Exhibit
4.4


 


	
  Westport
  Innovations Inc.

  Information for Shareholders

  	
   

  	
  Annual
  and Special Meeting

  of Shareholders:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  July 8,
  2008

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Management
  Information Circular

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Dated June 6, 2008

  



 


 





 

















 


TABLE
OF CONTENTS


 


	
  NOTICE OF
  ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

  	
  2

  
	
  SOLICITATION OF
  PROXIES

  	
  4

  
	
  VOTING OF
  COMMON SHARES AND PRINCIPAL HOLDERS OF COMMON SHARES

  	
  5

  
	
  COMPENSATION OF
  EXECUTIVE OFFICERS

  	
  6

  
	
  PERFORMANCE
  GRAPH

  	
  14

  
	
  EQUITY
  COMPENSATION PLAN INFORMATION

  	
  15

  
	
  INTEREST OF
  INFORMED PERSONS IN MATERIAL TRANSACTIONS

  	
  18

  
	
  INTEREST OF
  CERTAIN PERSONS OR COMPANIES IN MATTERS TO BE ACTED UPON

  	
  19

  
	
  RECEIPT OF 2008
  FINANCIAL STATEMENTS

  	
  19

  
	
  ELECTION OF
  DIRECTORS

  	
  19

  
	
  APPOINTMENT OF
  AUDITORS

  	
  24

  
	
  APPROVAL OF
  AMENDMENT TO ARTICLES

  	
  24

  
	
  APPROVAL OF
  SHARE CONSOLIDATION

  	
  26

  
	
  APPROVAL OF
  AMENDMENTS TO SECURITY BASED COMPENSATION PLANS

  	
  28

  
	
  STATEMENT OF
  CORPORATE GOVERNANCE PRACTICES

  	
  30

  
	
  OTHER
  INFORMATION

  	
  40

  



 


SCHEDULE “A” BOARD
OF DIRECTORS CHARTER


 


1

















 


NOTICE OF ANNUAL AND SPECIAL MEETING OF
SHAREHOLDERS


 





 


NOTICE
OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS


TO
BE HELD ON TUESDAY, JULY 8, 2008


 


TO SHAREHOLDERS OF WESTPORT
INNOVATIONS INC.


 


Notice is hereby given that the Annual and Special
Meeting (the “Meeting”) of Shareholders of
Westport Innovations Inc. (“Westport”) will
be held at the Delta Vancouver Airport Hotel, 3500 Cessna Drive, Richmond,
British Columbia on Tuesday, July 8, 2008 at 2:00 p.m. (Pacific
time).  The purpose of the Meeting is to
consider, and to take action with respect to, the following matters.


 


1.                                       The receipt of the audited financial
statements of Westport for the year ended March 31, 2008, together with
the auditors’ report on those statements;


 


2.                                       The election of directors of Westport for
the next year;


 


3.                                       The appointment of auditors for Westport
for the next year and the authorization of the directors to fix their
remuneration;


 


4.                                       The amendment of Westport’s articles to
remove the maximum number of directors;


 


5.                                       The authorizing of Westport’s board of
directors to effect the consolidation of the issued common shares of Westport
on the basis of one new common share for not less than two and not
more than five common
shares held immediately prior to the consolidation;


 


6.                                       The approval of amendments to the
Westport stock option plan and share unit plan; and


 


7.                                       The transaction of such other business as
may properly be brought before the Meeting or any adjournment or adjournments
of the Meeting.


 


Shareholders are referred to the accompanying management
information circular dated June 6, 2008 (the “Circular”)
for more detailed information with respect to the matters to be considered at
the Meeting.


 


Individuals, corporations or other persons directly
registered with Computershare Trust Company of Canada (“Computershare”)
as shareholders of Westport on June 3, 2008 (“Registered
Owners”) may attend the Meeting in person and vote.  Shareholders owning shares through a
brokerage firm or in any other manner who are not directly registered with
Computershare on June 3, 2008 (“Beneficial Owners”)
who wish to attend the Meeting and vote, should enter their own names in the
blank space on the instrument of proxy provided to them by their broker (or the
broker’s agent), and return that proxy to their broker (or the broker’s agent)
in accordance with the instructions provided by their broker (or agent), well
in advance of the Meeting.  Registered
and Beneficial Owners who do not wish to attend the Meeting or to vote their
shares in person may be represented by proxy. 
A person appointed as proxyholder does not need to be a shareholder of
Westport.  Shareholders who are unable to
attend the Meeting in person are requested to date, sign, and return the
accompanying registered instrument of proxy (the “Proxy”),
or other appropriate form of proxy, in accordance with the instructions set
forth in the Circular.  For 


 


2

















 


Registered Owners, the Proxy, or form
of proxy, will not be valid unless it is deposited at the offices of
Computershare Trust Company of Canada, Proxy Department, 100 University Avenue,
9th Floor, Toronto, Ontario M5J 2Y1, (fax numbers: 1-866-249-7775 toll free
North America, or 1-416-263-9524 international) not less than forty-eight (48)
hours (excluding Saturdays, Sundays and holidays) before the Meeting, or any
adjournment thereof.  For Beneficial
Owners, the form of proxy can be mailed to Broadridge Financial Solutions, Inc.
at the address set forth on their Proxy or, alternatively, a Beneficial Owner can
either call their toll-free telephone line to vote, or access their dedicated
voting website at www.proxyvotecanada.com.


 


Only persons registered as holders of common shares on
the records of Westport as of the close of business on June 3, 2008, are
entitled to receive notice of the Meeting.


 


	
  Dated as of the
  6th day of June, 2008.

  	
   

  
	
   

  	
   

  
	
   

  	
  By the order of the Board of Directors

  
	
   

  	
   

  
	
   

  	
   

  	
  (Signed)
  W. Chipman Johnston

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  W. Chipman Johnston

  Corporate Secretary

  



 


3

















 


SOLICITATION OF PROXIES


 


This Management Information Circular (the “Circular”) is furnished in connection with the solicitation
by the management of Westport Innovations Inc. (“Westport”
or the “Corporation”) of proxies to be used at
the Annual and Special Meeting (the “Meeting”) of
the holders (“Shareholders”) of common shares (“Common Shares”) of Westport. 
This Meeting is to be held at the Delta Vancouver Airport Hotel, 3500
Cessna Drive, Richmond, British Columbia on Tuesday, July 8, 2008 at 2:00 p.m.
(Pacific time) for the purposes set forth in the accompanying notice of Meeting
(the “Notice”).  Solicitation of proxies will be primarily by
mail, but may also be by way of telephone, facsimile, or oral communication by
the directors, officers, or regular employees of Westport, at no additional
compensation to them.  The costs of the
solicitation of proxies will be borne by Westport.


 


Appointment
of Proxyholders and Revocation of Proxies


 


An Instrument of Proxy (the “Proxy”)
accompanies this Circular, and the persons named in it are both officers of
Westport.  A Shareholder, however, has the right to appoint another person (who does
not need to be a Shareholder) to represent him or her at the Meeting.  To exercise this right, a
Shareholder should strike out the names on the Proxy and insert the name of his
or her appointee in the blank space provided. 
Alternatively, a Shareholder may complete a Proxy in an appropriate
written form of his or her own choosing (“Alternative Form of
Proxy”).  The Proxy or an
Alternative Form of Proxy will not be valid unless it is deposited at the
offices of Computershare Trust Company of Canada (“Computershare”),
Proxy Department, 100 University Avenue, 9th Floor, Toronto, Ontario M5J 2Y1 (fax numbers: 1-866-249-7775 toll free North America,
or 1-416-263-9524 international) not less than forty-eight (48)
hours (excluding Saturdays, Sundays, and holidays) before the time of the
Meeting or any adjournment of the Meeting.


 


A Shareholder who has submitted a Proxy or Alternative
Form of Proxy may revoke it by means of a written document signed by the
Shareholder or by his or her duly authorized attorney, or if the Shareholder is
a corporation, by a duly authorized officer or officers or attorney of such
corporation.  The document must be
deposited either: (i) at the registered office of Westport (being 4500
Bankers Hall East, 855 - 2nd Street S.W., Calgary, Alberta T2P 4K7) at any time
up to and including the last business day preceding the day of the Meeting, or
any adjournment of the Meeting at which the Proxy or Alternative Form of
Proxy is to be used; or (ii) with the Chairman of the Meeting on the day
of the Meeting or any adjournment of the Meeting.  In addition, a Proxy or Alternative Form of
Proxy may be revoked: (i) by the Shareholder personally attending at the
Meeting and voting the securities represented by the Proxy, or if the
Shareholder is a corporation by a duly authorized officer or officers or
attorney of such corporation attending at the Meeting and voting the securities;
or (ii) in any other manner permitted by law.


 


Exercise
of Discretion by Proxyholders


 


The persons named in the Proxy will vote or withhold
from voting the Common Shares in respect of which they are appointed, on any
ballot that may be called for, in accordance with the direction of the
Shareholder appointing them.  In the absence of such specification, the Proxyholder
shall be deemed to have been granted the authority to vote the relevant Common
Shares FOR: (i) the election of the directors, as set forth in this
Circular; (ii) the appointment of auditors, as set forth in this Circular,
at such remuneration as may be determined by the board of directors of Westport
(the “Board of Directors”); (iii) the amendment of Westport’s articles to
remove the maximum number of directors, as set forth in this Circular; (iv) the
share consolidation, as set forth in this Circular; and (v) the amendment
of the Westport stock option plan and share unit plan, as set forth in this
Circular.  The Proxy also confers discretionary
authority upon the persons named in the Proxy with respect to amendments to, or
variations of, the matters identified in the Notice and with 


 


4

















 


respect to other matters that may
properly be brought before the Meeting.  As of the date of this Circular, the
management of Westport knows of no such amendment, variation, or other matter
to come before the Meeting other than the matters referred to in the Notice.


 


Signing
of Proxy


 


A Proxy signed by a person acting as an attorney or in
some other representative capacity (including a representative of a corporate
Shareholder) should indicate his or her capacity (following his or her
signature) and should provide the appropriate documentation confirming qualification
and authority to act (unless such documentation has previously been filed with
Westport or Computershare).


 


VOTING OF COMMON SHARES AND
PRINCIPAL HOLDERS OF COMMON SHARES


 


Voting
of Common Shares - General


 


As at June 3, 2008, there were 96,140,970  Common Shares
issued and outstanding, each of which carries the right to one vote at meetings
of Shareholders.  Only persons registered as Shareholders on the books
of Westport maintained by Computershare (“Registered Shareholders”) as of the
close of business on June 3, 2008 (the “Record Date”) are entitled to
receive notice and to vote at the Meeting. 
Shareholders who do not hold Common Shares in their own name on the
records of Westport are not entitled to receive notice of the Meeting or to
vote in respect of such shares at the Meeting, and should refer to the section
entitled “Advice to Beneficial Holders of
Common Shares” immediately below for details regarding how they may
exercise voting rights.  Any
person who acquires Common Shares from a Shareholder after the Record Date may
vote those Common Shares if, not later than 10 days prior to the Meeting, that
person makes a request in a satisfactory written form to Computershare to have
his or her name included as a Registered Shareholder on the list of
Shareholders for the Meeting and establishes that he or she owns such Common
Shares.


 


Advice
to Beneficial Holders of Common Shares


 


The information set forth in this
section is of significant importance as most Shareholders do not hold Common
Shares in their own name.  Shareholders who do not hold Common
Shares in their own name (“Beneficial Shareholders”)
should note that only proxies deposited by Shareholders whose names appear on
the records of Westport as the registered holders of Common Shares can be
recognized and acted upon at the Meeting. 
If the Common Shares are listed in an account statement provided to a
Shareholder by a broker, then in almost all cases those shares will not be
registered in the Shareholder’s own name on the records of Westport.  Such Common Shares will more likely be
registered in the name of the Shareholder’s broker or an agent of that
broker.  In Canada, the vast majority of
these shares are registered in the name of CDS & Co. (the registration
name for The Canadian Depositary for Securities, which acts as nominee for many
Canadian brokerage firms).  Common Shares
held by brokers or their agents or nominees can only be voted (for or against
resolutions) upon the instructions of the Beneficial Shareholder.  Without specific instructions, brokers and
their agents and nominees are prohibited from voting Common Shares for the
broker’s clients.  Therefore, Beneficial Shareholders cannot be
recognized at the Meeting for purposes of voting their Common Shares in person
or by way of proxy unless their brokers or agents are given specific
instructions.  If you are a Beneficial
Shareholder and wish to vote in person at the Meeting, please contact your
broker or agent well in advance of the Meeting to determine how you can do so.


 


Applicable regulatory policy requires brokers to seek
voting instructions from Beneficial Shareholders in advance of Shareholders’
meetings.  Every brokerage has its own
mailing procedures and provides its own return instructions to its clients,
which should be carefully followed by Beneficial Shareholders if they 


 


5

















 


wish to ensure that their Common Shares are voted at
the Meeting.  In certain cases, the form
of proxy supplied to a Beneficial Shareholder by his or her broker (or the
agent of the broker) is identical to the Proxy provided to Registered
Shareholders.  However, its purpose is
limited to instructing the Registered Shareholder (i.e., the broker or agent of
the broker) how to vote on behalf of the Beneficial Shareholder.  The majority of Canadian brokers now delegate
responsibility for obtaining instructions from clients to Broadridge Financial
Solutions, Inc. (“Broadridge”).  Broadridge typically prepares a
machine-readable voting instruction form, mails that form to Beneficial
Shareholders and asks them to return the instruction forms to Broadridge.  Alternatively, Beneficial Shareholders can
either call Broadridge’s toll-free telephone line or access Broadridge’s
dedicated voting website at www.proxyvotecanada.com to deliver their voting
instructions.  Broadridge then tabulates
the results of all instructions received and provides instructions respecting
the voting of Common Shares to be represented at the Meeting.  A
Beneficial Shareholder receiving a voting instruction form from Broadridge
cannot use that form to vote Common Shares directly at the Meeting – voting
instructions must be provided to Broadridge (in accordance with the
instructions set forth on the Broadridge form) well in advance of the Meeting
in order to have the Common Shares voted.


 


Although a Beneficial Shareholder may not be
recognized directly at the Meeting for the purposes of voting Common Shares
registered in the name of his or her broker (or agent of the broker), a
Beneficial Shareholder may attend at the Meeting as proxyholder for the
Registered Shareholder and vote the Common Shares in that capacity.  Beneficial
Shareholders who wish to attend the Meeting and indirectly vote their Common
Shares as Proxyholder for the Registered Shareholder should enter their own
names in the blank space on the Proxy and return the Proxy to their broker (or
the broker’s agent) in accordance with the instructions provided by such broker
(or agent) well in advance of the Meeting.


 


Principal
Holders of Common Shares


 


Mr. Thomas Boone Pickens maintains direct or
indirect control or direction over 11,438,299 Common Shares, 11.90% of the
issued and outstanding Common Shares.


 


To the knowledge of the directors and senior officers
of the Corporation, as of the effective date of this Circular, there are no
other persons who beneficially owned or exercised control or direction over
more than 10% of the outstanding Common Shares.


 


COMPENSATION OF EXECUTIVE
OFFICERS


 


Summary
Compensation Table


 


The following table sets forth information concerning
the total compensation paid, during each of the last three financial years, to
Westport’s Chief Executive Officer, Chief Financial Officer, and the other
three executive officers who had the highest aggregate remuneration
(collectively, the “Named Executive Officers”),
determined on the basis of base salary and bonuses paid during the financial
year ended March 31, 2008.


 


6

















 


	
   

  	
   

  	
   

  	
   

  	
  Annual Compensation

  	
   

  	
  Long Term Compensation

  	
   

  	
   

  	
   

  
	
  Name and

  Principal Position

  	
   

  	
  Fiscal

  Year

  	
   

  	
  Salary

  	
   

  	
  Bonus

  	
   

  	
  Securities

  Under Share

  Units

  Granted(1)

  	
   

  	
  Securities

  Under

  Options

  Granted(2)

  	
   

  	
  Securities

  Under Share

  Units

  Granted(1)

  	
   

  	
  All Other

  Compensation(3)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  ($)

  	
   

  	
  ($)

  	
   

  	
  (#)

  	
   

  	
  (#)

  	
   

  	
  (#)

  	
   

  	
  ($)

  	
   

  
	
  David Demers

  Chief Executive Officer

  	
   

  	
  2008

  2007

  2006

  	
   

  	
  400,000

  394,792

  372,917

  	
   

  	
  107,500

  93,750

  75,000

  	
   

  	
  57,796

  89,286

  75,000

  	
   

  	
  —

  —

  330,491

  	
   

  	
  273,177

  213,777

  169,700

  	
   

  	
  —

  —

  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Michael Gallagher

  President and Chief
  Operating

  Officer

  	
   

  	
  2008

  2007

  2006

  	
   

  	
  375,000

  369,792

  348,875

  	
   

  	
  100,781

  78,750

  65,609

  	
   

  	
  54,183

  75,000

  43,450

  	
   

  	
  —

  —

  301,088

  	
   

  	
  256,104

  182,898

  154,600

  	
   

  	
  17,019

  15,222

  17,104

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Elaine Wong

  Chief Financial Officer and

  Executive Vice President, Finance

  	
   

  	
  2008

  2007

  2006

  	
   

  	
  227,500

  206,471

  174,167

  	
   

  	
  59,125

  35,000

  31,484

  	
   

  	
  31,788

  33,334

  20,851

  	
   

  	
  —

  75,000

  105,079

  	
   

  	
  150,248

  66,507

  53,957

  	
   

  	
  5,932

  4,980

  3,504

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Nicholas Sonntag,

  Executive Vice President,

  Corporate Development(4)

  	
   

  	
  2008

  2007

  2006

  	
   

  	
  325,000

  189,583

  —

  	
   

  	
  12,682

  —

  —

  	
   

  	
  6,818

  —

  —

  	
   

  	
  —

  90,000

  75,000

  	
   

  	
  121,038

  —

  —

  	
   

  	
  110,709

  153,043

  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Melih Ogmen

  Vice President, Heavy Duty

  Operations(5)

  	
   

  	
  2008

  2007

  2006

  	
   

  	
  210,000

  —

  —

  	
   

  	
  —

  —

  —

  	
   

  	
  —

  —

  —

  	
   

  	
  30,000

  —

  —

  	
   

  	
  60,000

  —

  —

  	
   

  	
  17,875

  —

  —

  	
   

  



 






Notes:


 


(1)                                  The numbers disclosed in these columns
represent the aggregate share units issued to each Executive Officer, during
each fiscal year, pursuant to the Westport share unit plans approved by
Shareholders in September 2003 (the “2003 Unit Plan”)
and the amended version of the 2003 Unit Plan approved by the Shareholders in July 2006
(as amended, the “2006 Unit Plan”).  The units granted for performance
compensation are granted subsequent to the fiscal year for which the
compensation applies, and therefore reflect compensation for performance in the
fiscal year prior to the year of issuance. 
Share units under the Annual Compensation column are granted as part of
the annual incentive bonus for the Named Executive Officers (and are not
subject to vesting provisions). Share units listed under the Long Term
Compensation column were granted to Mr. Demers, Dr. Gallagher and Ms. Wong
as part of Westport’s long-term incentive program. Share units listed under the
Long Term Compensation column were granted to Messrs. Sonntag, and Ogmen
as part of Westport’s long-term incentive program and as a separate one-time
retention grant. 2008 Long-term incentive program grants vest only on the
achievement of profitability milestones approved by the Board of Directors,
while the one-time retention grants are subject to vesting over a three-year
period starting in fiscal year 2011. Each vested share unit entitles the Named
Executive Officers to receive one Common Share without payment of any
additional consideration at any time after the date of vesting and prior to the
expiry date. During the fiscal year ended March 31, 2008, all of the units
granted under annual compensation and all of the units granted under Long Term
Compensation as part of the long term incentive program occurred on June 4,
2007, when the previous day’s closing price was $1.86. All of the units granted
as part of the one time retention grant occurred on March 28, 2008, when
the previous day’s closing price was $3.06. 
During the fiscal year ended March 31, 2007, all of the units
granted under annual compensation occurred on April 28, 2006, when the
previous day’s closing price was $1.05, and all of the units granted under Long
Term Compensation occurred on July 20, 2006, when the previous day’s
closing price was $0.97. During the fiscal year ended March 31, 2006, all
of the units granted to the Named Executive Officers occurred on May 26,
2005 when the previous day’s closing price was $1.51.


 


7
















 


(2)                                The numbers disclosed in these columns
represent the aggregate options issued to each Named Executive Officer, during
each fiscal year pursuant to the Westport stock option plan approved by
Shareholders in September, 2003 (the “Stock Option Plan”).  During the fiscal year ended March 31,
2008, stock options which were granted to Mr. Ogmen occurred on May 17,
2007, when the previous day’s closing price was $1.91.  During the fiscal year ended March 31,
2007, stock options which were granted to Ms. Wong and Mr. Sonntag
occurred on September 29, 2006, when the previous day’s closing price was
$1.22.  During the fiscal year ended March 31,
2006, stock options granted to the Mr. Demers, Dr. Gallagher and Ms. Wong
occurred on May 26, 2005, when the previous day’s closing price was $1.51,
and stock options granted to Mr. Sonntag as part of his consulting
contract occurred on March 30, 2006, when the previous day’s closing price
was $0.92.


 


(3)                                The column entitled “All Other
Compensation” includes employer contributions to RRSP or Employee Share
Purchase programs.  These are voluntary
participation programs where the employer matches employee contributions up to
a maximum 5% of base salary per pay period. 
Other compensation for Mr. Sonntag during the fiscal year ended March 31,
2008 includes $61,209 in taxable assignment benefits, $39,750 in bonus related
to his consulting contract in 2006, and $9,750 in RRSP employer contributions, and during the fiscal year ended March 31,
2007 includes $26,418 in taxable assignment benefits, $1,625 in RRSP employer
contributions and $125,000 in consulting fees. Other compensation for Dr. Ogmen
during the fiscal year ended March 31, 2008 includes a $10,000 employment
signing bonus and $7,875 in RRSP employer contributions.  Perquisites and employee program benefits
(medical, life and disability insurance) received in 2006, 2007 or 2008 did not
exceed the lesser of $50,000 and 10% of the total annual salary and bonuses for
any of the Named Executive Officers in any of those years and are therefore not
reported in the table.


 


(4)                                Mr. Sonntag completed a consulting
contract in fiscal year 2007 and was hired as President, Asia Business Unit in September 2006.  All compensation related to Mr. Sonntag’s
consulting contract is reported in the All Other Compensation column.


 


(5)                                Dr. Ogmen joined Westport on April 1,
2007.


 


The aggregate cash compensation earned by the
Corporation’s five highest officers and/or employees during the financial year
ended March 31, 2008 was $2,035,216. 
The aggregate cash compensation earned by the Corporation’s Named
Executive Officers during the financial year ended March 31, 2008 was
$1,969,123.


 


Westport does not currently have a stock appreciation
rights plan for its employees.


 


Option and Share Unit Grants During the Year Ended March 31,
2008


 


Stock options and share units granted to the Executive
Officers during the fiscal year ended March 31, 2008 were as follows.


 


	
   

  	
   

  	
  Common Shares Under Securities
  Granted (#) (1)

  	
   

  	
  % of Total

  Options/Share

  Units

  Granted in 

  	
   

  	
  Exercise

  Price

  Options/

  Share

  	
   

  	
  Market Value of

  Common Shares

  Underlying

  Options/Share

  Units on Date of 

  	
   

  	
  Expiry Date

  Options/Share

  	
   

  
	
  Name

  	
   

  	
  Options/Share Units

  	
   

  	
  Fiscal Year

  	
   

  	
  Units

  	
   

  	
  Grant

  	
   

  	
  Units

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  David Demers

  	
   

  	
  57,796

  273,177

  	
  (3)

  (3)

  	
  17.1

  	
  %(3)

  	
  —

  	
   

  	
  $

  $

  	
  1.86

  1.86

  	
   

  	
  June 4, 2015
  June 4, 2015

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Michael Gallagher

  	
   

  	
  54,183

  256,104

  	
  (3)

  (3)

  	
  16.0

  	
  %(3)

  	
  —

  	
   

  	
  $

  $

  	
  1.86

  1.86

  	
   

  	
  June 4, 2015
  June 4, 2015

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Elaine Wong

  	
   

  	
  31,788

  150,248

  	
  (3)

  (3)

  	
  9.4

  	
  %(3)

  	
  —

  	
   

  	
  $

  $

  	
  1.86

  1.86

  	
   

  	
  June 4, 2015
  June 4, 2015

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Nicholas Sonntag

  	
   

  	
  6,818

  61,038

  60,000

  	
  (3)

  (3)

  (3)

  	
  6.6

  	
  %(3)

  	
  —

  	
   

  	
  $

  $

  $

  	
  1.86

  1.86

  3.06

  	
   

  	
  June 4, 2015
  June 4, 2015 March 28, 2016

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Melih Ogmen

  	
   

  	
  30,000

  60,000

  	
  (2)

  (3)

  	
  12.0

  3.1

  	
  %(2)

  %(3)

  	
  $

  	
  1.91

  	
  (2)

  	
  $

  $

  	
  1.91

  3.06

  	
   

  	
  May 17, 2015
  March 28, 2016

  	
   

  
																



 


8

















 






Notes:


 


(1)                                  For a detailed description of the
terms of the options and share units, please see “Equity Compensation Plan Information”.


 


(2)                                  Options.


 


(3)                                  Share units.


 


Aggregated
Option and Share Unit Exercises During the Year Ended March 31, 2008 and
Financial Year-End Option and Performance Share Unit Values


 


The following table sets forth certain information
respecting the numbers and accrued value of unexercised stock options and share
units as at March 31, 2008, as well as options and share units exercised
by the Named Executive Officers during the fiscal year ended March 31,
2008.


 


	
   

  	
   

  	
  Securities

  Acquired on

  Exercise

  Options/Share

  	
   

  	
  Aggregate

  Value

  Realized at

  Exercise Date

  Options/Share

  	
   

  	
  Unexercised Options/Share Units as at

  March 31, 2008 (#)

  	
   

  	
  Value of Unexercised In-the-Money

  Options/Share Units as at March 31,

  2008(1) ($)

  	
   

  
	
   

  	
   

  	
  Units (#)

  	
   

  	
  Units ($)

  	
   

  	
  Exercisable

  	
   

  	
  Unexercisable

  	
   

  	
  Exercisable

  	
   

  	
  Unexercisable

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  David Demers

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  168,671

  781,886

  	
  (2)

  (3)

  	
  330,491

  308,805

  	
  (2)

  (3)

  	
  178,242

  2,384,752

  	
  (2)

  (3)

  	
  508,956

  941,855

  	
  (2)

  (3)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Michael Gallagher

  	
   

  	
  54,183

  	
  (3)

  	
  $

  	
  96,988

  	
  (3)

  	
  183,420

  445,921

  	
  (2)

  (3)

  	
  301,088

  286,587

  	
  (2)

  (3)

  	
  177,824

  1,360,059

  	
  (2)

  (3)

  	
  463,676

  874,090

  	
  (2)

  (3)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Elaine Wong

  	
   

  	
  25,000

  	
  (3)

  	
  $

  	
  66,000

  	
  (3)

  	
  81,479

  159,499

  	
  (2)

  (3)

  	
  155,079

  161,331

  	
  (2)

  (3)

  	
  94,696

  486,472

  	
  (2)

  (3)

  	
  253,322

  492,060

  	
  (2)

  (3)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Nicholas Sonntag

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  105,000

  6,818

  	
  (2)

  (3)

  	
  60,000

  121,038

  	
  (2)

  (3)

  	
  214,650

  20,795

  	
  (2)

  (3)

  	
  109,800

  369,166

  	
  (2)

  (3)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Melih Ogmen

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  30,000

  60,000

  	
  (2)

  (3)

  	
  —

  — 

  	
  (2)
 (3)

  	
  34,200

  183,000

  	
  (2)

  (3)

  



 






Notes:


 


(1)                                The value of the unexercised “in-the-money”
options has been determined by subtracting the exercise price of the options
from the closing price of the Common Shares on March 31, 2008 of $3.05, as
reported by the TSX, and multiplying by the number of Common Shares that may be
acquired upon the exercise of the options. 
The value of the unexercised share units has been determined by
multiplying $3.05 (the March 31, 2008 closing price) by the number of
Common Shares that may be acquired upon the exercise of the share units.


 


(2)                                Options.


 


(3)                                Share units.


 


Report
on Executive Compensation


 


The Human Resources and Compensation Committee of the
Board of Directors (the “Human Resources and
Compensation Committee”) supports the Board of Directors in its
oversight responsibilities related to executive compensation. In doing so, the
Human Resources and Compensation Committee is responsible for, among other
things, administering Westport’s executive compensation program and long-term
incentive plans, and for advising and reviewing on employee incentive and
benefit programs for appropriateness.  
The Human Resources and Compensation Committee is also responsible for
evaluating the Chief Executive Officer succession planning process and working
with the Board of Directors on setting the authority and accountability of the
Chief Executive Officer, and for establishing the corporate objectives which
the Chief Executive Office is responsible for meeting together with the metrics
to measure the Chief Executives Officer’s performance.  The Human Resources and Compensation
Committee is additionally responsible for bringing the compensation of the
Chief Executive Officer and the senior management team to the Board of
Directors for approval.  The Human
Resources and 


 


9

















 


Compensation Committee regularly seeks the advice and recommendations
of Westport’s Chief Executive Officer and President and Chief Operating Officer
with respect to the compensation of executive officers.


 


The Human Resources and Compensation Committee reviews
on an annual basis the Corporation’s executive compensation program with the
assistance of third party consultants, if deemed advisable or necessary, to
ensure the continued validity of the general approaches presently
undertaken.  In 2006, the Human Resources
and Compensation Committee conducted a comprehensive review of the Westport
executive compensation program with the assistance of independent outside
consultants Roger Gurr and Associates. 
Roger Gurr and Associates was paid a fee of $61,119 for the foregoing
services.  As a result of this process,
the committee approved a revised executive total compensation program on November 17,
2006 to govern the executive compensation going forward.  This revised program is described below and
has formed the basis of the Corporation’s compensation policy since its
implementation.


 


In 2007, Roger Gurr and Associates was again engaged
by the Human Resources and Compensation Committee to conduct a benchmark review
of the Westport executive base salaries and salary ranges.  They were asked to utilize the same methodology
and comparator groups that were established in 2006 to provide and updated data
set and related observations.   As a
result of this process, the committee confirmed that the executive salary
ranges were appropriate and no salary increases were provided to the Chief
Executive Officer or the President and Chief Operating Officer in fiscal your
2008.  Roger Gurr and Associates was paid
a fee of $6,572 for the foregoing services.


 


Executive Compensation Review


 


The Human Resources and Compensation Committee
believes that a substantial portion of annual executive compensation should be
performance driven and received only when Westport meets targeted goals
approved by the Human Resources and Compensation Committee, or when the
executive is a substantial factor in the success of major projects that benefit
Westport.   This approach provides an
even balancing of a large number of interests that should be considered when
dealing with matters of executive compensation.


 


Westport’s compensation philosophy involves a
performance-based compensation and reward structure that:


 


·                  Has a
significant portion of compensation that is performance based. The compensation
programs are designed to provide higher rewards for increased success and
outstanding performance thereby motivating and assisting in the retention of
outstanding people.  Compensation will be
aligned with the performance of the Corporation (on both a short-term and
long-term basis) and individual areas of responsibility.  Westport’s compensation philosophy strives to
provide management with a clear and common understanding of the Corporation’s
objectives and the rewards for achievement of objectives.


 


·                  Aligns the
interest of executive and senior management with those of the
shareholders.  The compensation programs
are designed to reward objectives that create shareholder value –
profitability, operating cash flows, revenue growth, and stock performance.   This is achieved by linking the payout of
annual bonus and long term incentives to specific performance metrics for
profitability and cash management within the annual operating and strategic
business plans.


 


·                  Provides
competitive compensation.  The compensation
programs are designed to attract, retain and motivate high caliber executives
and senior management and to achieve annual and strategic objectives that build
shareholder value.  The programs are
designed to encourage and incentivize strong corporate performance (financial
and non financial) and individual performance. Actual compensation results are
intended to be competitive with comparator industry companies.


 


10

















 


In order to retain, motivate and attract high caliber
executives and senior management, Westport’s executive compensation plan has
historically consisted of three principal components:


 


·                  base salary,


 


·                  annual incentive program, and


 


·                  long-term annual incentive program.


 


The programs are designed to provide total
compensation near the median level of total compensation for comparator group
companies, with third quartile compensation achievable with exceptional
performance. It also strives to balance short-term and long-term rewards to encourage
the long-term enhancement of shareholder value. The Human Resources and
Compensation Committee retains the right to design guidelines and policies
relating to vesting provisions.


 


Base Salary


 


·                  The Human
Resources and Compensation Committee provides recommendations to the Board of
Directors with respect to salary guidelines for the executive management team.


 


·                  Chief Executive
Officer and the President and Chief Operating Officer base salaries are
recommended to the Board of Directors by the Human Resources and Compensation
Committee, based on proposals made by the Chairman of the Board of Directors.


 


·                  The base
salaries for the other senior officers are at the discretion of the Chief
Executive Officer and President and Chief Operating Officer and reviewed by the
Human Resources and Compensation Committee.


 


·                  Based on the
recommendation of third party consultants, salary ranges are based on two
comparator groups (each, a “Comparator Group”)
– a Canadian Industrial Technology group and a US Alternative Power &
Energy Technology group which are used as a guideline in setting bases salaries
for the executive officers.  Base
salaries are set to maintain attractiveness with the Comparator Group.  In addition to Comparator Group levels for
comparable positions, increases in base salary are based upon an evaluation of
such factors as level of responsibility, individual performance, and
contributions to the Corporation, as well as the expected market value of
senior executives based on executive experience and qualifications.


 


Annual Incentive Program


 


·                  Following a
review with third party consultants of the annual bonus practices of the
Comparator Group, the Board of Directors, based on a recommendation of the
Human Resources and Compensation Committee, determined that annual bonus
opportunities for executive management will be set to maintain Comparator Group
attractiveness and be based on achieving performance metrics around corporate
and individual areas of responsibility.


 


·                  Annual bonus
performance metrics of consolidated net profitability, operating profitability,
operating cash flows, and revenue growth will be used with operating
profitability metric being weighted the highest in terms of priority
achievement for the Chief Executive Officer, President and Chief Operating
Officer and Chief Financial Officer. Incentive awards may range from a 0.0 to
2.0 performance factor, with the payout for the target performance factor of
1.0 being 50% of annual salary.


 


11

















 


·                  All other
executive officers will have their performance metrics and performance factor
scales set both per each individual area of the business responsibility
(financial and strategic metrics) and at the consolidated performance metric
level. Incentive awards may range from a 0.0 to 2.0 performance factor, with
the payout for the target performance factor of 1.0 ranging from 25-40% of
annual salary.


 


·                  The Board of
Directors always reserves the right to award bonuses at its discretion.


 


·                  Bonus awards are
generally designed to be aligned to shareholder interests as they will be
provided in a combination of cash and share units as determined by the Human
Resources and Compensation Committee.


 


Long-Term Incentive
Program


 


Long-term incentive awards
are made annually each fiscal year, and are designed to reinforce the
connection between executive officer compensation and Westport’s financial
performance, by motivating and rewarding participants for improving long term
financial strength and enhancing shareholder value.


 


A three-year Long-Term Incentive plan (“LTI plan”) was approved November 17, 2006 by the Board
of Directors in which Restricted Share Units (“RSUs”)
reserved under Westport’s 2006 Unit Plan are granted to participating
executives and selected employee members upon the achievement of performance
metrics established for the 2007 through 2009 period.  These performance metrics include
profitability, revenue growth and stock price appreciation.  The three-year LTI plan has an annual
targeted RSU pool size of 800,000 RSUs and awards may range from a 0.0 to 2.0
performance factor in the event the set performance metrics are either exceeded
or not satisfied.  The new LTI plan also
has established vesting provisions for any RSUs granted under the program. RSUs
granted under the LTI plan during the fiscal year ended March 31, 2008
vest on profitability targets.


 


Minimum
Share Ownership Guidelines


 


(i)                                     Westport directors are required to hold a
minimum value of Common Shares or share units of the Corporation equal to their
annual retainer, to be acquired over a five-year period;


 


(ii)                                  each of Westport’s executive officers is
required to hold a minimum value of Common Shares or share units  or options of the Corporation equal to his or
her annual salary, to be acquired over a five-year period;


 


Employment
Agreements – Termination and Change of Control


 


All of Westport’s Named Executive Officers have
entered into employment agreements with Westport that have indefinite
terms.  Pursuant to the terms of each
employment agreement, each executive officer is entitled to an annual base
salary, annual or discretionary incentive bonuses and long term incentives
through the granting from time to time of stock options and share units
pursuant to Westport’s equity based compensation plans.


 


Pursuant to the terms of the above-described
employment agreements, in the event of termination of an executive’s employment
by Westport without cause, each of the Named Executive Officers is entitled to
an amount ranging from twelve to twenty-four months salary and benefits, may be
entitled to annual or incentive bonuses, and may be entitled to immediate
vesting of all unvested stock options and share units previously granted to the
Named Executive Officer.


 


12

















 


Mr. Demers and Dr. Gallagher are entitled to
an amount of twenty-four months of salary, benefits and annual or incentive
bonuses, and the immediate vesting of all unvested stock options and share
units previously granted to them in the event of such termination.


 


Ms. Wong is entitled to an amount of twelve
months of salary and benefits plus one month of additional salary and benefits
for every year of service as an executive to a maximum of eighteen months of
salary, benefits and annual or incentive bonuses, and the immediate vesting of
all unvested stock options and share units previously granted to her in the
event of such termination.


 


Mr. Sonntag is entitled to an amount of twelve
months of salary and benefits in his first year of service, an amount of
eighteen months of salary and benefits in his second year of service, an amount
of twenty-four months of salary and benefits after his second complete year of
service, and, in any year, the immediate vesting of all unvested stock options
and share units previously granted to him in the event of such termination.


 


Dr. Ogmen is entitled to an amount of twelve
months of salary and benefits in the event of such termination.


 


Mr. Demers, Dr. Gallagher and Ms. Wong
each have change of control provisions in their respective employment
agreements that provide that if they are terminated following a change of
control, or should they resign following a change of control, they are entitled
to an amount equal to not less than two years of salary, benefits and annual or
incentive bonuses, and to the immediate vesting of all unvested stock options
and share units previously granted to them.


 


Mr. Sonntag has a change of control provision in
his employment agreement that provides that if he is terminated following a
change of control, he is entitled to an amount not less than two years of
salary, benefits and annual or incentive bonuses, and to the immediate vesting
of all unvested stock options and share units previously granted to him.


 


For the purpose of the above, a change of control is
defined to have occurred upon the happening of any of the following: (i) the
acquisition, by whatever means, by an entity of ownership or control of more
than 30% of the Common Shares; (ii) the amalgamation, consolidation, or
merger with any other company resulting in Westport owning less than 50% of the
outstanding shares after such reorganization; (iii) the sale of all or
substantially all of the assets of Westport; (iv) approval by the Shareholders
of Westport of the liquidation, dissolution or winding-up of Westport; or (v) the
majority of the members of the Board of Directors elected at a meeting of
Shareholders not being management nominees.


 


Composition
of Compensation Committee


 


The members of the Human Resources and Compensation
Committee for the fiscal year ended March 31, 2008 were Henry F.
Bauermeister, (Chair), Dr. Dezsö Horváth and John Beaulieu.  Mr. Kenneth Socha, a former member of
the Human Resources and Compensation Committee, resigned as a member of the
Board of Directors on July 26, 2007.


 


Submitted by the Human Resources and Compensation
Committee:


 


Henry F. Bauermeister (Chair)


John Beaulieu


Dr. Dezsö Horváth


 


13

















 


PERFORMANCE GRAPH


 


The Common Shares have been listed and posted for
trading on the Toronto Stock Exchange (the “TSX”),
under the trading symbol “WPT” since June 30, 1999.  Prior to that time they were traded on The
Alberta Stock Exchange.  The following
graph and table is a reporting requirement under Canadian securities laws, and
compares the change in the cumulative total Shareholder return on the Common
Shares over the period from March 31, 2003 to March 31, 2008
(assuming a $100 investment was made on March 31, 2003 at the closing
price of the Common Shares on that date), with the cumulative total return of
the S&P/TSX Composite Index over the same period, assuming reinvestment of
dividends.


 


Cumulative Total Shareholder Return
on $100 Invested in


Common Shares on March 31, 2008





 


	
   

  	
   

  	
  March 31,

  2003

  	
   

  	
  March 31,

  2004

  	
   

  	
  March 31,

  2005

  	
   

  	
  March 31,

  2006

  	
   

  	
  March 31,

  2007

  	
   

  	
  March 31,

  2008

  	
   

  
	
   ̈

  	
  S&P/TSX Composite Index

  	
   

  	
  $

  	
  100

  	
   

  	
  $

  	
  137.73

  	
   

  	
  $

  	
  156.92

  	
   

  	
  $

  	
  201.53

  	
   

  	
  $

  	
  224.56

  	
   

  	
  $

  	
  233.55

  	
   

  
	
  n

  	
  Westport

  	
   

  	
  $

  	
  100

  	
   

  	
  $

  	
  148.32

  	
   

  	
  $

  	
  120.13

  	
   

  	
  $

  	
  63.09

  	
   

  	
  $

  	
  105.37

  	
   

  	
  $

  	
  204.70

  	
   

  



 


14
















 


EQUITY
COMPENSATION PLAN INFORMATION


 


Summary


 


The following table sets forth, as at March 31,
2008, the compensation plans of Westport under which Common Shares are
authorized for issuance.


 


	
  Plan Category

  	
   

  	
  Number of Common

  Shares to be Issued Upon

  Exercise of Outstanding

  Options, Warrants and

  Rights

  	
   

  	
  Weighted-Average

  Exercise Price of

  Outstanding Options

  	
   

  	
  Number of Common

  Shares Remaining

  Available for Future

  Issuance Under Equity

  Compensation Plans

  	
   

  
	
  Equity compensation plans
  approved by security holders

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Stock Option Plan(1)

  	
   

  	
  4,186,845

  	
   

  	
  $

  	
  1.92

  	
   

  	
  365,115

  	
   

  
	
  2001 Performance Unit Plan(2)

  	
   

  	
  40,000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  2006 Unit Plan(3) (4)

  	
   

  	
  3,750,468

  	
   

  	
  —

  	
   

  	
  2,630,987

  	
   

  
	
  Equity compensation plans not
  approved by security  holders
  (5) (6)

  	
   

  	
  138,452

  	
   

  	
  $

  	
  4.04

  	
   

  	
  —

  	
   

  
	
  Total

  	
   

  	
  8,115,765

  	
   

  	
  $

  	
  1.99

  	
   

  	
  2,996,102

  	
   

  



 






Notes:


 


(1)                                  The options outstanding
under the Stock Option Plan were held as follows: 35.1% or 1,469,557 by
employees, 50.0% or 2,093,670 by officers, 5.6% or 235,000 by directors who
were not also officers, and 9.3% or 388,618 by consultants.


(2)                                  The units outstanding
under the 2001 Performance Unit Plan were held as follows: 100% or 40,000 by
officers.


(3)                                  Effective as of July,
2006 the 2003 Unit Plan was amended and is now referenced as the “2006 Unit
Plan”.  See “Share Unit
Plans” below.


(4)                                  The units outstanding
under the 2006 Unit Plan were held as follows: 88.5% or 3,317,383 by officers
and 11.5% or 433,085 by employees.


(5)                                  In January 2003,
as part of a negotiated initial employment arrangement, Westport granted
options to acquire up to 50,000 Common Shares to Dr. Gallagher with an
exercise price per Common Share of $2.61, being the market value of the Common
Shares on the date of grant of the options. 
These options expire on January 6, 2011 and vest over a two year
period (1/3 upon grant and 1/3 on each of the anniversary dates of the date of
grant).


(6)                                  Mr. Guff Muench,
former President of Cummins Westport Inc., has options to acquire up to 88,452
Common Shares at a weighted average exercise price of $4.85.  The options were granted to Mr. Muench
at a time when he was President of Cummins Westport Inc.


 


Westport currently has in place two active equity
based compensation plans, the Stock Option Plan and the 2006 Unit Plan, both of
which are described in more detail below.


 


Stock
Option Plan


 


On July 22, 2003, the Board of Directors adopted
the Stock Option Plan, which stipulated that the maximum number of Common
Shares issuable under it would not exceed 7,050,000 Common Shares (or 7.3% of
the currently issued and outstanding Common Shares).  The Stock Option Plan was approved by
Shareholders at the Annual and Special Meeting of Westport held on September 3,
2003.


 


The Stock Option Plan authorizes the Board of
Directors to issue options to directors, officers, employees, and providers of
services to Westport or Westport’s subsidiaries.  The number of Common Shares reserved for
issuance to Westport insiders cannot exceed 10% of the outstanding Common
Shares, and Common Shares issued to any one insider within a one-year period
cannot exceed 3% of the outstanding Common Shares.  Additionally, the number of Common Shares
reserved for issuance to 


 


15

















 


insiders under the Stock Option Plan and any other
share compensation arrangement of the Corporation shall not exceed 10% of the
total number of issued and outstanding Common Shares.  Options issued pursuant to the Stock Option
Plan must have an exercise price not less than the closing price of the shares
on the TSX on the day prior to the day of grant.  The period during which an option may be
exercised shall be determined by the Board of Directors at the time the option
is granted, subject to any vesting limitations which may be imposed by the
Board of Directors at the time such option is granted, provided that no option
shall be exercisable for a period exceeding eight years from the date the
option is granted.


 


The options granted under the Stock Option Plan expire
on the earlier of the date of the expiration of the set option period and 90
days after the date a holder ceases to hold the position or positions of
director, officer, employee, or service provider of Westport or its
subsidiaries, as the case may be (provided that such option holder has ceased
to be a director, officer, employee, or provider of services for a reason other
than cause, death, permanent disability, or normal retirement).  In the event of the death or permanent
disability of a holder, any option previously granted to him or her shall be
exercisable until the end of the option period noted above, or until the
expiration of 12 months after the date of death or permanent disability of such
option holder, whichever is earlier.  In
the event an optionholder ceases to be a director, officer, employee, or
service provider for cause, any option previously granted to him or her shall
immediately expire and terminate.  In the
event of a sale by Westport of all or substantially all of its assets or in the
event of a change in control of Westport, each holder shall be entitled to
exercise, in whole or in part, the options granted to such holder, either
during the term of the option or within 90 days after the date of the sale or
change of control, whichever first occurs. 
Options are non-assignable, although they contain provisions permitting
the legal personal representative of an optionee, for a period of 12 months, to
exercise the option in the event of the death of the optionee.  The Board of Directors may amend or revise
the terms of the Stock Option Plan, subject to receipt of all necessary
regulatory and Shareholder approvals. 
Any amendment to the Stock Option Plan must be approved by a majority of
votes cast at a meeting of the Shareholders.


 


As at March 31, 2008, an aggregate of 4,186,845
options were outstanding under the Stock Option Plan, representing
approximately 4.4% of the issued and outstanding Common Shares, and as at June 3,
2008, an aggregate of 4,004,223 such options were outstanding, representing
approximately 4.2% of the issued and outstanding Common Shares, with 366,252
Common Shares remaining available for issuance in connection with new options
grants under the Stock Option Plan.


 


Share
Unit Plans


 


A performance share unit granted pursuant to the
Corporation’s Performance Share Unit Plan entitles the holder, subject to the
terms and conditions of the plan and the holder’s unit agreement, to receive
one fully paid Common Share.


 


In 2001, Shareholders approved the 2001 Performance
Unit Plan.  A maximum of 1,500,000 shares
were issuable pursuant to the 2001 Performance Unit Plan and as at March 31,
2008, an aggregate of 40,000 performance units were outstanding under the 2001
Performance Unit Plan, representing 0.04% of the issued and outstanding Common
Shares (2.7% of the total shares issuable under such plan).  No further units will be issued under the
2001 Performance Plan.


 


In September 2003, Shareholders approved the 2003
Unit Plan to replace the 2001 Performance Unit Plan.  The primary objective of the 2003 Unit Plan
when implemented was to conserve cash reserves by using equity to pay part of
the annual and other incentives to Westport’s officers, employees, and
directors (including those of Westport’s subsidiaries).  Specifically, the 2003 Unit Plan was used to
issue performance share units to: (i) recognize contributions made by
employees or contractors in accordance with Westport’s existing bonus plans and
compensation; (ii) serve in lieu of cash payments to Westport’s directors
in respect of annual retainers; (iii) enable Westport to attract key
employees by issuing 


 


16

















 


performance units as signing bonuses; (iv) enable
Westport to settle contractual amounts payable as a result of termination or
statutory severance payments owing to employees; or (v) enable Westport to
issue units in lieu of cash payments for selected consulting or contract
services.


 


The aggregate number of Common Shares initially
reserved for issuance under the 2003 Unit Plan was limited
to 2,500,000.  At the 2006 Annual
and Special Meeting of the Corporation, a resolution was approved to amend the
2003 Unit Plan to increase the number of Common Shares reserved for issuance
thereunder.  The Board of Directors
determined that an additional 5,000,000 Common Shares be reserved for issuance
under the 2003 Unit Plan and the fixed maximum number of Common Shares reserved
under the Unit Plan be amended accordingly, resulting in a maximum of 7,500,000
Common Shares being reserved for issuance under the 2006 Unit Plan, being 7.8%
of the currently issued and outstanding Common Shares.  The Board of Directors additionally approved
and recommended a number of amendments to the 2003 Unit Plan to incorporate
certain recommendations made by Institutional Shareholder
Services, Inc.  The significant
amendments to the 2003 Unit Plan were approved by Shareholders at the
Corporation’s 2006 Annual and Special Meeting with the amended plan being
referred to as the “2006 Unit Plan”.  The
current terms of the 2006 Unit Plan provide that (i) units may not be
granted to satisfy retainers payable to directors of Westport or in lieu of
cash payments; (ii) units may not be granted for selected consulting or
contract services; and (iii) the number of Common Shares reserved for
issuance to insiders under the 2003 Unit Plan, and all other options for Common
Shares granted to insiders as compensation or incentive may exceed 10% of the
outstanding Common Shares, provided that the number of Common Shares issued to
insiders under the 2006 Unit Plan or any other share compensation arrangement
shall not exceed 10% of the outstanding Common Shares within any one-year
period. Additionally, amendments to the 2006 Unit
Plan are being proposed for approval by the Shareholders at the Meeting which
provide that the number of Common Shares reserved for issuance to Westport
insiders pursuant to the 2006 Unit Plan and all other equity compensation plans
cannot exceed 10% of the total number of issued and outstanding Common Shares.


 


The Board of Directors has the discretion to select
the participants to the 2006 Unit Plan, grant the units and impose such
restrictions, vesting periods and provisions, and other conditions on the units
as it determines. The 2006 Unit Plan also stipulates that: (i) the number
of Common Shares issued to any one insider and such insider’s associates (as
that term is defined by the Securities Act
(British Columbia)) under the 2006 Unit Plan or any other Westport share
compensation arrangement, within a one year period, shall not exceed 3% of the outstanding
Common Shares; and (ii) the number of Common Shares that may be issued
under the 2006 Unit Plan to the directors of Westport (other than directors who
are also officers) will not exceed 200,000 Common Shares in the aggregate.  The Board of Directors may amend or revise
the terms of the 2006 Unit Plan, subject to receipt of all necessary approvals,
provided that no such amendment or revision shall materially adversely affect
the rights of any participant under the plan.


 


The units under the 2006 Unit Plan expire on the date
of the expiration of the set expiration period as set by the Board of
Directors, provided that no unit shall be exercisable for a period exceeding
ten years from the grant date.  Units or
any rights or interest of a holder under the 2006 Unit Plan may be assigned,
encumbered or transferred to the extent that certain rights may pass to a
beneficiary or legal representative upon the death of the holder by will or by
the laws of succession and distribution. Units or any rights or interest of a
holder under the 2006 Unit Plan may also be assigned to the extent permitted by
law.


 


As at March 31, 2008, an aggregate of 3,750,468
units were outstanding under the 2006 Unit Plan, representing 3.9% of the
issued and outstanding Common Shares, and as at June 3, 2008, an aggregate
of 3,750,468 units were outstanding, representing 3.9% of the issued and
outstanding Common Shares.  As at June 3,
2008, 2,630,987 Common Shares remain available for issuance in connection with
new unit grants under the 2006 Unit Plan.


 


17

















 


Amendments to Security Based
Compensation Plans


 


The terms of the Stock
Option Plan and 2006 Unit Plan do not reflect recent policy changes of the TSX,
nor emerging practices and limitations on management that are typically being
adopted in new equity compensation plans. On June 6, 2006, the TSX
published a Staff Notice updating previously issued guidance on amendment
procedures for share option and share unit plans and extending the option and
unit expiry date during a blackout period.


 


As a part of Westport’s
corporate governance practices and trading policies, the Corporation imposes
certain self-imposed periods, from time to time, where insiders and employees
are restricted from trading Westport securities. These restricted trading
periods are commonly referred to as “blackout periods”. The TSX’s Staff Notice
acknowledges that insiders and employees of issuers should not be disadvantaged
by not being permitted to exercise their options before they expire during a
blackout period, and the TSX now allows issuers to amend their share option and
share unit plans to extend the expiration date of options that will expire
during or soon after such blackout period for a fixed number of days after the
end of a blackout period. As a result, the Corporation is seeking Shareholder
approval at the Meeting for these amendments to the Stock Option Plan and 2006
Unit Plan.  If the option or share unit
expires during a blackout period, the proposed amendments to the Stock Option
Plan and 2006 Unit Plan will extend the expiry date of the option or unit for
ten business days after the end of the last day of the blackout period. Also,
if the option or unit expires within 10 business days after the end of the
blackout period, the expiry date will be extended to allow for a total of 10
business days after the end of the last day of the blackout period. For
example, if the option or unit expires four business days after the end of the
blackout period, the expiry date for that option or unit will be extended by an
additional six business days.


 


The Board of Directors
has additionally approved amendments to the Stock Option Plan to provide that
if any eligible participant under the Stock Option Plan is subject to a
requirement that he or she not benefit personally from a grant of options, the
Board of Directors may grant any options to which such person would otherwise
be entitled to such person’s employer or other entity designated by them that
directly or indirectly imposes that requirement on the individual.


 


For additional
information, see the section of this Circular entitled “Approval of
Amendments to Security Based Compensation Plans”.


 


INTEREST OF INFORMED PERSONS IN MATERIAL
TRANSACTIONS


 


Other than as described below or elsewhere disclosed
in this Circular, no insider of Westport, nor any person nominated for election
as a director of Westport, nor any associate or affiliate of such persons, has
had any material interest, direct or indirect, in any transaction of Westport’s
since the commencement of Westport’s last financial year, nor in any proposed
transaction which has materially affected or would materially affect Westport
or any of its subsidiaries.


 


On July 26, 2007, Perseus, L.L.C. (“Perseus”), a Washington, DC based private equity fund
management group, through its affiliates, exercised the conversion option on
approximately $22.1 million of secured, subordinated convertible debentures
(the “Notes”) held by them in order to
acquire approximately 16.5 million common shares of Westport, which were then
sold to third parties at a price of $3.10 per share for total gross proceeds of
approximately $51.3 million with all proceeds going to Perseus and its
affiliates.  As an inducement for Perseus’s
conversion of the Notes, Westport agreed to pay an amount equal to 50% of the
interest that would otherwise have been payable on the Notes, on December 31,
2007 and June 30, 2008, had the Notes not been converted.  Interest accrued to July 25, 2007 of
$0.1 million and the inducement payment of $0.8 million totaled approximately
$0.9 million and can be settled at Westport’s option, in a combination of
common shares, new Notes and, in certain circumstances, cash.  On January 


 


18

















 


10  2008,
Westport issued 156,816 shares to settle $0.5 million of the amounts payable to
Perseus, net of any applicable taxes.  Messrs. John
C. Fox and Kenneth M. Socha, both Senior Managing Directors of Perseus, served
on the Board of
Directors until July 26, 2007.


 


Mr. Littlefair, a member of Westport’s Board of Directors, is
President, Chief Executive Officer and a director of Clean Energy Fuels Corp. (“Clean Energy”), a publicly traded company
in which Westport has approximately 2.3% of the issued and outstanding shares
and with which Westport maintains an ongoing business relationship. In
addition, Mr. Demers
served as a director of Clean Energy until April 4, 2008. 
Mr. Kenneth M. Socha also served as a director of Clean Energy.  Mr. Thomas Boone Pickens, an insider of
Westport, is also a director of Clean Energy. Further, during the third quarter
of the fiscal year ended March 31, 2008, Westport entered into a
non-interest bearing, limited recourse loan of $6.0 million with Clean Energy
Finance, LLC. This loan allowed Westport to finance the establishment and
maintenance of an inventory of approximately 75 liquefied natural gas fuel
systems in anticipation of deliveries to customers of the Ports of Los Angeles
and Long Beach, and is repayable only from the receipt of funds from the sale
of these fuel systems.


 


INTEREST OF CERTAIN PERSONS OR COMPANIES IN
MATTERS TO BE ACTED UPON


 


Except as set forth below, management of the
Corporation is not aware of any material interest, direct or indirect, by way
of beneficial ownership of Common Shares or otherwise of any director or
proposed nominee for election as director, or executive officer or anyone who
has held office as such since April 1, 2007, or of any associate or
affiliate of any of the foregoing in any matter to be acted in at the Meeting
other than the election of directors except as described herein.


 


The Corporation’s directors and executive officers may
be considered as having an interest in the amendments to the Stock Option Plan
and 2006 Unit Plan as they have been and may be granted options or units
thereunder.


 


RECEIPT OF 2008 FINANCIAL STATEMENTS


 


Westport’s financial statements for the fiscal year
ended March 31, 2008 have been forwarded to Shareholders.  No formal action will be taken at the Meeting
to approve the financial statements, with the requirements of the Business Corporations Act (Alberta) (the “Act”) being met with the advance circulation of such
financial statements.  If any
Shareholders have questions respecting such financial statements, the questions
may be brought forward at the Meeting.


 


ELECTION OF DIRECTORS


 


Unless otherwise directed, the
persons named in the Proxy intend to vote in favour of the election, as
directors of Westport, of the nominees whose names are set forth below.  The Board of Directors
cannot currently consist of less than one director and more than ten directors,
with the number of directors within such range to be fixed from time to time by
resolution of the Board of Directors.  In
order to enable greater flexibility in the constitution of the Board of
Directors, the Corporation is seeking Shareholder approval at the Meeting for
an amendment to the Corporation’s articles to remove the maximum number of
directors permissible. For additional information, see the section of this
Circular entitled “Approval of Amendment of
Articles”. At the present time, Westport has seven directors.  The Board of Directors has fixed the number
of directors to be nominated at the Meeting at ten.  Each director elected will hold office until
the next annual meeting of Shareholders or until his successor is duly elected,
unless his office is vacated earlier in accordance with the by-laws of Westport
or applicable law.


 


19

















 


The following table and accompanying notes set forth
the names and municipalities of residence of all persons proposed to be
nominated for election as directors, the positions with Westport now held by
them, their principal occupations or employment for the preceding five years,
the dates on which they became directors of Westport, and the number of Common
Shares owned by them or over which they exercise control or direction as at the
Record Date.


 


	
  John A. Beaulieu (73), a US citizen, of Vancouver, Washington, USA,
  joined the Board of Directors in September of 1997 and was appointed
  Chairman in 2002. He is also currently Chair of the Human Resources and
  Compensation Committee. Mr. Beaulieu co-founded Cascadia Pacific
  Management, LLP, a venture capital fund in Portland, Oregon, in 1990 and has
  been actively involved in finding, financing, and assisting in the growth of
  more than 70 emerging growth technology-based companies since 1986.
  Mr. Beaulieu’s business career included being President of Steelcraft Corporation
  and holding other general management positions at American
  Standard & Evans Products. Earlier executive employment was at
  Proctor & Gamble, Ford Motor Co., and Arthur Young & Co.
  Mr. Beaulieu obtained a Bachelor of Commerce degree (1956) and a Masters
  of Business Administration degree (1963), both from Santa Clara University of
  California. Mr. Beaulieu is also a member of the board of directors of
  Parran Capital Inc. (a publicly traded capital pool company), other
  privately-held venture backed enterprises, and one socially focused
  organization.

  	
   

  	
  Chairman of the Board of Directors



  Chair of the Human Resources and Compensation Committee



  Member (former Chair) of the

  Nominating and Corporate Governance Committee  



  Member of the Audit Committee  

  

  41,087
  (1)

  
	
   

  	
   

  	
   

  
	
  Warren J. Baker (69), a US citizen, of Avila Beach, California, USA, joined Westport’s
  board in September of 2002. He is currently Chair of the Nominating and
  Corporate Governance Committee. He has been President of California
  Polytechnic State University in San Luis Obispo, California since 1979.
  Dr. Baker is a Fellow of the American Society of Civil Engineers, a
  Fellow in the Engineering Society of Detroit, a member of the board of
  directors of the California Council for Science and Technology, and a member
  of the U.S. Business-Higher Education Forum. Dr. Baker has served as a
  member of the U.S. National Science Board, and has served as Chair of the
  board of directors of the ASCE Civil Engineering Research Foundation.
  Dr. Baker is also a member of the board of directors of John
  Wiley & Sons, Inc. of Hoboken, New Jersey, a New York Stock
  Exchange listed global publisher of print and electronic products,
  specializing in scientific, technical, and medical books and journals.
  Dr. Baker also served on the board of directors of the Society of
  Manufacturing Engineers’ Education Foundation, and is a member of the Board
  of Governors, U.S. – Mexico Foundation for Science and a member of the board
  of directors, MESA California (Mathematics-Engineering-Science Achievement).

  	
   

  	
  Chair of the Nominating and

  Corporate Governance Committee



  Member of the Strategy Committee  



  Board Technology Advisor  



  7,500(1)

  
	
   

  	
   

  	
   

  
	
  Henry F. Bauermeister Jr. (69), a US citizen, of Lee’s Summit, Missouri, USA,
  joined Westport’s board in October of 2005. He is currently Chair of the
  Audit Committee. From 1995 to 2005, Mr. Bauermeister was the President
  of Cummins Mid-America, the Cummins distributor for Kansas and Missouri,
  located in Kansas City. From 1978 to 1995, he was President of Diesel ReCon
  at Cummins Inc., the business unit responsible for remanufacturing and
  reselling used engines and parts. Under Mr. Bauermeister’s leadership,
  revenues at Cummins Diesel ReCon grew tenfold. Mr. Bauermeister is a
  Certified Public Accountant (Indiana) and received his bachelor’s degree from
  the University of Nebraska where he majored in Accounting and minored in
  Economics. Mr. Bauermeister has held a number of financial positions
  within Cummins including the Group Controller position for the Components
  Group.

  	
   

  	
  Chair of the Audit Committee



  Member (former Chair) of the Human Resources and Compensation Committee
  



  50,000(1)

  



 


20

















 


	
  M.A. (Jill) Bodkin (64), a Canadian citizen,
  of Vancouver,  British Columbia, Canada, is a new nominee to
  Westport’s Board of Directors. She has been the Chair and Chief Executive
  Officer of Golden Heron Enterprises since 1996. In 2007, Ms. Bodkin was
  also appointed Director for Canadian Development for KCTS 9 Television, the Seattle,
  Washington based Pacific Northwest PBS station. From 1987 to 1996,
  Ms. Bodkin was with Ernst & Young as a Corporate Finance
  Partner, advising on financing technology companies and capital projects in
  North America and Asia. After her early career in trade and finance in
  Ottawa, in 1981 Ms. Bodkin became British Columbia’s first woman Deputy
  Minister, responsible for financial institutions, and later, Founding Chair
  of the British Columbia Securities Commission. Her mid-career graduate
  studies were in public finance at the Maxwell School, Syracuse University.
  Ms. Bodkin is a Governor and former Chair of the Vancouver Board of
  Trade, as well as a former member of the boards of directors of the
  Laurentian Bank of Canada and KCTS 9 Television. Ms. Bodkin is the
  President of the Board of Pacific Coast Television, as well as President of
  Yaletown Venture Partners, VCC, Vancouver, and is a member of the Oversight
  Council for the Canadian Institute of Chartered Accountants. She has served
  on boards of policy think tanks, including the Thailand Development Research
  Institute, the Institute for Research in Public Policy in Canada, and the
  Canada West Foundation.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  David R. Demers (52), a Canadian citizen, of West Vancouver, British Columbia, Canada,
  is a founder of Westport and has been Chief Executive Officer and a director
  since the company was formed in March of 1995. Mr. Demers obtained
  a Bachelor of Physics Degree in 1976 and a Bachelor of Law Degree in 1978,
  both from the University of Saskatchewan. Mr. Demers is also a member of
  the board of directors of Parran Capital Inc. (a publicly traded capital pool
  company), Cummins Westport Inc., a private company in which Westport has a
  50% investment, and Juniper Engines Inc., a private company in which Westport
  has a 49% investment.

  	
   

  	
  Chief Executive Officer



  Member of the Strategy Committee



  364,619 (1)

  
	
   

  	
   

  	
   

  
	
  J. Michael Gallagher (61), a US citizen, of Vancouver,
  British Columbia, Canada, has been a member of Westport’s board since
  July of 2007 and was appointed Westport’s President in October 2004
  in addition to his role as Westport’s Chief Operating Officer, which he has
  held since January 6, 2003. He is also a member of the board of directors of Cummins Westport Inc. and BTIC Westport Inc., both private companies in which Westport has a 50%
  investment. Prior to joining
  Westport, Dr. Gallagher was Senior Vice-President, Operations, Americas,
  for Fluor Corp., an international engineering company headquartered in
  California. He also held senior executive positions with the London-based
  multinational engineering firm Kvaerner Group, as well as with the Bechtel
  Group in San Francisco. Dr. Gallagher is also on the board of several
  non-profit organizations, including the California Natural Gas Vehicle
  Partnership, WestStart-CALSTART and the Canadian Centre for Policy Ingenuity.

  	
   

  	
  President and Chief Operating Officer



  86,810(1)

  



 


21

















 


	
  Dezsö J. Horváth (65), a Canadian citizen,
  of Toronto, Ontario, Canada, has been a member of Westport’s board since
  September 2001. He is currently Chair of the Strategy Committee. He is
  the Dean and holds the Tanna H. Schulich Chair in Strategic Management at the
  Schulich School of Business at York University in Toronto, Ontario, where he
  has taught since 1977. He holds an electrical engineering degree, as well as
  degrees in management (MBA, Licentiate, PhD) from Swedish universities.
  After an early R&D career with the Swedish multinational ASEA (now ABB)
  in the electrical industry, he accepted senior academic appointments at
  Swedish and then Canadian universities. Since becoming Schulich’s Dean in
  1988, Dr. Horváth has worked with internal and external stakeholders to
  position Schulich as “Canada’s Global Business SchoolTM”. In addition to publishing
  books and articles on strategic management and international business,
  Dr. Horváth has been engaged by major corporations and governments as a
  consultant in these fields. In addition to his membership on corporate boards
  in the past, Dr. Horváth is currently a Director of Inscape Corporation
  and Samuel, Son & Co. Limited. He is also on the board of The
  Toronto International Leadership Centre for Financial Sector Supervision (a
  non-profit organization), as well as being on the Advisory Board of the St.
  Petersburg University Graduate School of Management and the International
  Advisory Council of the Guanghua School of Management, Peking University. He
  is a Co-Founder of the Czech Management Centre, Prague, and the International
  Management Centre, Hungary (now part of the Central European University in
  Budapest). Dr. Horváth is a member of the Strategic Management Society,
  the Academy of Management and the Academy of International Business (AIB). In
  2004, he was named AIB International Dean of the Year.

  	
   

  	
  Chair of the Strategy Committee



  Member of the Audit Committee  



  Member of the Human Resources and Compensation Committee



  Member of the Nominating and Corporate Governance Committee



  135,000(1)

  
	
   

  	
   

  	
   

  
	
  Sarah Liao Sau Tung (56), a Hong Kong SAR citizen, of Hong Kong,
  People’s Republic of China, is the former Secretary for the Environment,
  Transport and Works of the Hong Kong Special Administrative Region and a
  member of the Executive Council of Hong Kong 2002-2007. In 1988,
  Dr. Liao founded an environmental consulting company, and in 2001 served
  as an environmental expert/presenter for the Beijing 2008 Olympic Games Bid
  Committee. Dr. Liao served as a Council member of the Environmental
  Division of the Hong Kong Institution of Engineers from 1988 to 1992. Major
  community commitments included chairmanship of the Research and Testing
  Committee of the Consumer Council from 1988 to 1996; member of the
  Occupational Safety Council from 1990 to 1992; the Building Committee of the
  Housing Authority from 1996 to 2000; and a part-time member of the Central
  Policy Unit from 1999 to 2001. She is a Fellow of the Hong Kong Institution
  of Engineers; a Fellow of the Royal Society of Chemistry, UK; and Honorary
  Professor, Civil Engineering Department, University of Hong Kong. A graduate
  from the Diocesan Girls’ School, she earned her bachelor’s degree in
  chemistry and botany, master’s degree in inorganic chemistry and doctorate in
  environmental/occupational health from the University of Hong Kong.
  Dr. Liao was awarded a master’s degree in analytical chemistry by the
  University of Birmingham.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Andrew J. Littlefair (47), a US citizen, of Newport Beach, California, USA, has been a member of Westport’s
  board since July of 2007. He is President, Chief Executive Officer and a
  director of Clean Energy Fuels Corp. (a publicly traded company). From 1996
  to 2001, Mr. Littlefair served as President of Pickens Fuel Corp. From
  1987 to 1996, Mr. Littlefair served in various management positions at
  Mesa, Inc., an energy company of which Boone Pickens was Chief Executive
  Officer. From 1983 to 1987, Mr. Littlefair served in the Reagan
  Administration as a presidential aide. Mr. Littlefair is also currently
  Chairman of NGV America, a U.S. advocacy group for natural gas vehicles.
  Mr. Littlefair holds a B.A. from the University of Southern California.

  	
   

  	
  Member of the Strategy Committee



  38,500(1)

  



 


22

















 


	
  Albert Maringer (63), a
  Canadian citizen, of Canmore, Alberta, Canada, is a new nominee to
  Westport’s Board of Directors. He is the founder, President and Chief
  Executive Officer of Maringer Consulting Alberta Ltd. since June of
  2007. Prior to 2007, Dr. Maringer held the position of President and
  Chief Executive Officer of Siemens Canada Limited from 2000 to 2006.
  Dr. Maringer’s career with Siemens AG spans a 46 year period during
  which, prior to 2000, Dr. Maringer held the following positions within
  Siemens AG’s operations or subsidiaries: President, ATD TD Division for five
  years; General Manager of North America Motor Operations for four years; plus
  various management and engineering leadership roles including strategy
  development, R&D, manufacturing and project management. Dr. Maringer
  has served as a member of the board of directors for The Conference Board of
  Canada in Ottawa and is currently the Co-Chair for the Centre for Foreign
  Owned Enterprises at the Conference Board of Canada. He has also served as a
  member of the board of directors of the Canadian Nuclear Association.
  Dr. Maringer is a board member, Economic Council with the City of
  Mississauga; member of the Board of Trustees, Calgary Zoo, Calgary; and is a
  director and Chairman Emerit with the German-Canadian Chamber of Commerce and
  Industry. Dr. Maringer is also a member of the board with Clinicare Inc.,
  a healthcare information technology company in Calgary, Alberta, and an
  advisory board member of Skypower Corporation in Toronto, Ontario.
  Dr. Maringer is a member of the advisory committee for the Center for
  German-European Studies at York University, Ontario, serves on the advisory
  council of the Schulich School of Business, Ontario, and is a Professor and
  Chair of International Management, Friedrich-Schiller-Universität in Germany.

  	
   

  	
   

  



 






Note:


 


(1)                                  Number of Common Shares Beneficially
Owned or Controlled as at June 3, 2008. 
The information as to this number, not being within the knowledge of
Westport, has been furnished by the respective nominees.


 


(2)                                  For further information on the Audit
Committee’s composition, mandate and other matters please refer to the section
entitled “Audit Committee Matters”
in the Corporation’s Annual Information Form.


 


Compensation
of Directors


 


Westport has a compensation
policy for its outside directors of primarily compensating such directors with
an annual retainer payment.  During the
fiscal year ended March 31, 2008, with the exception of the Chairman of
the Board of Directors, non-management directors were paid an annual retainer
of U.S. $20,000, with the Chairman of Westport receiving an annual retainer of
U.S. $50,000.  A non-management director
was also entitled to an annual fee of U.S. $1,500 for serving as a member of
any committee of the Board of Directors or an additional annual fee of U.S.
$3,700 for acting as Chairman of any such committee.  The exception is the Audit Committee
Chairman, who received an annual aggregate committee retainer of U.S.
$7,500.  Outside Westport directors also
received U.S. $1,000 per board or committee meeting attended in person or by
telephone.  In addition, effective October 15,
2007, outside directors whose time and travel exceeds three days received U.S.
$1,000 per diem payment for the fourth and succeeding days. All of these fees
were paid quarterly.  The total cash
consideration paid by Westport to its outside directors for the fiscal year
ended March 31, 2008, was U.S. $302,975. 
On July 19, 2007, an aggregate of 75,000 fully vested options were
granted to Drs. Baker and Horváth, and Messrs. Bauermeister, Beaulieu
and Littlefair as outside directors of Westport at an exercise price of $3.00
per Common Share.


 


On April 25, 2008, the
Board of Directors approved a new director compensation plan that recognizes
the directors’ time commitments and committee involvement and demands, and that
brings the Board of Directors’
compensation in line with that provided to other boards of comparable companies
in Canada. Commencing in the 2009 fiscal year, non-management directors will be paid an
annual retainer of U.S. $40,000, with the Chairman of Westport receiving an
annual retainer of U.S. $100,000. Non-management directors will also be
entitled to an annual fee of U.S. $7,500 for serving as a member of the
Strategy Committee or Nominating and Corporate Governance Committee of the
Board of Directors, and an 


 


23

















 


annual fee of U.S. $8,500
for serving as a member of the Audit Committee or Human Resources and
Compensation Committee of the Board of Directors. Committee Chairs will receive
an annual retainer of U.S. $10,000, with the exception of the Audit Committee
Chair, who will receive an annual retainer of U.S. $15,000. Outside Westport
directors will no loner receive payment for Board of Directors or committee
meetings attended in person or by telephone.


 


APPOINTMENT OF AUDITORS


 


Westport has requested that KPMG LLP, Chartered
Accountants, act as independent auditors for Westport, subject to Shareholder
approval.  Unless otherwise directed, the
persons named in the Proxy intend to vote in favour of the appointment of KPMG
LLP, Chartered Accountants, of Vancouver, British Columbia as auditors of
Westport, to hold office until the close of the next annual meeting of
Shareholders, at a remuneration to be determined by the Board of Directors.


 


During the fiscal year ended March 31, 2008, KPMG LLP
received $224,540 in remuneration for performing audit responsibilities,
$32,300 for audit related services and $55,162 for tax fees.


 


APPROVAL OF AMENDMENT TO ARTICLES


 


At the Meeting, Shareholders of the Corporation will
be asked to consider and, if thought advisable, to approve a special resolution
amending the articles of the Corporation by removing the maximum number of
directors.  The current articles of the
Corporation provide that the Corporation shall have at least one (1) and a
maximum of ten (10) directors.


 


The text of the special
resolution authorizing the amendment is as follows:


 


“BE IT RESOLVED AS A SPECIAL
RESOLUTION THAT:


 


1.                                      Pursuant to paragraph 173(1)(l) of the Business Corporations Act (Alberta), Article 4 of the
articles of the Corporation is amended by removing the maximum number of
directors permitted, so that Article 4 shall read as follows:


 


“The
Corporation shall have at least one (1) Director.”


 


2.                                        Upon articles of amendment having become
effective in accordance with the provisions of the Business
Corporations Act (Alberta), the articles of the Corporation shall be
amended accordingly.


 


3.                                        Any director or officer of the Corporation be
and is hereby authorized and directed to do all acts and things and to execute
(whether under the corporate seal of the Corporation or otherwise) all
documents as he deems necessary or desirable for the implementation of this
resolution, including the execution and delivery to the Registrar of
Corporations of articles of amendment in duplicate.”


 


The Board of Directors unanimously
recommends a vote FOR the approval of the amendment to the articles of the
Corporation.


 


On any ballot that may be
called for at the Meeting, the Common Shares represented by proxies in favour
of management nominees will be voted in favour of the special resolution in the
absence of directions to the contrary.


 


24
















 


The special resolution authorizing the amendment to
the articles of the Corporation is required to be passed by a majority of not
less than two-thirds of the votes cast by Shareholders who vote in person or by
proxy at the Meeting.  If the special
resolution is passed, articles of amendment will be filed with the Registrar of
Corporations.  The amendment will become
effective when the Registrar of Corporations issues a Certificate of Amendment.


 


Under the Act, any Shareholder may dissent in
respect of the proposed amendment to the articles by following the procedure
prescribed in the Act which is summarized below.


 


A shareholder entitled to dissent and who complies
with the Act is entitled to be paid by the Corporation the fair value of the
Common Shares held by him, determined as of the close of business on the last
business day before the day on which the resolution is adopted.


 


Each Shareholder who intends to dissent must comply
with the provisions of Section 191 of the Act which provides, among other
things, that each dissenting Shareholder must, at or before the Meeting, send
to the Corporation a written objection to the resolution in respect of which he
is dissenting.  If the Shareholder and
the Corporation cannot agree on the fair value for the Common Shares, either
the Corporation or the dissenting Shareholder may apply to a Court by
originating notice after the adoption of the resolution to fix the fair
value.  Upon an application being made
the Corporation is obliged, unless the Court otherwise orders, to send to each
dissenting Shareholder a written offer to pay him an amount considered by the
directors of the Corporation to be the fair value of his shares and a statement
showing how the fair value was determined. 
A dissenting Shareholder may accept the Corporation’s offer at any time
before the Court fixes the fair value of his shares.  If the Corporation’s offer is not accepted,
the Court must make an order fixing the fair value of the shares, giving
judgment in the amount in favour of each dissenting Shareholder and determining
the time in which the Corporation must pay the amount.  The Court may also in its discretion allow a
reasonable rate of interest.  A
dissenting Shareholder is not required to give security for costs in respect of
a court application and, except in special circumstances, is not required to
pay the costs of the application or appraisal.


 


A dissenting Shareholder ceases to have any rights
as a Shareholder of the Corporation other than the right to be paid the fair
value of his shares upon:


 


(i)            the
action approved by the resolution from which the Shareholder dissents becoming
effective;


 


(ii)                                   the making of an agreement between the
Corporation and the Shareholder for the purchase of his shares;  or


 


(iii)          the
pronouncement of an order by the Court respecting the fair value of his shares.


 


Prior to the occurrence of one of these events, the
Shareholder may withdraw his dissent or the Corporation may rescind the
resolution.


 


The Corporation may not make a payment to a
dissenting Shareholder if there are reasonable grounds for believing that the
Corporation is, or would after the payment be, unable to pay its liabilities as
they become due, or the realizable value of the Corporation’s assets would
thereby be less than the aggregate of its liabilities.  In such a case, the Corporation must notify
each dissenting Shareholder that it is unable lawfully to pay for his
shares.  Each dissenting Shareholder may
then withdraw his notice of objection and be reinstated to his full rights as a
Shareholder, failing which he retains his status as a claimant against the
Corporation to be paid when the Corporation is able to do so.


 


25

















 


The above is only a summary of the provisions of Section 191
of the Act.  These provisions are
technical and complex.  It is suggested that any Shareholder wishing to dissent seek
independent legal advice since the failure to comply strictly with the
provisions of the Act may prejudice his right to dissent.


 


Number of Directors


 


As a result of the increasing scope, geographic
distribution and complexity of the Corporation’s business, management believes
that it may be necessary or desirable in the future to increase the maximum
number of directors of the Corporation in order to better represent the
Corporation’s diverse business and shareholder base.  It is proposed to amend Article 4 of the
articles to accomplish this goal by removing the restriction on the maximum
number of directors of the Corporation.


 


APPROVAL OF SHARE CONSOLIDATION


 


The Board of Directors has determined that it may be
in Westport’s best interests for the Board of Directors to have the authority
to implement a consolidation (the “Consolidation”)
of Westport’s issued and outstanding Common Shares.  Westport regularly reviews whether seeking a
listing on additional stock exchanges may be to the benefit of the Corporation
and is currently exploring all options in this regard. The Corporation has
reviewed a variety of alternatives, such as the NASDAQ, LSE, AMEX, NYSE, AIM
and certain exchanges located in Asia.  A
listing of securities on one or more of these exchanges has enabled some
TSX-listed companies to expand their investor base, increase the liquidity of
their equity securities and reduce their cost of capital. The Corporation’s
share price may be below that required to meet the minimum listing requirements
of stock exchanges other than the TSX on which the Corporation may wish to
pursue an inter-listing in the future, in addition to the TSX listing. Where
this is the case, if the Corporation were to decide to pursue an additional
listing on such exchanges, the Corporation would first be required to complete
a Consolidation.  Some of the
above-referenced issuers were required to complete share consolidations as part
of their additional listings.


 


A Consolidation would enable the Board of Directors
to proceed with the inter-listing of the Corporation’s shares on certain
additional stock exchanges should the Board of Directors determine such an
additional listing to be in Westport’s best interests.  No such decision has been made, although the
Corporation will not proceed with a Consolidation unless it is able to complete
a listing on another stock exchange in connection with the Consolidation.  Shareholder approval of a Consolidation would
merely give the Board of Directors the ability to proceed with an inter-listing
on those exchanges where the Consolidation would be required to satisfy minimum
listing requirements or would otherwise be beneficial to the Corporation.  Shareholders are not being asked to approve
whether the Corporation should proceed with an inter-listing. If a
Consolidation is approved at the Meeting it will not be necessary for the
Corporation to incur the expense and time delays required by an additional
Shareholders meeting to approve a Consolidation if a decision is made to seek
an inter-listing.


 


If the Board of Directors decides to proceed with a
Consolidation, the Corporation will issue a press release regarding the timing
of the process, the Consolidation ratio selected by the Board of Directors and
any additional relevant information for Shareholders.


 


The
Board of Directors recommends that Shareholders approve the proposed Consolidation on the basis of
one new Common Share for each such
number of Common Shares issued and outstanding as the Board of Directors may determine advisable, with such
Consolidation to be on a basis of one new Common Share for not less than two
and not more than five Common Shares issued and outstanding immediately prior
to such Consolidation.  The Consolidation
would occur within one year of the date of the Meeting, unless the Board of
Directors determines not to proceed with an inter-listing or the Board of
Directors believes that the anticipated higher share price resulting from the
Consolidation would not assist in 


 


26

















 


generating investor interest. As of the date
hereof, the Board of Directors has not yet made a determination to proceed with
a Consolidation or additional exchange listing. However, Westport is seeking
Shareholder approval at this time to undertake such a Consolidation in the
future should a determination be made that such Consolidation is beneficial or
necessary.


 


There
can be no assurance that there will be any increase, or will not be any
decrease, in the market price per Common Share, improvement in the liquidity of
the Common Shares or reduction in the Corporation’s cost of capital resulting
from any Consolidation, if completed.  In
addition, there is no assurance that a higher share price will generate
increased investor
interest. Also, there are no assurances that the Board of Directors will seek any
additional stock exchange listings,
that the Corporation will meet any listing requirements of any
additional stock exchange, or that the
Common Shares will be approved for listing on any additional stock exchange.


 


At the Meeting, Shareholders
of the
Corporation will be asked to consider and, if thought advisable, to approve a
special resolution substantially in the following form:


 


“BE IT RESOLVED AS A SPECIAL RESOLUTION THAT:


 


1.                                       pursuant
to Section 173 of the Business
Corporations Act (Alberta),
the issued and outstanding Common Shares of the Corporation be changed upon the
determination of the Corporation’s Board of Directors at any time prior to July 9,
2009 into a different number of shares, by the consolidation (the “Consolidation”) of the issued and outstanding Common Shares (the “Old Common
Shares”) on the basis of one (1) new Common Share (a “New Common Share”) for each such number of Old Common Shares
issued and outstanding as the Board of Directors may determine advisable, with such Consolidation to be on a basis of
one New Common Share for not less than two and not more than five Old Common
Shares;


 


2.                                       no
fractional shares shall be issued upon the Consolidation and any such
fractional interests otherwise issuable shall be rounded down to the nearest
whole number;


 


3.                                       any
one director or officer of the Corporation be and is hereby authorized to file
an amendment to the Corporation’s articles to effect the Consolidation and to
do all such further acts and things and
to execute all such other documents necessary or desirable to carry out the
terms of the foregoing resolutions; and


 


4.                                       the
directors of the Corporation may revoke this resolution at any time prior to
the issuance of a certificate of amendment of articles without any further
approval of the Shareholders of the Corporation.”


 


The Board of Directors unanimously recommends a vote FOR the
approval of the Consolidation.


 


The
completion of the Consolidation, if approved by the Board of Directors, is
conditional upon the approval of the TSX. 
In addition, notwithstanding the approval of the Consolidation by Shareholders,
the Board of Directors, in its sole
discretion, may revoke the special resolution at any time prior to the issuance
of a certificate of amendment of articles and abandon the Consolidation without
further approval of or notice to its Shareholders.


 


The
special resolution approving the Consolidation requires the approval of not
less than two thirds of the votes cast by shareholders present in person or by
proxy at the Meeting.


 


As at June 3, 2008, the Corporation had 96,140,970 Common Shares issued and outstanding.  The proposed Consolidation, if conducted at
the maximum permitted one for five basis, would reduce the 


 


27

















 


number of Common Shares outstanding to approximately
19,228,194 Common Shares.  The effective
date of the Consolidation of the Common Shares will be the date of filing of
articles of amendment effecting the same under the Act.  If the special resolution is approved, the
Corporation would be entitled to complete the Consolidation at any time within one year from the date of the
Meeting.  However, the Common Shares will
not trade on the TSX on a post-consolidated basis until the Corporation
determines to proceed with the Consolidation and all required filings of the TSX have been completed and a bulletin from
the TSX has been issued in this regard.


 


No
fractional Common Shares will be issued pursuant to the Consolidation, and if
it occurs any such fractional securities otherwise issuable will be rounded
down to the nearest whole
number of post-Consolidation Common Shares.


 


Non-registered
Shareholders holding their Common Shares through a bank, broker or other
nominee should note that such banks, brokers or other nominees may have
different procedures for processing
any Consolidation than those that will be put in place by the Corporation for
Registered Shareholders, and their procedures may result, for example, in
differences in the precise number of Common Shares issued to Shareholders
in lieu of fractional share
interests.  If a Consolidation
occurs and a Shareholder holds Common Shares with such a bank, broker or other nominee and if Shareholders have questions in this regard, Shareholders
are encouraged to contact their
nominee.


 


If the
proposed Consolidation is approved by Shareholders and implemented by the Board
of Directors, Registered Shareholders will be required to exchange their share
certificates representing pre-Consolidation
Common Shares for new share certificates representing post-Consolidation Common
Shares.  Registered Shareholders will be
sent a transmittal letter from the Corporation’s transfer agent, Computershare
Trust Company of Canada, after the determination to proceed with such
Consolidation is made by the Board of Directors.  The letter of transmittal will contain
instructions on how to surrender your certificate(s) representing your
pre-Consolidation Common Shares to
the transfer agent.  The transfer agent
will forward to each Registered Shareholder who has submitted the required
documents a new share certificate representing the number of post-Consolidation
Common Shares to which the Shareholder is entitled.  Until surrendered, each share certificate
representing pre-Consolidation Common Shares will be deemed for all purposes to
represent the applicable number of whole post-Consolidation Common Shares.


 


Under
the Act, Shareholders do not have dissent and appraisal rights with respect to
the proposed Consolidation.


 


APPROVAL OF AMENDMENTS TO
SECURITY BASED COMPENSATION PLANS


 


The
Corporation currently grants incentive stock options under the Stock Option
Plan.  Additionally, the Corporation
currently grants share units under the 2006 Unit Plan and previously utilized
the 2003 Unit Plan for such purpose.  
The Stock Option Plan was adopted on July 22, 2003.  The terms of the Stock Option Plan and the
2006 Unit Plan do not reflect recent policy changes of the TSX, nor emerging
practices and limitations on management that are typically being adopted in new
equity compensation plans.   On June 6,
2006, the TSX published a Staff Notice (the “TSX Notice”)
updating previously issued guidance on amendment procedures for share option
and share unit plans and extending the option and unit expiry date during a
blackout period.


 


In the
TSX Notice, the TSX noted that many listed issuers establish, from time to
time, self-imposed blackout periods, which have the effect of restricting
certain option-holders from exercising their options.  The TSX recognizes that the establishment of
such blackout periods represents good corporate governance and is intended to
foster compliance with applicable securities laws, by restricting affected 


 


28

















 


individuals
from trading in securities of a publicly listed entity at times when they may
be in possession of material undisclosed information concerning that entity.


 


However,
the TSX also noted that, due to certain restrictions that otherwise prevent
extensions of the time during which an option-holder may exercise options, an
option-holder may be unfairly penalized by not being able to exercise expiring
options during the period that a self-imposed blackout remains in effect.  The TSX has indicated that it is not the TSX’s
intention to penalize option-holders as a result of positive corporate
behaviour on the part of listed issuers and, as a result, the TSX has confirmed
that issuers may amend their stock option plans to provide a conditional
extension to the expiration date for options that expire during, or immediately
after, a blackout period.


 


In
light of the foregoing, the Board of Directors has approved amendments to the
Stock Option Plan and 2006 Unit Plan to provide that options issued under the
Stock Option Plan and units granted under the 2006 Unit Plan will expire on the
later of: (i) the expiry date of the affected options; or (ii) if the
expiry date occurs during a blackout period established under the Corporation’s
Disclosure Policy, or within ten business days thereafter, the date that is ten
business days following the end of such blackout period.


 


The
Board of Directors has additionally approved amendments to the Stock Option
Plan to provide that if any eligible participant under the Stock Option Plan is
subject to a requirement that he or she not benefit personally from a grant of
options, the Board of Directors may grant any options to which such person
would otherwise be entitled to such person’s employer or other entity
designated by them that directly or indirectly imposes that requirement on the
individual.  The purpose of this
amendment is to provide more visibility into the true beneficial ownership of
any options granted under the Stock Option Plan, as without such ability the
person to whom such option is granted will generally hold such options as
trustee on behalf of their employer or similar entity, though will appear for
all purposes as the registered owner of such compensation awards. Further
amendments are being proposed to both the Stock Option Plan and 2006 Unit Plan
to clarify that the number of Common Shares reserved for issuance to Westport
insiders pursuant to the Stock Option Plan and 2006 Unit Plan, and all other
equity compensation plans, cannot exceed 10% of the total number of issued and
outstanding Common Shares.


 


An
application has been made to the TSX for approval of the foregoing amendments
to the Stock Option Plan and 2006 Unit Plan. 
Under the policies of the TSX, the foregoing amendments must be approved
by Shareholders, by way of ordinary resolution. 
Accordingly, at the Meeting, Shareholders will be asked to consider and,
if thought fit, pass a resolution approving the foregoing amendments to the
Stock Option Plan and 2006 Unit Plan.  On
the vote to be called for at the Meeting, the Common Shares represented by
proxies in favor of the management designees named in the accompanying Instrument
of Proxy will be voted, in the absence of direction to the contrary, for
approval of the ordinary resolution ratifying and confirming the amendments to
the Option Plan and 2006 Unit Plan.  In
order to be approved, such resolution must be passed by a simple majority of
the votes cast in person or by proxy at the Meeting.  The text of the resolution to be presented to
shareholders for consideration at the Meeting is as follows:


 


“BE IT
RESOLVED THAT, as an ordinary resolution of the shareholders of Westport
Innovations Inc., the amendments to the stock option plan and share unit plan
of the Corporation, as approved by the Board of Directors and described in the
Management Information Circular of the Corporation, dated June 6, 2008, be
and the same are hereby approved, ratified and confirmed, without amendment.”


 


The Board of Directors unanimously
recommends a vote FOR the approval of the amendment of the Corporation’s equity
based compensation plans.


 


29

















 


STATEMENT OF CORPORATE GOVERNANCE PRACTICES


 


Corporate
governance relates to the activities of the Board of Directors and the Westport
structures, traditions, and processes of leadership and stewardship.  It relates to accountability oversight, role
definitions, and the assignment of power and responsibilities governing
communications with Shareholders. 
Westport also believes that corporate governance is about creating a
culture of openness among all of the Westport stakeholders.


 


The
Board of Directors has always believed that effective corporate governance is
critical to the continued and long-term success of Westport, and contributes to
maximized Shareholder value over time. 
Westport continually updates and modifies its governance practices in
these changing times, and the Board of Directors is of the view that Westport’s
general approach to corporate governance is appropriate for a company the size
of Westport.  The following discussion
discloses details of Westport’s corporate governance practices.


 


Board
of Directors


 


Structure and
Composition


 


The
Board of Directors is currently composed of seven directors.  The Board of Directors has established
criteria for the selection of new directors, and for the evaluation of current
directors, in an effort to foster a diversity of viewpoints and to ensure a
depth of business and other valuable experience.


 


National
Policy 58-201 Corporate Governance
Guidelines (“NP 58-201”)
suggests that the board of directors of every listed corporation should be
constituted with a majority of individuals who qualify as independent
directors.  An independent director is a
director who has no direct or indirect relationship with the issuer which
could, in the view of the Board of Directors, be reasonably expected to
interfere with the director’s independent judgment.  Eight of Westport’s ten directors nominated
for election at the Meeting, being Dr. Warren J. Baker, Henry F.
Bauermeister Jr, John A. Beaulieu, M.A. (Jill) Bodkin, Dr. Dezsö J. Horváth, Dr. Sarah
Liao Sau Tung, Andrew Littlefair and Dr. Albert Maringer, are considered
to be independent within the meaning of NP 58-201.  Messrs. David Demers and Michael
Gallagher are officers of Westport, and are considered to be non-independent by
reason of their employment with the Corporation.


 


To
ensure the independence of the Board of Directors in the discharge of its
responsibilities, all of the committees of the Board of Directors are currently
comprised of independent directors, other than the Strategy Committee, where
three of the four directors are independent. 
In addition, Mr. Beaulieu, an independent director, has been
appointed Chairman of Westport.  The
Board of Directors also affords the independent directors the opportunity, at
every meeting, to meet without management present in sessions chaired by the
Chairman to discuss any procedural or substantive issues.  And finally, certain specific functions of
the Board of Directors are the exclusive responsibility of the independent
directors, including revising the Charter of the Board of Directors or the
position descriptions for Chairman or Chief Executive Officer.


 


Other Directorships


 


A
number of members of the Board of Directors are presently also directors of
other reporting issuers (or the equivalent). 
Such other directorships are disclosed in the table under the heading “Election
of Directors”.


 


30
















 


Mandate
and Charter of the Board of Directors


 


The
mandate of the Board of Directors, as prescribed by corporate statute, is to
manage or supervise the management of the business and affairs of Westport, and
to act honestly and in good faith with a view to the best interests of
Westport.  In fulfilling its mandate, the
Board of Directors is responsible for the stewardship of Westport and, as part
of that responsibility, assumes responsibility for the following matters: (i) selecting,
appointing, and (if necessary) terminating the Chief Executive Officer; (ii) Chief
Executive Officer succession planning, including monitoring the performance of
senior management of Westport; (iii) approving the overall compensation of
Westport’s senior management team; (iv) adoption of a strategic planning
process, approval of strategic plans, and monitoring performance against those
plans; (v) approving annual capital and operating plans, and monitoring
performance against those plans; (vi) approving policies and processes to
identify business risks, to determine what risks are acceptable to Westport,
and to ensure that systems and actions are in place to manage such risks; (vii) approving
policies and procedures that enhance the integrity of Westport’s financial
reporting, internal controls, and management information systems; and (viii) implementing
an appropriate, formal orientation program for new Westport directors.  Westport’s orientation program includes
meetings with the Chairman to better understand the role of the Board of
Directors, its committees and its directors and with executive officers to
understand the nature and operations of Westport’s business.  New members of the Board of Directors are
also provided with copies of the Charter of the Board of Directors and of the
committees of the Board of Directors, the most recent strategic plan and other
pertinent information.  Additionally, the
Board of Directors periodically receives advice from outside legal counsel and
its auditors regarding changes in the regulations applicable to Westport.  Westport encourages its directors to
undertake additional continuing education and budgets an amount equal to $2,000
per director, per year, for such continuing education.  The
full text of the Westport Board of Directors Charter is attached as Schedule “A”
hereto.  The documents incorporated in
the Board of Directors Charter by reference, being the board committee charters
and position descriptions, are available on Westport’s website at
www.westport.com/commitment/governance.php.


 


The
Board of Directors annually reviews its Charter to ensure that it is up to date
and is current with all of the legislative changes occurring in the corporate
governance field.  In some instances,
Westport has chosen to adopt various policies and guidelines that are not yet
legally imposed on Westport, but that the Board of Directors feels are
effective governance practices that can further protect the rights of
Shareholders and contribute to the continuous efforts to maximize Shareholder
value.  In June 2007, the Board of
Directors amended the provisions of its Charter that prohibited (i) the
Westport Chief Executive Officer from exchanging board of director positions
with the chief executive officer of another public corporation, and (ii) three
or more Westport directors from sitting on another public company board of
directors together, to remove such prohibitions in cases approved by the Board
of Directors.  These changes were made in
the best interests of the Corporation, and enabled Mr. Andrew Littlefair,
the chief executive officer of Clean Energy (a company listed on the NASDAQ
exchange), to join the Board of Directors.


 


Some
of the governance policies and guidelines that Westport has adopted into its
Board of Directors Charter and practices are as follows:


 


(i)                                     Westport
directors are required to hold a minimum of one times their annual retainer in
Common Shares or share units, to be acquired over a three-year period;


 


(ii)                                  each
of Westport’s executive officers is required to hold a minimum of one times his
or her annual salary in Common Shares or share units, to be acquired over a
five-year period;


 


(iii)                               no
loans shall be made from Westport to any of its officers or directors;


 


31

















 


(iv)                              the
Board of Directors has instituted a policy on the maximum number of options or
share units that can be annually granted to an unrelated director;


 


(v)                                 unless
approved by the Board of Directors, the Chief Executive Officer is prohibited
from exchanging board of director positions with the chief executive officer of
another public corporation;


 


(vi)                              unless
approved by the Board of Directors,  three or more
Westport directors are prohibited from sitting on another public company board
of directors together;


 


(vii)                           the
Nominating and Corporate Governance Committee shall review the retention of a
director upon a job change on the part of that director;


 


(viii)                        every
Westport senior officer requires the approval of the Board of Directors before
accepting a seat on the board of directors of another public company;


 


(ix)                                the
directors have unrestricted access to Westport’s personnel and documents for
the purpose of fulfilling their duties;


 


(x)                                   the
establishment of an “Ethics Hotline” whereby employees of Westport can anonymously
report breaches of Westport’s Code of Conduct (the “Code”),
or any other activities it wishes to bring to the attention of senior
management.  The Code must be signed by
all directors, officers and employees on an annual basis.  The Code can be found on Westport’s website
at www.westport.com/pdf/WPT-Code_of_Conduct.pdf;


 


(xi)                                the
establishment of position descriptions for the Chairman of the Board of Directors,
Committee chairmen, Chief Executive Officer and Corporate Secretary.  These can be found on Westport’s website
at: 
www.westport.com/pdf/WPT-Position_Descriptions.pdf; and


 


(xii)                             the
requirement that all directors disclose any conflicts of interest, or potential
conflicts of interest, and refrain, subject to certain exceptions, from
discussing or voting on any matters when such a conflict or potential conflict
arises.


 


Meetings
of the Board of Directors


 


The
Board of Directors endeavors to meet at least 10 times annually, with at least
three of those meetings being in person. 
In addition, the Board of Directors may hold unscheduled additional
meetings from time-to-time as business needs require.  The Board of Directors had 13 meetings in
Westport’s last fiscal year, 5 times in person, and 8 times by telephone
conference call.  At every meeting there
is the opportunity for the independent directors to meet without management or
related directors present in sessions chaired by the Chairman to discuss any
procedural or substantive issues.


 


Chairman
of the Board of Directors


 


The
principal responsibility of the Chairman of the Board of Directors is to ensure
the independence of the Board of Directors in the discharge of its
responsibilities.  In this regard, the
Chairman, individually or with the support of the Nominating and Corporate
Governance Committee, shall consult with the Chief Executive Officer on
selection of Committee members and chairmanships, Board of Directors meeting
agendas, the format and adequacy of information provided to the directors, and
the effectiveness of Board of Directors meetings.  The Chairman shall advise the Chief Executive
Officer with respect to the agenda for the directors’ annual governance and
strategic planning retreat.  The Chairman
shall also consult directly with other directors on issues of Board of
Directors independence or dissent, potential conflict of 


 


32

















 


interest
situations, and personal liability matters. 
The Chairman also proposes and recommends the compensation paid to, and
participates with the members of the Human Resources and Compensation Committee
in evaluating the performance of, the Chief Executive Officer.


 


Board
of Director Committees


 


Members
of Westport’s management are frequently invited to participate in meetings of
the standing committees of the Board of Directors (the “Committees”)
in order to provide management insight and information for the benefit of
Committee deliberations.  As a matter of
practice, the Committees may, at their discretion, conduct any portion or all
of their meetings without management representation to facilitate their
independence of management.  All members
of the Board of Directors are invited to participate in Committee meetings
regardless of whether they are members of the Committee in question, but
directors do not receive remuneration for such attendance unless they are
members of that Committee. In addition, from time to time the Board of
Directors establishes ad hoc
committees with specific purposes.


 


Committee
Composition


 


Each
Committee consists of a minimum of three directors, and other than the Strategy
Committee, there is a requirement that all Committee members shall be
independent.  The Board of Directors
designates one member of each Committee as its Chair.  Each member of the Audit Committee shall
possess a basic level of “financial literacy” (defined as the ability to read
and understand fundamental financial statements), and at least one member shall
have accounting or related financial management experience.  The Board of Directors gives consideration to
the periodic rotation of the membership of each Committee and, from time to
time as the Board of Directors sees fit, rotation of chairmanship of the
Committees.


 


The
Committees, their current members and the number of times each Committee met
during the past fiscal year are set forth below.


 


	
  Committee

  	
   

  	
  Members

  	
   

  	
  Number of Meetings

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Audit

  	
   

  	
  Henry F. Bauermeister Jr.
  (Chair)

  John Beaulieu

  Dr. Dezsö
  Horváth

  	
   

  	
  5

  (3 in person, 2 by conference call)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Human Resources and Compensation

  	
   

  	
  John Beaulieu (Chair)
 Henry F. Bauermeister Jr. (former Chair)
 Dr. Dezsö Horváth
 Kenneth M. Socha (resigned July 26,
  2007)

  	
   

  	
  7

  (2 in person, 5 by conference call)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Nominating and Corporate Governance

  	
   

  	
  Dr. Warren Baker (Chair)
 John Beaulieu (former Chair)
 Dr. Dezsö Horváth

  	
   

  	
  4

  (3 in person, 1 by conference call)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Strategy

  	
   

  	
  Dr. Dezsö Horváth (Chair)

  Dr. Warren Baker

  David Demers 

  John C. Fox (resigned July 26, 2007)

  Andrew Littlefair (as of July 26, 2007)

  	
   

  	
  4

  (3 in person, 1 by conference call)

  



 


Committee
Meetings Membership and Attendance


 


Regular
meetings of the Committees are held throughout the year as required, and the
Audit Committee meets at least four times per year in conjunction with the
review and approval of annual and quarterly financial statements, management
discussion and analysis, and related filings. 
The Chairman or any 


 


33

















 


member
of a Committee can call additional meetings of their Committee at any time. The
following table reflects the attendance of each of the directors for the year
ended March 31, 2008 for meetings of the Board of Directors and Committees
of which they were members.


 




	
   

  	
   

  	
  Number of Meetings Attended

  	
   

  	
   

  
	
  Director

  	
   

  	
  Board

  	
   

  	
  Committee

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dr. Warren
  Baker

  	
   

  	
  12/13

  	
   

  	
  8/8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Henry
  F. Bauermeister Jr.

  	
   

  	
  13/13

  	
   

  	
  12/12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  John
  Beaulieu

  	
   

  	
  13/13

  	
   

  	
  16/16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  David
  Demers

  	
   

  	
  13/13

  	
   

  	
  4/4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  John
  C. Fox
 (resigned from the Board July 26, 2007
  and attended 2/4 Board meetings and 1/2 Committee meetings that occurred
  while he was a director)

  	
   

  	
  2/13

  	
   

  	
  1/4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Michael
  Gallagher

  (appointed to the Board July 26, 2007 and attended 9/9 Board meetings
  and 0/0 Committee meetings that occurred while he was a director; attended
  other Board meetings as a guest)

  	
   

  	
  13/13

  	
   

  	
  0/0

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dr. Dezsö
  Horváth

  	
   

  	
  11/13

  	
   

  	
  20/20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Andrew
  Littlefair
 (appointed to the Board July 19, 2007
  and attended 6/10 Board meetings and 2/3 Committee meetings that occurred
  while he was a director)

  	
   

  	
  6/13

  	
   

  	
  2/4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kenneth
  M. Socha
 (resigned from the Board July 26, 2007
  and attended 2/4 Board meetings and 3/3 Committee meetings that occurred
  while he was a director)

  	
   

  	
  2/13

  	
   

  	
  3/7

  






 


A
summary of the activities and responsibilities of each of the Committees is set
out below.


 


Audit
Committee


 


The
primary responsibility for Westport’s financial reporting, accounting systems,
and internal controls is vested in senior management and is overseen by the
Board of Directors.  The Audit Committee
has been established to assist the Board of Directors in fulfilling its
responsibilities in this regard.  The
external auditor is ultimately accountable to the Board of Directors and the
Audit Committee as representatives of Westport.


 


The
Audit Committee has unrestricted access to Westport’s personnel and documents,
and is provided with the resources necessary to carry out its
responsibilities.  The Audit Committee
and the external 


 


34

















 


auditors
meet at least quarterly without the presence of Westport management to review
any areas of material disagreement with Westport management or other issues of
concern, including assessing the cooperation received by the auditors in the
conduct of their audit and their access to all requested records, data, and
information.  As necessary or desirable,
the Chair of the Audit Committee may also request that the external auditors be
present at any other meetings of the Audit Committee, the Board of Directors or
Shareholders.


 


The
Audit Committee and Westport’s Chief Financial Officer also meet, at least
annually, in order to review the execution of management’s reporting and
financial management responsibilities, as well as any other areas of concern to
the Audit Committee.  The Audit Committee
also meets, at least annually, with Westport’s Corporate Secretary and external
legal counsel, to review legal matters that may have a material impact on the
financial statements, Westport’s compliance policies, and any material reports
or inquiries received from regulators or government agencies. All members of
the Audit Committee are independent.


 


The Audit Committee is charged with the following
specific responsibilities:


 


·                                          The
Audit Committee is responsible for reviewing and submitting for Shareholder
approval the annual engagement of Westport’s auditors, and providing a forum
for direct communication between the auditors and the Board of Directors to
ensure the independence of the external auditors.  Such a review includes approval of the
proposed scope of the auditors’ engagement, materiality, and approval of the
budget for the annual audit, as well as the pre-approval of any non-audit
services.


 


·                                          As part of
the risk management oversight responsibility of the Board of Directors, the
Audit Committee is responsible for assessing the range of risks and making
recommendations to the Board of Directors regarding appropriate
responsibilities for the identification, monitoring, and management of these
risks.  The Audit Committee is focused on
primarily financial reporting risks but, as part of its oversight of the system
of internal controls, also reviews the effectiveness of the overall process for
identifying principal business risks and provides its view to the Board of Directors.


 


·                                          The Audit
Committee is responsible for overseeing the design and implementation of an
effective system of internal control over financial reporting by Westport
management, including the internal audit function, and identifying any
responsibilities assumed by the Audit Committee for the oversight of internal
control beyond financial reporting.


 


·                                          Prior to any
public disclosure, the Audit Committee shall review and recommend to the Board
of Directors the approval of the following:


 


(i)                                     quarterly
and annual financial statements and related documents, in order to satisfy
itself that all disclosures are consistent with the disclosures contained in
the financial statements and are in compliance with regulatory requirements and
industry standards;


 


(ii)                                  public
financing documents and prospectuses; and


 


(iii)                               other
timely disclosure documents containing financial information that would likely
be material to either the quarterly or annual financial statements.


 


·                                          The audited
consolidated financial statements of Westport may include the results of other
companies, in whole or in part, in which Westport maintains an equity interest.  In addition, an 


 


35

















 


investor company could
include the disclosure of Westport’s results or the results of a co-owned
subsidiary in their financial statements. 
The Audit Committee is responsible for establishing a coordination and
communications framework with the accountants, auditors, and audit committees
of these companies, and for satisfying itself that Westport’s consolidated
financial statements accurately reflect the results of all companies included,
regardless of whether these companies were audited by different external
auditors.


 


·                                          The Audit
Committee is also responsible for overseeing Westport management’s development
and implementation of appropriate policies regarding continuous disclosure,
compliance with filing requirements, and prompt reporting to Shareholders of
material events impacting Westport.  The
Board of Directors
has also approved a disclosure policy (described in more detail below) and a
trading policy that governs the conduct of all of Westport’s directors,
officers, employees and other insiders.


 


·                                          As part of
their oversight responsibility around disclosure, the Audit Committee oversees
management’s processes around the interim and annual filings of the
certifications of the Chief Executive Officer and Chief Financial Officer.  The Chief Executive Officer and Chief
Financial Officer certify that they have reviewed the filings, that the filings
do not contain any untrue statement of material fact or omit such facts, and
that the financial information fairly presents the Company’s financial
condition, results of operations, and cash flows as of the date and for periods
represented in the filings.  The Chief
Executive Officer and Chief Financial Officer are additionally required to make
certain representations and conclusions around the effectiveness of the Company’s
disclosure controls and procedures.  The
Audit Committee has reviewed management’s processes for capturing, documenting,
and supporting the representations made in these certifications.


 


·                                          The Audit
Committee has also reviewed management’s process to receive, assess, and
address complaints received by Westport regarding accounting, internal controls
or auditing matters and its procedures for the confidential, anonymous submission
by Westport employees of questionable financial practices.  The Audit Committee reviews this process
annually.


 


·                                          Additional
information respecting the Audit Committee, including information relating to
its composition, the education and experience of its members, and the text of
Westport’s Audit Committee Charter is contained in Westport’s Annual
Information Form.


 


Nominating
and Corporate Governance Committee


 


Although
the functions listed below are the exclusive responsibility of unrelated directors,
the Nominating and Corporate Governance Committee consults closely with the
Chief Executive Officer in fulfilling the following responsibilities:


 


·                                          Developing
and monitoring Westport’s general approach to governance issues and applicable
guidelines, and making recommendations to the Board of Directors in this regard
for discussion and final approval.


 


·                                          Reviewing
structures and procedures implemented to allow the Board of Directors to
function with the proper degree of independence from management.


 


·                                          Reviewing the
Charter of the Board of Directors, revising it from time to time, and making
recommendations to the Board of Directors in this regard for discussion and
final approval.


 


36

















 


·                                          Reviewing and
developing guidelines for the operation of the Board of Directors, including
its functions, size and composition, and minimum attendance guidelines.


 


·                                          Recommending
and periodically reviewing the charter, structure, composition, membership,
minimum attendance guidelines and functions of each Committee.


 


·                                          Identifying
the required competencies and characteristics of potential directors,
developing lists of candidate directors, and making recommendations to the
Board of Directors in this regard for discussion and final approval.


 


·                                          Reviewing the
orientation and continuing education programs established for new and current
directors.  Directors are also provided
with updates from external counsel, external auditors and by management.


 


·                                          Performing
regular assessments of the Board of Directors, Committees and individual
directors, and making recommendations to the Board of Directors in this regard
for discussion and final approval. 
Assessments are done on no less than an annual basis and are spearheaded
by the Chairman.


 


·                                          Reviewing and
initiating discussions on corporate governance issues and policies with regard
to such matters as takeover bids, shareholders rights plans, conflicts of
interest, corporate business ethics, and other specific corporate governance issues.


 


·                                          Considering
and approving, where appropriate, the engagement of the services of outside
experts and advisors at the expense of Westport, when so requested by
individual directors.


 


The
Nominating and Corporate Governance Committee acts as a nominating committee to
consider if and when new individuals are to be proposed for election or
appointment to the Board of Directors, having regard to the competencies,
skills and personal qualities of potential candidates and existing members of
the Board of Directors. All members of the Nominating and Corporate Governance
Committee are independent.


 


Human
Resources and Compensation Committee


 


The
Human Resources and Compensation Committee has the following responsibilities:


 


·                                          Making
recommendations to the Board of Directors regarding the selection, appointment,
and (if necessary) termination of the Chief Executive Officer.


 


·                                          Evaluating
the succession planning process for, and monitoring the performance of, the
Chief Executive Officer and senior management, and making recommendations to
the Board of Directors in this regard for discussion and final approval.


 


·                                          Evaluating,
together with the Chief Executive Officer, a position description for the Chief
Executive Officer, setting out the Chief Executive Officer’s authority, duties
and responsibilities, defining the scope of management’s responsibilities, and
making recommendations to the Board of Directors in this regard for discussion
and final approval.


 


·                                          Recommending
and assisting the Board of Directors in establishing the corporate objectives
for which the Chief Executive Officer will be responsible for meeting, and the
metrics to measure the Chief Executive Officer’s performance.


 


37

















 


·                                          Evaluating
the level and forms of compensation for the Chief Executive Officer, in light
of Westport’s financial and non-financial performance, and making
recommendations to the Board of Directors in this regard for discussion and final approval.


 


·                                          Evaluating
the level and forms of compensation for the senior management team as proposed
and recommended by the President and Chief Operating Officer, in light of
Westport’s financial and non-financial performance, and making recommendations
to the Board of
Directors in this regard for discussion and final approval.


 


·                                          Evaluating
the level and forms of compensation for the directors, in light of Westport’s
financial and non-financial performance and commensurate with the
responsibilities and risks in being an effective director, and making
recommendations to the Board of Directors in this regard for discussion and final approval.


 


·                                          Reviewing the
overall parameters of Westport’s stock option and executive performance
incentive programs, recommending option and share unit allocations for senior
officers, approving option allocations for directors and other employees, and
making recommendations to the Board of Directors in this regard for discussion
and final approval.


 


·                                          Periodically
reviewing Westport’s pension, savings, and other benefits plans, as applicable,
to evaluate their appropriateness.


 


·                                          Reviewing
public or regulatory disclosure respecting compensation, and the basis on which
performance is measured.


 


In
completing the foregoing responsibilities, the Human Resources and Compensation
Committee shall, when appropriate, engage independent consultants or
compensation specialists, or subscribe to publications, in order to provide
analysis of executive and director compensation levels and practices in the
marketplace.  Such analysis shall be used
in determining whether Westport’s overall compensation strategies and levels
for directors and senior management are competitive with those of its peer
group companies. For information relating to the Human Resources and
Compensation Committee’s report on executive compensation, see “Report on Executive Compensation”
above.  All members of the Human
Resources and Compensation Committee are independent.


 


Strategy
Committee


 


The
Board of Directors formed the Strategy Committee in September of 2002 to
oversee the implementation of Westport’s strategic direction.  The Strategy Committee consults closely with
Westport management as it fulfills the following responsibilities:


 


·                                          Regularly
reviewing, discussing and, when necessary, suggesting revisions to management’s
vision.


 


·                                          Establishing
procedural guidelines with management to develop and implement Westport’s
strategy, as well as to identify goals and expectations for the Westport
strategic planning process.


 


·                                          Requiring the
Chief Executive Officer to propose a clearly articulated and well-supported
strategy for Westport.


 


·                                          Assisting
management in the development of a strategy that is approved by the Board of
Directors.


 


38

















 


·                                          Assisting
management in assessing whether management has the business plans and the
financial, operational, and human resource requirements necessary to implement
its strategy.


 


·                                          Assisting
management in the expression of Westport’s strategy and its planned
implementation to the Board of Directors in a written document.


 


·                                          Providing
ongoing critical evaluation of, and accountability for performance relating to,
the strategy, financial limits, and operating objectives approved by the Board
of Directors.


 


·                                          Requiring
that management provide appropriate information, in appropriate detail,
consistent with the directors’ roles, to enable the directors to make informed
decisions on matters coming before the Board of Directors.


 


·                                          Overseeing
the Board of Directors’ knowledge of the particular circumstances of Westport’s
business and the industry in which it is operating, in order to provide
strategic questioning and input, and recognize any critical strategic
discontinuities in management’s strategic thinking and planning.


 


·                                          Exercising discipline
in differentiating director roles from management roles in the development and
implementation of Westport’s strategies.


 


·                                          Understanding,
identifying, and discussing the key issues, assumptions, risks, and
opportunities that relate to the development and implementation of appropriate
Westport strategies.


 


·                                          Requiring
management to include discussion and management of risks and opportunities
(including, without limitation, economic, environmental, ethical, financial,
leadership, operational, political, reputational, strategic, competitive and
technological risks and opportunities) as key components of the strategic
planning process.


 


·                                          Participating
and leading an annual strategic planning retreat for the Board of Directors and
Westport management.


 


Westport’s
Disclosure Policy


 


The
Board of Directors approved the adoption of a disclosure policy (the “Policy”) on June 28, 2001, which was last updated on May 17,
2007, and is reviewed annually.  The
intent of the Policy is to ensure that communications to the investing public
about Westport continue to be timely, factual, accurate, and broadly
disseminated in accordance with all applicable legal and regulatory
requirements.  The Policy extends to all
Westport employees, the Board of Directors, and those authorized to speak on
Westport’s behalf.  The Policy covers
disclosure in documents filed with the securities regulators, and written
statements made in Westport’s annual and quarterly reports, news releases,
letters to Shareholders, presentations by senior management, marketing
materials, advertisements, information contained on Westport’s web site, as
well as other electronic communications. 
The Policy also extends to oral statements made in meetings and during
telephone conversations with analysts and investors, interviews with the media,
speeches, press conferences, and conference calls, and so on.


 


The
Board of Directors has appointed Darren Seed, Director, Investor Relations of
Westport, as Westport’s Investor Relations Officer, and has established a
disclosure policy committee (the “Disclosure Committee”)
responsible for overseeing Westport’s disclosure practices.  The Disclosure Committee currently consists
of Westport’s Chief Executive Officer, President and Chief Operating Officer,
Chief Financial Officer, Corporate Counsel, and Director, Investor
Relations.  Westport’s Director, Investor



 


39

















 


Relations
also serves as secretary to the Disclosure Committee and maintains minutes of
the meetings.  The Disclosure Committee
meets as conditions dictate.


 


The
Disclosure Committee has set benchmarks for a preliminary assessment of
materiality, and will determine when developments justify public
disclosure.  If it is deemed that the
information should remain confidential, the Disclosure Committee will determine
how that confidential information will be controlled.  The Disclosure Committee reviews and, if
necessary, updates the Policy on an annual basis or as needed in order to
comply with changing regulatory requirements, and reports to the Board of
Directors on an annual basis.


 


OTHER INFORMATION


 


Except
as otherwise specified herein, the information set forth in this Circular is
provided as of June 3, 2008.


 


Additional
information relating to Westport is available through the Internet at
www.westport.com and on the Canadian System for Electronic Document Analysis
and Retrieval (SEDAR) at www.sedar.com. 
Financial information of Westport is provided in the comparative financial
statements and management’s discussion and analysis of Westport for the most
recently completed financial year. 
Copies of the financial statements and management’s discussion and
analysis of Westport may be obtained from the Director, Investor Relations, of
Westport at 101-1750 West 75th Avenue, Vancouver, British Columbia V6P 6G2 or
by facsimile at (604) 718-2001.


 


DATED effective the 6th day of June, 2008.


 


40
















 


SCHEDULE “A”


BOARD OF
DIRECTORS CHARTER


 


The
Charter of the Board of Directors of Westport Innovations Inc.


 


Purpose of the Charter


 


The
purpose of this Charter for the Board of Directors (the “Board”)
of Westport Innovations Inc. (“Westport”) is
to disclose the standards of corporate governance that have been adopted and
practiced at Westport.  Westport’s Board,
Committees of the Board and individual directors shall be assessed on an annual
basis on their effectiveness at achieving the standards for corporate
governance as set out in this Charter.


 


The following items are
incorporated by reference into, and together comprise, this Board Charter: the
Charters of Westport’s four Committees of the Board – the Audit Committee, the
Nominating and Corporate Governance Committee, the Human Resources and
Compensation Committee and the Strategy Committee, together with the five
Position Descriptions for the Non-Executive Chair of the Board, four Committee
Chairs, Individual directors, the Chief Executive Officer and the Corporate
Secretary.


 


Westport’s Commitment to
Effective Corporate Governance


 


Effective
corporate governance plays an important role in protecting shareholder rights,
helping to maximize shareholder value over time and assisting the creation of a
vibrant, dynamic and successful corporation.


 


The
successful implementation of high standards of corporate governance is an
important objective that contributes to the continued success of, and public
confidence in, Westport.  The
establishment of an advanced corporate governance system, supported by a
strong, independent and engaged Board, will determine in part how Westport is
perceived by its various business partners and stakeholder groups, including
prospective and current investors, strategic partners, employees, customers,
suppliers and regulators.  In addition,
an effective governance program will enhance the Board’s ability to attract
top-tier international corporate directors in its Board succession planning.


 


Other
objectives to be achieved by Westport’s continued commitment to effective
corporate governance include the following:


 


(a)                                 To
satisfy prospective investors, directors, strategic partners, employees,
customers, suppliers, regulators and the public that Westport’s governance
standards and practices are sound, possess integrity and transparency of
process;


 


(b)                                 To
demonstrate to Westport’s stakeholders that the organization is trustworthy,
effective and ethical;


 


(c)                                  To
promote high levels of individual and organizational performance and accountability;


 


(d)                                 To
establish diligence in addressing governance issues; governance failure can be
very costly and can result in negative publicity, loss of shareholder and
organizational support, costly litigation and other penalties; and


 


(e)                                  To
communicate corporate governance practices in the most relevant and user-
friendly framework as possible, consistent with “best practices” in the field.


 


A-1

















 


The Objective of Westport’s Board
of Directors


 


In
general terms, the Board is responsible for the overall corporate governance of
Westport and is charged with overseeing and directing the management of the
business and affairs of Westport.  Each
director and officer of Westport, in exercising his or her powers and
discharging his or her duties, is required by law to: (i) act honestly and
in good faith with a view to the best interests of Westport; and (ii) exercise
the care, diligence and skill that a reasonably prudent person would exercise
in comparable circumstances.


 


The
objective of the Board, working with management and on behalf of the Westport
shareholders, is to help build a strong, healthy and competitive corporation
that maximizes shareholder value.


 


The Board believes that
realizing these outcomes can be enhanced through: (i) addressing the
corporate objective of enhancing long-term shareholder value while taking into
account the interests of other stakeholders; and (ii) conforming to
effective standards of corporate governance contained within this Charter.


 


Overall Responsibilities of the
Westport Board of Directors


 


The
Board is responsible for the stewardship of Westport and, as part of this
responsibility, shall assume responsibility for the following matters:


 


(a)                                  Selecting,
appointing and (if necessary) terminating the Chief Executive Officer;


 


(b)                                 Chief
Executive Officer succession planning, including monitoring the performance of
senior management;


 


(c)                                  Approving
the compensation of the senior management team;


 


(d)                                 Adoption
of a strategic planning process, approval of strategic plans, and monitoring
performance against plans;


 


(e)                                  Approving
annual capital and operating plans and monitoring performance against those
plans;


 


(f)                                    Approving
policies and processes to identify business risks, to address what risks are
acceptable to Westport and ensuring that systems and actions are in place to
manage them;


 


(g)                                 Approving
policies and procedures that enhance the integrity of Westport’s internal
control and management information systems;


 


(h)                                 Implementing
an appropriate, formal orientation program for new directors; and


 


(i)            Approving a Westport communications
policy.


 


Board Independence from
Management


 


Westport believes in an
effective Board that has a high degree of independence from management.  In order to achieve this, the following
structures and processes have been adopted:


 


A-2

















 


The Board is constituted with a
majority of independent directors


 


A majority of Westport
directors shall be unrelated and independent, in accordance with the standards
imposed by the Toronto Stock Exchange and any applicable statutes, rules and
regulations of the Canadian securities regulatory authorities.


 


Committees are either composed of
a majority, or exclusively, of outside and unrelated directors


 


All of
the directors on the Audit Committee, the Nominating and Corporate Governance
Committee and the Human Resources and Compensation Committee, and at least a
majority of the directors on the Strategy Committee, shall be outside
(non-management) and unrelated directors.


 


The Chair is a check on Board
independence


 


Westport shall have a
Chair who is an outside and unrelated director. 
The Chair shall be responsible for working to ensure the independence of
the Board in the discharge of its responsibilities, as outlined in the Chair’s
position description, approved by the Board. 
The Chair shall also be explicitly responsible for ensuring that an
appropriate Committee of the Board monitors the performance of the Chief
Executive Officer on a regular basis and that the assessment of the Chief
Executive Officer is reported to and discussed by the whole Board.


 


Executive sessions of outside
directors occur at every meeting


 


The Board has an
opportunity at every meeting to meet without management present.  These sessions provide an opportunity for
Board members to discuss any procedural or substantive issues they wish.  The Chair and/or the Board may then discuss
with the Chief Executive Officer any issues arising.


 


Access to management


 


The Board shall, on a
regular basis, both formally and informally, gain regular exposure to members
of management for the purposes of evaluating executive succession and other
purposes.  In addition, directors may, should
they desire, be entitled to consult with any member of management on an
as-needed basis if they deem such a meeting necessary in the carrying out their
responsibilities and duties as directors.


 


Certain functions remain the
exclusive responsibility of outside directors


 


Lastly, certain specific
functions shall be the exclusive responsibility of outside (non-management)
directors, consulting closely with the Chief Executive Officer, who will then
bring recommendations to the full Board for approval.  These functions include:


 


(a)           Revising the Charter of the Board
from time to time;


 


(b)           Developing a position description for
the Chair of the Board; and


 


(c)                                  Developing
a position description for the Chief Executive Officer, as well as indicators
to measure the Chief Executive Officer’s performance.


 


A-3

















 


Other Effective Westport
Corporate Governance Practices


 


The following practices
are designed to make the Board as effective as it can be:


 


Adequate compensation for
directors and explicit performance expectations


 


The
Human Resources and Compensation Committee shall recommend for discussion and
Board approval levels and forms of compensation for directors, and shall work
to ensure that such compensation realistically reflects the responsibilities
and risk in being an effective Westport director.


 


Each
Westport director shall be required to meet the expectations set out in the
position descriptions for Westport directors and shall meet minimum attendance
requirements, including attending: (i) 80% of all Board and Committee
meetings; (ii) the directors’ annual governance and strategic planning
retreat; and (iii) the Annual General Meeting.


 


Meetings of the Board
will be held as required, but generally 10 times a year.


 


Effective committee structure and
charters


 


The Chair shall be
responsible for putting in place an appropriate Committee structure and shall
monitor compliance with the Board and Committee charters.


 


Board, committee and director
assessments


 


The Chair shall conduct
regular assessments of the Board, the Committees of the Board and individual
directors.


 


An effective Corporate Secretary


 


A Corporate Secretary who
has a position description approved by the Board shall support the Board in its
work.  The Corporate Secretary shall
report to the Chair of the Board.  The
Chair shall approve the appointment of the Corporate Secretary and evaluate his
or her performance.


 


Retaining of professional
advisors


 


The Chair of the Board may, in his or her discretion,
under appropriate circumstances, retain a professional advisor to provide
services to the Board or a Committee of the Board, at the expense of Westport.


 


If an individual director
wishes to engage an outside advisor at the expense of Westport for advisory
purposes, the engagement of such outside advisor shall be approved by the Chair
of the Board or Chair of the applicable Committee of the Board, depending on
the circumstances and reason for requesting independent professional advice.


 


Conditions for re-election of
directors


 


Whether a Westport
director stands for re-election at the Annual General Meeting shall be based
on: (i) that director’s performance as evidenced by his execution of his
or her duties and responsibilities; (ii) the confidence of other Board
members in that director; (iii) the confidence that Westport shareholders
have in that director, if such views are known and considered accurate and
considered relevant; (iv) the preferences of the individual director; and (v) the
skills, competencies, experience and benefit to Westport 


 


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of such directors
re-election, without undue regard being had to such director’s shareholdings in
Westport or relationship with existing directors, officers, shareholders or
affiliates of Westport. In addition, the Nominating and Corporate Governance
Committee shall review the retention of any director upon a change of work or
employment by that director.


 


Directors’ shareholdings


 


In an effort to better
align the interests of the director with the common shareholders of Westport,
each director is required to hold a minimum of one times their annual retainer
in Westport common shares or performance share units, to be acquired within a
three year period, such period commencing on the later of July 9, 2003 and
the date that the director was initially elected to the Board.


 


Executive Officer’s shareholdings


 


In an effort to better
align the interests of Westport’s senior management team with the common
shareholders of Westport, each executive officer of Westport is required to
hold a minimum of one times his or her annual salary in common shares or
performance share units, to be acquired within a five year period, such period
commencing on the later of July 9, 2003 and the date that the individual
became a Westport Executive.


 


Loans for Westport


 


Westport shall be
prohibited from making any loans to any of its directors or officers.


 


Other Board Memberships


 


Unless approved by the Board, the Westport Chief
Executive Officer is prohibited from swapping directorships with the chief
executive officer of another public corporation.


 


Unless
approved by the Board, three or more directors are prohibited from sitting on
another public company’s board of directors together.


 


Every executive officer
requires the approval of the Board before accepting a directorship of another
public company.


 


Other Westport Corporate
Governance Responsibilities


 


Other areas of
responsibility for the Board include the following:


 


General responsibility


 


The principal
responsibility of the Board is to promote the best interests of Westport and
its shareholders.  This responsibility
includes: (i) approving fundamental operating, financial and other
corporate plans, strategies and objectives; (ii) approving the
compensation of Westport’s executive officers; (iii) adopting policies of
corporate governance and conduct, including compliance with applicable laws and
regulations, financial and other controls; (v) reviewing the process of
providing appropriate financial and operational information to the shareholders
and the public generally; and (vi) evaluating the overall effectiveness of
the Board.


 


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Fiduciary duties


 


The
Board must act with a view to the best interests of Westport and its shareholders
generally.


 


Fiduciary
duties include, by way of example, the obligation to refrain from (i) voting
on contracts where personal financial or other interests conflict with those of
Westport; (ii) using insider information in securities transactions; and (iii) appropriating
a corporate opportunity for personal benefit. 
Directors must act with such care as would reasonably be expected of a
person having the knowledge and experience of the director in question.


 


Directors
should have sufficient information to enable them to make knowledgeable
decisions on all matters coming before the Board.  It is the responsibility of each director to
ask such questions as may be necessary to satisfy himself or herself that he or
she has been supplied with all the necessary information on which to base his
or her decisions.  Directors should be
familiar with the aspects of the business and affairs of Westport and have a
basic understanding of the principal operational and financial objectives,
strategies and plans of Westport, the results of operations and the financial
condition of Westport.


 


Directors
are entitled to rely in good faith on: (i) financial statements of
Westport which are represented to them by an officer of Westport or in a
written report of the auditors of Westport as fairly reflecting the financial
condition of Westport; and (ii) an opinion or report of a lawyer,
accountant, engineer, appraiser or other person whose profession lends
creditability to a statement made by them.


 


In order to fulfill their
fiduciary duties to Westport and its shareholders, each director should: (i) prepare
for and attend no less than 80% of the meetings of the Board; (ii) be
sufficiently informed about the current and proposed activities of Westport; (iii) review
the minutes of any meeting not attended as well as any resolutions passed or
actions taken; (iv) obtain advice from outside or independent advisors and
consultants when necessary; (v) review the minutes of the previous meeting
of the Board to determine that they accurately represent the discussions that
took place and the resolutions that were passed; and (vi) be especially
attentive to specific aspects of Westport’s activities according to their own
experience and occupation.


 


Conflicts of interest


 


A
director who is a party to a material contract or proposed material contract
with Westport, or who is a director or officer of or has a material interest in
any person who is a party to a material contract or proposed material contract
with Westport, must disclose in writing to Westport, or request to have entered
in the minutes of meetings of directors, the nature and intent of his or her
interest.


 


The
disclosure required to be made by a director where there is a conflict of
interest must be made at the meeting at which a proposed contract is first
considered by the Board or, if the director had no interest in a proposed
contract at the time of such meeting, at the first meeting of the Board after
that director acquires an interest.  If
the director acquires an interest after a contract is made, he or she must
disclose their interest at the first meeting of the Board after they became so
interested.  If a person who has an
interest in a contract later becomes a director of Westport, they must disclose
their interest at the first meeting of the Board after he or she became a
director.


 


Where
a proposed contract is dealt with by a written resolution signed by all
directors in lieu of a meeting of the Board, the disclosure must be made
immediately upon receipt of the resolution or, if the director had no interest
at the time of receipt of the resolution, at the first meeting of the Board
after he or she acquired the interest.


 


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A director who discloses
a conflict of interest must refrain from taking part in any discussions or
voting on any resolution to approve the contract, unless the contract is:


 


(a)                                  An
arrangement by way of security for money loaned to or obligations undertaken by
that director, or by a body corporate in which that director has an interest,
for the benefit of Westport or an affiliate;


 


(b)                                 A
contract relating primarily to a director’s remuneration as a director,
officer, employee or agent of Westport or an affiliate;


 


(c)                                  A
contract for indemnity or insurance with respect to a director or officer of
Westport, a former director or officer of Westport or 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; or


 


(d)                                 A
contract with an affiliate of Westport, provided, however, that directors who
serve on Boards of affiliated corporations are not prohibited from voting on
contracts between the two corporations.


 


Any profits or gains
realized by a director as a result of their privileged position on the Board
must be reimbursed to Westport, except in the case of gains resulting from
contracts with respect to which that director has complied with the obligation
to disclose his or her interest and refrained from voting.


 


Corporate opportunity


 


Directors
are precluded from obtaining for themselves or diverting to another person or
corporation with whom or with which they are associated, either secretly or
without the approval of Westport, any property or business advantage either
belonging to Westport or for which it has been negotiating.


 


Each
director is also precluded from so acting even after their resignation where
the resignation may fairly be said to have been prompted or influenced by a
wish to acquire for themselves the opportunity sought by Westport, or where it
was their position with Westport that led to the opportunity.


 


A director may not use
his or her position as a director to make a profit even if it was not open to
Westport to participate in the transaction.


 


Duty of independence


 


A director must act
strictly in the best interests of Westport and its shareholders generally and
not in the interest of any one shareholder or group of shareholders.  In determining whether a particular
transaction or course of action is in the best interests of Westport, a
director, if he or she is elected or appointed by holders of a class or series
of shares, may give special, but not exclusive, consideration to the interests
of those who elected or appointed them.


 


Duty of confidentiality


 


Directors of Westport
have an obligation to maintain the confidentiality of matters discussed at
meetings of the Board unless:


 


(a)                                  It
was clearly understood at the Board meeting that the information was not
required to be kept in confidence;


 


(b)           The director was required or
authorized by law to disclose the information;


 


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(c)                                The
director was authorized expressly or implicitly by the Board to make disclosure
of the information; or


 


(d)                               The
information was previously disclosed publicly.


 


Duty not to misuse information or
position


 


Directors must not misuse
their position or make improper use of information acquired by virtue of their
position to gain, directly or indirectly, an advantage for themselves or any
other person or to cause detriment to Westport. 
Directors are insiders of Westport and, as such, must not use any
information to trade in securities or to assist others to trade in securities
before the information is available to the public.


 


Insider reporting


 


Directors are required to
report to the appropriate regulatory authorities, and to Westport’s Corporate
Counsel, any changes in their direct or indirect beneficial ownership of or
control or direction over securities of Westport within ten days of the change.


 


External communications


 


The Board is responsible
for overseeing the establishment, maintenance and annual review of Westport’s
external communications policies, which facilitate effective communication
with, and accurate, appropriate and timely disclosure to, its shareholders,
analysts and the public generally.


 


Delegation of authority to
officers and committees


 


The
Board may delegate authority and functions to officers and to Committees of the
Board.  The Board has the right to approve
the appointment of Westport officers to perform such duties assigned to them by
the Board and the Chief Executive Officer.


 


Committees
of the Board currently include an Audit Committee, a Nominating and Corporate
Governance Committee, a Human Resources and Compensation Committee and a
Strategy Committee.  The Board has
established charters for each such Committee, and these charters include the
Committee’s responsibilities, the composition and membership of the Committee,
the number of meetings to be held by the Committee per year and other relevant
matters.


 


The following matters are
within the sole purview of the Board and may not be delegated by the Board to a
Committee of the Board or to an officer of Westport:


 


(a)                                  The
submission to the shareholders of any question or matter requiring the approval
of the shareholders;


 


(b)           The filling of a vacancy among the
directors or in the office of the auditor;


 


(c)           The issuance of securities, except in
the manner and on the terms authorized by the directors;


 


(d)           The declaration of dividends;


 


(e)                                  The
purchase, redemption or other acquisition of shares of Westport, except in the
manner and on the terms authorized by the directors;


 


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(f)                                    The
payment of a commission to any person in consideration of: (i) his or her
purchasing or agreeing to purchase shares of Westport from Westport or from any
other person; or (ii) his or her procuring or agreeing to procure
purchasers for shares of Westport;


 


(g)           The approval of a management proxy
circular;


 


(h)           The approval of any Westport
financial statements; or


 


(i)            The adoption, amendment or repealing
of any by-laws of Westport.


 


Financial statements


 


The
Board has a duty to approve the annual financial statements of Westport and to
submit the financial statements of Westport, and the external auditors’ report
thereon, for the preceding year to the shareholders at the Annual General
Meeting of the shareholders of Westport.


 


A
director is required to forthwith notify both the Audit Committee and Westport’s
auditors of any error or misstatement of which he or she became aware in the
audited financial statements of Westport. 
The Board has a duty to prepare and issue corrected financial statements
on being informed of an error or misstatement by an auditor or former auditor
and the duty to file these statements with or inform the appropriate regulatory
authorities.


 


On demand from Westport’s
external auditors, each present and former director of Westport has a duty to
furnish to Westport’s auditors any information and explanations and allow
access to any books, records, documents, accounts or vouchers of Westport or
its subsidiaries that he or she is reasonably able to furnish and which
Westport’s external auditors consider necessary to enable them to report on the
annual financial statements.


 


Shareholder meetings


 


The Board is required to
call the Annual General Meeting of the shareholders and may, at any time, call
a special meeting of shareholders.  The
Board has a duty to call a special meeting of the shareholders to approve any
matter that requires the approval of shareholders by special resolution.


 


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