Westport Innovations Inc.

Westport Innovations Inc.

June 12, 2006 14:29 ET

Perseus, L.L.C. Completes $22.1 Million Strategic Investment in Westport Innovations

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - June 12, 2006) - Westport Innovations Inc. (TSX:WPT), a global leader in gaseous-fuelled power technologies, today announced that one or more investment funds managed by Perseus, L.L.C., a U.S.-based private equity fund management company, have completed definitive agreements for a strategic investment of approximately $22.1 million in Westport to be completed in two separate tranches. The closing of the first tranche of $13.8 million is committed and will be funded on or before July 15, 2006. The parties also have agreed to a further investment of approximately $8.3 million to be used to pursue new business opportunities, with this second tranche being subject to, amongst other requirements, shareholder approval being received at Westport's upcoming 2006 Annual & Special General Meeting and the satisfaction of certain business development milestones. Assuming receipt of shareholder approval and satisfaction of the milestones, the second tranche is expected to be completed within 180 days of the 2006 Annual & Special General Meeting.


- Perseus is a sophisticated U.S. private equity investment firm with successful holdings in other leading clean technology companies, including Clean Energy Fuels Corp., of which both Westport and Perseus are shareholders.

- Proceeds will fund commercial launch of HPDI LNG truck engines in North America and Australia, development of Westport's international business ventures, and general working capital requirements.

- First tranche of convertible notes will be issued upon closing at a conversion price of $1.30 per share, representing a conversion premium of 25% to the 20-day weighted average closing price.

- Second tranche amount will be triggered by Westport when additional capital is needed for new business opportunities and will be convertible at $1.40 per share.

- Right of first refusal is being granted to Perseus to invest up to an additional US$10 million.

"Perseus' investment and long-term support will deliver a great strategic lift to our global business expansion plans," stated David Demers, Chief Executive Officer of Westport. "We have worked together with Perseus on the Board of Directors of Clean Energy Fuels, and it is clear we share the same vision of the opportunities and challenges of moving the world's commercial vehicle sector to natural gas. This strategic investment is timely as we launch new products into markets struggling to cope with reduced availability and increased price volatility of conventional fuels and the higher cost of compliance with new emissions regulations. High oil prices have delivered solid economic arguments in favour of natural gas vehicles as a viable transportation alternative. In addition, the environmental benefits provided by natural gas vehicles are indisputable."

"We made an investment in Westport because we feel that the company is uniquely positioned to capitalize on the price advantage of natural gas as a global transportation fuel and current trends towards environmentally responsible urban transportation," stated Kenneth Socha, Senior Managing Director of Perseus. "Westport has developed alternative fuel solutions that not only significantly reduce emissions and greenhouse gases but also are economically superior to other fuel alternatives for the medium and heavy duty transportation sectors. Our exhaustive due diligence revealed a well-managed, efficient and technologically superior company with significant opportunities for growth and value creation."

About Perseus, L.L.C.

Perseus, L.L.C. is a private equity fund management company headquartered in Washington, D.C., with an office in New York and affiliate offices in Munich and New Delhi. Founded in 1995, Perseus invests in companies with which it can participate in the strategic planning, operations and development and thereby add significant value to the investment. Perseus and its affiliates manage seven investment funds with capital commitments totalling over US$1.3 billion. Perseus has been one of the most active private equity investors in the energy technology industry and has made 16 energy technology investments in such sectors as distributed generation, clean fuels, solar power, power storage, oil recycling, and grid enhancing technologies. All references in this press release to Perseus are intended to refer to Perseus, L.L.C. and its managed investment funds. www.perseusllc.com/.

About the Strategic Investment

Under the terms of the investment agreement, Westport has agreed to issue approximately $22.1 million in aggregate principal amount of convertible notes ("Notes") to Perseus, of which approximately $5.5 million has been received and $8.3 million will be advanced on or before July 15, 2006. Approximately $8.3 million will be advanced upon the completion of future business development milestones and the receipt of shareholder approval. Interest will accrue at 8% of the amount advanced. Interest will be paid, at the option of Westport, in notes, shares or, after the second anniversary of the first tranche, in cash. Interest on the second tranche can be paid at the option of Westport in notes, shares, or cash. The Notes can be converted to common shares no later than five years from the closing of the first tranche. In connection with the issuance of the Notes, Perseus will receive warrants to purchase common shares of Westport during a four-year term. For the first tranche, Perseus will receive approximately 2.7 million warrants exercisable at $1.30, reflecting 25% of the shares represented by conversion of the Notes. For the second tranche, Perseus will receive approximately 1.5 million warrants exercisable at $1.40.

National Bank Financial Inc. acted as financial advisor to Westport in this transaction.

New Westport Directors

The Westport Board of Directors will be expanded to seven members, with Kenneth M. Socha and John C. Fox of Perseus being added to the Board.

About Kenneth M. Socha

Prior to joining Perseus in 1991, Mr. Socha practiced corporate and securities law as a partner of Lane and Edson and, thereafter, of Dewey Ballantine. Mr. Socha serves as a director of the following Perseus portfolio companies: Beacon Power Corporation, Biometric Access Company, Clean Energy Fuels Corp., Chroma Energy, Inc., Iridian Technologies, Inc., NxtPhase T&D Corporation, and Puralube Inc. Mr. Socha was a contributing author of the first edition of The Art of M&A. Mr. Socha holds a B.A. from the University of Notre Dame and a J.D. from Duke University School of Law.

About John C. Fox

Prior to joining Perseus in 2000, Mr. Fox was Chief Operating Officer of Ontario Power Generation Inc. (formerly Ontario Hydro), where he was responsible for generation, transmission, distribution, and retailing for one of the largest electric utilities in North America. He served as Executive Vice President of the Canyon Group, a Los Angeles based marketing and management consultancy during 1992 and 1993. From 1981 to 1992, Mr. Fox held various management positions with Pacific Gas and Electric Company (PG&E) in San Francisco, California, including Manager, Energy Efficiency Services. He serves as a Board member for the Alliance to Save Energy and Rocky Mountain Institute. During 1992, he served as the Head of the Energy Efficiency Task Force, President Bush's Commission on Environmental Quality. Mr. Fox is a board member of Beacon Power Corporation, NxtPhase T&D Corporation, Serveron Corporation, Puralube Inc., and Soft Switching Technologies Corporation. Mr. Fox holds a B.S. in Civil Engineering from the University of Toronto and an M.B.A. from McMaster University in Hamilton, Ontario.

Patrick Lavelle to Resign from Board

Patrick Lavelle, a Director of Westport since 1996, has voluntarily resigned from the Board to allow the Perseus director appointments to be completed. Mr. Lavelle has served on every committee of the Board and has been a key contributor to the development and growth of the company. Westport's management team and the Board of Directors thank him for his ten years of Board service and unconditional support of the company during its first decade of operations.

Mr. Lavelle commented, "When I joined Westport's Board, we had a dream and an office at the University of British Columbia with five employees. Together we've built the world leader in clean engine technology for heavy duty engines, and I am very pleased that one of the world's leading investors has recognized what we've achieved by making this significant strategic investment. I am confident the company is on the right track and I look forward to Westport's future success."

About Westport Innovations Inc.

Westport Innovations Inc. is the leading developer of environmental technologies that allow engines to operate on clean-burning fuels such as natural gas, hydrogen, and hydrogen-enriched natural gas (HCNG). Westport has technology development alliances in place with Cummins, Ford, BMW, and Isuzu, as well as an ownership interest in Clean Energy, the largest provider of natural gas for vehicles in North America. Cummins Westport Inc., Westport's joint venture with Cummins Inc., manufactures and sells the world's widest range of low-emissions alternative fuel engines for commercial transportation applications such as trucks and buses. www.westport.com.

Note: This document contains forward-looking statements about Westport's business, operations, future financing plans, technology development and the environment in which Westport operates, which are based on Westport's estimates, forecasts and projections. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict, or are beyond Westport's control. Consequently, readers should not place any undue reliance on such forward-looking statements. In addition, these forward-looking statements relate to the date on which they are made. Westport disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

All references to $ in this release shall mean Canadian Dollars, unless specifically provided otherwise.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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