parent Disclosure Letter, neither the execution of this Agreement nor the consummation of the transactions contemplated hereby, either alone or in conjunction with another event, will: (A) accelerate the time of payment, vesting or funding or result in any payment of compensation or benefits to any current or former employee, officer, director or other service provider of Parent or any Parent Subsidiary; (B) give rise to any payment or benefit that, individually or in combination with any other such payment or benefit, will or may be made by Parent or any Parent Subsidiary to any of their current or former employees or other service providers that could reasonably be expected to be characterized as a “parachute payment” within the meaning of Section 280G(b)(2) of the Code; (C) result in payments or benefits which would not be deductible under Section 280G of the Code; or (D) result in any severance or other payment becoming due, or increase the amount of any compensation or benefits due, to any current or former employee, officer, director, consultant or other service provider of Parent or any Parent Subsidiary. No Person is entitled to receive any additional payment (including any tax gross-up or other payment) from Parent or any Parent Subsidiary as a result of the imposition of the excise taxes required by Section 4999 of the Code or any taxes required by Section 409A of the Code.

Section 5.11     Labor and Other Employment Matters.

(a)     Neither Parent nor any of the Parent Subsidiaries is a party to a collective bargaining agreement or similar agreement (other than national labor contracts). As of the date of this Agreement and except as would not reasonable be expected to have a Parent Material Adverse Effect, with respect to employees of Parent or any of its Subsidiaries: (i) there is no labor-related strike, walkout or lockout pending or, to Parent’s Knowledge, threatened in writing, and (ii) there is no pending, or, to the Knowledge of Parent, threatened union organizing campaign and no labor union has made a pending written demand for recognition or certification.

(b)     Except as would not reasonably be expected to result in, either individually or in the aggregate, a Parent Material Adverse Effect, (i) Parent and each of its Subsidiaries is in compliance with all Laws relating to the hiring of employees and the employment of labor, including all such Laws relating to fair employment practices, employment discrimination, terms and conditions of employment, workers’ compensation, occupational safety and health, overtime, wages and hours, plant closures and layoffs, worker classification and immigration, and (ii) there is no charge, complaint, lawsuit or other proceeding pending, or, to the Knowledge of Parent, threatened against Parent or any of its Subsidiaries before any Governmental Authority brought by or on behalf of any current or former employee or any class of the foregoing, alleging breach of any express or implied contract of employment, any applicable Law governing employment or the termination thereof or other discriminatory, wrongful or tortious conduct in connection with the employment relationship.

Section 5.12     Material Contracts. All Parent Material Contracts have been filed as exhibits to the Parent SEC Filings or included in the Parent Canadian Filings, as the case may be, made through and including the date of this Agreement. Each Parent Material Contract is in full force and effect and is valid, binding and enforceable against Parent and/or any Parent Subsidiary party thereto, and, to the Knowledge of Parent, each other party thereto in accordance with its terms, except for such failures to be in such full force and effect or to be valid, binding and enforceable as are not reasonably likely to have, individually or in the aggregate, a Parent Material Adverse Effect. None of Parent or any Parent Subsidiary, nor, to the Knowledge of Parent, any other party thereto, is in material breach or violation of, or default under, any Parent Material Contract, and no event has occurred that with notice or lapse of time or both would constitute a violation, breach or default under any Parent Material Contract, except where in each case such breach, violation or default is not reasonably likely to have,

 

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individually or in the aggregate, a Parent Material Adverse Effect. None of Parent or any Parent Subsidiary has received any written notice of an event of default pursuant to the terms of any Parent Material Contract.

Section 5.13     Litigation. Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect, as of the date of this Agreement, (a) there is no Action pending or, to the Knowledge of Parent, threatened by or before any Governmental Authority, nor, to the Knowledge of Parent, is there any investigation pending by any Governmental Authority, in each case, against Parent, Merger Sub, any other Parent Subsidiary, and (b) none of Parent, Merger Sub or any other Parent Subsidiary, nor any of Parent or any Parent Subsidiary’s respective property, is subject to any outstanding judgment, order, writ, injunction or decree of any Governmental Authority.

Section 5.14     Environmental Matters.

(a)     Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect:

(i)     Parent and each Parent Subsidiary are in compliance with applicable Environmental Laws, have applied for all Environmental Permits necessary to conduct their current operations and are in compliance with their respective Environmental Permits.

(ii)     Neither Parent nor any Parent Subsidiary has received any written notice, demand, letter or claim alleging that Parent or any such Parent Subsidiary is in violation of, or liable under, any Environmental Law or that any judicial, administrative or compliance order has been issued against Parent or any Parent Subsidiary which remains unresolved. There is no litigation, investigation, request for information or other proceeding pending, or, to the Knowledge of Parent, threatened against Parent and any Parent Subsidiary under any applicable Environmental Law.

(iii)     Neither Parent nor any Parent Subsidiary has entered into or agreed to any consent decree or order or is subject to any judgment, decree or judicial, administrative or compliance order relating to compliance with Environmental Laws, Environmental Permits or the investigation, sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous Materials and no investigation, litigation or other proceeding is pending or, to the Knowledge of Parent, threatened against Parent or any Parent Subsidiary under any applicable Environmental Law.

(iv)     Neither Parent nor any Parent Subsidiary has assumed, by Contract or operation of Law, any liability under any Environmental Law or relating to any Hazardous Materials, or is an indemnitor in connection with any threatened or asserted claim by any third-party indemnitee for any liability under any Environmental Law or relating to any Hazardous Materials.

(v)     Neither Parent nor any Parent Subsidiary has caused, and to the Knowledge of Parent, no Third Party has caused any Release of a Hazardous Material that would be required to be investigated or remediated by Parent or any Parent Subsidiary under Environmental Law.

(b)     This Section 5.14 contains the exclusive representations and warranties of Parent and Merger Sub with respect to environmental matters.

Section 5.15     Intellectual Property.

(a)     Section 5.15(a) of the Parent Disclosure Letter sets forth a correct and complete list of all material Intellectual Property registrations and applications for registration owned by Parent or a Parent Subsidiary. Except as set forth in Section 5.15(a) of the Parent Disclosure Letter, Parent or a Parent Subsidiary is the sole and exclusive owner of each such registration and application for Intellectual Property and each such item is subsisting and, to the Knowledge of Parent, valid and enforceable.

 

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(b)     Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect, as of the date of this Agreement, (i) Parent and the Parent Subsidiaries own or are licensed or otherwise possess valid rights to use all Intellectual Property necessary to conduct the business of Parent and the Parent Subsidiaries as it is currently conducted, (ii) the conduct of the business of Parent and the Parent Subsidiaries as it is currently conducted does not infringe, misappropriate or otherwise violate the Intellectual Property rights of any Third Party, (iii) there are no pending or, to the Knowledge of Parent, threatened claims with respect to any of the Intellectual Property rights owned by Parent or any Parent Subsidiary, (iv) except as set forth in Section 5.15(b)(iv) of the Parent Disclosure Letter, to the Knowledge of Parent, no Third Party is currently infringing or misappropriating Intellectual Property owned by Parent or any Parent Subsidiary, (v) there are no orders, writs, injunctions, or decrees to which Parent or any Parent Subsidiary is subject with respect to any material Intellectual Property, and (vi) the Merger will not alter in a manner materially adverse to Parent or any Parent Subsidiary, or materially impair Parent’s or any Parent Subsidiary’s rights in, any Intellectual Property described in Section 5.15(b)(i).

(c)     Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect, (i) neither Parent nor the Parent Subsidiaries has ever been a member or promoter of, or a contributor to, any industry standards body or any similar organization that could reasonably be expected to require or obligate Parent or a Parent Subsidiary to grant or offer to any other Person any license or right to Intellectual Property owned or purported to be owned by Parent or a Parent Subsidiary, and (ii) except as set forth in Section 5.15(c)(ii) of the Parent Disclosure Letter, to the Knowledge of Parent, no funding, facilities or personnel of any Governmental Authority or any university, college, research institute or other educational institution has been or is being used, directly or indirectly, to create, in whole or in part, any Intellectual Property owned or purported to be owned by Parent or a Parent Subsidiary, except for any such funding or use of facilities or personnel that does not result in such Governmental Authority or institution obtaining ownership rights or any other similar right, title or interest (including any “march in” rights) in or to such Intellectual Property.

(d)     Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect, to the Knowledge of the Parent, there have been no material security breaches in the information technology systems of Parent or the Parent Subsidiaries or the information technology systems of a Third Party to the extent used by or on behalf of Parent or a Parent Subsidiary.

Section 5.16     Properties.

(a)     Except as set forth on Section 5.16(a) of the Parent Disclosure Letter, neither Parent nor the Parent Subsidiaries own or has any options to purchase any real property. Parent has provided the Company true, correct and complete copies of all Real Property Leases. No Person other than Parent or the Parent Subsidiaries has any option or right to terminate any of the Real Property Leases other than as expressly set forth in such Real Property Leases. Parent and the Parent Subsidiaries own good, valid and marketable title, free and clear of all Liens (other than Permitted Liens), to all of their respective material tangible Assets. Parent and the Parent Subsidiaries own, lease under valid leases or has use of and/or valid access under valid agreements to all material facilities, machinery, equipment and other material tangible Assets necessary for the conduct of their respective business as presently conducted. With respect to the material property and Assets they lease (including, without limitation, the Leased Real Properties), Parent and the Parent Subsidiaries are in compliance in all material respects with such leases (including, without limitation, the Real Property Leases) and hold a valid and enforceable leasehold interest therein, free of any Liens, other than Permitted Liens. Each Real Property Lease is in full force and effect and there is no violation, breach, default, or any event or condition which, after notice or lapse of time or both, will constitute a violation, breach or default by Parent or a Parent Subsidiary under any Real Property Lease, or, to the Knowledge of Parent or the Parent Subsidiaries, by any other party thereto. There are no parties physically occupying or using any portion of any of the Leased Real Properties nor do any other parties have the right to physically occupy or use any portion of the Leased Real Properties, in each case, other than Parent or the Parent Subsidiaries.

 

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Section 5.17     Taxes.

(a)     Parent, Merger Sub and each other Parent Subsidiary has filed with the appropriate Governmental Authority all Tax Returns required to be filed, taking into account any extensions of time within which to file such Tax Returns, and all such Tax Returns were complete and correct, subject in each case to such exceptions as, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect. Parent and each Parent Subsidiary has duly paid (or there has been paid on their behalf), or made adequate provisions for, all material Taxes required to be paid by them.

(b)     (i) There are no audits, investigations by any Governmental Authority or other proceedings pending with regard to any material Taxes or Tax Returns of Parent, Merger Sub or any other Parent Subsidiary; (ii) no deficiency for Taxes of Parent, Merger Sub or any other Parent Subsidiary has been claimed, proposed or assessed in writing or, to the Knowledge of Parent, threatened, by any Governmental Authority, which deficiency has not yet been settled, except for such deficiencies which are being contested in good faith or with respect to which the failure to pay, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect; (iii) none of Parent, Merger Sub or any other Parent Subsidiary has waived any statute of limitations with respect to Taxes or agreed to any extension of time with respect to any Tax assessment or deficiency for any open tax year; and (iv) none of Parent, Merger Sub or any of the other Parent Subsidiaries has entered into any “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law).

(c)     Parent, Merger Sub and the other Parent Subsidiaries have complied, in all material respects, with all applicable Laws, rules and regulations relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446 and 3402 of the Code or similar provisions under any foreign Laws) and have duly and timely withheld and have paid over to the appropriate taxing authorities all material amounts required to be so withheld and paid over on or prior to the due date thereof under all applicable Laws.

(d)     There are no Tax Liens upon any property or assets of Parent, Merger Sub or any other Parent Subsidiary except Liens for Taxes not yet due and payable or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established.

(e)     Neither Parent nor any Parent Subsidiary has requested, has received or is subject to any written ruling of a Governmental Authority or has entered into any written agreement with a Governmental Authority with respect to any Taxes.

(f)     There are no Tax allocation or sharing agreements or similar arrangements with respect to or involving Parent or any Parent Subsidiary, and after the Closing Date neither Parent nor any Parent Subsidiary shall be bound by any such Tax allocation agreements or similar arrangements or have any liability thereunder for amounts due in respect of periods prior to the Closing Date.

(g)     Neither Parent nor any Parent Subsidiary (A) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was Parent) or (B) has any liability for the Taxes of any Person (other than Parent or any Parent Subsidiary) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.

(h)     Neither Parent nor any Parent Subsidiary has participated in any “listed transaction” or “substantially similar” transaction, within the meaning of Treasury Regulations Section 1.6011-4(b)(2).

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“reorganization” within the meaning of Section 368(a) of the Code or (ii) result in gain recognition to holders of Company Common Stock in the Merger pursuant to Section 367(a) of the Code (assuming that, in the case of any holder who would be treated as a “five-percent transferee shareholder” within the meaning of Treasury Regulations Section 1.367(a)-3(c)(5)(ii), such holder enters into a five-year gain recognition agreement in the form provided in Treasury Regulations Section 1.367(a)-8, as provided for in Treasury Regulations Section 1.367(a)—3(c)(1)(iii)(B), and complies with the requirements of that agreement and Treasury Regulations Section 1.367(a)-8 for avoiding the recognition of gain.

(j)     Neither Parent nor any of the Parent Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (A) in the two years prior to the date of this Agreement or (B) in a distribution which could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with transactions contemplated by this Agreement.

(k)     Neither Parent nor any Parent Subsidiary will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any: (i) change in method of accounting for a taxable period ending on or prior to the Closing Date; (ii) installment sale or open transaction disposition made on or prior to the Closing Date; or (iii) prepaid amount received on or prior to the Closing Date or (iv) and election under Code Section 108(i).

(l)     This Section 5.17 contains the exclusive representations and warranties of Parent with respect to tax matters.

Section 5.18     Insurance. Parent maintains policies of fire and casualty, liability and other forms of insurance in such amounts, with such deductibles and against such risks and losses as are, in Parent’s judgment, reasonable for the business and Assets of Parent and the Parent Subsidiaries. All such policies are in full force and effect, all premiums due and payable thereon have been paid (other than retroactive or retrospective premium adjustments that are not yet, but may be, required to be paid with respect to any period ending prior to the Closing Date), and no written notice of cancellation or termination has been received with respect to any such policy which has not been replaced on substantially similar terms prior to the date of such cancellation.

Section 5.19     Opinion of Financial Advisor. Parent Board has received the opinion of Rothschild Inc. to the effect that, as of the date of such opinion and based on and subject to the assumptions and limitations set forth therein, the Exchange Ratio is fair from a financial point of view to Parent.

Section 5.20     Vote Required. The affirmative vote of (A) the majority of the total votes cast to approve (i) the issuance of the Merger Consideration and (ii) the assumption by Parent of Company Restricted Stock Units and Company Restricted Stock pursuant to Section 3.4 ((i) and (ii) together, the “Parent Shareholder Approval”); and (B) the holders of 66 2/3% of the total votes cast to approve the change of the name of Parent to “Westport Fuel Systems Inc.” (the “Parent Name Change Approval”) are the only votes of the holders of any class or series of shares of Parent required to consummate the transactions contemplated by this Agreement.

Section 5.21     Brokers. No broker, finder or investment banker (other than Rothschild Inc.) is entitled to any brokerage, finder’s or other fee or commission in connection with the Merger based upon arrangements made by or on behalf of Parent, Merger Sub or any other Parent Subsidiary.

Section 5.22     Investment Company Act. None of Parent, Merger Sub or any other Parent Subsidiary is required to be registered as an investment company under the Investment Company Act.

 

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Section 5.23     Ownership of Merger Sub; No Prior Activities.

(a)     Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement. All of the interests of Merger Sub are owned directly or indirectly by Parent.

(b)     Except for the obligations or liabilities incurred in connection with its organization and the transactions contemplated by this Agreement, Merger Sub has not, and will not have prior to the Effective Time, incurred, directly or indirectly, through any subsidiary or Affiliate, any obligations or liabilities or engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any Person.

Section 5.24     Ownership of Company Common Stock. None of Parent, Merger Sub or any other Parent Subsidiary is, nor at any time during the last three years has been, an “interested stockholder” of the Company as defined in Section 203 of the DGCL.

Section 5.25     Affiliate Transactions. Except as set forth in the Parent SEC Filings made through and including the date of this Agreement or as permitted by this Agreement, from January 1, 2015 through the date of this Agreement there have been no transactions, agreements, arrangements or understandings between Parent or any Parent Subsidiary, on the one hand, and any Affiliates (other than Parent Subsidiaries) of Parent or other Persons, on the other hand, that would be required to be disclosed under Item 404 of Regulation S-K promulgated by the SEC.

Section 5.26     No Other Representations or Warranties. Except for the representations and warranties contained in ARTICLE IV, each of Parent and Merger Sub acknowledge that neither the Company nor any other Person or entity on behalf of the Company has made, and neither Parent nor Merger Sub has relied upon, any representation or warranty, whether express or implied, with respect to the Company or any of the Company Subsidiaries or their respective businesses, affairs, assets, liabilities, financial condition, results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, plans or prospects) or with respect to the accuracy or completeness of any other information provided or made available to Parent or Merger Sub by or on behalf of the Company.

ARTICLE VI.

COVENANTS AND AGREEMENTS

Section 6.1     Conduct of Business by the Company.

(a)     The Company covenants and agrees that, between the date of this Agreement and the earlier to occur of the Effective Time and the date, if any, on which this Agreement is terminated pursuant to Section 8.1 (the “Interim Period”), except to the extent required by Law, as may be agreed in writing by Parent (which consent shall not be unreasonably withheld, delayed or conditioned), as may be expressly required or permitted pursuant to this Agreement, or as set forth in Section 6.1(a) of the Company Disclosure Letter, the Company shall, and shall cause each of the Company Subsidiaries to (i) conduct its business in the ordinary course and in a manner consistent with past practice in all material respects, and (ii) use its commercially reasonable efforts to preserve intact in all material respects its current business organization, goodwill, ongoing businesses and relationships with third parties that have material business dealings with the Company and the Company Subsidiaries, and keep available the services of its present officers and key employees.

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unreasonably withheld, delayed or conditioned), as may be expressly required or permitted pursuant to this Agreement, or as set forth in Section 6.1(b) of the Company Disclosure Letter, the Company shall not, and shall not cause or permit any Company Subsidiary to, do any of the following:

(i)     amend or propose to amend the Company Charter or Company Bylaws (or such equivalent organizational or governing documents of any Company Subsidiary);

(ii)     declare or pay any dividend on or make any other distribution (whether in cash, stock or property) in respect of any of its capital stock, or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any of its capital stock, or any repurchase or otherwise acquire, directly or indirectly, any of its capital stock;

(iii)     except as otherwise contemplated in Section 6.1(b)(iv), issue, sell, deliver, redeem or purchase any of its equity securities, or grant or enter into any options, warrants, rights, agreements or commitments with respect to the issuance of its securities, or amend any terms of any such equity securities or agreements, in each case except for issuances of securities upon the exercise of outstanding options and warrants and redemptions or purchases pursuant to the terms of existing Contracts of the Company and the Company Subsidiaries;

(iv)     grant, issue, confer, award, except as may be specifically required under a Company Benefit Plan in effect as of the date hereof and listed in Section 4.10(a) of the Company Disclosure Letter, or modify the terms of any options, convertible securities, restricted stock, phantom shares, equity-based compensation or other rights to acquire, or denominated in, capital stock of the Company or any of the Company Subsidiaries (except issuances in connection with the exercise or settlement of Company Options, Company Restricted Stock Units, shares of Company Restricted Stock or Company Phantom Shares outstanding on the date of this Agreement in accordance with their terms);

(v)     acquire or agree to acquire (including by merger, consolidation or acquisition of stock or assets) any real property, corporation, partnership, limited liability company, other business organization or any division or material amount of assets thereof, for a purchase price in excess of $1,000,000;

(vi)     sell, pledge, lease, dispose of, abandon, permit to lapse or encumber (other than a Permitted Lien) any material property or assets, other than disposition of inventory in the ordinary course of business;

(vii)     incur, create or assume any Indebtedness for borrowed money or issue or amend the terms of any debt securities or assume, guarantee or endorse, or otherwise become responsible for the Indebtedness of any other person or entity (other than a wholly owned Company Subsidiary), except (A) Indebtedness incurred under the Company’s Securitization Documents or (B) Indebtedness incurred to refinance or refund any existing Indebtedness or Indebtedness permitted under this Agreement;

(viii)     make any loans, advances or capital contributions to, or investments in, any other Person, or make any change in its existing borrowing or lending arrangements for or on behalf of any of such Persons, whether pursuant to a Company Benefit Plan or otherwise, other than (A) by the Company or a wholly owned Company Subsidiary to the Company or a wholly owned Company Subsidiary or (B) advances subject to repayment or right of set-off not in excess of $5,000 to employees in the ordinary course of employment relations and consistent with the Company’s policies on advancement of expenses in effect as of the date hereof;

 

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(ix)     materially amend, modify or consent to the termination of any Company Material Contract, or amend, waive, modify or consent to the termination of the Company’s or any Company Subsidiary’s material rights thereunder, other than in the ordinary course of business and consistent with past practice;

(x)     except as required pursuant to any Company Benefit Plans in effect as of the date hereof and listed in Section 4.10(a) of the Company Disclosure Letter, as otherwise required by Law, (A) hire or terminate (other than for cause) any employee, officer, director or consultant (that is an individual) of the Company or any Company Subsidiary with an annual salary or wage rate or consulting fee in excess of $150,000 or who is not terminable “at will” without the payment of any severance or other payment or promote or appoint any Person to a position of officer or director of the Company or any Company Subsidiary; (B) increase or promise to increase the compensation, bonus, perquisites or pension, welfare, severance or other benefits payable or to become payable to any current or former employees, officers, directors or consultants (that are individuals) of the Company or any Company Subsidiary (other than promotion-related increases of base salary in the ordinary course of business consistent with past practice), (C) grant or promise to grant any severance, retention, termination or similar payments to, or enter into any severance or similar agreement with, any employee, officer, director or consultant (that is an individual) of the Company or any Company Subsidiary, (D) enter into any employment, change of control, severance or retention agreement with any current or former employee, officer, director or consultant (that is an individual) of the Company or any Company Subsidiary, (E) except as specifically provided herein, accelerate the vesting or payment, or fund or in any way secure the payment, of the compensation payable or the benefits provided to or to become payable or provided to any current or former employees, officers, directors or consultants (that are individuals) of the Company or any Company Subsidiary, (F) establish, adopt, enter into or amend any Company Benefit Plan, collective bargaining agreement, plan, trust, fund, policy or arrangement with, or for the benefit of, any current or former directors, officers, employees or consultants (that are individuals) of the Company or any Company Subsidiary or any of their beneficiaries, or any agreement, plan, policy or arrangement that would constitute a Company Benefit Plan if it were in existence on the date hereof, (G) forgive or promise to forgive any loans to any current or former directors, officers, employees or consultants (that are individuals) of the Company or any Company Subsidiary, or (H) change any actuarial or other assumptions used to calculate funding obligations with respect to any Company Benefit Plan, or change the manner in which contributions to such plans are made or the basis on which such contributions are determined;

(xi)     make any material change to its methods of accounting in effect at December 31, 2014, except as required by a change in GAAP (or any interpretation thereof) or in applicable Law;

(xii)     fail to duly and timely file all material reports and other material documents required to be filed with all Governmental Authorities and other authorities (including NASDAQ), subject to extensions permitted by Law;

(xiii)     make, change or rescind any election relating to Taxes, change a material method of Tax accounting, amend any material Tax Return, settle or compromise any material federal, state, local or foreign income Tax liability, audit, claim or assessment, enter into any material closing agreement related to Taxes, or knowingly surrender any right to claim any material Tax refund, except in each case unless required by Law or necessary or appropriate to qualify or preserve the status of any Company Subsidiary as a disregarded entity or partnership for United States federal income tax purposes;

(xiv)     take any action that could, or fail to take any action, the failure of which could, reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code;

 

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(xv)     adopt a plan of merger, arrangement or amalgamation, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization;

(xvi)     enter into any Contract or transaction with (including the making of any payment to) a director or officer of the Company or members of their “immediate family” (as such terms are defined in Rule 16a-1 of the Exchange Act) (each of the foregoing, a “Related Person”) (other than the Company or a Company Subsidiary) or an Affiliate of a Related Person (other than the Company or a Company Subsidiary), in each case of a type that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act;

(xvii)     waive, release, assign, settle or compromise any Action, including any state or federal regulatory proceeding seeking damages or injunction or other equitable relief, that would, (A) require the payment of monetary damages by the Company or any Company Subsidiary after the date hereof of $500,000 per Action or $1,000,000 in the aggregate or (B) involve any injunctive or other non-monetary relief which, in either case, imposes material restrictions on the business operations of the Company and the Company Subsidiaries, taken as a whole;

(xviii)     fail to use commercially reasonable efforts to maintain, with financially responsible insurance companies, insurance in such amounts and against such risks and losses as is maintained by it at present;

(xix)     take, or agree in writing or otherwise to take any other action that would prevent the Company from performing, or cause the Company not to perform, any of its covenants and agreements hereunder;

(xx)     take, or agree to commit to take, any action that would reasonably be expected to result in any of the conditions to the Merger set forth in Article VII not being satisfied; or

(xxi)     authorize, or enter into any Contract, commitment or arrangement to do any of the foregoing.

Section 6.2     Conduct of Business by Parent.

(a)     Parent covenants and agrees that, during the Interim Period, except to the extent required by Law, as may be agreed in writing by the Company (which consent shall not be unreasonably withheld, delayed or conditioned), as may be expressly required or permitted pursuant to this Agreement, or as set forth in Section 6.2(a) of the Parent Disclosure Letter, Parent shall, and shall cause each of the Parent Subsidiaries to, (i) conduct its business in the ordinary course and in a manner consistent with past practice in all material respects, and (ii) use its commercially reasonable efforts to preserve intact in all material respects its current business organization, goodwill, ongoing businesses and relationships with third parties that have material business dealings with the Parent and the Parent Subsidiaries, and keep available the services of its present officers and key employees.

(b)     Without limiting the foregoing, Parent covenants and agrees that, during the Interim Period, except to the extent required by Law, as may be agreed in writing by the Company (which consent shall not be unreasonably withheld, delayed or conditioned), as may be expressly required or permitted pursuant to this Agreement, or as set forth in Section 6.2(b) of the Parent Disclosure Letter, Parent shall not, and shall not cause or permit any of the Parent Subsidiaries to, do any of the following:

(i)     amend or propose to amend the Parent Articles or Parent Bylaws (or such equivalent organizational or governing documents of any Parent Subsidiary material to Parent and the Parent Subsidiaries, considered as a whole, if such amendment would be adverse to Parent or the Company);

 

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(ii)     declare or pay any dividend on or make any other distribution (whether in cash, stock or property) in respect of any of its capital stock, or split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any of its capital stock, or any repurchase or otherwise acquire, directly or indirectly, any of its capital stock;

(iii)     except as otherwise contemplated in Section 6.2(b)(iv), issue, sell, deliver, redeem or purchase any of its equity securities, or grant or enter into any options, warrants, rights, agreements or commitments with respect to the issuance of its securities, or amend any terms of any such equity securities or agreements, in each case except for issuances of securities upon the exercise of outstanding options and warrants and redemptions or purchases pursuant to the terms of existing Contracts of the Parent and the Parent Subsidiaries;

(iv)     grant, issue, confer or award or modify the terms of any options, convertible securities, restricted stock, phantom shares, equity-based compensation or other rights to acquire, or denominated in, any of Parent’s or any of the Parent Subsidiaries’ capital stock or take any action not otherwise contemplated by this Agreement to cause to be exercisable any otherwise unexercisable option under any existing stock plan of Parent or any Parent Subsidiary (except as (i) explicitly provided by the terms of any unexercisable options or other equity awards outstanding on the date of this Agreement, (ii) except in the ordinary course of business consistent with past practice or (iii) as may be required under agreements executed prior to the date of this Agreement or under any existing Parent Benefit Plan);

(v)     acquire or agree to acquire (including by merger, consolidation or acquisition of stock or assets), any real property, corporation, partnership, limited liability company, other business organization or any division or material amount of assets thereof that would, or would reasonably be expected to, prevent, delay or materially impair the ability of Parent or Merger Sub to consummate the Merger before the Outside Date;

(vi)     adopt a plan of merger, arrangement or amalgamation, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization;

(vii)     fail to duly and timely file all material reports and other material documents required to be filed with all Governmental Authorities and other authorities (including NASDAQ and the TSX), subject to extensions permitted by Law;

(viii)     incur, create or assume any Indebtedness for borrowed money or issue or amend the terms of any debt securities or assume, guarantee or endorse, or otherwise become responsible for the Indebtedness of any other person or entity (other than a wholly owned Parent Subsidiary);

(ix)     take any action that could, or fail to take any action, the failure of which could, reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code;

(x)     take, or agree in writing or otherwise to take any other action that would prevent Parent from performing, or cause Parent not to perform, any of its covenants and agreements hereunder;

(xi)     take, or agree to commit to take, any action that would reasonably be expected to result in any of the conditions to the Merger set forth in ARTICLE VII not being satisfied; or

(xii)     authorize, or enter into any Contract, commitment or arrangement to do any of the foregoing.

 

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(c)     Notwithstanding anything herein to the contrary, CWI shall not be deemed to be a “Parent Subsidiary” for purposes of this Section 6.2.

Section 6.3     Preparation of Form F-4 , Circular and Proxy Statement; Stockholder Meetings.

(a)     As promptly as reasonably practicable, and in any event within 40 days following the date of this Agreement (or, if such date is not a Business Day, the next succeeding Business Day), (i) the Company shall prepare and cause to be filed with the SEC the Proxy Statement, and (ii) the Company and Parent shall prepare, and Parent shall cause to be filed with the SEC, the Form F-4, which will include the Proxy Statement as a prospectus. Each of the Company and Parent shall use its reasonable best efforts to have the Form F-4 declared effective under the Securities Act as promptly as practicable after such filing and keep the Form F-4 effective for so long as necessary to complete the Merger. Each of the Company and Parent shall furnish all information concerning itself, its Affiliates and the holders of its capital stock to the other and provide such other assistance as may be reasonably requested in connection with the preparation, filing and distribution of the Form F-4, Proxy Statement and the Circular. The Form F-4, Proxy Statement and the Circular shall include all information reasonably requested by such other party to be included therein. Each of the Company and Parent shall promptly notify the other upon the receipt of any comments from the SEC or the Canadian Securities Commissions, as applicable, or any request from the SEC or the Canadian Securities Commissions, as applicable, for amendments or supplements to the Form F-4, the Circular or Proxy Statement, and shall provide the other with copies of all correspondence between it and its Representatives, on one hand, and the SEC or the Canadian Securities Commissions, as applicable, on the other hand. The Company shall use its reasonable best efforts to respond as promptly as practicable to any comments from the SEC with respect to the Proxy Statement, and Parent shall use its reasonable best efforts to respond as promptly as practicable to any comment from the SEC or the Canadian Securities Commissions with respect to the Circular or the Form F-4, as applicable. Notwithstanding the foregoing, prior to filing the Form F-4 (or any amendment or supplement thereto) or mailing the Proxy Statement or any other materials used in connection with the Company Stockholder Meeting that constitute “proxy materials” or “solicitation materials” as those terms are used in Rules 14a-1 through 14a-17 under the Exchange Act or are otherwise used for the “solicitation” of “proxies” as those terms are defined in Rule 14a-1 under the Exchange Act (or any amendment or supplement thereto) or mailing the Circular or any other materials used in connection with the Parent Shareholder Meeting that constitute an “information circular”, “proxy-related materials” or are otherwise used for the “solicitation” of “proxies” as those terms are used under applicable Canadian securities Law or “proxy materials” or “solicitation materials” as those terms are used in Rules 14a-1 through 14a-17 under the Exchange Act or are otherwise used for the “solicitation” of “proxies” as those terms are defined in Rule 14a-1 under the Exchange Act (or any amendment or supplement thereto) or responding to any comments of the SEC or the Canadian Securities Commissions, as applicable, with respect thereto, each of the Company and Parent (i) shall provide the other an opportunity to review and comment on such document or response (including the proposed final version of such document or response) and (ii) shall include in such document or response all comments reasonably proposed by the other. Parent shall advise the Company, promptly after it receives notice thereof, of the time of effectiveness of the Form F-4, the issuance of any stop order relating thereto or the suspension of the qualification of the Parent Common Shares issuable in connection with the Merger for offering or sale in any jurisdiction, and Parent shall use its reasonable best efforts to have any such stop order or suspension lifted, reversed or otherwise terminated. Parent will advise the Company promptly after it receives notice of the issuance by any Canadian Securities Commission, any other securities regulatory authority, the TSX or by any other Governmental Authority of any order to cease or suspend trading of any securities of Parent or the institution or threat of institution of any proceeding for that purpose. Parent shall also take any other action (other than qualifying to do business in any jurisdiction in which it is not now so qualified) required to be taken under the Securities Act, the Exchange Act, any applicable foreign or state securities or “blue sky” Laws and the rules and regulations thereunder in connection with the issuance of Parent Common Shares in the Merger, and the Company shall furnish all information concerning the Company and the holders of its capital stock as may be reasonably requested in connection with any such actions.

 

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(b)     If, at any time prior to the Effective Time, any information relating to the Company or Parent, or any of their respective Affiliates, should be discovered by the Company or Parent which, in the reasonable judgment of the Company or Parent, should be set forth in an amendment of, or a supplement to, any of the Form F-4, the Circular or the Proxy Statement, so that any of such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party which discovers such information shall promptly notify the other parties hereto, and the Company and Parent shall cooperate in the prompt filing with the SEC and the Canadian Securities Commissions, as applicable, of any necessary amendment of, or supplement to, the Proxy Statement, the Circular or the Form F-4 and, to the extent required by Law, in making or otherwise disseminating the information contained in such amendment or supplement to stockholders of the Company or Shareholders of Parent, as applicable. Nothing in this Section 6.3(b) shall limit the obligations of any party under Section 6.3(a). For purposes of Section 4.8, Section 5.8 and this Section 6.3, any information concerning or related to the Company, its Affiliates or the Company Stockholder Meeting will be deemed to have been provided by the Company, and any information concerning or related to Parent or its Affiliates or the Parent Shareholder Meeting will be deemed to have been provided by Parent.

(c)     As promptly as reasonably practicable following the date of this Agreement, the Company shall, in accordance with applicable Law and the Company Charter and Company Bylaws, establish a record date for, duly call, give notice of, convene and hold the Company Stockholder Meeting. Without the prior written consent of Parent, the adoption of this Agreement by the stockholders of the Company and related matters shall be the only proposals to be submitted to, or voted on by, the stockholders of the Company at the Company Stockholder Meeting. The Company shall use its reasonable best efforts to cause the Proxy Statement to be mailed to the stockholders of the Company and to hold the Company Stockholder Meeting as soon as reasonably practicable after the Form F-4 is declared effective under the Securities Act. The Company shall, through the Company Board, recommend to its stockholders that they give the Company Stockholder Approval, include such recommendation in the Proxy Statement and solicit and use its reasonable best efforts to obtain the Company Stockholder Approval, except to the extent that the Company Board shall have made a Company Adverse Recommendation Change as permitted by Section 6.5(d). Notwithstanding anything in this Agreement to the contrary, the Company shall not postpone or adjourn the Company Stockholder Meeting without the consent of Parent (which consent shall not be unreasonably withheld or delayed), other than (i) to solicit additional proxies for the purpose of obtaining Company Stockholder Approval, (ii) in the absence of a quorum, and (iii) to allow reasonable additional time for the filing and/or mailing of any supplemental or amended disclosure that the Company Board has determined, after consultation with outside legal counsel, is necessary under applicable Law and for such supplemental or amended disclosure to be disseminated and reviewed by the stockholders of the Company prior to the Company Stockholder Meeting.

(d)     As promptly as reasonably practicable following the date of this Agreement, Parent shall, in accordance with applicable Law and the Parent Articles and Parent Bylaws, establish a record date for, duly call, give notice of, convene and hold the Parent Shareholder Meeting. Parent shall use its reasonable best efforts to cause the Circular to be mailed to the shareholders of Parent and to hold the Parent Shareholder Meeting as soon as reasonably practicable after the Form F-4 is declared effective under the Securities Act. Parent shall, through the Parent Board, recommend to its shareholders that they give the Parent Shareholder Approval and the Parent Name Change Approval, include such recommendations in the Circular and solicit and use its reasonable best efforts to obtain the Parent Shareholder Approval and Parent Name Change Approval, except to the extent that the Parent Board shall have made a Parent Adverse Recommendation Change as permitted by Section 6.5(e).

Section 6.4     Access to Information; Confidentiality.

(a)     During the Interim Period, to the extent permitted by applicable Law and Contracts, and subject to the reasonable restrictions imposed from time to time upon advice of counsel, each of the Company and Parent shall, and shall cause each of the Parent Subsidiaries and the Company Subsidiaries, respectively, to, afford to the other party and to the Representatives of such other party reasonable access during normal business hours and

 

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upon reasonable advance notice to all of their respective properties, offices, books, Contracts, commitments, personnel and records and, during such period, each of the Company and Parent shall, and shall cause each of the Company Subsidiaries and the Parent Subsidiaries, respectively, to, furnish reasonably promptly to the other party (i) a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of federal or state securities Laws, and (ii) all other information (financial or otherwise) concerning its business, properties and personnel as such other party may reasonably request. Without limiting the foregoing, from the date hereof until the earlier of (i) the Effective Time and (ii) the termination of this Agreement, the Company shall maintain, or cause to be maintained, and provide Parent and its Representatives continued access to, the Data Site, and shall not remove any documents or information loaded onto the Data Site prior to, on or after the date hereof. The Company shall not remove any of the documents or items provided in the Data Site through and including the Closing Date.

(b)     This Section 6.4 shall not require either the Company or Parent to permit any access, or to disclose any information, that in the reasonable, good faith judgment (after consultation with counsel) of such party (i) would reasonably be expected to result in any violation of any Contract or Law to which such party or its Subsidiaries is a party or is subject or cause any privilege (including attorney-client privilege) that such party or any of its Subsidiaries would be entitled to assert to be undermined with respect to such information and such undermining of such privilege could in such party’s good faith judgment (after consultation with counsel) adversely affect in any material respect such party’s position in any pending or, what such party believes in good faith (after consultation with counsel) could be, future litigation or (ii) is reasonably pertinent to any litigation, if any, in which such party or any of its Subsidiaries, on the one hand, and the other party or any of its Subsidiaries, on the other hand, are adverse parties; provided, that, in the case of clause (i), the parties hereto shall cooperate in seeking to find a way to allow disclosure of such information (including by entering into a joint-defense or similar agreement) to the extent doing so (A) would not (in the good faith belief of the party being requested to disclose the information (after consultation with counsel)) reasonably be likely to result in the violation of any such Contract or Law or reasonably be likely to cause such privilege to be undermined with respect to such information or (B) could reasonably (in the good faith belief of the party being requested to disclose the information (after consultation with counsel)) be managed through the use of customary “clean-room” arrangements pursuant to which non-employee Representatives of the other party shall be provided access to such information; provided, further, that the party being requested to disclose the information shall (x) notify the other party that such disclosures are reasonably likely to violate its or its Subsidiaries’ obligations under any such Contract or Law or are reasonably likely to cause such privilege to be undermined, (y) communicate to the other party in reasonable detail the facts giving rise to such notification and the subject matter of such information (to the extent it is able to do so in accordance with the first proviso in this Section 6.4(b)) and (z) in the case where such disclosures are reasonably likely to violate its or its Subsidiaries’ obligations under any Contract, use reasonable commercial efforts to seek consent from the applicable Third Party to any such Contract with respect to the disclosures prohibited thereby (to the extent not otherwise expressly prohibited by the terms of such Contract).

(c)     Each of the Company and Parent will hold, and will cause its Representatives and Affiliates to hold, any nonpublic information, including any information exchanged pursuant to this Section 6.4, in confidence to the extent required by and in accordance with, and will otherwise comply with, the terms of the Confidentiality Agreement.

Section 6.5     Acquisition Proposals.

(a)     Subject to the other provisions of this Section 6.5, during the Interim Period, the Company shall not, and shall cause each of the Company Subsidiaries, and its and their officers and directors, managers or equivalent not to, and shall use its reasonable best efforts to cause any other Representatives of the Company or the Company Subsidiaries not to, directly or indirectly through another Person, (i) solicit, initiate, knowingly encourage or knowingly facilitate any inquiry, discussion, offer or request that constitutes, or could reasonably be expected to lead to, a Company Acquisition Proposal (an “Inquiry”), (ii) engage in any discussions or

 

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negotiations regarding, or furnish to any Third Party any non-public information in connection with, or otherwise cooperate in any way with, or knowingly facilitate in any way any effort by, any Third Party in connection with, any Company Acquisition Proposal or Inquiry, (iii) approve or recommend a Company Acquisition Proposal, or enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, share purchase agreement, asset purchase agreement, share exchange agreement, option agreement or other similar definitive agreement (other than an Acceptable Confidentiality Agreement entered into in accordance with Section 6.5(b)) providing for or relating to a Company Acquisition Proposal (an “Alternative Acquisition Agreement”), or (iv) propose or agree to do any of the foregoing.

(b)     Notwithstanding anything to the contrary in this Section 6.5, at any time prior to obtaining the requisite Company Stockholder Approval, the Company may, in response to an unsolicited bona fide written Company Acquisition Proposal by a Third Party made after the date of this Agreement (that did not result from a breach of this Section 6.5) (i) furnish non-public information to such Third Party (and such Third Party’s Representatives) making a Company Acquisition Proposal (provided, however, that (A) prior to so furnishing such information, the Company receives from the Third Party an executed Acceptable Confidentiality Agreement, and (B) any non-public information concerning the Company or the Company Subsidiaries that is provided to such Third Party shall, to the extent not previously provided to Parent or Merger Sub, be provided to Parent or Merger Sub prior to or simultaneously with providing it to such Third Party), and (ii) engage in discussions or negotiations with such Third Party (and such Third Party’s Representatives) with respect to the Company Acquisition Proposal if, in the case of each of clauses (i) and (ii): (x) the Company Board determines in good faith, after consultation with its financial and legal advisors, that such Company Acquisition Proposal constitutes, or could reasonably be expected to lead to, a Superior Proposal, and (y) the Company Board determines in good faith, after consultation with legal counsel, that failure to take such action would be reasonably likely to be inconsistent with the directors’ fiduciary duties under applicable Law.

(c)     The Company shall notify Parent promptly (and in any event within twenty-four (24) hours) after receipt of any Company Acquisition Proposal or any request for nonpublic information relating to the Company or any Company Subsidiary by any Third Party, or any Inquiry from any Person seeking to have discussions or negotiations with the Company relating to a possible Company Acquisition Proposal. Such notice shall indicate the identity of the Third Party making the Company Acquisition Proposal or Inquiry and all of the material terms and conditions of any Company Acquisition Proposal or Inquiries. The Company shall also promptly notify Parent if it enters into discussions or negotiations concerning any Company Acquisition Proposal or provides nonpublic information or data to any person in accordance with this Section 6.5(c) and keep the other party informed of the status and terms of any such proposals, offers, discussions or negotiations on a current basis, including by providing a copy of all material documentation or correspondence relating thereto.

(d)     Except as permitted by this Section 6.5(d), neither the Company Board nor any committee thereof shall (i) withhold, withdraw, qualify or modify (or publicly propose to withhold, withdraw, qualify or modify), in a manner adverse to Parent or Merger Sub, the Company Recommendation, (ii) approve, adopt or recommend (or publicly propose to approve, adopt or recommend) any Company Acquisition Proposal, (iii) fail to include the Company Recommendation in the Proxy Statement or any Schedule 14D-9, as applicable, (iv) fail to publicly recommend against any Company Acquisition Proposal within five (5) business days of the request of Parent and reaffirm the Company Recommendation within five (5) business days (any of the actions described in clauses (i), (ii), (iii) and (iv) of this Section 6.5(d), a “Company Adverse Recommendation Change”), or (v) approve, adopt, declare advisable or recommend (or agree to, resolve or propose to approve, adopt, declare advisable or recommend), or cause or permit the Company to enter into, any Alternative Acquisition Agreement (other than an Acceptable Confidentiality Agreement entered into in accordance with this Section 6.5). Notwithstanding anything to the contrary set forth in this Agreement, at any time prior to obtaining the Company Stockholder Approval, the Company Board shall be permitted to (x) terminate this Agreement to enter into a definitive agreement, including an Alternative Acquisition Agreement, with respect to a Superior Proposal, subject to compliance with Section 6.5(f) and Section 8.3, if the Company Board (A) has received a Company Acquisition Proposal that, in the good faith determination of the Company Board, after consultation with its

 

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financial and legal advisors, constitutes, or could reasonably be expected to lead to, a Superior Proposal, after having complied with, and giving effect to all of the adjustments which may be offered by Parent and Merger Sub pursuant to, Section 6.5(f), and (B) determines in good faith, after consultation with its financial and legal advisors, that failure to take such action would be inconsistent with the directors’ fiduciary duties under applicable Law, or (y) effect a Company Adverse Recommendation Change in response to a Company Intervening Event if the Company Board determines in good faith, after consultation with its financial and legal advisors, that failure to take such action would be inconsistent with the directors’ fiduciary duties under applicable Law.

(e)     Except as permitted by this Section 6.5(e), neither the Parent Board nor any committee thereof shall (i) withhold, withdraw, qualify or modify (or publicly propose to withhold, withdraw, qualify or modify), in a manner adverse to the Company or the Parent Recommendation, or (ii) fail to include the Parent Recommendation in the Circular or any Schedule 14D-9, as applicable (any of the actions described in clauses (i) or (ii), a “Parent Adverse Recommendation Change”). Notwithstanding anything to the contrary set forth in this Agreement, at any time prior to obtaining the Parent Shareholder Approval, and subject to compliance with Section 6.5(g) and Section 8.3, the Parent Board shall be permitted to effect a Parent Adverse Recommendation Change if, after the date of this Agreement a Parent Intervening Event has occurred or arisen and the Parent Board determines in good faith, after consultation with its financial and legal advisors, that failure to take such action would be inconsistent with the directors’ fiduciary duties under applicable Law.

(f)     The Company Board shall not be entitled to terminate this Agreement or effect a Company Adverse Recommendation Change as permitted under Section 6.5(d) in circumstances involving or relating to a Company Acquisition Proposal unless (i) the Company has provided a written notice (a “Notice of Superior Proposal”) to Parent and Merger Sub that the Company intends to take such action and describing the material terms and conditions of, and attaching a complete copy of, the Superior Proposal that is the basis of such action (it being understood that such material terms need not include the identity of the Third Party), (ii) during the five (5) Business Day period following Parent’s and Merger Sub’s receipt of the Notice of Superior Proposal, the Company shall, and shall cause its Representatives to, negotiate with Parent and Merger Sub in good faith (to the extent Parent and Merger Sub desire to negotiate) to make such adjustments in the terms and conditions of this Agreement so that such Superior Proposal ceases to constitute a Superior Proposal, and (iii) following the end of the five (5) Business Day period, the Company Board shall have determined in good faith, after consultation with its financial and legal advisors, taking into account any changes to this Agreement proposed in writing by Parent and Merger Sub in response to the Notice of Superior Proposal or otherwise, that the Superior Proposal giving rise to the Notice of Superior Proposal continues to constitute a Superior Proposal. Any material amendment to the financial terms or any other material amendment of such Superior Proposal shall require a new Notice of Superior Proposal, and the Company shall be required to comply again with the requirements of this Section 6.5(f); provided, however, that references to the five (5) Business Day period above shall then be deemed to be references to a three (3) Business Day period.

(g)     Other than in connection with a Company Acquisition Proposal (which shall be subject to Section 6.5(f) and shall not be subject to this Section 6.5(g)), nothing in this Agreement shall prohibit or restrict the Company Board from making a Company Adverse Recommendation in response to a Company Intervening Event to the extent that (i) the Company Board determines in good faith, after consultation with the Company’s outside legal counsel, that the failure of the Company Board to effect a Company Adverse Recommendation Change would be inconsistent with its fiduciary duties under applicable Law, and (ii) (A) the Company provides Parent five (5) Business Days written notice of its intention to take such action, which notice shall specify the reasons therefor, (B) after providing such notice and prior to making such Company Adverse Recommendation Change, the Company shall negotiate in good faith with Parent during such five (5) Business Day period (to the extent that Parent desires to negotiate) to make such revisions to the terms of this Agreement as would not permit the Company Board to make a Company Adverse Recommendation Change pursuant to this Section 6.5(g), and (C) the Company Board shall have considered in good faith any changes to this Agreement offered in writing by Parent, and following such five (5) Business Day period, shall have determined in good faith, after consultation

 

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with its outside legal counsel and financial advisors, that the Company Board’s fiduciary duties under applicable Law would continue to require a Company Adverse Recommendation Change with respect to such Company Intervening Event.

(h)     Nothing contained in this Section 6.5 or elsewhere in this Agreement shall prohibit the Company or the Company Board, directly or indirectly through its Representatives, from disclosing to the Company’s stockholders a position contemplated by Rule 14e-2(a) and Rule 14d-9 promulgated under the Exchange Act; provided, however, that any disclosure other than a “stop, look and listen” or similar communication of the type contemplated by Rule 14d-9(f) promulgated under the Exchange Act, an express rejection of any applicable Company Acquisition Proposal or an express reaffirmation of the Company Recommendation to the Company’s stockholders in favor of the Merger shall be deemed to be an Company Adverse Recommendation Change.

(i)     The Company shall, and shall cause each of the Company Subsidiaries and its and their officers and directors, managers or equivalent, and shall use its reasonable best efforts to cause any other Representatives of the Company or the Company Subsidiaries to immediately cease any existing discussions, negotiations or communications (including discontinuing access to the Data Site) with any Person conducted heretofore with respect to any Company Acquisition Proposal. The Company shall, within ten (10) Business Days of the date hereof, request that, and use all commercially reasonable efforts to cause, all Third Parties who have been furnished confidential information regarding the Company in connection with the solicitation of or discussions regarding a Company Acquisition Proposal within the twelve (12) months prior to the date of this Agreement to promptly return or destroy such information (to the extent that the Company is entitled to have such information returned or destroyed).

(j)     For purposes of this Agreement:

(i)     “Company Acquisition Proposal” shall mean any unsolicited bona fide indication of interest, inquiry, proposal or offer from any Third Party for (or expression by a Third Party that it is considering or may engage in), whether in one transaction or a series of related transactions, (i) any sale, lease, exchange, mortgage, pledge, license, transfer or other disposition, directly or indirectly, by merger, consolidation, sale of equity interests, share exchange, joint venture, business combination or otherwise, of any assets of the Company or any Company Subsidiary representing twenty percent (20%) or more of the consolidated assets of the Company and the Company Subsidiaries, taken as a whole as determined on a book-value basis, or to which twenty percent (20%) or more of the consolidated revenues or earnings are attributable, (ii) any issue, sale or other disposition of (including by way of merger, consolidation, joint venture, business combination, share exchange or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into, such securities) representing twenty percent (20%) or more of the voting power of the Company or any of the Company Subsidiaries whose business constitutes 20% or more of the net revenue, net income or assets of the Company and the Company Subsidiaries, taken as a whole, (iii) any tender offer or exchange offer in which any Person or “group” (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) shall seek to acquire beneficial ownership (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), or the right to acquire beneficial ownership, of twenty percent (20%) or more of the outstanding shares of any class of voting securities of the Company, (iv) any recapitalization, restructuring, liquidation, dissolution or other similar type of transaction with respect to the Company in which a Third Party shall acquire beneficial ownership of twenty percent (20%) or more of the outstanding shares of any class of voting securities of the Company or any of the Company Subsidiaries whose business constitutes 20% or more of the net revenue, net income or assets of the Company and the Company Subsidiaries, taken as a whole, or (v) any transaction which is similar in form, substance or purpose to any of the foregoing transactions; provided, however, that the term “Company Acquisition Proposal” shall not include the Merger or the other transactions contemplated by this Agreement.

 

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(ii)     “Superior Proposal” shall mean a bona fide written Company Acquisition Proposal (except that, for purposes of this definition, the references in the definition of “Company Acquisition Proposal” to “twenty percent (20%)” shall be replaced by “fifty percent (50%)”) on its most recently amended or modified terms, if amended or modified, made by a Third Party on terms that the Company Board determines in good faith, after consultation with the Company’s financial and legal advisors, taking into account all financial, legal, regulatory and any other aspects of the transaction described in such proposal (including the identity of the Person making such proposal, any termination or break-up fees, expense reimbursement provisions, and conditions to, and timing and likelihood of consummation as well as post-closing synergies and pro forma economics, to the extent applicable), as well as any changes to the financial terms of this Agreement proposed by Parent and Merger Sub in response to such proposal or otherwise, to be more favorable to the Company and the Company’s stockholders (solely in their capacity as such) from a financial point of view than the transactions contemplated by this Agreement. Reference to “this Agreement” in this paragraph shall be deemed to include any proposed alteration of the terms of this Agreement by Parent.

(k)     Parent shall notify the Company promptly (and in any event within twenty-four (24) hours) after receipt of any Parent Acquisition Proposal or any request for nonpublic information relating to Parent or any Parent Subsidiary by any Third Party, or any Inquiry from any Person seeking to have discussions or negotiations with Parent relating to a possible Parent Acquisition Proposal. Such notice shall indicate the identity of the Third Party making the Parent Acquisition Proposal or Inquiry and the material terms and conditions of any Parent Acquisition Proposal or Inquiries. Parent shall also promptly notify the Company if it enters into discussions or negotiations concerning any Parent Acquisition Proposal or provides nonpublic information or data to any person in accordance with this Section 6.5(k) and keep the other party informed of the status and terms of any such proposals, offers, discussions or negotiations on a current basis, including by providing a copy of all material documentation or correspondence relating thereto.

Section 6.6     Appropriate Action; Consents; Filings.

(a)     The parties hereto agree to make an appropriate filing of a Notification and Report Form pursuant to the HSR Act and to make all other filings required to be made prior to the Effective Time by applicable foreign Antitrust Laws (collectively, “Foreign Antitrust Approvals”) with respect to the transactions contemplated hereby as promptly as practicable and in any event prior to the expiration of any applicable legal deadline (provided, that the submission or filing of a Notification and Report Form pursuant to the HSR Act will be made within ten (10) Business Days of the date of this Agreement) and to supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act and any other filings required in connection with the Foreign Antitrust Approvals or any other Antitrust Law. Each of the Company and Parent shall (and shall cause the Company Subsidiaries and the Parent Subsidiaries, respectively, to) take any and all actions necessary to obtain any consents, clearances or approvals required under or in connection with any Antitrust Laws, and to enable all waiting periods under applicable Antitrust Laws to expire, and to avoid or eliminate each and every impediment under applicable Antitrust Laws asserted by an Governmental Authority, in each case, to cause the Merger and the other transactions contemplated by this Agreement to occur prior to the Outside Date, including but not limited to (x) promptly complying with or modifying any request for additional information (including any second request) by any Governmental Authority, (y) if necessary to obtain clearance by any Governmental Authority before the Outside Date, offering, negotiating, committing to, taking and effecting, by consent decree, hold separate order or otherwise, the sale, divestiture, license or other disposition of any and all of the share capital, assets, rights, products or business of the Company and Parent and their respective Subsidiaries, and any other actions that limit the freedom of action with respect to, or the ability to retain, any of the businesses of the Company and Parent and their respective Subsidiaries, and (z) contesting, defending and appealing any lawsuit or other legal proceeding, whether judicial or administrative, threatened or pending preliminary or permanent injunction or other order, decree or ruling or statute, rule, regulation or executive order that would adversely affect the ability of any party hereto to consummate the transactions contemplated hereby and taking any and all other actions to prevent the entry,

 

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enactment or promulgation thereof; provided, however, that in no event shall the Company or Parent or any of their respective Subsidiaries be obligated to commit to any actions that would, individually or in combination, materially reduce the reasonably anticipated benefits of the transactions contemplated by this Agreement.

(b)     Upon the terms and subject to the conditions set forth in this Agreement (including Section 6.5), and except with regard to the Antitrust Laws which shall be governed by Section 6.6(a), each of the Company and Parent shall (and shall cause the Company Subsidiaries and the Parent Subsidiaries, respectively, to) use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other party in doing, all things necessary, proper or advisable under applicable Law or pursuant to any Contract to consummate and make effective, as promptly as practicable, the Merger and the other transactions contemplated by this Agreement, including (i) the taking of all actions necessary to cause the conditions to Closing set forth in ARTICLE VII to be satisfied, (ii) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from Governmental Authorities or other Persons necessary in connection with the consummation of the Merger and the other transactions contemplated by this Agreement and the making of all necessary registrations and filings (including filings with Governmental Authorities, if any) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Authority or other Persons necessary in connection with the consummation of the Merger and the other transactions contemplated by this Agreement, (iii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the Merger or the other transactions contemplated by this Agreement, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Authority vacated or reversed, and (iv) the execution and delivery of any additional instruments necessary to consummate the Merger and the other transactions contemplated by this Agreement and to fully carry out the purposes of this Agreement.

(c)     In connection with and without limiting the foregoing, each of Parent and the Company shall give (or shall cause the Parent Subsidiaries or the Company Subsidiaries, respectively, to give) any notices to Third Parties, and Parent shall use, and cause each of its Subsidiaries to use, its reasonable best efforts, and the Company shall use its reasonable best efforts to cooperate with Parent in its efforts, to obtain any Third Party consents not covered by Sections 6.6(a) and 6.6(b) that are necessary, proper or advisable to consummate the Merger. Notwithstanding the foregoing, obtaining any approval or consent from any third party pursuant to this Section 6.6(c) shall not be considered a condition to the obligations of Parent and Merger Sub to consummate the Merger.

(d)     Each of the parties hereto will furnish to the other such necessary information and reasonable assistance as the other may request in connection with the preparation of any required governmental filings or submissions and will cooperate in responding to any inquiry from a Governmental Authority, including promptly (and in any event within twenty-four (24) hours) informing the other party of such inquiry, consulting in advance before making any presentations or submissions to a Governmental Authority, and supplying each other with copies of all material correspondence, filings or communications between either party and any Governmental Authority with respect to this Agreement. To the extent practicable, and permitted by a Governmental Authority, each party hereto shall permit representatives of the other party to participate in meetings (whether by telephone or in person) with such Governmental Authority.

(e)     Notwithstanding anything to the contrary in this Agreement, in connection with obtaining any approval or consent from any Person (other than any Governmental Authority) with respect to the Merger, without the prior written consent of Parent, none of the Company, any of the Company Subsidiaries or any of the Company’s or Company Subsidiary’s Representatives, shall pay or commit to pay to such Person whose approval or consent is being solicited any cash or other consideration, make any accommodation or commitment or incur any liability or other obligation to such Person. The Company shall cooperate with Parent and the Merger Sub with respect to accommodations that may be requested or appropriate to obtain such consents.

 

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Section 6.7     Notification of Certain Matters; Transaction Litigation.

(a)     The Company shall give prompt notice to Parent, and Parent shall give prompt notice to the Company, of any notice or other communication received by such party from any Governmental Authority in connection with this Agreement, the Merger or the other transactions contemplated by this Agreement, or from any Person alleging that the consent of such Person is or may be required in connection with the Merger or the other transactions contemplated by this Agreement.

(b)     The Company shall give prompt notice to Parent, and Parent shall give prompt notice to the Company, to the extent in each case it obtains Knowledge thereof, of (i) any inaccuracy of any representation or warranty of the Company or Parent, as applicable, contained herein at any time during the term hereof, (ii) the discovery of any fact or circumstance that, or the occurrence or non-occurrence of any event the occurrence or non-occurrence of which, would result in the failure to be satisfied of any of the conditions to the Closing in Article VII and (iii) any material failure of such party to comply with or satisfy any covenant or agreement to be complied with or satisfied by it hereby which would result in the failure to be satisfied of any of the conditions to the Closing in Article VII; provided that, in the case of clauses (i), (ii) and (iii), the failure to comply with this Section 6.7(b) shall not result in the failure to be satisfied of any of the conditions to the Closing in Article VII, or give rise to any right to terminate this Agreement under Article VIII, if the underlying fact, circumstance, event or failure would not in and of itself give rise to such failure or right.

(c)     The Company shall give prompt notice to Parent, and Parent shall give prompt notice to the Company, of any actions, suits, claims, investigations or proceedings commenced or, to such party’s Knowledge, threatened against, relating to or involving such party or any of the Company Subsidiaries or the Parent Subsidiaries, respectively, which relate to this Agreement, the Merger or the other transactions contemplated by this Agreement. The Company shall give Parent the opportunity to reasonably participate in the defense and settlement of any stockholder litigation against the Company and/or its directors relating to this Agreement and the transactions contemplated hereby, and no such settlement shall be agreed to without Parent’s prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed). Parent shall give the Company the opportunity to reasonably participate in the defense and settlement of any stockholder litigation against Parent and/or its directors relating to this Agreement and the transactions contemplated hereby, and no such settlement shall be agreed to without the Company’s prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed), unless such settlement involves only the payment of money and the amount of such settlement shall be fully covered by insurance proceeds.

Section 6.8     Public Announcements. Except as otherwise required by this Agreement, neither the Company, Parent nor Merger Sub shall issue or cause the publication of any press release or other public announcement or disclosure to any third party of the existence or any subject matter relating to, or terms or conditions of, this Agreement unless mutually approved by Parent and the Company, prior to release, announcement or disclosure; provided, however, that a party or its Representatives may issue a public announcement or other public disclosures required by Law or the rules of any stock exchange upon which such party’s equity securities are traded, provided that such Party uses reasonable best efforts to afford the other party an opportunity to first review the content of the proposed disclosure and provide reasonable comment regarding same. The Merger and this Agreement will be publicly announced in a mutually agreed form and at a mutually agreed time by Parent and Company.

Section 6.9     Directors’ and Officers’ Indemnification and Insurance.

(a)     Parent and Merger Sub agree that all rights to exculpation and indemnification for acts or omissions occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time (including any matters arising in connection with the transactions contemplated by this Agreement), now existing in favor of the Indemnitees as provided in the Company Charter or the Company Bylaws or each of the Company Subsidiaries’ respective articles or certificates of incorporation or bylaws

 

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(or comparable organizational or governing documents) shall survive the Merger and shall continue in full force and effect in accordance with their terms. The Surviving Entity shall (and Parent shall cause the Surviving Entity to) (i) indemnify, defend and hold harmless, and advance expenses to, Indemnitees with respect to all acts or omissions by them in their capacities as such at any time prior to the Effective Time, to the fullest extent required by the Company Charter or Company Bylaws, or the articles or certificates of incorporation or bylaws (or comparable organizational or governing documents) of any of the Company Subsidiaries, in each case, as in effect on the date of this Agreement, or applicable Law, and (ii) not amend, repeal or otherwise modify any such provisions in any manner that would adversely affect the rights thereunder of any Indemnitees.

(b)     Without limiting the provisions of Section 6.9(a), during the period commencing as of the Effective Time and ending on the sixth (6th) anniversary of the Effective Time, Parent and the Surviving Entity shall (and Parent shall cause the Surviving Entity to): (i) indemnify and hold harmless each Indemnitee against and from any costs or expenses (including attorneys’ fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, to the extent such claim, action, suit, proceeding or investigation arises out of or pertains to (x) any action or omission or alleged action or omission in such Indemnitee’s capacity as a director, officer, partner, member, trustee or employee of the Company or any of the Company Subsidiaries, or (y) this Agreement and any of the transactions contemplated hereby, including the Merger; and (ii) pay in advance of the final disposition of any such claim, action, suit, proceeding or investigation the expenses (including attorneys’ fees) of any Indemnitee upon receipt of an undertaking by or on behalf of such Indemnitee to repay such amount if it shall ultimately be determined that such Indemnitee is not entitled to be indemnified. Notwithstanding anything to the contrary contained in this Section 6.9(b) or elsewhere in this Agreement, neither Parent nor the Surviving Entity shall (and Parent shall cause the Surviving Entity not to) settle or compromise or consent to the entry of any judgment or otherwise seek termination with respect to any claim, action, suit, proceeding or investigation for which indemnification may be sought under this Section 6.9(b) unless such settlement, compromise, consent or termination includes an unconditional release of all Indemnitees from all liability arising out of such claim, action, suit, proceeding or investigation, and does not include an admission of fault or wrongdoing by any Indemnitee. Notwithstanding anything to the contrary set forth in this Agreement, Parent or the Surviving Entity (i) shall not be liable for any settlement effected without their prior written consent and (ii) shall not have any obligation hereunder to any Indemnitee to the extent that a court of competent jurisdiction shall determine in a final and non-appealable order that such indemnification is prohibited by applicable Law, in which case the Indemnitee shall promptly refund to Parent or the Surviving Entity the amount of all such expenses theretofore advanced pursuant hereto.

(c)     Prior to the Effective Time, the Company shall or, if the Company is unable to, Parent shall cause the Surviving Entity as of the Effective Time to, obtain and fully pay the premium for the non-cancellable extension of the directors’ and officers’ liability coverage of the Company’s existing directors’ and officers’ insurance policies and the Company’s existing fiduciary liability insurance policies (collectively, the “D&O Insurance”), in each case, for a claims reporting or discovery period of at least six (6) years from and after the Effective Time with respect to any claim related to any period of time at or prior to the Effective Time from an insurance carrier with the same or better credit rating as the Company’s current insurance carrier with respect to D&O Insurance with terms, conditions, retentions and limits of liability that are no less favorable than the coverage provided under the Company’s existing policies and with policy limits no less than the limits on the Company’s existing policies as long as the annual premium does not exceed 300% of the annual premium under the Company’s existing policies. If the Company or the Surviving Entity for any reason fails to obtain such “tail” insurance policies as of the Effective Time, (i) the Surviving Entity shall continue to maintain in effect, for a period of at least six (6) years from and after the Effective Time, the D&O Insurance in place as of the date hereof with the Company’s current insurance carrier or with an insurance carrier with the same or better credit rating as the Company’s current insurance carrier with respect to D&O Insurance with terms, conditions, retentions and limits of liability that are no less favorable than the coverage provided under the Company’s existing policies as of the date hereof, or (ii) Parent shall provide, or shall cause the Surviving Entity to provide, for a period of not less than six (6) years after the Effective Time, the Indemnitees who are insured under the

 

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Company’s D&O Insurance with comparable D&O Insurance that provides coverage for events occurring at or prior to the Effective Time from an insurance carrier with the same or better credit rating as the Company’s current insurance carrier, that is no less favorable than the existing policy of the Company (which may be provided under Parent’s D&O Insurance policy) or, if substantially equivalent insurance coverage is unavailable, the best available coverage; provided, however, that Parent and the Surviving Entity shall not be required to pay an annual premium for the D&O Insurance in excess of 300% of the annual premium currently paid by the Company for such insurance; and provided, further, that if the annual premiums of such insurance coverage exceed such amount, Parent or the Surviving Entity shall be obligated to obtain a policy with the greatest coverage available, with respect to matters occurring prior to the Effective Time, for a cost not exceeding such amount.

(d)     The Indemnitees to whom this Section 6.9 applies shall be third party beneficiaries of this Section 6.9. The provisions of this Section 6.9 are intended to be for the benefit of each Indemnitee and his or her successors, heirs, executors, trustees, fiduciaries, administrators or representatives. Parent shall pay all reasonable expenses, including attorney’s fees, that may be incurred by any Indemnitee in successfully enforcing the indemnity and other obligations provided in this Section 6.9.

(e)     Notwithstanding anything contained in Section 9.1 or Section 9.7 to the contrary, this Section 6.9 shall survive the consummation of the Merger in accordance with its terms and shall be binding, jointly and severally, on all successors and assigns of Parent, the Surviving Entity and its subsidiaries, and shall be enforceable by the Indemnitees and their successors, heirs or representatives. In the event that Parent or the Surviving Entity or any of its successors or assigns consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or transfers or conveys all or a majority of its properties and assets to any Person, then, and in each such case, commercially reasonable efforts shall be made so that the successors and assigns of Parent or the Surviving Entity, as applicable, shall succeed to the obligations set forth in this Section 6.9.

Section 6.10     Employee Benefit Matters.

(a)     During the one (1)-year period commencing at the Effective Time, Parent shall, or shall cause the Surviving Entity to, provide to each employee of the Company and any of the Company Subsidiaries who is employed by the Company or any of the Company Subsidiaries immediately prior to the Effective Time and continues to be employed by the Surviving Entity or any of the Company Subsidiaries immediately following the Effective Time (each a “Company Employee”) (i) a base salary (or wage rate) and target cash incentive compensation opportunity at least equal to such Company Employee’s base salary (or wage rate) and target cash incentive compensation opportunity in effect as of immediately prior to the Effective Time and (ii) employee benefits (excluding equity arrangements, deferred compensation arrangements, retiree health and welfare benefits and defined benefit pension plans) that are, in the aggregate, no less favorable than the employee benefits provided to the Company Employees by the Company and the Company Subsidiaries as of immediately prior to the Effective Time.

(b)     Parent shall provide, or shall cause the Surviving Entity to provide, to each Company Employee whose employment with the Surviving Entity, Company Subsidiaries and its Affiliates is involuntarily terminated in a severance-qualifying manner during the one (1)-year period following the Effective Time, severance benefits that are no less favorable, in the aggregate, than the severance benefits, if any, that would have been provided to such Company Employee pursuant to the terms of the severance pay arrangements maintained by the Company and the Company Subsidiaries upon such an involuntary severance-qualifying termination of employment immediately prior to the Effective Time.

(c)     For purposes of eligibility and vesting, benefit accrual and determination of level of benefits under the compensation and benefit plans, programs agreements and arrangements of Parent, the Company, the Parent Subsidiaries, the Company Subsidiaries, the Surviving Entity and any of its subsidiaries or any respective

 

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Affiliate thereof providing benefits to any Company Employees after the Closing (the “New Plans”), including for purposes of accrual of vacation and other paid time off and severance benefits under New Plans, but excluding for purposes of benefit accruals under any defined benefit plan or for purposes of vesting in any new equity-based compensation plan, program, agreement or arrangement, each Company Employee shall be credited with his or her years of service with the Company, the Company Subsidiaries and their respective Affiliates (and any additional service with any predecessor employer) before the Effective Time, to the same extent as such Company Employee was entitled, before the Effective Time, to credit for such service under any similar Company Benefit Plan, except (i) for New Plans as to which employees who are similarly situated to the Company Employees are not provided such service credit or (ii) where such credit would result in a duplication of benefits. In addition, and without limiting the generality of the foregoing, with respect to any plan that is an “employee welfare benefit plan” (as defined in Section 3(1) of ERISA), Parent shall use commercially reasonable efforts to cause: (i) each Company Employee to be immediately eligible to participate, without any waiting time, in any and all New Plans to the extent coverage under such New Plan replaces coverage under a comparable Company Benefit Plan in which such Company Employee participated immediately before such replacement; and (ii) for purposes of each New Plan providing medical, dental, pharmaceutical and/or vision benefits to any Company Employee, all pre-existing condition exclusions and actively-at-work requirements of such New Plan to be waived for such Company Employee and his or her covered dependents (except to the extent such restrictions were applicable and not satisfied by the Company Employee as of the Effective Time under the comparable Company Benefit Plan), and any eligible expenses incurred by such Company Employee and his or her covered dependents under a Company Benefit Plan during the portion of the plan year prior to the Effective Time to be taken into account under such New Plan for purposes of satisfying all deductible, co-insurance, co-payment and maximum out-of-pocket requirements applicable to such employee and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such New Plan.

(d)     Prior to making any material broad-based written or oral communications to the directors, officers or employees of the Company or the Company Subsidiaries pertaining to compensation or benefit matters that are affected by the transactions contemplated by this Agreement, the Company shall provide Parent with a copy of the intended communication, Parent shall have a reasonable period of time to review and comment on the communication, and Parent and the Company shall cooperate in providing any such mutually agreeable communication.

(e)     The parties hereto acknowledge and agree that all provisions contained in this Section 6.10 with respect to employees of the Company and the Company Subsidiaries are included for the sole and exclusive benefit of the respective parties hereto and shall not create any right, express or implied (i) in any other person, including employees, former employees, any participant or any beneficiary thereof in any Company Benefit Plan or (ii) to continued employment with Parent or any Parent Subsidiary. Notwithstanding anything in this Section 6.10 to the contrary, nothing in this Agreement, whether express or implied, shall be treated as an amendment or other modification of any Company Benefit Plan, Parent Benefit Plan or any other employee benefit plans of the Company or Parent.

Section 6.11     Certain Tax Matters.

(a)     Company, Parent and Merger Sub shall each use its reasonable best efforts (i) to cause the Merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code and (ii) to provide such information as reasonably requested by the Company in connection with the Company’s request for an IRS private letter ruling and/or for an opinion of Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”), counsel to the Company, as applicable, regarding the application of Sections 368 and/or 367(a) of the Code to the Merger, including executing and delivering officer’s certificates containing representations from the officers of the Company and Parent in connection with such IRS private letter ruling and/or opinions, as applicable.

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expected to (i) cause the Merger to fail to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. With respect to the Merger, if applicable, Parent will (and following the Merger, Parent will cause the Company to) file all required information with its Tax Returns and maintain all records required for Tax purposes, including, if applicable, the reporting requirements contained in Treasury Regulations Section 1.367(a)-3(c)(6).

(c)     If the Company obtains a favorable IRS private letter ruling or believes based on advice from counsel that it is more likely than not that the Merger is not subject to Section 367(a)(1) of the Code, Parent will make commercially reasonable arrangements with each five-percent transferee shareholder (as defined in Treasury Regulations Section 1.367(a)-3(c)(5)(ii)) and each “5-percent shareholder” (within the meaning of Treasury Regulations Section 1.367(a)-3(b)(1)(ii)), if any, to ensure that such shareholder will be informed of any “triggering event” within the meaning of Treasury Regulations Section 1.367(a)-8(j)(1) or (2).

(d)     Parent and the Company shall cooperate in the preparation, execution and filing of all Tax Returns, questionnaires, applications or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer and stamp taxes, and transfer, recording, registration and other fees and similar Taxes which become payable in connection with the Merger that are required or permitted to be filed on or before the Effective Times. Parent shall pay, without deduction from any amount payable to holders of Company Common Stock and without reimbursement from the other party, any such Taxes or fees imposed on it by any Governmental Authority (or for which its shareholders are primarily liable), which becomes payable in connection with the Merger.

(e)     Prior to the Closing Date, the Company shall deliver to Parent a duly executed certificate, dated not more than thirty (30) days prior to the Closing Date, certifying that (A) the Company is not and in the preceding five-year period has never been a “United States real property holding corporation” as defined in Section 897(c)(2) of the Code and the Treasury Regulations promulgated thereunder and (B) none of the Company Common Stock constitutes a “United States real property interest” as defined in Section 897(c) of the Code and the Treasury Regulations promulgated thereunder, which certificate shall be in accordance with Treasury Regulations Sections 1.897-2(h) and 1.1445-2(c)(3) and in a form reasonably satisfactory to Parent.

Section 6.12     Dividends. In the event that a distribution with respect to the shares of Company Common Stock permitted under the terms of this Agreement (including pursuant to Section 6.1(b)(ii) above) has (i) a record date prior to the Effective Time and (ii) has not been paid as of the Effective Time, the holders of shares of Company Common Stock shall be entitled to receive such distribution from the Company at the time such shares are exchanged pursuant to ARTICLE III of this Agreement.

Section 6.13     Merger Sub. Parent shall take all actions necessary to (a) cause Merger Sub to perform its obligations under this Agreement and to consummate the Merger on the terms and conditions set forth in this Agreement, and (b) ensure that, prior to the Effective Time, Merger Sub shall not conduct any business or make any investments other than as specifically contemplated by this Agreement, or incur or guarantee any indebtedness.

Section 6.14     Section 16 Matters. Assuming that the Company delivers to Parent, in a timely fashion prior to the Effective Time, all requisite information necessary for Parent and Merger Sub to take the actions contemplated by this Section 6.14, the Company, Parent and Merger Sub each shall take all such steps as may be necessary or appropriate to ensure that (a) any dispositions of Company Common Stock (including derivative securities related to such stock) resulting from the Merger and the other transactions contemplated by this Agreement by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Company immediately prior to the Effective Time are exempt under Rule 16b-3 promulgated under the Exchange Act, and (b) any acquisitions of Parent Common Shares (including derivative securities related to such stock) resulting from the Merger and the other transactions contemplated by this Agreement by each individual who may become subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Parent are exempt under Rule 16b-3 promulgated under the Exchange Act.

 

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Section 6.15     Stock Exchange Listing. Parent shall cause the shares of Parent Common Shares to be issued in the Merger to be approved for listing on NASDAQ and the TSX, subject to official notice of issuance, prior to the Effective Time.

Section 6.16     Voting of Shares. Parent shall vote all shares of Company Common Stock beneficially owned by it or any of the Parent Subsidiaries as of the record date for the Company Stockholder Meeting in favor of adoption of this Agreement and approval of the Merger. The Company shall vote all shares of Parent Common Shares beneficially owned by it or any of the Company Subsidiaries as of the record date for the Parent Shareholder Meeting in favor of adoption of this Agreement, approval of the Merger, and issuance of shares of Parent Common Shares in connection therewith.

Section 6.17     Post-Closing Directors and Officers.

(a)     Parent shall take all necessary actions to cause, concurrent with the Closing (i) the name of Parent to be changed to “Westport Fuel Systems Inc.”, (ii) three members of the Parent Board to be determined in Parent’s sole discretion prior to Closing to resign from the Parent Board, (iii) the appointment of the three directors set forth on Exhibit C attached hereto or such other individuals as may be mutually agreed between Parent and the Company (the “Continuing Company Directors”) to fill the vacancies on the Parent Board resulting from such resignations, and (iv) each committee of the Parent Board to include such number of Continuing Company Directors as determined by Parent after taking into account each such Continuing Company Director’s relevant experience and expertise.

(b)     From and after the Closing, the Parent Board shall take all necessary actions to nominate, and to cause the Nominating and Corporate Governance Committee of Parent to recommend that the Parent Board nominate, the Continuing Company Directors for election to the Parent Board at the 2016 annual meeting of shareholders of Parent, the 2017 annual meeting of shareholders of Parent and the 2018 annual meeting of shareholders of Parent; provided, that no Continuing Company Director shall be subject to re-nomination in accordance with this Section 6.17(b) in the event such Continuing Company Director fails (i) to comply in all material respects with the governance guidelines and policies of Parent applicable to Parent directors during the fiscal year immediately preceding such Continuing Company Director’s re-nomination or (ii) to attend in-person at least seventy-five percent (75%) of the duly called meetings of the Parent Board for the Parent fiscal year immediately preceding such re-nomination. Notwithstanding anything in this Agreement to the contrary, in the event of the death, resignation or removal for cause of a Continuing Company Director, Parent and the Parent Board shall have no obligation to nominate or appoint a replacement Continuing Company Director to fill the vacancy created by such death, resignation or removal. The Continuing Company Directors shall be third party beneficiaries of this Section 6.17. Parent shall pay all reasonable expenses, including attorney’s fees, that may be incurred by any Continuing Company Director in seeking the enforcement of the rights and obligations provided for in this Section 6.17.

Section 6.18     Solicitation of Employees.

(a)     Prior to the Closing Date, neither the Company nor any of Company Subsidiary shall directly, or indirectly, either on its own account or for any person, firm or company (except by means of a generally public solicitation or by retaining an executive recruiting firm that has not been directed to approach and does not approach employees of Parent or any Parent Subsidiary), solicit, or endeavor to cause, any employee of Parent or any Parent Subsidiary to alter in any way, terminate or breach his, her or its relationship or agreement with Parent or any Parent Subsidiary.

(b)     Prior to the Closing Date, neither Parent nor any Parent Subsidiary shall directly, or indirectly, either on its own account or for any person, firm or company (except by means of a generally public solicitation or by retaining an executive recruiting firm that has not been directed to approach and does not approach employees of Company or any Company Subsidiary), solicit, or endeavor to cause, any employee of the

 

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Company or any Company Subsidiary to alter in any way, terminate or breach his, her or its relationship or agreement with Company or any Company Subsidiary.

Section 6.19     Amendment to Rights Agreement. The Company Board shall take all necessary action so that none of the performance by the respective parties hereto of their obligations hereunder, nor any of the transactions contemplated hereunder will cause (i) the Rights to become exercisable under the Rights Agreement; (ii) Parent or Merger Sub or any of their Affiliates to be deemed an “Acquiring Person” (as defined in the Rights Agreement); or (iii) the “Stock Acquisition Date” (as defined in the Rights Agreement) to occur upon any such event. The “Separation Time” (as defined in the Rights Agreement) will not have occurred.

Section 6.20     Financial Statement Cooperation. To the extent requested by Parent during the Interim Period, the Company shall, and shall use commercially reasonable efforts to cause the independent auditors of the Company to, provide customary assistance to Parent and its underwriters in connection with the preparation of financial statements of the Company and its Subsidiaries and related information (collectively, the “Company Financial Information”) sufficient to enable Parent to prepare financial statements sufficient for inclusion in any registration statement under the Securities Act, including compliance with the applicable provisions of Regulation S-X, including making work papers available to Parent’s Representatives, the provision of “comfort letters” in customary form in connection with any offering or financing, delivery of consents to the inclusion of the financial statements required in connection with any offering or financing, participation in due diligence matters with respect to any offering or financing and assistance in responding to comments or questions from the SEC with respect to the Company Financial Information. The Company shall cause each of the Company’s Chief Executive Officer and Chief Financial Officer, in their capacity as officers of the Company, to execute officers’ certificates or management representation letters and deliver such officers’ certificates and management representation letters to the independent auditors of Parent with respect to the Company Financial Information, in a customary form and substance, to permit such auditors to issue unqualified reports with respect to the audited Company Financial Information and in connection with procuring the consent of such auditors to the inclusion of such financial information in connection with any offering or financing. Parent shall reimburse the Company for the reasonable costs and expenses incurred by the Company pursuant to this Section 6.20 (including fees and expenses payable to the independent auditors).

Section 6.21     Takeover Statutes. If any Takeover Statute may become, or may purport to be, applicable to the transactions contemplated by this Agreement, each of Parent and the Company and the members of its respective board of directors, to the extent permissible under applicable Law, shall grant such approvals and take such actions, in accordance with the terms of this Agreement, as are necessary so that the transactions contemplated by this Agreement may be consummated as promptly as practicable, and in any event prior to the Outside Date, on the terms and conditions contemplated hereby and otherwise, to the extent permissible under applicable Law, act to eliminate the effect of any Takeover Statute on any of the transactions contemplated by this Agreement.

Section 6.22     Confidentiality. The obligations of Parent and the Company under the Confidentiality Agreement shall remain in full force and effect and all information provided to any party hereto or its Representatives pursuant to or in connection with this Agreement is deemed to be “Evaluation Material” as defined under the Confidentiality Agreement; provided, that nothing in the Confidentiality Agreement shall be deemed to restrict the performance by the Company or Parent of their respective obligations under this Agreement and, in the case of any conflict between the terms of this Agreement and the terms of the Confidentiality Agreement, the terms of this Agreement shall control.

Section 6.23     Automotive and Industrial Operations. Representatives of Parent and the Company jointly have developed an agreed upon business plan for the Automotive, Industrial and Operations Combined Company Project to be named the “Fuel Systems Automotive and Industrial Group” (the “Combined Company Project”), which they intend to implement within the 36 months following the Closing. Exhibit D hereto sets forth a list of the management team, who shall be officers of Fuel Systems Automotive and Industrial Group, to be charged

 

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with undertaking the implementation of the Combined Company Project. Consistent with the Combined Company Project, following the Closing the Surviving Entity the headquarters of the Automotive Division of the Fuel Systems Automotive and Industrial Group and its associated operations will be in Cherasco, Italy. Subject to Law and the reasonable business judgment of the Parent Board, Parent shall use commercially reasonable efforts to assist the implementation of the Combined Company Project, as may be modified from time to time by the management of the Fuel Systems Automotive Industrial Group and approved by Parent, by maintaining sufficient capital in the Fuel Systems Automotive Industrial Group consistent with the needs of the Fuel Systems Automotive Industrial Group to achieve the Combined Company Project as it may be modified from time to time.

Section 6.24     Sales and Distribution Contracts. As soon as reasonably practicable after the date hereof, the Company shall provide Parent with a schedule of any sales or distribution Contracts (or series of Contracts with a party or related parties) that provide for annual payments by or to the Company or any Company Subsidiary, or pursuant to which the Company or any Company Subsidiary is reasonably likely to receive or make annual payments, in excess of $500,000 that had no previously been scheduled pursuant to Section 4.12.

ARTICLE VII.

CONDITIONS

Section 7.1     Conditions to the Obligations of Each Party. The respective obligations of each party to effect the Merger and to consummate the other transactions contemplated by this Agreement shall be subject to the satisfaction or (to the extent permitted by Law) waiver by each of the parties, at or prior to the Effective Time, of the following conditions:

(a)     Stockholder Approvals. The Company Stockholder Approval and the Parent Shareholder Approval shall have been obtained.

(b)     No Restraints. No Governmental Authority having jurisdiction over the Company or Parent shall have enacted, issued, promulgated, enforced or entered any Law or Order (whether temporary, preliminary or permanent) which is then in effect and has the effect of making the Merger illegal or otherwise restricting, preventing or prohibiting consummation of the Merger or otherwise restraining, enjoining, preventing, prohibiting or making illegal the acquisition of some or all of the shares of Company Common Stock by Parent. Without limiting the generality of the foregoing, (i) the waiting period (and any extension thereof) applicable to the transactions contemplated by this Agreement under the HSR Act shall have expired or been terminated and (ii) any mandatory waiting period or required consent under any other applicable Antitrust Laws shall have expired or been obtained; provided, that any order, decree or ruling with respect to foreign Antitrust Laws other than those set forth on Schedule 7.1(b) shall be disregarded for the purposes of this Section 7.1(b).

(c)     Form F-4. The Form F-4 shall have become effective under the Securities Act, and no stop order suspending the effectiveness of the Form F-4 shall have been issued and no proceedings for that purpose shall have been initiated or be threatened by the SEC that has not been withdrawn.

(d)     Listing. The Parent Common Shares to be issued in the Merger shall have been authorized for listing on the NASDAQ and the TSX, subject to official notice of issuance.

(e)     TSX Acceptance. Parent shall have received the conditional acceptance of the TSX in respect of the transactions contemplated by this Agreement.

Section 7.2     Conditions to the Obligations of Parent and Merger Sub. The respective obligations of Parent and Merger Sub to effect the Merger and to consummate the other transactions contemplated by this Agreement

 

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are subject to the satisfaction or (to the extent permitted by Law) waiver by Parent, at or prior to the Effective Time, of the following additional conditions:

(a)     Representations and Warranties. (i) The representations and warranties set forth in Section 4.1(a) (Organization and Qualification; Subsidiaries), Section 4.3(a) (Capital Structure) (except for the first two sentences), Section 4.4 (Authority), Section 4.19 (Opinion of Financial Advisor), Section 4.20 (Takeover Statute), Section 4.21 (Vote Required), Section 4.22 (Brokers) and Section 4.23 (Investment Company Act) shall be true and correct in all material respects as of the date of this Agreement and as of the Effective Time, as though made as of the Effective Time, (ii) the representations and warranties set forth in the first two sentences of Section 4.3(a) (Capital Structure) shall be true and correct in all but de minimis respects as of the date of this Agreement and as of the Effective Time, as though made as of the Effective Time, and (iii) each of the other representations and warranties of the Company contained in this Agreement shall be true and correct as of the date of this Agreement and as of the Effective Time, as though made as of the Effective Time, except (x) in each case, representations and warranties that are made as of a specific date shall be true and correct only on and as of such date, and (y) in the case of clause (iii) where the failure of such representations or warranties to be true and correct (without giving effect to any materiality or “Company Material Adverse Effect” qualifications set forth therein) does not have, and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

(b)     Agreements and Covenants. The Company shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing Date.

(c)     Officer’s Certificate. The Company shall have delivered to Parent a certificate, dated the date of the Closing and signed by its chief executive officer or another senior officer on behalf of the Company, certifying to the effect that the conditions set forth in Section 7.2(a) and Section 7.2(b) have been satisfied.

(d)     Absence of Material Adverse Effect. Since the date of this Agreement, there shall not have been any event, change or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.

Section 7.3     Conditions to the Obligations of the Company. The obligations of the Company to effect the Merger and to consummate the other transactions contemplated by this Agreement are subject to the satisfaction or (to the extent permitted by Law) waiver by the Company, at or prior to the Effective Time, of the following additional conditions:

(a)     Representations and Warranties. (i) The representations and warranties set forth in Section 5.1(a) and (b) (Organization and Qualification; Subsidiaries), Section 5.3(a) (Capital Structure) (except the first two sentences), Section 5.4 (Authority), Section 5.21 (Brokers) and Section 5.22 (Investment Company Act) shall be true and correct in all material respects as of the date of this Agreement and as of the Effective Time, as though made as of the Effective Time, (ii) the representations and warranties set forth in the first two sentences of Section 5.3(a) (Capital Structure) shall be true and correct in all but de minimis respects as of the date of this Agreement and as of the Effective Time, as though made as of the Effective Time, and (iii) each of the other representations and warranties of Parent and Merger Sub contained in this Agreement shall be true and correct as of the date of this Agreement and as of the Effective Time, as though made as of the Effective Time, except (x) in each case, representations and warranties that are made as of a specific date shall be true and correct only on and as of such date, and (y) in the case of clause (iii) where the failure of such representations or warranties to be true and correct (without giving effect to any materiality or “Parent Material Adverse Effect” qualifications set forth therein) does not have, and would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

 

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(b)     Agreements and Covenants. Parent and Merger Sub shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by them on or prior to the Closing Date.

(c)     Officer’s Certificate. Parent shall have delivered to the Company a certificate, dated the date of the Closing and signed by its chief executive officer or another senior officer on behalf of Parent, certifying to the effect that the conditions set forth in Section 7.3(a) and Section 7.3(b) have been satisfied.

(d)     Absence of Material Adverse Effect. Since the date of this Agreement, there shall not have been any event, change or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a Parent Material Adverse Effect.

ARTICLE VIII.

TERMINATION, AMENDMENT AND WAIVER

Section 8.1     Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after receipt of the Company Stockholder Approval or the Parent Shareholder Approval (except as otherwise expressly noted), as follows:

(a)     by mutual written agreement of each of Parent and the Company; or

(b)     by either Parent or the Company, if:

(i)     the Effective Time shall not have occurred on or before April 30, 2016 (the “Outside Date”); provided, however, that the right to terminate this Agreement pursuant to this Section 8.1(b)(i) shall not be available to any party if the failure of such party (and in the case of Parent, including the failure of Merger Sub) to perform any of its obligations under this Agreement has been a principal cause of, or resulted in, the failure of the Merger to be consummated on or before such date; provided further that if the waiting period applicable to the transactions contemplated by the Agreement under the HSR Act shall not have expired or been terminated or any other mandatory waiting period or required consent under any other applicable Antitrust Laws that is a condition to the party’s obligations to effect the Merger under Section 7.1(b) shall not have expired or been obtained, then the Outside Date shall be extended until August 31, 2016;

(ii)     any Governmental Authority of competent jurisdiction shall have issued an Order or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such Order or other action shall have become final and non-appealable; provided, however, that the right to terminate this Agreement under this Section 8.1(b)(ii) shall not be available to a party if the issuance of such final, non-appealable Order was primarily due to the failure of such party (and in the case of Parent, including the failure of Merger Sub) to perform any of its obligations under this Agreement; or

(iii)     the Company Stockholder Approval shall not have been obtained at a duly held Company Stockholder Meeting, or at any adjournment or postponement thereof at which this Agreement and the transactions contemplated hereby have been voted upon, provided, however, that the right to terminate this Agreement under this Section 8.1(b)(iii) shall not be available to the Company if the failure to obtain such Company Stockholder Approval was primarily due to the Company’s failure to perform any of its obligations under this Agreement;

 

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(iv)     the Parent Shareholder Approval shall not have been obtained at a duly held Parent Shareholder Meeting, or at any adjournment or postponement thereof at which this Agreement and the transactions contemplated hereby have been voted upon, provided, however, that the right to terminate this Agreement under this Section 8.1(b)(iv) shall not be available to Parent if the failure to obtain such Parent Shareholder Approval was primarily due to Parent’s failure to perform any of its obligations under this Agreement; or

(c)     by the Company, if:

(i)     Parent or Merger Sub shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements set forth in this Agreement, which breach or failure to perform (x) would, or would reasonably be expected to, result in a failure of a condition set forth in Section 7.3(a) or Section 7.3(b) and (y) cannot be cured on or before the Outside Date or, if curable, is not cured by Parent within twenty (20) days of receipt by Parent of written notice of such breach or failure; provided that the Company shall not have the right to terminate this Agreement pursuant to this Section 8.1(c)(i) if the Company is then in breach of any of its respective representations, warranties, covenants or agreements set forth in this Agreement such that the conditions set forth in either Section 7.2(a) or Section 7.2(b) would not be satisfied;

(ii)     the Company Board has determined to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal to the extent permitted by, and subject to the terms and conditions of Section 6.5; provided, that the right to terminate under this Section 8.1(c)(ii) shall not be available after the receipt of the Company Stockholder Approval; provided, further, that any such purported termination pursuant to this Section 8.1(d)(ii) shall be void and of no force or effect unless the Company has complied with Section 8.3(a); provided, further, however, that in the event of such termination, the Company substantially concurrently enters into such Alternative Acquisition Agreement; or

(iii)     if (x) the Parent Board authorizes, approves or recommends a Parent Acquisition Proposal; (y) Parent or any Parent Subsidiary enters into a written Contract relating to a Parent Acquisition Proposal (other than a confidentiality agreement); or (z) Parent or any Parent Subsidiary consummates any transaction regarding a Parent Acquisition Proposal.

(d)     by Parent, if:

(i)     the Company shall have breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements set forth in this Agreement, which breach or failure to perform (x) would, or would reasonably be expected to, result in a failure of a condition set forth in Section 7.2(a) or Section 7.2(b) and (y) cannot be cured on or before the Outside Date or, if curable, is not cured by the Company within twenty (20) days of receipt by the Company of written notice of such breach or failure; provided that Parent shall not have the right to terminate this Agreement pursuant to this Section 8.1(d)(i) if Parent or Merger Sub are then in breach of any of their respective representations, warranties, covenants or agreements set forth in this Agreement such that the conditions set forth in either Section 7.3(a) or Section 7.3(b) would not be satisfied, or

(ii)     prior to the receipt of the Company Stockholder Approval, (A) a Company Adverse Recommendation Change shall have occurred, (B) a material and willful breach of any of the Company’s obligations under Section 6.5 by (directly or indirectly) the Company’s or any Company Subsidiary’s officers, directors or Representatives shall have occurred or (C) the Company or any Company Subsidiary or the Company Board shall have approved, recommended, adopted or entered into, or publicly announced its intention to approve, recommend, adopt or enter into, an Alternative Acquisition Agreement (other than an Acceptable Confidentiality Agreement) whether or not permitted by Section 6.5.

 

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Section 8.2     Effect of Termination. In the event that this Agreement is terminated and the Merger and the other transactions contemplated by this Agreement are abandoned pursuant to Section 8.1, written notice thereof shall be given to the other party or parties, specifying the provisions hereof pursuant to which such termination is made and describing the basis therefor in reasonable detail, and this Agreement shall forthwith become null and void and of no further force or effect whatsoever without liability on the part of any party hereto (or any of the Company Subsidiaries, Parent Subsidiaries or any of the Company’s or Parent’s respective Representatives), and all rights and obligations of any party hereto shall cease; provided, however, that, notwithstanding anything in the foregoing to the contrary (a) no such termination shall relieve any party hereto of any liability or damages resulting from or arising out of any willful or intentional breach of this Agreement; and (b) the Confidentiality Agreement, this Section 8.2, Section 8.3, Section 8.6,ARTICLE IX and the definitions of all defined terms appearing in such sections shall survive any termination of this Agreement pursuant to Section 8.1. If this Agreement is terminated as provided herein, all filings, applications and other submissions made pursuant to this Agreement, to the extent practicable, shall be withdrawn from the agency or other person to which they were made.

Section 8.3     Termination Fee.

(a)     In the event this Agreement is terminated by the Company pursuant to Section 8.1(c)(ii) or by Parent pursuant to Section 8.1(d)(ii), then the Company shall pay, or cause to be paid, to Parent the Termination Fee, by wire transfer of same day funds to an account designated by Parent, within two (2) Business Days of such termination.

(b)     In the event this Agreement is terminated by the Company pursuant to Section 8.1(c)(iii), then Parent shall pay, or cause to be paid, to the Company the Termination Fee, by wire transfer of same day funds to an account designated by the Company within two (2) Business Days of such termination.

(c)     In the event that, prior to the Company Stockholder Meeting, a Company Acquisition Proposal is publicly proposed or publicly disclosed and this Agreement is terminated by Parent or the Company pursuant to Section 8.1(b)(iii) or by Parent pursuant to Section 8.1(d)(i) as a result of a willful breach by the Company or Section 8.1(d)(ii)(A), then the Company shall pay to Parent the Expenses of Parent within two (2) Business Days after receipt following such termination of documentation supporting such Expenses of Parent. If, concurrently, or within twelve (12) months after any such termination described in the immediately preceding sentence, the Company enters into a definitive agreement with respect to, or otherwise consummates, any Company Acquisition Proposal (substituting fifty percent (50%) for the twenty percent (20%) threshold set forth in the definition of “Company Acquisition Proposal”) for all purposes under this Section 8.3(c), then the Company shall pay to Parent the Termination Fee as promptly as possible (but in any event within two (2) Business Days) following the consummation of such Company Acquisition Proposal, unless the Termination Fee has already been paid to Parent pursuant to Section 8.1(a). Parent’s right to receive the one-time payment of the Termination Fee (if and when due) and the Expenses of Parent from the Company as provided in this Section 8.3(c) shall be the sole and exclusive remedy available to Parent against the Company with respect to this Agreement and the transactions contemplated hereby in the event that this Agreement is terminated by Parent or the Company pursuant to Section 8.1(b)(iii) or by Parent pursuant to Section 8.1(d)(i) as a result of a willful breach by the Company or Section 8.1(d)(ii)(A).

(d)     In the event that, prior to Parent Shareholder Meeting, (i) a Parent Acquisition Proposal is publicly proposed or publicly disclosed, (ii) the Third Party making such Parent Acquisition Proposal has publicly indicated to the Parent shareholders to the effect that they should not vote in favor of any of the matters required by the Parent Shareholder Approval, and (iii) this Agreement is terminated by Parent or the Company pursuant to Section 8.1(b)(iv) or by the Company pursuant to Section 8.1(c)(i) as a result of a willful breach by Parent, then Parent shall pay to the Company the Expenses of the Company within two (2) Business Days after receipt following such termination of documentation supporting such Expenses of the Company. If, concurrently, or within twelve (12) months after any such termination described in the immediately preceding sentence, the

 

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Parent enters into a definitive agreement with respect to, or otherwise consummates, any Parent Acquisition Proposal for all purposes under this Section 8.3(d), then Parent shall pay to the Company the Termination Fee as promptly as possible (but in any event within two (2) Business Days) following the consummation of such Parent Acquisition Proposal. The Company’s right to receive the one-time payment of the Termination Fee (if and when due) and the Expenses of the Company from Parent as provided in this Section 8.3(d) shall be the sole and exclusive remedy available to the Company against Parent with respect to this Agreement and the transactions contemplated hereby in the event that this Agreement is terminated by the Company or Parent pursuant to Section 8.1(b)(iv) or by the Company pursuant to Section 8.1(c)(i) as a result of a willful breach by Parent.

(e)     Notwithstanding anything to the contrary set forth in this Agreement, the parties agree that:

(i)     under no circumstances shall the Company be required to pay the Termination Fee earlier than one (1) full Business Day after receipt of appropriate wire transfer instructions from Parent; and

(ii)     under no circumstances shall the Company be required to pay the Termination Fee on more than one occasion.

(f)     Each of the parties hereto acknowledges that (i) the agreements contained in this Section 8.3 are an integral part of the transactions contemplated by this Agreement, (ii) the Termination Fee is not a penalty, but is liquidated damages, in a reasonable amount that will compensate the Company or Parent, as the case may be, in the circumstances in which such fee is payable for the efforts and resources expended and opportunities foregone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation of the transactions contemplated hereby, which amount would otherwise be impossible to calculate with precision, and (iii) without these agreements, the parties would not enter into this Agreement; accordingly, if the Company or Parent, as the case may be, fails to timely pay any amount due pursuant to this Section 8.3 and, in order to obtain such payment, either the Company or Parent, as the case may be, commences a suit that results in a judgment against the other party for the payment of any amount set forth in this Section 8.3, such paying party shall pay the other party its costs and Expenses in connection with such suit, together with interest on such amount at the annual rate of ten percent (10%) for the period from the date such payment was required to be made through the date such payment was actually received, or such lesser rate as is the maximum permitted by applicable Law.

Section 8.4     Amendment. Subject to compliance with applicable Law, this Agreement may be amended by mutual agreement of the parties hereto by action taken or authorized by their respective boards of directors (or similar governing body or entity) at any time before or after receipt of the Company Stockholder Approval and prior to the Effective Time; provided, however, that after the Company Stockholder Approval has been obtained, there shall not be (a) any amendment of this Agreement that changes the amount or the form of the consideration to be delivered under this Agreement to the holders of Company Common Stock, or which by applicable Law or in accordance with the rules of any stock exchange requires the further approval of the stockholders of the Company or Parent without such further approval of such stockholders, or (b) any amendment or change not permitted under applicable Law. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto.

Section 8.5     Waiver. At any time prior to the Effective Time, subject to applicable Law, any party hereto may (a) extend the time for the performance of any obligation or other act of any other party hereto, (b) waive any inaccuracy in the representations and warranties of the other party contained herein or in any document delivered pursuant hereto, and (c) subject to the proviso of Section 8.4, waive compliance with any agreement or condition contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby. Notwithstanding the foregoing, no failure or delay by the Company, Parent or Merger Sub in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right hereunder.

 

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Section 8.6     Fees and Expenses. Except as otherwise provided in this Agreement, all Expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such expenses, whether or not the transactions contemplated by this Agreement are consummated; provided, however, that the Company and Parent shall share equally all Expenses related to the printing and filing of the Form F-4 and the printing, filing and distribution of the Proxy Statement and the Circular, other than attorneys’ and accountants’ fees.

ARTICLE IX.

GENERAL PROVISIONS

Section 9.1     Non-Survival of Representations and Warranties. None of the representations, warranties or covenants that are to be performed prior to the Closing in this Agreement or any certificate or other writing delivered pursuant to this Agreement, including any rights arising out of any breach of such representations or warranties, shall survive the Effective Time. The terms of ARTICLE I and this ARTICLE IX, as well as the covenants and other agreements set forth in ARTICLE II and ARTICLE VI, that by their terms apply, or that are to be performed in whole or in part after the Closing, shall survive the consummation of the transactions contemplated herein in accordance with their terms.

Section 9.2     Notices. Any notice, request, claim, demand and other communications hereunder shall be sufficient if in writing and sent (i) by facsimile transmission (providing confirmation of transmission) or e-mail of a pdf attachment (provided that any notice received by facsimile or e-mail transmission or otherwise at the addressee’s location on any Business Day after 5:00 p.m. (Pacific time) shall be deemed to have been received at 9:00 a.m. (Pacific time) on the next Business Day), or (ii) by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as follows (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.2):

if to Parent or Merger Sub:

 

Westport Innovations Inc.
1750 West 75th Avenue, Suite 101
Vancouver, British Columbia
Canada V6P 6G2
Phone:		(604) 718-2000
Email:		SManki@westport.com
Attention:		Salman Manki, General Counsel

with a copy (which shall not constitute notice) to:

 

Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York 10019
Phone:		(212) 728-8535
Fax:		(212) 728-9535
Attention:		Gordon R. Caplan. Esq.
		Matthew J. Guercio, Esq.

 

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if to the Company:

 

Fuel Systems Solutions, Inc.
780 Third Avenue, 25th Floor
New York, New York 10017
Phone:		(646)506-7163
Fax:		(646)502-7171
Attention:		Pietro Bersani

with a copy (which shall not constitute notice) to:

 

Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Phone:		(213) 687-5000
Fax:		(213) 687-5600
Attention:		Brian J. McCarthy, Esq.

Section 9.3     Interpretation; Certain Definitions. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. Consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement. When a reference is made in this Agreement to an Article, Section, Schedule or Exhibit, such reference shall be to an Article or Section of, or a Schedule or Exhibit to, this Agreement, unless otherwise indicated. The table of contents and headings for this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other instrument made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any Law defined or referred to herein or in any agreement or instrument that is referred to herein means such Law as from time to time amended, modified or supplemented, including (in the case of statutes) by succession of comparable successor Laws. References to a person are also to its successors and permitted assigns. All references to “dollars” or “$” refer to currency of the United States of America.

Section 9.4     Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced under any present or future Law, or public policy, (a) such term or other provision shall be fully separable, (b) this Agreement shall be construed and enforced as if such invalid, illegal or unenforceable provision had never comprised a part hereof, and (c) all other conditions and provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable term or other provision or by its severance herefrom so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that transactions contemplated by this Agreement be consummated as originally contemplated to the fullest extent possible.

Section 9.5     Assignment; Delegation. Neither this Agreement nor any rights, interests or obligations hereunder shall be assigned or delegated, in whole or in part, by any of the parties hereto (whether by operation of Law or otherwise) without the prior written consent of the other parties hereto (except to the Surviving Entity).

 

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Section 9.6     Entire Agreement. This Agreement (including the exhibits, annexes and appendices hereto) constitutes, together with the Confidentiality Agreement, the Company Disclosure Letter and the Parent Disclosure Letter, the entire agreement between the parties with respect to the subject matter hereof and thereof and supersedes all prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and thereof.

Section 9.7     No Third-Party Beneficiaries. This Agreement is not intended to and shall not confer any rights or remedies upon any person other than the parties hereto and their respective successors and permitted assigns, except for the provisions of Section 6.9 and 6.17. Without limiting the generality of the foregoing, the parties acknowledge and agree that the provisions contained in Section 6.23 are included for the sole and exclusive benefit of the respective parties hereto and shall not create any right, express or implied in any other Person. The representations and warranties in this Agreement are the product of negotiations among the parties hereto and are for the sole benefit of the parties hereto. Any inaccuracies in such representations and warranties are subject to waiver by the parties hereto in accordance with Section 8.5 without notice or liability to any other person. The representations and warranties in this Agreement may represent an allocation among the parties hereto of risks associated with particular matters regardless of the knowledge of any of the parties hereto. Accordingly, persons other than the parties hereto may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.

Section 9.8     Specific Performance. The parties hereto agree that irreparable damage, for which monetary damages (even if available) would not be an adequate remedy, would occur in the event that the parties hereto do not perform the provisions of this Agreement (including failing to take such actions as are required of it hereunder to consummate the Merger and the other transactions contemplated by this Agreement) in accordance with its specified terms or otherwise breach such provisions. Accordingly, the parties acknowledge and agree that the parties shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which they are entitled at Law or in equity. Each of the parties agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that any other party has an adequate remedy at Law or that any award of specific performance is not an appropriate remedy for any reason at Law or in equity. Any party seeking an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement shall not be required to provide any bond or other security in connection with any such order or injunction.

Section 9.9     Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission or by e-mail of a pdf attachment shall be effective as delivery of a manually executed counterpart of this Agreement.

Section 9.10     Governing Law. This Agreement and all actions, proceedings or counterclaims (whether based on contract, tort or otherwise) directly or indirectly arising out of or relating to this Agreement or the actions of Parent, Merger Sub or the Company in the negotiation, administration, performance and enforcement thereof, shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice or conflict of Laws provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Delaware.

Section 9.11     Consent to Jurisdiction.

(a)     Each of the parties hereto hereby irrevocably submits to the exclusive jurisdiction of the courts of the State of Delaware and to the jurisdiction of the United States District Court for the District of Delaware, for the purpose of any action, proceeding or counterclaim (whether based on contract, tort or otherwise) directly or

 

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indirectly arising out of or relating to this Agreement or the actions of the parties hereto in the negotiation, administration, performance and enforcement thereof, and each of the parties hereto hereby irrevocably agrees that all claims in respect to such action or proceeding may be heard and determined exclusively in any state or federal court located in the State of Delaware.

(b)     Each of the parties hereto (i) irrevocably consents to the service of the summons and complaint and any other process in any other action or proceeding relating to the transactions contemplated by this Agreement, on behalf of itself or its property, by personal delivery of copies of such process to such party and nothing in this Section 9.11 shall affect the right of any party to serve legal process in any other manner permitted by Law, (ii) consents to submit itself to the personal jurisdiction of any United States federal court located in the State of Delaware or any Delaware state court in the event any dispute arises out of this Agreement or the transactions contemplated by this Agreement, (iii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (iv) agrees that it will not bring any action relating to this Agreement or the transactions contemplated by this Agreement in any court other than any United States federal court located in the State of Delaware or any Delaware state court. Each of Parent, Merger Sub and the Company agrees that a final judgment in any action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.

Section 9.12     WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE OUT OF OR RELATING TO THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, OR THE ACTIONS OF THE PARTIES HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF. EACH OF THE PARTIES HERETO CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.12.

[Remainder of page intentionally left blank; signature page follows.]

 

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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

 

[Agreement and Plan of Merger]

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Annex B—Opinion of J.P. Morgan Securities LLC

[Letterhead of J.P. Morgan Securities LLC]

September 1, 2015

The Board of Directors

Fuel Systems Solutions, Inc.

780 Third Avenue, 25^th Floor

New York, NY 10017

Members of the Board of Directors:

You have requested our opinion as to the fairness, from a financial point of view, to the holders of common stock, par value $0.001 per share (the “Company Common Stock”), of Fuel Systems Solutions, Inc., a Delaware corporation (the “Company”) of the Exchange Ratio (as defined below) in the proposed merger (the “Transaction”) of the Company with Whitehorse Merger Sub Inc., a Delaware corporation (“Merger Sub”) and a direct wholly-owned subsidiary of Westport Innovations Inc., an Alberta corporation (the “Acquiror”). Pursuant to the Agreement and Plan of Merger (the “Agreement”), by and among the Company, the Acquiror and Merger Sub, the Company will become a wholly-owned subsidiary of the Acquiror, and each outstanding share of Company Common Stock, other than shares of Company Common Stock held in treasury or owned by the Acquiror and its affiliates, will be converted into the right to receive 2.129 shares (the “Exchange Ratio”), subject to adjustment as provided in Section 3.2 of the Agreement, of the Acquiror’s common stock (the “Acquiror Common Stock”).

In connection with preparing our opinion, we have (i) reviewed a draft dated August 30, 2015 of the Agreement; (ii) reviewed certain publicly available business and financial information concerning the Company and the Acquiror and the industries in which they operate; (iii) compared the proposed financial terms of the Transaction with the publicly available financial terms of certain transactions involving companies we deemed relevant and the consideration paid for such companies; (iv) compared the financial and operating performance of the Company and the Acquiror with publicly available information concerning certain other companies we deemed relevant and reviewed the current and historical market prices of the Company Common Stock and the Acquiror Common Stock and certain publicly traded securities of such other companies; (v) reviewed certain internal financial analyses and forecasts prepared by each of the managements of (a) the Company and (b) the Acquiror, as adjusted by the management of the Company, as well as the estimated amount and timing of the cost savings and related expenses and synergies expected to result from the Transaction (the “Synergies”); and (vi) performed such other financial studies and analyses and considered such other information as we deemed appropriate for the purposes of this opinion.

In addition, we have held discussions with certain members of the management of the Company and the Acquiror with respect to certain aspects of the Transaction, and the past and current business operations of the Company and the Acquiror, the financial condition and future prospects and operations of the Company and the Acquiror, the effects of the Transaction on the financial condition and future prospects of the Company and the Acquiror, and certain other matters we believed necessary or appropriate to our inquiry.

In giving our opinion, we have relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with us by the Company and the Acquiror or otherwise reviewed by or for us, and we have not independently verified (nor have we assumed responsibility or liability for independently verifying) any such information or its accuracy or completeness. We have not conducted or

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been provided with any valuation or appraisal of any assets or liabilities, nor have we evaluated the solvency of the Company or the Acquiror under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to us or derived therefrom, including the Synergies, we have assumed that they have been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of the Company and the Acquiror to which such analyses or forecasts relate. We express no view as to such analyses or forecasts (including the Synergies) or the assumptions on which they were based. We have also assumed that the Transaction and the other transactions contemplated by the Agreement will qualify as a tax-free reorganization for United States federal income tax purposes, and will be consummated as described in the Agreement, and that the definitive Agreement will not differ in any material respects from the draft thereof furnished to us. We have also assumed that the representations and warranties made by the Company and the Acquiror in the Agreement and the related agreements are and will be true and correct in all respects material to our analysis. We are not legal, regulatory or tax experts and have relied on the assessments made by advisors to the Company with respect to such issues. We have further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without any adverse effect on the Company or the Acquiror or on the contemplated benefits of the Transaction.

Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. It should be understood that subsequent developments may affect this opinion and that we do not have any obligation to update, revise, or reaffirm this opinion. Our opinion is limited to the fairness, from a financial point of view, to the holders of the Company Common Stock of the Exchange Ratio in the proposed Transaction and we express no opinion as to the fairness of any consideration to be paid in connection with the Transaction to the holders of any other class of securities, creditors or other constituencies of the Company or as to the underlying decision by the Company to engage in the Transaction. Furthermore, we express no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the Transaction, or any class of such persons relative to the Exchange Ratio applicable to the holders of the Company Common Stock in the Transaction or with respect to the fairness of any such compensation. We are expressing no opinion herein as to the price at which the Company Common Stock or the Acquiror Common Stock will trade at any future time.

We have acted as financial advisor to the Company with respect to the proposed Transaction and will receive a fee from the Company for our services, a substantial portion of which will become payable only if the proposed Transaction is consummated. In addition, the Company has agreed to indemnify us for certain liabilities arising out of our engagement. Please be advised that during the two years preceding the date of this letter, neither we nor our affiliates have had any material financial advisory or other material commercial or investment banking relationships with the Acquiror. During the two years preceding the date of this letter, we and our affiliates have had commercial or investment banking relationships with the Company, for which we and such affiliates have received customary compensation. Such services during such period have included acting as financial advisor in connection with the Company’s strategic planning and evaluation of defensive strategies concluding in December of 2014. In addition, we and our affiliates hold, on a proprietary basis, approximately 0.13% of the outstanding capital stock of the Acquiror. In the ordinary course of our businesses, we and our affiliates may actively trade the debt and equity securities of the Company or the Acquiror for our own account or for the accounts of customers and, accordingly, we may at any time hold long or short positions in such securities.

On the basis of and subject to the foregoing, it is our opinion as of the date hereof that the Exchange Ratio in the proposed Transaction is fair, from a financial point of view, to the holders of the Company Common Stock.

The issuance of this opinion has been approved by a fairness opinion committee of J.P. Morgan Securities LLC. This letter is provided to the Board of Directors of the Company (in its capacity as such) in connection with and for the purposes of its evaluation of the Transaction. This opinion does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote with respect to the Transaction or any other

 

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matter. This opinion may not be disclosed, referred to, or communicated (in whole or in part) to any third party for any purpose whatsoever except with our prior written approval. This opinion may be reproduced in full in any proxy or information statement mailed to stockholders of the Company but may not otherwise be disclosed publicly in any manner without our prior written approval.

Very truly yours,

/s/ J.P. Morgan Securities LLC

J.P. MORGAN SECURITIES LLC

 

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Annex C—Douglas Voting Agreement

VOTING AGREEMENT

This VOTING AGREEMENT (this “Agreement”), dated as of September 1, 2015, is entered into by and among Westport Innovations Inc., an Alberta, Canada corporation (“Parent”), Fuel Systems Solutions, Inc., a Delaware corporation (the “Company”), and each of K&M Douglas Trust, James Douglas And Jean Douglas Irrevocable Descendants’ Trust, Douglas Family Trust and James E. Douglas, III (each, a “Stockholder”, and collectively, the Stockholders).

WHEREAS, the Stockholders own (both beneficially and of record) in the aggregate 2,671,684 shares of common stock, par value $0.001 per share (“Company Common Stock” and such shares of Company Common Stock together with any shares of Company Common Stock acquired by the Stockholders after the date hereof being collectively referred to herein as the “Company Shares”) of the Company;

WHEREAS, the Stockholders own (both beneficially and of record) in the aggregate 10,045,657 common shares (“Parent Common Shares” and such shares of Parent Common Shares together with any Parent Common Shares acquired by the Stockholders after the date hereof being collectively referred to herein as the “Parent Shares”) of Parent;

WHEREAS, the Company, Parent, and Whitehorse Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), have entered into an Agreement and Plan of Merger, dated as of the date hereof (the “Merger Agreement”); and

WHEREAS, the Stockholders have agreed to enter into this Agreement in order to induce Parent and the Company to enter into the Merger Agreement and to consummate the transactions contemplated thereby.

NOW, THEREFORE, in consideration of Parent’s and the Company’s entering into the Merger Agreement and of the mutual covenants and agreements contained herein and other good and valuable consideration, the adequacy of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

SECTION 1. Defined Terms. Capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to them in the Merger Agreement.

SECTION 2. Representations and Warranties of Stockholders. Each of the Stockholders severally and not jointly hereby represents and warrants to each of Parent and the Company as follows:

(a) Title to the Company Shares. Such Stockholder is the record and beneficial owner of the corresponding number of shares of Company Common Stock set forth in Exhibit A, which as of the date hereof constitutes all of the shares of Company Common Stock owned beneficially and of record by the Stockholder. Such Stockholder and its Affiliates do not have any rights of any nature to acquire any additional shares of Company Common Stock. Except for (i) proxies and restrictions in favor of Parent and the Company granted pursuant to this Agreement, and (ii) such transfer restrictions of general applicability as may be provided under the Securities Act and the “blue sky” laws of the various states of the United States, the Stockholder owns all of such shares of Company Common Stock free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on voting rights, restrictions, charges, proxies and other encumbrances of any nature, and has not appointed or granted any proxy, power of attorney or other authorization, which appointment or grant is still effective, with respect to any of such shares of Company Common Stock.

(b) Title to the Parent Shares. Such Stockholder is the record and beneficial owner of the corresponding number of shares of Parent Common Shares set forth in Exhibit B, which as of the date hereof constitutes all of

 

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the Parent Common Shares owned beneficially and of record by the Stockholder. Such Stockholder and its Affiliates do not have any rights of any nature to acquire any additional Parent Common Shares. Except for (i) proxies and restrictions in favor of Parent and the Company granted pursuant to this Agreement, and (ii) such transfer restrictions of general applicability as may be provided under the Securities Act, the “blue sky” laws of the various states of the United States and Canadian securities laws, the Stockholder owns all of such Parent Common Shares free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on voting rights, restrictions, charges, proxies and other encumbrances of any nature, and has not appointed or granted any proxy, power of attorney or other authorization, which appointment or grant is still effective, with respect to any of such Parent Common Shares.

(c) Authority Relative to this Agreement. Such Stockholder has the power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by such Stockholder and the consummation by such Stockholder of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of such Stockholder. This Agreement has been duly and validly executed and delivered by such Stockholder and, assuming the due authorization, execution and delivery by each of Parent and the Company, constitutes a legal, valid and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with its terms, (i) except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally, and (ii) subject to general principles of equity.

(d) No Conflict. Except for any filings as may be required by applicable securities laws, the execution and delivery of this Agreement by such Stockholder does not, and the performance of this Agreement by such Stockholder will not, (i) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or any other Person by such Stockholder, except for filings with the SEC or Canadian securities regulators of such reports under the Exchange Act or Canadian securities laws as may be required in connection with this Agreement and the transactions contemplated by this Agreement; (ii) conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under any provision of any agreement to which such Stockholder is a party, including any voting agreement, stockholders agreement, voting trust, trust agreement, pledge agreement, loan or credit agreement, note, bond, mortgage, indenture lease or other agreement, instrument, permit, concession, franchise or license; or (iii) conflict with or violate any judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to such Stockholder or to such Stockholder’s property or assets.

(e) Adequate Information. Such Stockholder is a sophisticated stockholder and seller with respect to the Company Shares and has adequate information concerning the business and financial condition of each of Parent and the Company to make an informed decision regarding the Merger and the sale of the Company Shares and has independently and without reliance upon the Company or Parent and based on such information as such Stockholder has deemed appropriate, made its own analysis and decision to enter into this Agreement. Such Stockholder acknowledges that the agreements contained herein with respect to the Company Shares and the Parent Shares held by such Stockholder are irrevocable prior to the termination of this Agreement in accordance with Section 10.

SECTION 3. Covenants of Stockholders.

(a) Restriction on Transfer. Each Stockholder hereby covenants and agrees that prior to the termination of this Agreement, such Stockholder shall not, directly or indirectly, sell, transfer, tender, assign, hypothecate or otherwise dispose of, grant any proxy to, deposit any Company Shares or Parent Shares into a voting trust, enter into a voting trust agreement or create or permit to exist any additional security interest, lien, claim, pledge, option, right of first refusal, limitation on voting rights, charge or other encumbrance of any nature with respect to the Company Shares or Parent Shares. Notwithstanding the foregoing, Stockholder may take any action described in the previous sentence, so long as the other party (a “transferee”) to such action executes this Agreement (or a joinder thereto in a form reasonably satisfactory to each of Parent and the Company) and agrees to be bound by its terms.

 

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(b) Additional Shares. Prior to the termination of this Agreement, such Stockholder will promptly notify each of Parent and the Company of the number of any new shares of Company Common Stock and Parent Common Shares acquired directly or beneficially by such Stockholder, if any, after the date hereof. Any such shares shall automatically become “Company Shares” or “Parent Shares,” as applicable, within the meaning of this Agreement immediately upon their acquisition by such Stockholder.

(c) Nonsolicitation.

(i) Prior to the termination of this Agreement, such Stockholder shall (1) not (whether directly or indirectly through any representative of such Stockholder) engage in any conduct that if conducted by the Company would be prohibited by Section 6.5 of the Merger Agreement after taking into account the terms of such section, and (2) advise the Company (in order that the Company can timely comply with its obligations under Section 6.5(c) of the Merger Agreement) of such Stockholder’s receipt of any Company Acquisition Proposal.

(ii) Prior to the termination of this Agreement, such Stockholder shall not, directly or indirectly through another Person, (1) solicit or initiate any inquiry, discussion, offer or request that constitutes, or could reasonably be expected to lead to, a Parent Acquisition Proposal (a “Parent Inquiry”), or (2) engage in any discussions or negotiations regarding, or furnish to any Third Party any non-public information in connection with, any Parent Acquisition Proposal or Parent Inquiry.

(d) Public Announcement. Such Stockholder shall consult with each of Parent and the Company before issuing any press releases or otherwise making any public statements with respect to the transactions contemplated herein and shall not issue any such press release or make any such public statement without the approval of each of Parent and the Company (which approval shall not be unreasonably withheld, conditioned or delayed), except as may be required by Law, including any filings with the SEC pursuant to the Exchange Act or with Canadian securities regulators pursuant to applicable Canadian securities laws. This Section 3(c) shall terminate and be null and void upon the termination of this Agreement in accordance with Section 10.

(e) Disclosure. Such Stockholder hereby authorizes each of Parent and the Company to publish and disclose in any announcement or disclosure required by applicable Law, including, without limitation, as required by the SEC, Canadian securities regulators, the NASDAQ Stock Market, LLC, the Toronto Stock Exchange or any other U.S. or Canadian securities exchange, and the Proxy Statement (including all documents and schedules filed with the SEC in connection with any of the foregoing), such Stockholder’s identity and ownership of the Company Shares and the Parent Shares and the nature of such Stockholder’s commitments, arrangements and understandings under this Agreement. Each of Parent and the Company hereby authorizes each Stockholder to make such disclosure or filings as may be required by applicable Law, including, without limitation, as required by the SEC, Canadian securities regulators, the NASDAQ Stock Market, LLC, the Toronto Stock Exchange or any other U.S. or Canadian securities exchange.

SECTION 4. Voting Agreement.

(a) Company Shares Voting Agreement. Each Stockholder hereby agrees that prior to the termination of this Agreement, at any meeting of the stockholders of the Company, however called, in any action by written consent of the stockholders of the Company, or in any other circumstances upon which such Stockholder’s vote, consent or other approval is sought, such Stockholder shall vote the Company Shares owned beneficially or of record by such Stockholder as follows:

(i) in favor of adoption of the Merger Agreement, and approval of the terms thereof and of the Merger, and the other transactions contemplated thereby;

(ii) against any action or agreement that has or would reasonably be likely to result in any conditions to the Company’s obligations under Article VII of the Merger Agreement not being satisfied;

 

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(iii) against any Company Acquisition Proposal; and

(iv) against any amendments to the Company Charter and/or the Company Bylaws if such amendment would reasonably be expected to prevent or materially delay the consummation of the Closing.

(b) Parent Shares Voting Agreement. Each Stockholder hereby agrees that prior to the termination of this Agreement, at any meeting of the shareholders of Parent, however called, in any action by written consent of the shareholders of Parent, or in any other circumstances upon which such Stockholder’s vote, consent or other approval is sought, such Stockholder shall vote the Parent Shares owned beneficially or of record by such Stockholder as follows:

(i) to approve the issuance of the Merger Consideration; and

(ii) other than in the case of a Parent Acquisition Proposal, against any action or agreement that has or would reasonably be likely to result in any conditions to Parent’s and Merger Sub’s obligations under Article VII of the Merger Agreement not being satisfied.

(c) Grant of Company Shares Proxy. Each Stockholder hereby irrevocably grants to and appoints, Parent and each of its designees (the “Parent Authorized Parties” and each a “Parent Authorized Party”), and each of them individually, as the Stockholder’s proxy and attorney-in-fact (with full power of substitution) for and in the name, place and stead of the Stockholder, to vote the Company Shares or execute one or more written consents or approvals in respect of the Company Shares:

(i) in favor of adoption of the Merger Agreement, and approval of the terms thereof and of the Merger, and the other transactions contemplated thereby;

(ii) against any action or agreement that has or would reasonably be expected to result in any conditions to the Company’s obligations under Article VII of the Merger Agreement not being satisfied;

(iii) against any Company Acquisition Proposal;

(iv) against any amendments to the Company Charter and/or the Company Bylaws if such amendment would reasonably be expected to prevent or materially delay the consummation of the Closing; and

(v) against any other action or agreement that is intended, or would reasonably be expected to, impede, interfere with, delay, or postpone the Merger or the transactions contemplated by the Merger Agreement or change in any manner the voting rights of any class of stock of the Company;

in each case, if and only if such Stockholder (1) fails to vote, or (2) attempts to vote (whether by proxy, in person or by written consent), in a manner which is inconsistent with the terms of this Agreement.

(d) Grant of Parent Shares Proxy. Each Stockholder hereby irrevocably grants to and appoints, the Company and each of its designees (the “Company Authorized Parties” and each a “Company Authorized Party”), and each of them individually, as the Stockholder’s proxy and attorney-in-fact (with full power of substitution) for and in the name, place and stead of such Stockholder, to vote the Parent Shares or execute one or more written consents or approvals in respect of the Parent Shares:

(i) to approve the issuance of the Merger Consideration; and

(ii) other than in the case of a Parent Acquisition Proposal, against any action or agreement that has or would reasonably be likely to result in any conditions to Parent’s and Merger Sub’s obligations under Article VII of the Merger Agreement not being satisfied;

in each case, if and only if such Stockholder (1) fails to vote, or (2) attempts to vote (whether by proxy, in person or by written consent), in a manner which is inconsistent with the terms of this Agreement.

(e) Each Stockholder hereby ratifies and confirms that the irrevocable proxies set forth in Sections 4(c) and (d) are given in connection with the execution of the Merger Agreement and that such irrevocable proxy is

 

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given to secure the performance of such Stockholder’s duties in accordance with this Agreement. Each Stockholder hereby further ratifies and confirms that the irrevocable proxies granted hereby are coupled with an interest and may under no circumstances be revoked, except as otherwise provided in this Agreement. Such irrevocable proxies shall be valid until termination of this Agreement. The powers of attorney granted by such Stockholder herein are durable powers of attorney and shall survive the dissolution, bankruptcy, death or incapacity of such Stockholder. Upon the execution of this Agreement, such Stockholder hereby revokes any and all prior proxies or powers of attorney given by the Stockholder with respect to voting of the Company Shares or the Parent Shares on the matters contemplated hereby and agrees not to grant any subsequent proxies or powers of attorney with respect to the voting of the Company Shares or the Parent Shares on the matters contemplated hereby until after the termination of this Agreement. Each Stockholder understands and acknowledges that each of Parent and the Company is entering into the Merger Agreement in reliance upon such Stockholder’s execution and delivery of this Agreement and such Stockholder’s granting of the proxies contained in Sections 4(c) and (d). Each Stockholder hereby affirms that the proxies granted in Section 4(c) and (d) are given in connection with the execution of the Merger Agreement, and that such proxies are given to secure the performance of the duties of such Stockholder under this Agreement. If for any reason a proxy granted herein is found by a court of competent jurisdiction to not be valid, then the Stockholder agrees to vote the Parent Shares or the Company Shares, as applicable, in accordance with Section 4(a) or Section 4(a), as applicable. For Company Shares as to which such Stockholder is the beneficial but not the record owner, such Stockholder shall take all necessary actions to cause any record owner of such Company Shares to irrevocably constitute and appoint Parent and its designees as such record owner’s attorney and proxy and grant an irrevocable proxy to the same effect as that contained herein. For Parent Shares as to which such Stockholder is the beneficial but not the record owner, the Stockholder shall take all necessary actions to cause any record owner of such Parent Shares to irrevocably constitute and appoint the Company and its designees as such record owner’s attorney and proxy and grant an irrevocable proxy to the same effect as that contained herein. The parties acknowledge and agree that none of Parent or the Company or their respective successors, assigns, subsidiaries, divisions, employees, officers, directors, stockholders, agents and affiliates shall owe any duty to, whether in law or otherwise, or incur any liability of any kind whatsoever, including without limitation, with respect to any and all claims, losses, demands, causes of action, costs, expenses (including attorney’s fees) and compensation of any kind or nature whatsoever to such Stockholder in connection with or as a result of any voting by a Parent Authorized Party of the Company Shares or a Company Authorized Party of the Parent Shares subject to the irrevocable proxies hereby granted to the such Authorized Parties at any annual or special meeting of the stockholders of the Company or Parent for the purpose set forth herein.

(f) Other Voting. Each Stockholder may vote on all issues other than those specified in this Section 4 that may come before a meeting of the stockholders of the Company or the shareholders of Parent, as the case may be, in its sole discretion, provided that such vote does not contravene the provisions of this Section 4.

(g) Acquisition Proposals; Superior Proposals. Notwithstanding anything to the contrary herein, each Stockholder shall be entitled to participate with the Company and its directors, officers, representatives, advisors or other intermediaries in any negotiations or discussions with any Person (including, without limitation, negotiating or discussing a voting agreement with a Person that would be entered into at any time after the termination of this Agreement), or any preparations therefor, in each case in connection with a Company Acquisition Proposal or a Superior Proposal.

SECTION 5. Representations and Warranties of Parent. Parent hereby represents and warrants to the Company and the Stockholders as follows:

5.1. Organization. Parent is duly organized, validly existing, and in good standing under the laws of Alberta, Canada.

5.2. Authority Relative to this Agreement. Parent has the corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent and the consummation by Parent of the transactions contemplated hereby have been duly and validly authorized by all necessary

 

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action on the part of Parent. This Agreement has been duly and validly executed and delivered by Parent and, assuming the due authorization, execution and delivery by the Company and the Stockholder, constitutes a legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, (i) except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally, and (ii) subject to general principles of equity.

5.3. No Conflict. The execution and delivery of this Agreement by Parent does not, and the performance of this Agreement by Parent will not, (a) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or any other Person by Parent, except for filings with the SEC or Canadian securities regulators of such reports under the Exchange Act or applicable Canadian securities laws as may be required in connection with this Agreement and the transactions contemplated by this Agreement; (b) conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under any provision of, the Parent Articles and/or Parent Bylaws or any other agreement to which Parent is a party; or (c) conflict with or violate any judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to Parent or to Parent’s property or assets.

SECTION 6. Representations and Warranties of the Company. The Company hereby represents and warrants to Parent and the Stockholders as follows:

6.1. Organization. The Company is duly organized, validly existing, and in good standing under the laws of the State of Delaware.

6.2. Authority Relative to this Agreement. The Company has the corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of the Company. This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and the Stockholder, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, (i) except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally, and (ii) subject to general principles of equity.

6.3. No Conflict. The execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, (a) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or any other Person by the Company, except for filings with the SEC of such reports under the Exchange Act as may be required in connection with this Agreement and the transactions contemplated by this Agreement; (b) conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under any provision of, the Company Charter and/or the Company Bylaws or any other agreement to which the Company is a party; or (c) conflict with or violate any judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to the Company or to the Company’s property or assets.

SECTION 7. Further Assurances. Each Stockholder shall, without further consideration, from time to time, execute and deliver, or cause to be executed and delivered, such additional or further consents, documents and other instruments as Parent or the Company may reasonably request for the purpose of effectuating the matters covered by this Agreement.

SECTION 8. Stop Transfer Order. In furtherance of this Agreement, concurrently herewith each Stockholder shall and hereby does authorize each of Parent and the Company to notify the Company’s transfer agent and Parent’s transfer agent, as applicable, that there is a stop transfer order with respect to all Company Shares and the Parent Shares, as applicable (and that this Agreement places limits on the voting and transfer of the Company Shares and the Parent Shares, as applicable). Each Stockholder further agrees to cause each of Parent and the Company not to register the transfer of any certificate representing any of the Parent Shares and

 

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the Company Shares, as the case may be, unless such transfer is made in accordance with the terms of this Agreement. If this Agreement is terminated in accordance with Section 10, then, promptly following the termination of this Agreement, or immediately following the Closing (and in any event within such time as would not delay receipt by the Stockholders of the consideration to be received by them under the Merger Agreement), to cause any stop transfer instructions imposed pursuant to this Section 8 to be lifted.

SECTION 9. Certain Events. Each Stockholder agrees that this Agreement and the obligations hereunder shall attach to the Company Shares and the Parent Shares, as applicable, and shall be binding on any Person to which legal or beneficial ownership of such Company Shares or Parent Shares, as applicable, shall pass, whether by operation of law or otherwise. In the event of any stock split, stock dividend, merger, consolidation, reorganization, recapitalization or other change in the capital structure of the Company affecting the Company Common Stock or other voting securities of the Company, or of Parent affecting the Parent Common Shares or other voting securities of Parent, the number of Company Shares or Parent Shares, as applicable, shall be deemed adjusted appropriately and this Agreement and the obligations hereunder shall attach to any additional shares of Company Common Stock or Parent Common Shares issued to or acquired by such Stockholder.

SECTION 10. Termination. This Agreement shall automatically terminate without further action of the parties on the first to occur of (a) the mutual written consent of the Company, Parent, and the Stockholders, (b) the Effective Time, (c) the termination of the Merger Agreement, or (d) the delivery of written notice of termination by the Stockholders to Parent and the Company following any Fundamental Amendment effected without the prior consent of the Stockholders, provided that the provisions of Section 11 hereof shall survive any such termination. “Fundamental Amendment” means the execution by Parent, Merger Sub and the Company of a written amendment to, or written waiver by Parent, Merger Sub and the Company of any provision of, the Merger Agreement that reduces the amount of the Merger Consideration or changes the form of, or decreases the Exchange Ratio from what is set forth in the Merger Agreement as in effect as of the date hereof (which for the avoidance of doubt is 2.129 Parent Common Shares per share of Company Common Stock), amends the conditions precedent set forth in Article VII of the Merger Agreement (except in the case of a waiver of a condition by Parent or the Company) or would result in additional monetary liability to such Stockholder.

SECTION 11. Miscellaneous.

(a) Expenses. All costs and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the party incurring such costs and expenses.

(b) Specific Performance. The parties hereto agree that, in the event any provision of this Agreement is not performed in accordance with the terms hereof, (i) the non-breaching party will sustain irreparable damages for which there is not an adequate remedy at law for money damages and (ii) the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity.

(c) Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among such parties with respect to the subject matter hereof.

(d) Assignment. Without the prior written consent of the other party to this Agreement, no party may assign any rights or delegate any obligations under this Agreement. Any such purported assignment or delegation made without prior consent of the other party hereto shall be null and void.

(e) Parties in Interest. This Agreement shall be binding upon, inure solely to the benefit of, and be enforceable by, the parties hereto and their successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to or shall confer upon any other person not a party hereto any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

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(f) Amendment. This Agreement may not be amended except by an instrument in writing signed by the parties hereto.

(g) Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the terms of this Agreement remain as originally contemplated to the fullest extent possible.

(h) Notices. All notices, requests, claims, demands and other communications under this Agreement shall be sufficient if in writing and sent (i) by facsimile transmission (providing confirmation of transmission) or e-mail of a .pdf attachment (provided that any notice received by facsimile or e-mail transmission or otherwise at the addressee’s location on any Business Day after 5:00 p.m. (Pacific time) shall be deemed to have been received at 9:00 a.m. (Pacific time) on the next Business Day), or (ii) by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as follows (or at such other address for a party as shall be specified in a notice given in accordance with this Section 11(h)):

if to Parent:

 

		Westport Innovations Inc.
		1750 West 75th Ave., Suite 101
		Vancouver, British Columbia
		V6P 6G2, Canada
		Attention:		Salman Manki, General Counsel
		Email:		SManki@westport.com
		Tel:		(604) 718-2000

with a copy to:

 

		Willkie Farr & Gallagher LLP
		787 Seventh Avenue
		New York, NY 10019
		Attention:		Gordon R. Caplan, Esq.
				Matthew J. Guercio, Esq.
		Facsimile:		(212) 728-9535

if to the Company:

 

		Fuel Systems Solutions, Inc.
		780 Third Avenue, 25th Floor
		New York, New York 10017
		Phone:		(646) 506-7163
		Attention:		Pietro Bersani

with a copy to:

 

		Skadden, Arps, Slate, Meagher & Flom LLP
		300 South Grand Avenue, Suite 3400
		Los Angeles, California 90071
		Attention:		Brian J. McCarthy, Esq.
		Facsimile:		(213) 687-5600

 

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if to the Stockholders:

 

		Douglas Telecommunications
		125 East Sir Francis Drake Blvd.
		Larkspur, CA 94939-1819
		Attention:		Tim McGaw
		Facsimile:		(415) 526-2214

with a copy to:

 

		Davis Wright Tremaine, LLP
		1201 Third Avenue, Suite 2200
		Seattle, WA 98101-3045
		Attention:		Ryan J. York
		Facsimile:		(206) 757-7178

(i) Governing Law. This Agreement shall be governed by and construed, performed and enforced in accordance with the internal laws of the State of Delaware applicable to contracts made and wholly performed within such state, without regard to any applicable conflicts of law principles.

(j) Exclusive Jurisdiction. The parties hereto agree that any suit, action or proceeding brought by either party to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought exclusively in any federal or state court located in the State of Delaware. Each of the parties hereto submits to the exclusive jurisdiction of any such court in any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of, or in connection with, this Agreement or the transactions contemplated hereby and hereby irrevocably waives the benefit of jurisdiction derived from present or future domicile or otherwise in such action or proceeding. Each party hereto irrevocably waives, to the fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

(k) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY, IN ANY MATTERS (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

(l) Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

(m) Counterparts. This Agreement may be executed and delivered (including by facsimile transmission or by e-mail of a .pdf attachment) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

[Rest of page intentionally blank.]

 

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered as of the date first written above.

 

 

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Annex D—Costamagna Voting Agreement

VOTING AGREEMENT

This VOTING AGREEMENT (this “Agreement”), dated as of September 1, 2015, is entered into by and among Westport Innovations Inc., an Alberta, Canada corporation (“Parent”), and Mariano Costamagna (the “Stockholder”).

WHEREAS, the Stockholder owns (both beneficially and of record) in the aggregate 1,634,185 shares of common stock, par value $0.001 per share (“Company Common Stock” and such shares of Company Common Stock together with any shares of Company Common Stock acquired by the Stockholder after the date hereof being collectively referred to herein as the “Shares”) of Fuel Systems Solutions, Inc., a Delaware corporation (the “Company”);

WHEREAS, the Company, Parent, and Whitehorse Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), have entered into an Agreement and Plan of Merger, dated as of the date hereof (the “Merger Agreement”); and

WHEREAS, the Stockholder has agreed to enter into this Agreement in order to induce Parent to enter into the Merger Agreement and to consummate the transactions contemplated thereby.

NOW, THEREFORE, in consideration of Parent’s entering into the Merger Agreement and of the mutual covenants and agreements contained herein and other good and valuable consideration, the adequacy of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

SECTION 1. Defined Terms. Capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to them in the Merger Agreement.

SECTION 2. Representations and Warranties of Stockholder. The Stockholder hereby represents and warrants to Parent as follows:

(a) Title to the Shares. The Stockholder is the record and beneficial owner of 1,634,185 shares of Company Common Stock, which as of the date hereof constitutes all of the shares of Company Common Stock owned beneficially and of record by the Stockholder and its Affiliates. The Stockholder and its Affiliates do not have any rights of any nature to acquire any additional shares of Company Common Stock. Except for (i) proxies and restrictions in favor of Parent granted pursuant to this Agreement and (ii) such transfer restrictions of general applicability as may be provided under the Securities Act and the “blue sky” laws of the various states of the United States, the Stockholder owns all of such shares of Company Common Stock free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on voting rights, restrictions, charges, proxies and other encumbrances of any nature, and has not appointed or granted any proxy, power of attorney or other authorization, which appointment or grant is still effective, with respect to any of such shares of Company Common Stock.

(b) Authority Relative to this Agreement. The Stockholder has the power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Stockholder and the consummation by the Stockholder of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of the Stockholder. This Agreement has been duly and validly executed and delivered by the Stockholder and, assuming the due authorization, execution and delivery by Parent, constitutes a legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, (i) except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally, and (ii) subject to general principles of equity.

 

 

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(c) No Conflict. Except for any filings as may be required by applicable federal securities laws, the execution and delivery of this Agreement by the Stockholder does not, and the performance of this Agreement by the Stockholder will not, (i) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or any other Person by the Stockholder, except for filings with the SEC of such reports under the Exchange Act as may be required in connection with this Agreement and the transactions contemplated by this Agreement; (ii) conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under any provision of any agreement to which the Stockholder is a party, including any voting agreement, stockholders agreement, voting trust, trust agreement, pledge agreement, loan or credit agreement, note, bond, mortgage, indenture lease or other agreement, instrument, permit, concession, franchise or license; or (iii) conflict with or violate any judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to the Stockholder or to the Stockholder’s property or assets.

(d) Adequate Information. The Stockholder is a sophisticated stockholder and seller with respect to the Shares and has adequate information concerning the business and financial condition of the Company to make an informed decision regarding the Merger and the sale of the Shares and has independently and without reliance upon the Company or Parent and based on such information as the Stockholder has deemed appropriate, made its own analysis and decision to enter into this Agreement. The Stockholder acknowledges that the agreements contained herein with respect to the Shares held by such Stockholder are irrevocable prior to the termination of this Agreement in accordance with Section 9.

SECTION 3. Covenants of Stockholder.

(a) Restriction on Transfer. The Stockholder hereby covenants and agrees that prior to the termination of this Agreement, the Stockholder shall not, directly or indirectly, sell, transfer, tender, assign, hypothecate or otherwise dispose of, grant any proxy to, deposit any Shares into a voting trust, enter into a voting trust agreement or create or permit to exist any additional security interest, lien, claim, pledge, option, right of first refusal, limitation on voting rights, charge or other encumbrance of any nature with respect to the Shares. Notwithstanding the foregoing, Stockholder may take any action described in the previous sentence, so long as the other party (a “transferee”) to such action executes this Agreement (or a joinder thereto in a form reasonably satisfactory to Parent) and agrees to be bound by its terms.

(b) Additional Shares. Prior to the termination of this Agreement, the Stockholder will promptly notify Parent of the number of any new shares of Company Common Stock acquired directly or beneficially by the Stockholder, if any, after the date hereof. Any such shares shall automatically become “Shares” within the meaning of this Agreement immediately upon their acquisition by the Stockholder.

(c) Nonsolicitation. Prior to the termination of this Agreement, the Stockholder shall (i) not (whether directly or indirectly through any representative of such Stockholder) engage in any conduct that if conducted by the Company would be prohibited by Section 6.5 of the Merger Agreement after taking into account the terms of such section, and (ii) advise the Company (in order that the Company can timely comply with its obligations under Section 6.5(c) of the Merger Agreement) of such Stockholder’s receipt of any Company Acquisition Proposal.

(d) Public Announcement. The Stockholder shall consult with Parent before issuing any press releases or otherwise making any public statements with respect to the transactions contemplated herein and shall not issue any such press release or make any such public statement without the approval of Parent (which approval shall not be unreasonably withheld, conditioned or delayed), except as may be required by Law, including any filings with the SEC pursuant to the Exchange Act. This Section 3(d) shall terminate and be null and void upon the termination of this Agreement in accordance with Section 9.

(e) Disclosure. The Stockholder hereby authorizes Parent to publish and disclose in any announcement or disclosure required by applicable Law, including, without limitation, as required by the SEC, the NASDAQ Stock Market, LLC, the Toronto Stock Exchange or any other U.S. or Canadian national securities exchange and

 

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the Proxy Statement (including all documents and schedules filed with the SEC in connection with either of the foregoing), the Stockholder’s identity and ownership of the Shares and the nature of the Stockholder’s commitments, arrangements and understandings under this Agreement. Parent hereby authorizes the Stockholder to make such disclosure or filings as may be required by applicable Law, including, without limitation, as required by the SEC, the NASDAQ Stock Market, LLC, the Toronto Stock Exchange or any other U.S. or Canadian national securities exchange.

SECTION 4. Voting Agreement.

(a) Voting Agreement. The Stockholder hereby agrees that prior to the termination of this Agreement, at any meeting of the stockholders of the Company, however called, in any action by written consent of the stockholders of the Company, or in any other circumstances upon which the Stockholder’s vote, consent or other approval is sought, the Stockholder shall vote the Shares owned beneficially or of record by the Stockholder as follows:

(i) in favor of adoption of the Merger Agreement, and approval of the terms thereof and of the Merger, and the other transactions contemplated thereby;

(ii) against any action or agreement that has or would reasonably be likely to result in any conditions to the Company’s obligations under Article VII of the Merger Agreement not being satisfied;

(iii) against any Company Acquisition Proposal; and

(iv) against any amendments to the Company Charter and/or the Company Bylaws if such amendment would reasonably be expected to prevent or materially delay the consummation of the Closing.

(b) Grant of Proxy. The Stockholder hereby irrevocably grants to and appoints, Parent and each of its designees (the “Authorized Parties” and each an “Authorized Party”), and each of them individually, as the Stockholder’s proxy and attorney-in-fact (with full power of substitution) for and in the name, place and stead of the Stockholder, to vote the Shares or execute one or more written consents or approvals in respect of the Shares:

(i) in favor of adoption of the Merger Agreement, and approval of the terms thereof and of the Merger, and the other transactions contemplated thereby;

(ii) against any action or agreement that has or would reasonably be expected to result in any conditions to the Company’s obligations under Article VII of the Merger Agreement not being satisfied;

(iii) against any Company Acquisition Proposal; and

(iv) against any amendments to the Company Charter and/or the Company Bylaws if such amendment would reasonably be expected to prevent or materially delay the consummation of the Closing;

in each case, if and only if the Stockholder (1) fails to vote, or (2) attempts to vote (whether by proxy, in person or by written consent), in a manner which is inconsistent with the terms of this Agreement.

The Stockholder hereby ratifies and confirms that the irrevocable proxy set forth in this Section 4(b) is given in connection with the execution of the Merger Agreement and that such irrevocable proxy is given to secure the performance of the Stockholder’s duties in accordance with this Agreement. The Stockholder hereby further ratifies and confirms that the irrevocable proxy granted hereby is coupled with an interest and may under no circumstances be revoked, except as otherwise provided in this Agreement. Such irrevocable proxy shall be valid until termination of this Agreement. The power of attorney granted by the Stockholder herein is a durable power of attorney and shall survive the dissolution, bankruptcy, death or incapacity of the Stockholder. Upon the

 

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execution of this Agreement, the Stockholder hereby revokes any and all prior proxies or powers of attorney given by the Stockholder with respect to voting of the Shares on the matters contemplated hereby and agrees not to grant any subsequent proxies or powers of attorney with respect to the voting of the Shares on the matters contemplated hereby until after the termination of this Agreement. The Stockholder understands and acknowledges that Parent is entering into the Merger Agreement in reliance upon the Stockholder’s execution and delivery of this Agreement and the Stockholder’s granting of the proxy contained in this Section 4(b). For Shares as to which the Stockholder is the beneficial but not the record owner, the Stockholder shall take all necessary actions to cause any record owner of such Shares to irrevocably constitute and appoint Parent and its designees as such record owner’s attorney and proxy and grant an irrevocable proxy to the same effect as that contained herein.

(c) Other Voting. The Stockholder may vote on all issues other than those specified in this Section 4 that may come before a meeting of the stockholders of the Company in its sole discretion, provided that such vote does not contravene the provisions of this Section 4.

(d) Actions in Capacity as Director or Officer. The Stockholder is entering into this Agreement solely in his capacity as a stockholder of the Company. Nothing in this Agreement shall be deemed to govern, limit or relate to any actions, omissions to act, or votes taken or not taken by the Stockholder in his capacity as a member of the Company Board or the board of directors or other equivalent governing body of any Company Subsidiary, or in his capacity as an officer of the Company or any Company Subsidiary and, for the avoidance of doubt, no such action taken or omission to act by the Stockholder in his capacity as a director or officer of the Company or any Company Subsidiary shall be deemed to violate any of the Stockholder’s obligations under this Agreement.

(e) Acquisition Proposals; Superior Proposals. Notwithstanding anything to the contrary herein, Stockholder shall be entitled to participate with the Company and its directors, officers, representatives, advisors or other intermediaries in any negotiations or discussions with any Person (including, without limitation, negotiating or discussing a voting agreement with a Person that would be entered into at any time after the termination of this Agreement), or any preparations therefor, in each case in connection with a Company Acquisition Proposal or a Superior Proposal.

SECTION 5. Representations and Warranties of Parent. Parent hereby represents and warrants to the Stockholder as follows:

5.1. Organization. Parent is duly organized, validly existing, and in good standing under the laws of Alberta, Canada.

5.2. Authority Relative to this Agreement. Parent has the corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent and the consummation by Parent of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of Parent. This Agreement has been duly and validly executed and delivered by Parent and, assuming the due authorization, execution and delivery by the Stockholder, constitutes a legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, (i) except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally, and (ii) subject to general principles of equity.

5.3. No Conflict. The execution and delivery of this Agreement by Parent does not, and the performance of this Agreement by Parent will not, (a) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or any other Person by Parent, except for filings with the SEC of such reports under the Exchange Act as may be required in connection with this Agreement and the transactions contemplated by this Agreement; (b) conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under any provision of, the Parent Articles and/or Parent Bylaws or any other agreement to which Parent is a party; or (c) conflict

 

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with or violate any judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to Parent or to Parent’s property or assets.

SECTION 6. Further Assurances. The Stockholder shall, without further consideration, from time to time, execute and deliver, or cause to be executed and delivered, such additional or further consents, documents and other instruments as Parent may reasonably request for the purpose of effectuating the matters covered by this Agreement.

SECTION 7. Stop Transfer Order. In furtherance of this Agreement, concurrently herewith the Stockholder shall and hereby does authorize Parent to notify the Company’s transfer agent that there is a stop transfer order with respect to all Shares (and that this Agreement places limits on the voting and transfer of the Shares). The Stockholder further agrees to cause the Company not to register the transfer of any certificate representing any of the Shares unless such transfer is made in accordance with the terms of this Agreement.

SECTION 8. Certain Events. The Stockholder agrees that this Agreement and the obligations hereunder shall attach to the Shares and shall be binding on any Person to which legal or beneficial ownership of such Shares shall pass, whether by operation of law or otherwise. In the event of any stock split, stock dividend, merger, consolidation, reorganization, recapitalization or other change in the capital structure of the Company affecting the Common Stock or other voting securities of the Company, the number of Shares shall be deemed adjusted appropriately and this Agreement and the obligations hereunder shall attach to any additional shares of Common Stock issued to or acquired by the Stockholder.

SECTION 9. Termination. This Agreement and the proxy granted pursuant to Section 4(b) shall automatically terminate without further action of the parties on the first to occur of (a) the Effective Time, (b) the termination of the Merger Agreement or (c) any change to the terms of the Merger without the prior written consent of Shareholder that (i) reduces the Exchange Ratio (subject to adjustments in compliance with Section 3.2 of the Merger Agreement) or (ii) changes the form of consideration payable in the Merger; provided that the provisions of Section 10 hereof shall survive any such termination.

SECTION 10. Miscellaneous.

(a) Expenses. All costs and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the party incurring such costs and expenses.

(b) Specific Performance. The parties hereto agree that, in the event any provision of this Agreement is not performed in accordance with the terms hereof, (i) the non-breaching party will sustain irreparable damages for which there is not an adequate remedy at law for money damages and (ii) the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity.

(c) Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among such parties with respect to the subject matter hereof.

(d) Assignment. Without the prior written consent of the other party to this Agreement, no party may assign any rights or delegate any obligations under this Agreement. Any such purported assignment or delegation made without prior consent of the other party hereto shall be null and void.

(e) Parties in Interest. This Agreement shall be binding upon, inure solely to the benefit of, and be enforceable by, the parties hereto and their successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to or shall confer upon any other person not a party hereto any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

 

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(f) Amendment. This Agreement may not be amended except by an instrument in writing signed by the parties hereto.

(g) Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the terms of this Agreement remain as originally contemplated to the fullest extent possible.

(h) Notices. All notices, requests, claims, demands and other communications under this Agreement shall be sufficient if in writing and sent (i) by facsimile transmission (providing confirmation of transmission) or e-mail of a .pdf attachment (provided that any notice received by facsimile or e-mail transmission or otherwise at the addressee’s location on any Business Day after 5:00 p.m. (Pacific time) shall be deemed to have been received at 9:00 a.m. (Pacific time) on the next Business Day), or (ii) by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as follows (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10(h)):

 

		if to Parent:
		Westport Innovations Inc.
		1750 West 75th Ave., Suite 101
		Vancouver, British Columbia
		V6P 6G2, Canada
		Attention:		Salman Manki, General Counsel
		Email:		SManki@westport.com
		Tel:		(604) 718-2000

 

		with a copy to:
		Willkie Farr & Gallagher LLP
		787 Seventh Avenue
		New York, NY 10019
		Attention:		Gordon R. Caplan, Esq.
				Matthew J. Guercio, Esq.
		Facsimile:		(212) 728-9535

 

		if to the Stockholder:
		MTM, S.r.l.
		Via La Morra 1
		12062 (CN), Italy
		Attention:		Mariano Costamagna
		Facsimile:		+39 0172 486540

(i) Governing Law. This Agreement shall be governed by and construed, performed and enforced in accordance with the internal laws of the State of Delaware applicable to contracts made and wholly performed within such state, without regard to any applicable conflicts of law principles.

(j) Exclusive Jurisdiction. The parties hereto agree that any suit, action or proceeding brought by either party to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or

 

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the transactions contemplated hereby shall be brought exclusively in any federal or state court located in the State of Delaware. Each of the parties hereto submits to the exclusive jurisdiction of any such court in any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of, or in connection with, this Agreement or the transactions contemplated hereby and hereby irrevocably waives the benefit of jurisdiction derived from present or future domicile or otherwise in such action or proceeding. Each party hereto irrevocably waives, to the fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

(k) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY, IN ANY MATTERS (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

(l) Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

(m) Counterparts. This Agreement may be executed and delivered (including by facsimile transmission or by e-mail of a .pdf attachment) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered as of the date first written above.

 

 

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Annex E—Becker Voting Agreement

VOTING AGREEMENT

This VOTING AGREEMENT (this “Agreement”), dated as of September 1, 2015, is entered into by and among Westport Innovations Inc., an Alberta, Canada corporation (“Parent”), and Becker Drapkin Management, L.P., a Texas limited partnership, Becker Drapkin Partners (QP), L.P., a Texas limited partnership, Becker Drapkin Partners, L.P., a Texas limited partnership and Steven R. Becker, an individual resident of Texas (collectively, the “Stockholder”).

WHEREAS, the Stockholder beneficially owns in the aggregate 1,900,619 shares of common stock, par value $0.001 per share (“Company Common Stock” and such shares of Company Common Stock together with any shares of Company Common Stock acquired by the Stockholder after the date hereof being collectively referred to herein as the “Shares”) of Fuel Systems Solutions, Inc., a Delaware corporation (the “Company”);

WHEREAS, the Company, Parent, and Whitehorse Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), have entered into an Agreement and Plan of Merger, dated as of the date hereof (the “Merger Agreement”); and

WHEREAS, the Stockholder has agreed to enter into this Agreement in order to induce Parent to enter into the Merger Agreement and to consummate the transactions contemplated thereby.

NOW, THEREFORE, in consideration of Parent’s entering into the Merger Agreement and of the mutual covenants and agreements contained herein and other good and valuable consideration, the adequacy of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

SECTION 1. Defined Terms. Capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings assigned to them in the Merger Agreement.

SECTION 2. Representations and Warranties of Stockholder. The Stockholder hereby represents and warrants to Parent as follows:

(a) Title to the Shares. The Stockholder is the beneficial owner of the shares of Company Common Stock set forth on Schedule I hereto, which as of the date hereof constitutes all of the shares of Company Common Stock owned beneficially by the Stockholder and its Affiliates. The Stockholder and its Affiliates do not have any rights of any nature to acquire any additional shares of Company Common Stock. Except for (i) proxies and restrictions in favor of Parent granted pursuant to this Agreement, (ii) such transfer restrictions of general applicability as may be provided under the Securities Act and the “blue sky” laws of the various states of the United States and (iii) the restrictions on the Stockholder pursuant to that certain Agreement dated as of October 29, 2014 by and among the Company, the Stockholder and certain of the Stockholder’s Affiliates, the Stockholder owns all of such shares of Company Common Stock free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on voting rights, restrictions, charges, proxies and other encumbrances of any nature, and has not appointed or granted any proxy, power of attorney or other authorization, which appointment or grant is still effective, with respect to any of such shares of Company Common Stock.

(b) Organization. The Stockholder is duly organized, validly existing and in good standing or similar concept under the laws of the jurisdiction of its organization.

(c) Authority Relative to this Agreement. The Stockholder has the power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Stockholder and the consummation by the Stockholder of the transactions contemplated hereby have been duly and validly authorized by all necessary

 

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action on the part of the Stockholder. This Agreement has been duly and validly executed and delivered by the Stockholder and, assuming the due authorization, execution and delivery by Parent, constitutes a legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, (i) except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally, and (ii) subject to general principles of equity.

(d) No Conflict. Except for any filings as may be required by applicable federal securities laws, the execution and delivery of this Agreement by the Stockholder does not, and the performance of this Agreement by the Stockholder will not, (i) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or any other Person by the Stockholder, except for filings with the SEC of such reports under the Exchange Act as may be required in connection with this Agreement and the transactions contemplated by this Agreement; (ii) conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under any provision of the organizational documents of the Stockholder or any other any agreement to which the Stockholder is a party, including any voting agreement, stockholders agreement, voting trust, trust agreement, pledge agreement, loan or credit agreement, note, bond, mortgage, indenture lease or other agreement, instrument, permit, concession, franchise or license; or (iii) conflict with or violate any judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to the Stockholder or to the Stockholder’s property or assets.

(e) Adequate Information. The Stockholder is a sophisticated stockholder and seller with respect to the Shares and has adequate information concerning the business and financial condition of the Company to make an informed decision regarding the Merger and the sale of the Shares and has independently and without reliance upon the Company or Parent and based on such information as the Stockholder has deemed appropriate, made its own analysis and decision to enter into this Agreement. The Stockholder acknowledges that the agreements contained herein with respect to the Shares held by such Stockholder are irrevocable prior to the termination of this Agreement in accordance with Section 8.

SECTION 3. Covenants of Stockholder.

(a) Restriction on Transfer. The Stockholder hereby covenants and agrees that prior to the termination of this Agreement, the Stockholder shall not, directly or indirectly, sell, transfer, tender, assign, hypothecate or otherwise dispose of, grant any proxy to, deposit any Shares into a voting trust, enter into a voting trust agreement or create or permit to exist any additional security interest, lien, claim, pledge, option, right of first refusal, limitation on voting rights, charge or other encumbrance of any nature with respect to the Shares, other than as provided in this Agreement or the Merger Agreement. Notwithstanding the foregoing, Stockholder may take any action described in the previous sentence, so long as the other party to such action executes this Agreement (or a joinder thereto in a form reasonably satisfactory to Parent) and agrees to be bound by its terms.

(b) Additional Shares. Prior to the termination of this Agreement, the Stockholder will promptly notify Parent of the number of any new shares of Company Common Stock acquired directly or beneficially by the Stockholder, if any, after the date hereof. Any such shares shall automatically become “Shares” within the meaning of this Agreement immediately upon their acquisition by the Stockholder.

(c) Nonsolicitation. Prior to the termination of this Agreement, the Stockholder shall (i) not (whether directly or indirectly through any representative of such Stockholder) engage in any conduct that if conducted by the Company would be prohibited by Section 6.5 of the Merger Agreement after taking into account the terms of such section, and (ii) advise the Company (in order that the Company can timely comply with its obligations under Section 6.5(c) of the Merger Agreement) of such Stockholder’s receipt of any Company Acquisition Proposal.

(d) Public Announcement. The Stockholder shall consult with Parent before issuing any press releases or otherwise making any public statements with respect to the transactions contemplated herein and shall not issue any such press release or make any such public statement without the approval of Parent (which approval shall not be unreasonably withheld, conditioned or delayed), except as may be required by Law, including any filings with the SEC pursuant to the Exchange Act. This Section 3(d) shall terminate and be null and void upon the termination of this Agreement in accordance with Section 8.

 

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(e) Disclosure. The Stockholder hereby authorizes Parent to publish and disclose in any announcement or disclosure required by applicable Law, including, without limitation, as required by the SEC, the NASDAQ Stock Market, LLC, the Toronto Stock Exchange or any other U.S. or Canadian national securities exchange and the Proxy Statement (including all documents and schedules filed with the SEC in connection with either of the foregoing), the Stockholder’s identity and ownership of the Shares and the nature of the Stockholder’s commitments, arrangements and understandings under this Agreement. Parent hereby authorizes the Stockholder to make such disclosure or filings as may be required by applicable Law, including, without limitation, as required by the SEC, the NASDAQ Stock Market, LLC, the Toronto Stock Exchange or any other U.S. or Canadian national securities exchange. Parent hereby authorizes the Stockholder to disclose in any disclosure required by applicable Law, including any filings with the SEC pursuant to the Exchange Act, the Parent’s identity and the commitments, arrangements and understandings under this Agreement.

SECTION 4. Voting Agreement.

(a) Voting Agreement. The Stockholder hereby agrees that prior to the termination of this Agreement, at any meeting of the stockholders of the Company, however called, in any action by written consent of the stockholders of the Company, or in any other circumstances upon which the Stockholder’s vote, consent or other approval is sought, the Stockholder shall vote the Shares owned beneficially or of record by the Stockholder as follows:

(i) in favor of adoption of the Merger Agreement, and approval of the terms thereof and of the Merger, and the other transactions contemplated thereby;

(ii) against any action or agreement that has or would reasonably be likely to result in any conditions to the Company’s obligations under Article VII of the Merger Agreement not being satisfied;

(iii) against any Company Acquisition Proposal; and

(iv) against any amendments to the Company Charter and/or the Company Bylaws if such amendment would reasonably be expected to prevent or materially delay the consummation of the Closing.

(b) Grant of Proxy. The Stockholder hereby irrevocably grants to and appoints, Parent and each of its designees (the “Authorized Parties” and each an “Authorized Party”), and each of them individually, as the Stockholder’s proxy and attorney-in-fact (with full power of substitution) for and in the name, place and stead of the Stockholder, to vote the Shares or execute one or more written consents or approvals in respect of the Shares:

(i) in favor of adoption of the Merger Agreement, and approval of the terms thereof and of the Merger, and the other transactions contemplated thereby;

(ii) against any action or agreement that has or would reasonably be expected to result in any conditions to the Company’s obligations under Article VII of the Merger Agreement not being satisfied;

(iii) against any Company Acquisition Proposal;

(iv) against any amendments to the Company Charter and/or the Company Bylaws if such amendment would reasonably be expected to prevent or materially delay the consummation of the Closing;

in each case, if and only if the Stockholder (1) fails to vote, or (2) attempts to vote (whether by proxy, in person or by written consent), in a manner which is inconsistent with the terms of this Agreement.

The Stockholder hereby ratifies and confirms that the irrevocable proxy set forth in this Section 4(b) is given in connection with the execution of the Merger Agreement and that such irrevocable proxy is given to secure the performance of the Stockholder’s duties in accordance with this Agreement. The Stockholder hereby further

 

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ratifies and confirms that the irrevocable proxy granted hereby is coupled with an interest and may under no circumstances be revoked, except as otherwise provided in this Agreement. Such irrevocable proxy shall be valid until termination of this Agreement or as provided in Section 4(f). The power of attorney granted by the Stockholder herein is a durable power of attorney and shall survive the dissolution, bankruptcy, death or incapacity of the Stockholder. Upon the execution of this Agreement, the Stockholder hereby revokes any and all prior proxies or powers of attorney given by the Stockholder with respect to voting of the Shares on the matters contemplated hereby and agrees not to grant any subsequent proxies or powers of attorney with respect to the voting of the Shares on the matters contemplated hereby until after the termination of this Agreement (other than a proxy in accordance with the terms of this Agreement). The Stockholder understands and acknowledges that Parent is entering into the Merger Agreement in reliance upon the Stockholder’s execution and delivery of this Agreement and the Stockholder’s granting of the proxy contained in this Section 4(b). The Stockholder hereby affirms that the proxy granted in this Section 4(b) is given in connection with the execution of the Merger Agreement, and that such proxy is given to secure the performance of the duties of the Stockholder under this Agreement. If for any reason the proxy granted herein is found by a court of competent jurisdiction to not be valid, then the Stockholder agrees to vote the Shares in accordance with Section 4(a). The parties acknowledge and agree that neither Parent, nor Parent’s successors, assigns, subsidiaries, divisions, employees, officers, directors, stockholders, agents and affiliates shall owe any duty to, whether in law or otherwise, or incur any liability of any kind whatsoever, including without limitation, with respect to any and all claims, losses, demands, causes of action, costs, expenses (including attorney’s fees) and compensation of any kind or nature whatsoever to the Stockholder in connection with or as a result of any voting by an Authorized Party of the Shares subject to the irrevocable proxy hereby granted to the Authorized Parties at any annual or special meeting of the stockholders of the Company for the purpose and in accordance with the terms set forth herein.

(c) Other Voting. The Stockholder may vote on all issues other than those specified in this Section 4 that may come before a meeting of the stockholders of the Company in its sole discretion, provided that such vote does not contravene the provisions of this Section 4.

(d) Actions in Capacity as Director or Officer. The Stockholder is entering into this Agreement solely in his capacity as a stockholder of the Company. Nothing in this Agreement shall be deemed to govern, limit or relate to any actions, omissions to act, or votes taken or not taken by the Stockholder in his capacity as a member of the Company Board or the board of directors or other equivalent governing body of any Company Subsidiary, or in his capacity as an officer of the Company or any Company Subsidiary and, for the avoidance of doubt, no such action taken or omission to act by the Stockholder in his capacity as a director or officer of the Company or any Company Subsidiary shall be deemed to violate any of the Stockholder’s obligations under this Agreement.

(e) Acquisition Proposals; Superior Proposals. Notwithstanding anything to the contrary herein, Stockholder shall be entitled to participate with the Company and its directors, officers, representatives, advisors or other intermediaries in any negotiations or discussions with any Person (including, without limitation, negotiating or discussing a voting agreement with a Person that would be entered into at any time after the termination of this Agreement), or any preparations therefor, in each case in connection with a Company Acquisition Proposal or a Superior Proposal.

(f) Company Adverse Recommendation Change. The obligations set forth in this Section 4 (including the proxy granted under Section 4(b)) shall apply to the Stockholder unless and until the earliest to occur of (x) the termination of this Agreement or the Merger Agreement or as otherwise provided pursuant to Section 8 or (y) there has been and remains in effect a Company Adverse Recommendation Change.

SECTION 5. Representations and Warranties of Parent. Parent hereby represents and warrants to the Stockholder as follows:

(a) Organization. Parent is duly organized, validly existing, and in good standing under the laws of Alberta, Canada.

(b) Authority Relative to this Agreement. Parent has the corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated

 

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hereby. The execution and delivery of this Agreement by Parent and the consummation by Parent of the transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of Parent. This Agreement has been duly and validly executed and delivered by Parent and, assuming the due authorization, execution and delivery by the Stockholder, constitutes a legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, (i) except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors’ rights generally, and (ii) subject to general principles of equity.

(c) No Conflict. The execution and delivery of this Agreement by Parent does not, and the performance of this Agreement by Parent will not, (a) require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority or any other Person by Parent, except for filings with the SEC of such reports under the Exchange Act as may be required in connection with this Agreement and the transactions contemplated by this Agreement; (b) conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under any provision of, the Parent Articles and/or Parent Bylaws or any other agreement to which Parent is a party; or (c) conflict with or violate any judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to Parent or to Parent’s property or assets.

SECTION 6. Further Assurances. The Stockholder shall, without further consideration, from time to time, execute and deliver, or cause to be executed and delivered, such additional or further consents, documents and other instruments as Parent may reasonably request for the purpose of effectuating the matters covered by this Agreement.

SECTION 7. Certain Events. The Stockholder agrees that this Agreement and the obligations hereunder shall attach to the Shares and shall be binding on any Person to which legal or beneficial ownership of such Shares shall pass, whether by operation of law or otherwise. In the event of any stock split, stock dividend, merger, consolidation, reorganization, recapitalization or other change in the capital structure of the Company affecting the Common Stock or other voting securities of the Company, the number of Shares shall be deemed adjusted appropriately and this Agreement and the obligations hereunder shall attach to any additional shares of Common Stock issued to or acquired by the Stockholder.

SECTION 8. Termination. This Agreement and the proxy granted pursuant to Section 4(b) shall automatically terminate without further action of the parties on the first to occur of (a) the Effective Time, (b) the termination of the Merger Agreement or (c) any change to the terms of the Merger without the prior written consent of Shareholder that (i) reduces the Exchange Ratio (subject to adjustments in compliance with Section 3.2 of the Merger Agreement) or (ii) changes the form of consideration payable in the Merger; provided that the provisions of Section 9 hereof shall survive any such termination.

SECTION 9. Miscellaneous.

(a) Expenses. All costs and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the party incurring such costs and expenses.

(b) Specific Performance. The parties hereto agree that, in the event any provision of this Agreement is not performed in accordance with the terms hereof, (i) the non-breaching party will sustain irreparable damages for which there is not an adequate remedy at law for money damages and (ii) the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity.

(c) Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among such parties with respect to the subject matter hereof.

(d) Assignment. Without the prior written consent of the other party to this Agreement, no party may assign any rights or delegate any obligations under this Agreement. Any such purported assignment or delegation made without prior consent of the other party hereto shall be null and void.

 

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(e) Parties in Interest. This Agreement shall be binding upon, inure solely to the benefit of, and be enforceable by, the parties hereto and their successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to or shall confer upon any other person not a party hereto any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

(f) Amendment. This Agreement may not be amended except by an instrument in writing signed by the parties hereto.

(g) Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the terms of this Agreement remain as originally contemplated to the fullest extent possible.

(h) Notices. All notices, requests, claims, demands and other communications under this Agreement shall be sufficient if in writing and sent (i) by facsimile transmission (providing confirmation of transmission) or e-mail of a .pdf attachment (provided that any notice received by facsimile or e-mail transmission or otherwise at the addressee’s location on any Business Day after 5:00 p.m. (Pacific time) shall be deemed to have been received at 9:00 a.m. (Pacific time) on the next Business Day), or (ii) by reliable overnight delivery service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as follows (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9(h)):

if to Parent:

 

				Westport Innovations Inc.
				1750 West 75th Ave., Suite 101
				Vancouver, British Columbia
				V6P 6G2, Canada
				Attention:		Salman Manki, General Counsel
				Email:		SManki@westport.com
				Tel:		(604) 718-2000

with a copy to:

 

		Willkie Farr & Gallagher LLP
		787 Seventh Avenue
		New York, NY 10019
		Attention:		Gordon R. Caplan, Esq.
				Matthew J. Guercio, Esq.
		Facsimile:		(212) 728-9535

if to the Stockholder:

 

		Becker Drapkin Management, L.P.
		500 Crescent Court, Suite 230
		Dallas, Texas 75201
		Attention:		Steven R. Becker
		Facsimile:		(214) 292-8896

 

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with a copy to:

 

		Gibson, Dunn & Crutcher LLP
		200 Park Avenue
		New York, New York 10166
		Attention:		Richard J. Birns, Esq.
		Facsimile:		(212) 716-0830

(i) Governing Law. This Agreement shall be governed by and construed, performed and enforced in accordance with the internal laws of the State of Delaware applicable to contracts made and wholly performed within such state, without regard to any applicable conflicts of law principles.

(j) Exclusive Jurisdiction. The parties hereto agree that any suit, action or proceeding brought by either party to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought exclusively in any federal or state court located in the State of Delaware. Each of the parties hereto submits to the exclusive jurisdiction of any such court in any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of, or in connection with, this Agreement or the transactions contemplated hereby and hereby irrevocably waives the benefit of jurisdiction derived from present or future domicile or otherwise in such action or proceeding. Each party hereto irrevocably waives, to the fullest extent permitted by Law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

(k) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY, IN ANY MATTERS (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

(l) Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

(m) Counterparts. This Agreement may be executed and delivered (including by facsimile transmission or by e-mail of a .pdf attachment) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed and delivered as of the date first written above.

 

 

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Officers and Directors

Section 124 of the ABCA provides, generally, as follows:

124(1) Except in respect of an action by or on behalf of the corporation or body corporate to procure a judgment in its favour, a corporation may indemnify a director or officer of the corporation, a former director or officer of the corporation or a person who acts or acted at the corporation’s request as a director or officer of a body corporate of which the corporation is or was a shareholder or creditor, and the director’s or officer’s heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the director or officer in respect of any civil, criminal or administrative action or proceeding to which the director or officer is made a party by reason of being or having been a director or officer of that corporation or body corporate, if

(a) the director or officer acted honestly and in good faith with a view to the best interests of the corporation, and

(b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the director or officer had reasonable grounds for believing that the director’s or officer’s conduct was lawful.

(2) A corporation may with the approval of the Court of Queen’s Bench of Alberta indemnify a person referred to in subsection (1) in respect of an action by or on behalf of the corporation or body corporate to procure a judgment in its favour, to which the person is made a party by reason of being or having been a director or an officer of the corporation or body corporate, against all costs, charges and expenses reasonably incurred by the person in connection with the action if the person fulfils the conditions set out in subsection (1)(a) and (b).

(3) Notwithstanding anything in this section, a person referred to in subsection (1) is entitled to indemnity from the corporation in respect of all costs, charges and expenses reasonably incurred by the person in connection with the defence of any civil, criminal or administrative action or proceeding to which the person is made a party by reason of being or having been a director or officer of the corporation or body corporate, if the person seeking indemnity

(a) was substantially successful on the merits in the person’s defence of the action or proceeding,

(b) fulfils the conditions set out in subsection (1)(a) and (b), and

(c) is fairly and reasonably entitled to indemnity.

(3.1) A corporation may advance funds to a person in order to defray the costs, charges and expenses of a proceeding referred to in subsection (1) or (2), but if the person does not meet the conditions of subsection (3) he or she shall repay the funds advanced.

(4) A corporation may purchase and maintain insurance for the benefit of any person referred to in subsection (1) against any liability incurred by the person

(a) in the person’s capacity as a director or officer of the corporation, except when the liability relates to the person’s failure to act honestly and in good faith with a view to the best interests of the corporation, or

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(b) in the person’s capacity as a director or officer of another body corporate if the person acts or acted in that capacity at the corporation’s request, except when the liability relates to the person’s failure to act honestly and in good faith with a view to the best interests of the body corporate.

(5) A corporation or a person referred to in subsection (1) may apply to the Court of Queen’s Bench of Alberta for an order approving an indemnity under this section and the Court of Queen’s Bench of Alberta may so order and make any further order it thinks fit.

(6) On an application under subsection (5), the Court of Queen’s Bench of Alberta may order notice to be given to any interested person and that person is entitled to appear and be heard in person or by counsel.

Section 7 of Westport’s By-laws contains the following provisions with respect to indemnification of Westport’s directors and officers:

7.05 Limitation of Liability

Subject to the ABCA, no director or officer for the time being of Westport shall be liable for the acts, receipts, neglects or defaults if any other director or officer or employee, or for joining in any receipt or act for conformity, or for any loss, damage or expense happening to Westport through the insufficiency or deficiency of title to any property acquired by Westport or for or on behalf of Westport or for the insufficiency or deficiency of any security in or upon which any of the moneys of or belonging to Westport shall be placed or invested, or for any loss or damage arising from the bankruptcy, insolvency or tortious act of any person, firm or corporation including any person, firm or corporation with whom or with which moneys, securities or effects shall be lodged or deposited for any loss, conversation, misapplication or misappropriation of or any damage resulting from any dealings with moneys, securities or other assets of or belonging to Westport or for any other loss, damage or misfortune whatsoever which may happen in the execution of the duties of his respective office or trust or in relation thereto unless the same shall happen by or through his failure to exercise the powers and to discharge the duties of his office honestly and in good faith with a view to the best interests of Westport and through a failure to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

7.06 Indemnity

Subject to the ABCA, Westport shall indemnify a director or officer, a former director or officer, and a person who acts or acted at Westport’s request as a director or officer of a body corporate of which Westport is or was a shareholder or creditor, and his heirs and legal representatives, against all costs, charges and expenses, including any amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect to any civil, criminal or administrative action or proceedings to which he is made a party by reason of being or having been a director of officer of Westport or such body corporate, if:

(a) he acted honestly and in good faith with a view to the best interests of Westport; and

(b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he had reasonable grounds for believing that his conduct was lawful.

7.07 Insurance

Westport may, subject to and in accordance with the ABCA, purchase and maintain insurance for the benefit of any director or officer as such against liability incurred by him.

Westport also enters into indemnity agreements with its directors and officers from time to time pursuant to which it has agreed to indemnify such persons in the manner contemplated by the ABCA.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling Westport pursuant to the foregoing provisions, Westport has been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is therefore unenforceable.

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Item 21. Exhibits and Financial Statement Schedules

The agreements included as exhibits to this proxy statement/prospectus contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

 

•

should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

 

•

may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

 

•

were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Westport and Fuel Systems acknowledge that, notwithstanding the inclusion of the foregoing cautionary statements, they are responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this registration statement not misleading. Additional information about Westport and Fuel Systems may be found elsewhere in this registration statement and our other public filings, which are available without charge through the SEC’s website at www.sec.gov. See “Where You Can Find More Information.”

(a) Exhibits

 

Exhibit Number		Exhibit Description
2.1		Agreement and Plan of Merger, dated as of September 1, 2015, by and among Westport Innovations Inc., Whitehorse Merger Sub Inc. and Fuel Systems Solutions Inc. (included as Annex A to the proxy statement/prospectus filed herewith)
3.1		Certificate of Amendment and Registration of Restated Articles of Westport Innovations Inc.
3.2		By-law No. 1 of Westport Innovations Inc.
5.1		Opinion of Bennett Jones LLP, regarding legality of securities being registered
10.1		Voting Agreement by and between Westport Innovations Inc., Fuel Systems Solutions, Inc. and Kevin Douglas (included as Annex C to the proxy statement/prospectus filed herewith)
21.1		Subsidiary List of Westport Innovations Inc.
23.1		Consent of Deloitte LLP
23.2		Consent of KPMG LLP
23.3		Consent of PricewaterhouseCoopers LLP

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Exhibit Number		Exhibit Description
23.4		Consent of Bennett Jones LLP (included as part of Exhibit 5.1)
24.1		Powers of Attorney (included on signature page)
99.1*		Form of Proxy Card for Special Meeting of Stockholders of Fuel Systems
99.2		Consent of J.P. Morgan Securities LLC

 

*	To be filed by amendment.

†	Pursuant to Item 601(b)(2) of Regulation S-K, Westport agrees to furnish supplementally a copy of any omitted schedule or exhibit to the Agreement and Plan of Merger to the SEC upon request.

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Item 22. Undertakings

(A) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial, bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) To file a post-effective amendment to the registration statement to include any financial information required by Item 8.A. of Form 20-F at the start of any delayed offering or throughout a continuous offering.

(5) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(6) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

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(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(B) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(C) (1) The undersigned registrant hereby undertakes as follows: that before any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.

(2) The registrant undertakes that every prospectus: (i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(D) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(E) The undersigned registrant hereby undertakes (i) to respond to requests for information that is incorporated by reference in the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means, and (ii) to arrange or provide for a facility in the United States for the purpose of responding to such requests. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

(F) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Vancouver, Canada, on October 19, 2015.

 

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints David Demers, Ashoka Achuthan and Salman Manki, and each of them acting individually, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead in any and all capacities, to sign this Registration Statement and any and all amendments thereto (including post-effective amendments and registration statements filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and otherwise), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature		Title		Date
/s/ David Demers David Demers		Chief Executive Officer and Director		October 19, 2015
/s/ Ashoka Achuthan Ashoka Achuthan		Chief Financial Officer (Principal Financial and Accounting Officer)		October 19, 2015
/s/ Warren J. Baker Warren J. Baker		Director		October 19, 2015
/s/ M.A. (Jill) Bodkin M.A. (Jill) Bodkin		Director		October 19, 2015

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Signature		Title		Date
/s/ Joseph P. Caron Joseph P. Caron		Director		October 19, 2015
/s/ Brenda J. Eprile Brenda J. Eprile		Director		October 19, 2015
/s/ Philip B. Hodge Philip B. Hodge		Director		October 19, 2015
/s/ Dezsö J. Horváth Dezsö J. Horváth		Director		October 19, 2015
/s/ Douglas R. King Douglas R. King		Director		October 19, 2015
/s/ Gottfried (Guff) Muench Gottfried (Guff) Muench		Director		October 19, 2015
/s/ Douglas G. Pearce Douglas G. Pearce		Director		October 19, 2015

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SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES

Pursuant to the Securities Act of 1933, the undersigned, the duly authorized representative in the United States of Westport Innovations Inc. has signed this Registration Statement on October 19, 2015.

 

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EXHIBIT INDEX

 

Exhibit Number		Exhibit Description
2.1		Agreement and Plan of Merger, dated as of September 1, 2015, by and among Westport Innovations Inc., Whitehorse Merger Sub Inc. and Fuel Systems Solutions, Inc. (included as Annex A to the proxy statement/prospectus filed herewith)
3.1		Certificate of Amendment and Registration of Restated Articles of Westport Innovations Inc.
3.2		By-law No. 1 of Westport Innovations Inc.
5.1		Opinion of Bennett Jones LLP regarding legality of securities being registered
10.1		Voting Agreement by and between Westport Innovations Inc., Fuel Systems Solutions, Inc. and Kevin Douglas (included as Annex C to the proxy statement/prospectus filed herewith)
21.1		Subsidiary List of Westport Innovations Inc.
23.1		Consent of Deloitte LLP
23.2		Consent of PricewaterhouseCoopers LLP
23.3		Consent of KPMG LLP
23.4		Consent of Bennett Jones LLP (included as part of Exhibit 5.1)
24.1		Powers of Attorney (included on signature page)
99.1*		Form of Proxy Card for Special Meeting of Stockholders of Fuel Systems Solutions, Inc.
99.2		Consent of J.P. Morgan Securities LLC

 

*	To be filed by amendment.

†	Pursuant to Item 601(b)(2) of Regulation S-K, Westport agrees to furnish supplementally a copy of any omitted schedule or exhibit to the Agreement and Plan of Merger to the SEC upon request.