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ex4_1.htm

  

  

  

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EXHIBIT 4.1

 

WESTPORT INNOVATIONS INC.

 

AMENDED AND RESTATED STOCK OPTION PLAN

 

(Amendments approved by the Corporation's shareholders on July 16, 2009 and amended

September 2, 2009.)

 

	
1.  

	
The Plan

 

A stock option plan (the "Plan") pursuant to which options to purchase common shares ("Shares") of Westport Innovations Inc. (the "Corporation") may be granted to the directors, officers, employees of, or provider of services to, the Corporation and its subsidiaries is hereby established on the terms and conditions herein set forth.

 

	
2.  

	
Purpose

 

The purpose of this Plan is to advance the interests of the Corporation by encouraging the directors, officers, employees of, or provider of services to, the Corporation and its subsidiaries to acquire Shares, thereby: (i) increasing the proprietary interests of such persons in the Corporation; (ii) aligning the interests of such persons with the interests of the Corporation's shareholders generally; (iii) encouraging such persons to remain associated with the Corporation; and (iv) furnishing such persons with an additional incentive in their efforts on behalf of the Corporation.

 

	
3.  

	
Administration

 

	
(a)  

	
This Plan shall be administered by the board of directors of the Corporation (the "Board").

 

	
(b)  

	
Subject to the terms and conditions set forth herein, the Board is authorized to provide for the granting, exercise and method of exercise of Options (as hereinafter defined), all on such terms (which may vary between Options granted from time to time) as it shall determine.  In addition, the Board shall have the authority to: (i) construe and interpret this Plan and all option agreements entered into hereunder; (ii) prescribe, amend and rescind rules and regulations relating to this Plan; and (iii) make all other determinations necessary or advisable for the administration of this Plan.  All determinations and interpretations made by the Board shall be binding on all Participants (as hereinafter defined) and on their legal, personal representatives and beneficiaries.

 

	
(c)  

	
Notwithstanding the foregoing or any other provision contained herein, the Board shall have the right to delegate the administration and operation of this Plan, in whole or in part, to a committee of the Board and/or to any member of the Board.  Whenever used herein, the term "Board" shall be deemed to include any committee or director to which the Board has, fully or partially, delegated the administration and operation of this Plan pursuant to this section 3.

 

 

  

  

  

 

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(d)  

	
An option to acquire the Shares granted hereunder ("Option") shall be evidenced by an agreement, signed on behalf of the Corporation and by the person to whom an Option is granted, which agreement shall be in such form as the Board shall approve.

 

	
4.  

	
Shares Subject to Plan

 

	
(a)  

	
Subject to section 15 below, the securities that may be acquired by Participants under this Plan shall consist of authorized but unissued Shares.

 

	
(b)  

	
The aggregate number of Shares reserved for issuance under Options granted pursuant to this Plan shall not exceed 5% of the total number of issued and outstanding Shares of the Corporation from time to time (calculated on a non-diluted basis).  For greater certainty, if any Option granted under this Plan is exercised, the number of Shares to which such Option relates shall be available for the purposes of the granting of further Options under this Plan.

 

	
(c)  

	
If any Option granted under this Plan shall expire or terminate for any reason without having been exercised in full, any unpurchased Shares to which such Option relates shall be available for the purposes of the granting of Options under this Plan.

 

	
5.  

	
Maintenance of Sufficient Capital

 

The Corporation shall at all times during the term of this Plan ensure that the number of Shares it is authorized to issue shall be sufficient to satisfy the requirements of this Plan.

 

	
6.  

	
Eligibility and Participation

 

	
(a)  

	
The Board may, in its discretion, select any directors, officers or employees of, or provider of services to, the Corporation or subsidiaries of the Corporation to participate in this Plan.  If any such person (a "Designated Individual") is (pursuant to the terms of his or her employment or otherwise) subject to a requirement that he or she not benefit personally from an Option grant, the Board may grant any Options to which a Designated Individual would otherwise be entitled to the person's employer or other entity designated by them (a "Designated Entity") that directly or indirectly imposes that requirement on the Designated Individual.  No provider of services to the Corporation who is also an insider (as that term is defined by the Securities Act (Ontario)) ("Insider") of the Corporation shall be granted Options in the capacity of a provider of services.  In addition, only persons who provide services to the Corporation of an ongoing or recurring nature shall be entitled to be granted Options.  (Any person or entity having been selected for

 

 

  

  

  

 

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participation in this Plan by the Board is herein referred to as a "Participant").

 

	
(b)  

	
The Board may from time to time, in its discretion, grant an Option to any Participant, upon the terms, conditions and limitations set forth herein, and such other terms, conditions and limitations permitted by and not inconsistent with this Plan as the Board may determine, provided that Options granted to any Participant shall be approved by the shareholders of the Corporation if the rules of any stock exchange or exchanges on which the Shares are listed require such approval.

 

	
(c)  

	
The number of Shares reserved for issuance to Insiders under this Plan or any other share compensation arrangement of the Corporation, shall not exceed 10% of the total number of issued and outstanding Shares.

 

	
(d)  

	
The number of Shares issued to Insiders under this Plan or any other share compensation arrangement of the Corporation, within a one year period,  shall not exceed 10% of the total number of issued and outstanding issue Shares.

 

	
(e)  

	
The number of Shares issued to any one Insider and such Insider's associates (as that term is defined by the Securities Act (Ontario)), under this Plan or any other share compensation arrangement of the Corporation, within a one year period, shall not exceed 5% of the total number of issued and outstanding Shares at the time of the contemplated issuance.

 

	
(f)  

	
Within any one financial year period, the total value of Options granted to a non-executive director under this Plan or any other share compensation arrangement of the Corporation, as determined by the Board on the date of grant, shall not exceed an aggregate of $100,000.  The aggregate number of Shares reserved for issuance pursuant to Options granted to non-employee directors of the Corporation under this Plan after July 27, 2001 shall never exceed 1% of the total number of issued and outstanding Shares at the time of the contemplated grant.

 

	
7.  

	
Exercise Price

 

Options may be exercised at a price (the "Exercise Price") that shall be fixed by the Board at the time that the Option is granted.  No Option shall be granted with an Exercise Price at a discount to the market price.  The market price shall be the closing price of the Shares on The Toronto Stock Exchange (or if the Shares are not listed on such exchange, on the stock exchange on which the Shares are traded) on the first day preceding the date of grant on which at least one board lot of Shares traded (the "Market Price").

 

	
8.  

	
Number of Optioned Shares

 

The number of Shares that may be acquired under an Option (the "Optioned Shares") granted to a Participant shall be determined by the Board as at the time the

 

 

  

  

  

 

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Option is granted, provided that the aggregate number of Shares reserved for issuance to any one Participant under this Plan or any other plan of the Corporation, shall not exceed five percent of the total number of issued and outstanding Shares (calculated on a non-diluted basis).

 

	
9.  

	
Term

 

The period during which an Option may be exercised (the "Option Period") shall be determined by the Board at the time the Option is granted, subject to any vesting limitations which may be imposed by the Board in its sole unfettered discretion at the time such Option is granted, provided that:

 

	
(a)  

	
no Option granted after July 16, 2009 shall be exercisable for a period exceeding five (5) years from the date the Option is granted, plus any applicable extension pursuant to section 9(d);

 

	
(b)  

	
the Option Period shall be automatically reduced in accordance with sections 11 and 12 below upon the occurrence of any of the events referred to therein;

 

	
(c)  

	
no Option in respect of which shareholder approval is required under the rules of any stock exchange or exchanges on which the Shares are then listed shall be exercisable until such time as the Option has been approved by the shareholders of the Corporation; and

 

	
(d)  

	
notwithstanding the foregoing provisions of this section 9, unless otherwise determined by the Board, if any Option granted hereunder is scheduled to expire: (i) at a time when the holder of the Option is subject to restrictions on trading of securities of the Corporation under a trading "blackout" established by the Corporation (pursuant to the Disclosure Policy of the Corporation then in effect or otherwise) (a "Blackout Period"); or (ii) within ten business days after the termination of a Blackout Period, the Option will, notwithstanding the scheduled expiry date of such Option, expire as of the date that is 10 business days following the end of the applicable Blackout Period (the "Revised Expiry Date") and shall be exercisable by the holder at any time up to the applicable time on the Revised Expiry Date.

 

	
10.  

	
Method of Exercise of Option

 

	
(a)  

	
Except as set forth in sections 11 and 12 below or as otherwise determined by the Board, no Option may be exercised unless the holder of such Option is, at the time the Option is exercised, a director, officer, employee of, or provider of services to, the Corporation or a subsidiary thereof.

 

	
(b)  

	
Subject to the other provisions of the Plan and any vesting limitations imposed by the Board at the time of grant, an Option may be exercised, in whole or in part, at any time or from time to time by the Participant giving written notice to the Corporation specifying the number of Shares with

 

 

  

  

  

 

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respect to which the Option is being exercised, which notice shall be accompanied by payment in full of the Exercise Price for the Shares with respect to which the Option is being exercised.

 

	
(c)  

	
A Participant shall not be obligated to purchase and pay for any Optioned Shares except those Optioned Shares in respect of which the Participant shall have exercised the Option pursuant to paragraph 10(b) above.

 

	
(d)  

	
Upon the exercise of an Option as aforesaid, the Corporation shall use its reasonable efforts to forthwith deliver, or cause the registrar and transfer agent of the Shares to deliver, to the relevant Participant (or his or her legal or personal representative) or to the order thereof, a certificate representing the number of Shares with respect to which the Option has been exercised, such Shares to be issued as fully paid and non-assessable Shares.

 

	
11.  

	
Ceasing to be a Director, Officer, Employee or Provider of Services

 

If any Participant who is a director, officer or employee of, or provider of services to, the Corporation or a subsidiary thereof shall cease to be a director, officer or employee of, or provider of services to, the Corporation or a subsidiary of the Corporation for any reason other than cause, death, permanent disability or normal retirement (or the relevant Designated Individual undergoes such change and no individual (an "Alternative Individual") is appointed in place of the Designated Individual in respect of the same Designated Entity), the Participant's Option will terminate at 5:00 p.m. (Calgary time) on the earlier of the date of the expiration of the Option Period and the ninetieth (90th) day after the date such Participant (or, in the case of a Designated Entity, the Designated Individual if no Alternative Individual is appointed) ceases to be a director, officer or employee of, or provider of services to, the Corporation or a subsidiary thereof. During such period, the Option, or portion thereof, shall be exercisable only to the extent that the Participant was entitled to exercise the Option as at the date of the cessation.

 

Neither the selection of any person as a Participant nor the granting of an Option to any Participant under this Plan shall: (i) confer upon such Participant (or a Designated Individual) any right to continue as a director, officer, employee of, or provider of services to, the Corporation or subsidiary, as the case may be; or (ii) be construed as a guarantee that the Participant (or a Designated Individual) will continue as a director, officer or employee of, or provider of services to, the Corporation or subsidiary, as the case may be.

 

	
12.  

	
Cause, Death, Permanent Disability or Normal Retirement of a Participant

 

In the event that a Participant (or the Designated Individual undergoes such change and no Alternative Individual is appointed) who is a director, officer or employee of, or provider of services to, the Corporation or a subsidiary thereof shall cease to be a director, officer or employee of, or provider of services to, the Corporation or a 

 

 

  

  

  

 

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subsidiary of the Corporation for cause, in the opinion of the Corporation's legal counsel, any Option previously granted to him or her shall immediately expire and terminate.

 

In the event of the death, permanent disability or normal retirement of a Participant (or the Designated Individual undergoes such change and no Alternative Individual is appointed), any Option previously granted to him or her shall be exercisable until the end of the Option Period or until the expiration of 12 months after the date of death, permanent disability or normal retirement of such Participant (or Designated Individual if no Alternative Individual is appointed), whichever is earlier, and then, in the event of death or permanent disability, only:

 

	
(a)  

	
if the Participant was not a Designated Entity, by the person or persons to whom the Participant's rights under the Option shall pass by the Participant's will or applicable law; and

 

	
(b)  

	
to the extent that the Participant was entitled to exercise the Option as at the date of his or her death or permanent disability.

 

	
13.  

	
Rights of Participants

 

No person entitled to exercise any Option granted under this Plan shall have any of the rights or privileges of a shareholder of the Corporation in respect of any Shares issuable upon exercise of such Option until such Shares have been paid for in full and issued to such person.

 

	
14.  

	
Proceeds from Exercise of Options

 

The proceeds from any sale of Shares issued upon the exercise of Options shall be added to the general funds of the Corporation and shall thereafter be used from time to time for such corporate purposes as the Board may determine and direct.

 

	
15.  

	
Adjustments

 

	
(a)  

	
The number of Shares subject to the Plan shall be increased or decreased proportionately in the event of the subdivision or consolidation of the outstanding Shares, and in any such event a corresponding adjustment shall be made changing the number of Shares deliverable upon the exercise of any Option granted prior to such event without any change in the total price applicable to the unexercised portion of the Option, but with a corresponding adjustment in the price for each Share covered by the Option.  In case the Corporation is reorganized or merged or consolidated or amalgamated with another corporation, appropriate provisions shall be made for the continuance of the Options outstanding under this Plan and to prevent their dilution or enlargement.

 

	
(b)  

	
Adjustments under this section 15 shall be made by the Board, whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive.  No fractional Shares shall be issued under this Plan on any such adjustment.

 

 

  

  

  

 

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16.  

	
Change of Control

 

Notwithstanding the provisions of section 11 herein, in the event of a sale by the Corporation of all or substantially all of its assets or in the event of a change of control of the Corporation, then the Participant shall be entitled to exercise in full or in part any unexercised Options previously granted hereunder, whether vested or not, until the earlier of the expiration of the Option Period or the expiration of ninety (90) days after the date of termination of the employment of the Participant with the Corporation or a subsidiary thereof or ninety (90) days after the cessation or termination of the Participant as a director or officer of, or provider of services to, the Corporation or a subsidiary thereof.

 

For the purpose of this Plan, change of control of the Corporation means:

 

	
(a)  

	
the acceptance by the holders of shares of the Corporation, representing in the aggregate of more than fifty percent (50%) of all issued and voting shares of the Corporation, of any offer, whether by way of a takeover bid or otherwise, for all or any of the voting shares of the Corporation;

 

	
(b)  

	
the acquisition hereafter, by whatever means, of ownership or control of more than fifty percent (50%) in aggregate of all issued and voting shares of the Corporation by any companies and/or individuals acting in concert; or

 

	
(c)  

	
the acquisition of ownership or control of less than fifty percent (50%) in the aggregate of all issued and voting shares of the Corporation and the voting of such shares allows the control group to elect a majority of the Board or to assume the effective management of the Corporation.

 

	
17.  

	
Transferability

 

All benefits, rights and Options accruing to any Participant in accordance with the terms and conditions of this Plan shall not be transferable or assignable unless specifically provided herein.  The Corporation shall not recognize any attempted exercise of any purported assignee of a Participant.  During the lifetime of a Participant, any Options granted hereunder may only be exercised by the Participant and in the event of the death or permanent disability of a Participant, who is an individual, by the person or persons to whom the Participant's rights under the Option pass by the Participant's will or applicable law.

 

	
18.  

	
Amendment and Termination

 

	
(a)  

	
Subject to section 18(b) below, the Board may amend this Plan in any respect without the approval of the shareholders of the Corporation and, without limiting the generality of the foregoing, the Board may make:

 

	
(i)  

	
amendments of a technical, clerical or "housekeeping" nature, or to clarify any provision of this Plan;

 

	
(ii)  

	
amendments providing for the termination or suspension of this

 

 

  

  

  

 

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Plan;

 

	
(iii)  

	
amendments to respond to changes in legislation, regulations, stock exchange rules or accounting or auditing requirements;

 

	
(iv)  

	
adjustments to outstanding Options in the event of certain transactions entered into by the Corporation;

 

	
(v)  

	
amendments to the vesting provisions of any outstanding Option (including, without limitation, acceleration of vesting);

 

	
(vi)  

	
amendments with respect to the method or manner of exercise of any Option;

 

	
(vii)  

	
amendments to the termination provisions set out in this Plan or any outstanding Option, provided no such amendment may result in: (i) an extension of any outstanding Option beyond 5 years from the original date of grant (without regard to extensions arising in respect of a Blackout Period); or (ii) the granting of an Option with an expiry date later than 5 years from the date of grant (without regard to an extension of the Option arising in respect of a Blackout Period); and

 

	
(viii)  

	
adjustments to reflect stock splits, stock dividends or other alterations to the share capital of the Corporation.

 

	
(b)  

	
Notwithstanding section 18(a) above, shareholder approval will be required in respect of any amendment of this Plan approved by the Board that:

 

	
(i)  

	
increases the number of shares reserved for issuance under this Plan;

 

	
(ii)  

	
reduces the exercise price of an Option, except for the purpose of maintaining option value in connection with a conversion, change, reclassification, redivision, redesignation, subdivision or consolidation of Shares or a reorganization, amalgamation, consolidation, merger, takeover bid or similar transaction involving the Corporation (and for this purpose, cancellation or termination of an Option prior to its expiry date for the purpose of reissuing Options to the same option-holder with a lower exercise price will be considered an amendment to reduce the exercise price of an Option);

 

	
(iii)  

	
extends the term of an Option beyond the maximum expiry date set out in the Plan (except where an expiry date would have fallen within a Blackout Period);

 

	
(iv)  

	
extends eligibility to participate in the Plan to persons other than

 

 

  

  

  

 

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officers, directors, employees of the Corporation (or any affiliate) and consultants to the Corporation (or any affiliate);

 

	
(v)  

	
extends the total value of Shares which may be granted to a non-executive director under this Plan or any other share compensation arrangement of the Corporation;

 

	
(vi)  

	
permits Options to be transferred, other than for normal estate settlement purposes or to an RRSP or similar plan;

 

	
(vii)  

	
permits awards other than Options to be made under the Plan; or

 

	
(viii)  

	
amends these amendment provisions of the Plan;

 

and no amendment of a nature referred to above in this section 18(b) shall take effect until approved by resolution of the shareholders of the Corporation passed by a simple majority of votes cast in person or by proxy at the applicable meeting of shareholders.

	
19.  

	
Necessary Approvals

 

The obligation of the Corporation to issue and deliver Shares in accordance with this Plan is subject to applicable securities legislation and to the receipt of any approvals that may be required from any regulatory authority or stock exchange having jurisdiction over the securities of the Corporation.  If Shares cannot be issued to a Participant upon the exercise of an Option due to legal or regulatory restrictions, the obligation of the Corporation to issue such Shares shall terminate and any funds paid to the Corporation in connection with the exercise of such Option will be returned to the relevant Participant as soon as practicable.

 

	
20.  

	
Stock Exchange Rules

 

The Plan and any option agreements entered into hereunder shall comply with the requirements from time to time of the stock exchange or exchanges on which the Shares are listed.

 

	
21.  

	
Right to Issue Other Shares

 

The Corporation shall not by virtue of this Plan be in any way restricted from declaring and paying stock dividends, issuing further Shares, varying or amending its share capital or corporate structure or conducting its business in any way whatsoever.

 

	
22.  

	
Notice

 

Any notice required to be given by this Plan shall be in writing and shall be given by registered mail, postage prepaid or delivered by courier or by facsimile transmission addressed, if to the Corporation, at the Office of the Corporation to the Corporation's Chief Financial Officer; or if to a Participant, to such Participant at his address as it appears on the books of the Corporation or in the event of the address of any such 

 

 

  

  

  

 

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Participant not so appearing then to the last known address of such Participant; or if to any other person, to the last known address of such person.

 

	
23.  

	
Shareholder Approval

 

Shareholder approval is required in respect of the terms of this Plan not less than every three (3) years.

 

	
24.  

	
Gender

 

Words used herein importing gender shall include all genders.

 

	
25.  

	
Interpretation

 

This Plan will be governed by and construed in accordance with the laws of the Province of Alberta.

 

  

  

  

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WESTPORT INNOVATIONS INC.

OPTION AGREEMENT

 

This Option Agreement is entered into between Westport Innovations Inc. ("Westport") and the Optionholder named below pursuant to Westport's stock option plan (the "Plan"), a copy of which is available to the Optionholder, and confirms that on ·, 200· (the "Grant Date"), · (the "Optionholder") was granted an option (the "Option") to purchase all, or any part of · Westport common shares (the "Common Shares") at a price of $· per Common Share.

 

The Option expires and terminates at 5:00 p.m. (Vancouver time) on the day that is the earlier of: (i) the 5th anniversary of the Grant Date; and (ii) any earlier date as determined by the terms of the Plan.

 

[Subject to the more specific terms of the Plan, the Option shall be subject to a vesting period and may be exercised on a cumulative basis such that at any time following the date that is one year from the date hereof (the "Initial Vesting Date"), the Option may be exercised for one-third of the Common Shares and thereafter for each completed one year period during the next two years, the Option may be exercised on a cumulative basis for a number of Common Shares equal to the initial vested portion thereof plus: (i), one-third of the Common Shares for each one year period completed following the Initial Vesting Date; less (ii) the number of Common Shares, if any, in respect of which the Option has been exercised prior to the time of exercise.]

 

OR

 

[The Option shall not be subject to a vesting period and may be exercised in whole or in part at any time following the date hereof.]

 

By signing this Option Agreement, the Optionholder acknowledges that the Optionholder has read and understands the terms of the Plan and accepts the Option in accordance with the terms of the Plan.

 

IN WITNESS WHEREOF Westport and the Optionholder have executed this Option Agreement as of ·, 200·.

 

	
WESTPORT INNOVATIONS INC.

	  
	  	  	  
	  	
By:

	  
	  	  	  
	  	  	  
	  	  
	  	
Name of Optionholder

	  	  
	  	  
	  	
Signature of Optionholderex4_2.htm

  

  

  

EXHIBIT 4.2

 

WESTPORT

INNOVATIONS INC.

 

 

AMENDED AND RESTATED PERFORMANCE SHARE UNIT

PLAN

 

(Approved by the Shareholders of Westport Innovations Inc. on July 16, 2009)

 

	
Section 1.  

	
The Plan

 

A performance share unit plan for executive officers, directors and key employees and contractors of Westport Innovations Inc. ("Westport") and its subsidiaries entitling participants to acquire fully paid common shares of Westport is hereby established on the terms and conditions set out below.

 

	
Section 2.  

	
Objectives

 

The objectives of this Plan are to:

 

	
(a)  

	
conserve Westport’s cash reserves by providing equity incentives to the Participants that would otherwise be payable in cash;

 

	
(b)  

	
ensure that the overall compensation for Westport executive officers, directors and key employees is competitive with Westport’s peers and industry participants; and

 

	
(c)  

	
increase Westport share ownership by Westport directors, executive officers and key employees to better align the interests of these individuals with Westport shareholders.

 

	
Section 3.  

	
Definitions

 

In this Plan, unless the context otherwise requires:

 

"Blackout Period" has the meaning ascribed thereto in Section 7(e) hereof;

 

"Board" means the board of directors of Westport, and if the Board has delegated the administration of this Plan to the Committee, the term "Board" shall include the Committee;

 

“Code” shall mean the United States Internal Revenue Code of 1986 as amended;

 

"Committee" means the human resources and compensation committee of the Board or such other committee of the Board to which the Board may from time to time delegate the administration of this Plan;

 

 

  

  

  

 

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"Common Shares" means the common shares of Westport as constituted on the Effective Date and any other shares of Westport into which the Common Shares may be subdivided, consolidated, reclassified or changed;

 

"Effective Date" means July, 20, 2006;

 

"Grant Date" means the date of grant of any particular Unit as set forth in this Plan;

 

"Insider" means:

 

	
(a)  

	
an insider as defined in the Securities Act (British Columbia), other than a person who falls within that definition solely by virtue of being a director or senior officer of a Subsidiary; and

 

	
(b)  

	
an associate (as defined in the Securities Act (British Columbia)) of any person who is an Insider by virtue of (a) above;

 

"Option Plan" means the stock option plan of Westport approved by Westport's board of directors and shareholders from time to time;

 

"Participant" means any employee, contractor, director or executive officer of Westport or a Subsidiary who is selected by the Board to participate in this Plan and is granted Units under this Plan;

 

"Plan" means this performance share unit plan of Westport as amended from time to time;

 

"Revised Expiry Date" has the meaning ascribed thereto in Section 7(e) hereof;

 

"Subsidiary" means any business entity in which Westport, directly or indirectly, owns fifty (50%) percent or more of the total combined voting power of all classes of shares or other equity interests;

 

"Unit" means a performance share unit granted to a Participant pursuant to this Plan entitling the Participant, subject to the terms and conditions of this Plan and the Unit Agreement, to receive one Common Share; and

 

"Unit Agreement" means the agreement between Westport and the Participant dated the Grant Date setting forth the terms and conditions of the Units granted to the Participant on that date.

 

In this Plan, whenever the context so requires, the masculine gender includes the feminine and singular number includes the plural.

 

	
Section 4.  

	
Administration

 

	
(a)  

	
Subject to the terms and conditions of this Plan, the Board shall have the sole and complete authority to:

 

	
(i)  

	
select Participants;

 

	
(ii)  

	
grant Units in such numbers and to such Participants as it shall determine;

 

	
(iii)  

	
impose such limitations, restrictions, vesting periods and conditions upon such grants of Units as it shall deem appropriate, including the annual establishment of any vesting terms in respect of Units to be granted;

 

 

  

  

  

 

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(iv)  

	
construe and interpret this Plan and Unit Agreements, and adopt, amend and restate administrative guidelines and other rules and regulations relating to this Plan and Unit Agreements, as it deems appropriate; and

 

	
(v)  

	
make all other determinations and take all other actions necessary or advisable for the implementation and administration of this Plan.

 

All calculations, determinations, interpretations and actions made, taken or approved by the Board shall be conclusive and binding upon Westport and all Participants and their beneficiaries and legal representatives.

 

	
(b)  

	
To the extent permitted by law, the Board may, from time to time, delegate to the Committee all or any of the powers conferred on the Board under this Plan and may further delegate the day-to-day administration of this Plan to a Plan administrator for such remuneration and on such other terms and conditions as the Board considers appropriate.

 

	
(c)  

	
Wherever the Board is to exercise discretion in the administration of the terms and conditions of this Plan, the term "discretion" shall mean the sole and absolute discretion of the Board.

 

	
(d)  

	
All actions and determinations (including any omissions with respect to the foregoing) which are taken or made in good faith by the Board or, if so delegated, by the Committee or a Plan administrator, shall not subject Westport or any member of the Board to any liability whatsoever to the Participants or their beneficiaries and legal representatives.

 

	
Section 5.  

	
Effective Date and Shares Subject to this Plan

 

	
(a)  

	
This Plan, as amended from time to time, shall be effective on the Effective Date.

 

	
(b)  

	
The maximum number of Common Shares which may be issued from treasury in respect of Units granted under this Plan shall be fixed at 2,142,856.  This prescribed maximum may be increased from time to time by the Board to any other specific amount, subject to applicable securities laws and obtaining shareholder approval and all necessary stock exchange approvals.  Although it is the initial intent of the Board to issue Common Shares from treasury upon the exercise of outstanding Units, the Board shall also have the discretion to purchase Common Shares in the public market to satisfy Westport’s obligations hereunder if it so chooses, and in that event, such Common Shares purchased shall not be included in the calculation of the maximum number of Common Shares which may be issued under  this Plan.

 

	
Section 6.  

	
Selection of Participants

 

	
(a)  

	
The Board may from time to time, in its discretion and having regard to any recommendations received from the Committee, select any Participant to participate in this Plan and grant Units to such Participant upon such terms, conditions and limitations as the Board may determine, in accordance with the terms, conditions and limitations set forth in this Plan.

 

	
(b)  

	
As a condition of becoming a Participant, each Participant will agree to comply with all relevant laws, rules and regulations and to furnish to Westport all information and undertakings as may be required to permit compliance with such laws, rules and regulations.

 

 

  

  

  

 

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Section 7.  

	
Issuance and Exercise of Units

 

	
(a)  

	
Units may be granted pursuant to this Plan for any of the following purposes:

 

	
(i)  

	
in accordance with Westport’s compensation and bonus plans and arrangements;

 

	
(ii)  

	
to enable Westport to attract key employees by issuing Units as a signing bonus; or

 

	
(iii)  

	
to enable Westport to settle contractual amounts payable as a result of termination or statutory severance payments owing to Participants.

 

	
(b)  

	
No fractional Units shall be granted and no cash shall be paid at any time in lieu of any fractional Units.

 

	
(c)  

	
No certificates shall be issued with respect to the Units.  Westport and each Participant shall execute a Unit Agreement with respect to each grant of Units confirming the number of Units, all terms and conditions in respect of the Units and such other matters as the Board may direct.

 

	
(d)  

	
Subject to the following, the period during which a Unit may be exercised shall be determined by the Board at the time the Unit is granted, provided that:

 

	
(i)  

	
no Unit shall be exercisable for a period exceeding ten (10) years from the Grant Date, plus any extension pursuant to Section 7(g);

 

	
(ii)  

	
unless otherwise specifically indicated in the Unit Agreement, and subject to Section 7(g) hereof, Units shall be deemed exercised immediately on the vesting thereof; and

 

	
(iii)  

	
The terms and conditions applicable to any grant of Units to a Participant who is subject to taxation under the Code, and that constitutes "deferred compensation", are subject to Section 409A of the Code and are intended to comply with Section 409A of the Code.  The terms of any such grant permitting deferral of payment, and where settlement is to be made by delivery of Common Shares, shall be subject to such requirements and shall be administered in such manner as the Committee may determine necessary or appropriate to comply with the applicable provisions of Code Section 409A as in effect from time to time.

 

	
(e)  

	
Upon exercise or deemed exercise of a Unit settlement shall be made by delivery of one Common Share for each such Unit exercised as soon as reasonably practicable.

 

	
(f)  

	
Within any one financial year period, the total value of Units granted to a non-executive director under this Plan or any other share compensation arrangement of Westport, as determined by the Board on the date of grant, shall not exceed an aggregate of $100,000.

 

	
(g)  

	
Notwithstanding the foregoing provisions of this Section 7, unless otherwise determined by the Board, if any Unit granted hereunder is scheduled to automatically exercise or to expire and become unexercisable: (i) at a time when the holder of the Unit is subject to restrictions on trading of securities of Westport under a trading "blackout" established by Westport (pursuant to the Disclosure Policy of Westport then in effect or otherwise) (a "Blackout Period"); or (ii) within ten business days after the termination of a Blackout Period, the Unit will, notwithstanding the scheduled deemed exercise or expiry date of such Unit, be deemed exercised, or expire and become unexercisable, as applicable, as of the date that is 10 business days following the end of

 

 

  

  

  

 

- 5 -

 

 

	
  

	
the applicable Blackout Period (the "Revised Expiry Date") and shall be exercisable by the holder at any time up to the applicable time on the Revised Expiry Date.

 

	
(h)  

	
Westport may withhold or cause to be withheld from any amount payable to a Participant hereunder, whether by cash or issuance of Common Shares, such amount as may be necessary so as to ensure that Westport will be able to comply with the applicable provisions of any federal, provincial, state or local law relating to the withholding of tax or other required deductions.

 

	
Section 8.  

	
Transferability

 

Units or any rights or interest of a Participant under this Plan may be assigned, encumbered or transferred  to the extent that such Units or rights pass to a beneficiary or legal representative upon the death of the Participant (whether by will or by the laws of succession and distribution). Units or any rights or interest of a Participant under this Plan may be assigned in accordance with and to the extent permitted by law or the rules of any applicable stock exchange or regulatory authority.

 

	
Section 9.  

	
Adjustments

 

	
(a)  

	
The existence of Units granted under this Plan shall not affect in any way the right or power of Westport or its shareholders to make or authorize any adjustment, recapitalization, reorganization or other change in Westport's capital structure or business or any amalgamation, combination, merger, consolidation or spin out involving Westport or any of its assets or to create or issue any bonds, debentures, shares or other securities of Westport or the rights or conditions attaching thereto or to effect the dissolution or liquidation of Westport or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of similar character or otherwise.

 

	
(b)  

	
The number of Units (and hence Common Shares subject to this Plan) may be adjusted as the Board in its discretion determines is appropriate on the occurrence of any of the events contemplated in Section 9(a).  In the event Westport is reorganized, merged, consolidated or amalgamated with another corporation, the Board shall make such provisions as it in its discretion determines is appropriate for the continuance of the Units then issued and outstanding pursuant to this Plan and to prevent their dilution or enlargement.

 

	
(c)  

	
A decision of the Board in respect of any matters falling within the scope of this Agreement shall be final and without recourse on the part of any Participant, his or her legal representatives, provided any amendments without their consent shall not adversely affect or impair the value of any Units then held.

 

	
Section 10.  

	
Amendment and Termination

 

	
(a)  

	
Subject to section 10(b) below, the Board may amend this Plan in any respect without the approval of the shareholders of Westport and, without limiting the generality of the foregoing, the Board may make:

 

	
(i)  

	
amendments of a technical, clerical or "housekeeping" nature, or to clarify any provision of this Plan;

 

	
(ii)  

	
amendments providing for the termination or suspension of this Plan;

 

	
(iii)  

	
amendments to respond to changes in legislation, regulations, stock exchange

 

 

  

  

  

 

- 6 -

 

	
 

	
rules or accounting or auditing requirements;

 

	
(iv)  

	
adjustments to outstanding Units in the event of certain transactions entered into by Westport;

 

	
(v)  

	
amendments to the vesting provisions of any outstanding Units (including, without limitation, acceleration of vesting);

 

	
(vi)  

	
amendments with respect to the method or manner of exercise of any Units;

 

	
(vii)  

	
amendments to the termination provisions set out in this Plan or any outstanding Units, provided no such amendment may result in: (i) an extension of any outstanding Unit beyond 10 years from the original date of grant (without regard to extensions arising in respect of a Blackout Period); or (ii) the granting of a Unit with an expiry date later than 10 years from the date of grant (without regard to an extension of the Unit arising in respect of a Blackout Period); and

 

	
(viii)  

	
adjustments to reflect stock splits, stock dividends or other alterations to the share capital of Westport.

 

	
(b)  

	
Notwithstanding section 10(a) above, shareholder approval will be required in respect of any amendment of this Plan approved by the Board that:

 

	
(i)  

	
increases the number of Common Shares reserved for issuance under this Plan;

 

	
(ii)  

	
extends the term of a Unit beyond the maximum expiry date set out in the Plan (except where an expiry date would have fallen within a Blackout Period);

 

	
(iii)  

	
extends eligibility to participate in the Plan to persons other than officers, directors, employees of Westport (or any affiliate) and consultants to Westport (or any affiliate);

 

	
(iv)  

	
extends the total value of Units which may be granted to a nonexecutive director under this Plan or any other share compensation arrangement of Westport;

 

	
(v)  

	
permits Units to be transferred, other than for normal estate settlement purposes or to an RRSP or similar plan;

 

	
(vi)  

	
permits awards other than Units to be made under the Plan; or

 

	
(vii)  

	
amends these amendment provisions of the Plan;

 

and no amendment of a nature referred to above in this section 10(b) shall take effect until approved by resolution of the shareholders of Westport passed by a simple majority of votes cast in person or by proxy at the applicable meeting of shareholders.

 

	
Section 11.  

	
Miscellaneous Provisions

 

	
(a)  

	
Except as specifically set out in this Plan, no Participant or other person shall have any claim or right to any Units under this Plan.  Neither this Plan nor any action taken thereunder shall 

 

 

  

  

  

 

- 7 -

 

 

	
 

	
interfere with the right of the employer of a Participant to terminate his or her employment at any time.  The payment of any sum of money in lieu of notice of the termination of employment shall not be considered as extending the period of employment for the purposes of this Plan.

 

	
(b)  

	
This Plan shall be construed in accordance with and governed by the laws of the Province of British Columbia.

 

	
(c)  

	
Under no circumstances shall the Units be considered Common Shares, nor shall they entitle any Participant to the exercise of voting rights, or the exercise of any other rights attaching to the ownership of Common Shares.

 

	
(d)  

	
Notwithstanding anything else contained in this Plan:

 

	
(i)  

	
the number of Common Shares issued to Insiders under this Plan or any other Westport share compensation arrangement, within a one year period, shall not exceed 10% of the outstanding Common Shares;

 

	
(ii)  

	
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 this Plan or any other Westport share compensation arrangement, within a one year period, shall not exceed 5% of the outstanding Common Shares; and

 

	
(iii)  

	
the number of Common Shares that may be issued under this Plan to the directors of Westport (other than directors who are also officers) will not exceed 200,000 Common Shares in the aggregate.

 

	
(iv)  

	
the number of Common Shares reserved for issuance to Insiders under this Plan and any other share compensation arrangement of Westport, shall not exceed 10% of the total number of issued and outstanding Common Shares.

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