This summary highlights selected information from this joint proxy statement/information statement and prospectus. It does not contain all of the information that may be important to you. Clean Diesel and CSI encourage you to carefully read this entire joint proxy statement/information statement and prospectus, including annexes, and the other documents to which this joint proxy statement/information statement and prospectus refers, to fully understand the merger proposals to be considered at the Clean Diesel annual meeting and the CSI special meeting.

 

Information About Clean Diesel and CSI

 

Clean Diesel Technologies, Inc.

 

Clean Diesel develops, designs, markets and licenses patented technologies and solutions that reduce harmful emissions from internal combustion engines while improving fuel economy and engine power. It is a Delaware corporation formed in 1994 as a wholly-owned subsidiary of Fuel Tech, Inc., a Delaware corporation (formerly known as Fuel-Tech N.V., a Netherlands Antilles limited liability company) (“Fuel Tech”). Clean Diesel was spun-off by Fuel Tech in a rights offering in December 1995. Since inception, Clean Diesel has developed a substantial portfolio of patents and related proprietary rights and extensive technological know-how.

 

Catalytic Solutions, Inc.

 

Catalytic Solutions, Inc. is a global manufacturer and distributor of emissions control systems and products, focused in the heavy duty diesel and light duty vehicle markets. Since being founded in 1996, CSI has grown from not only a provider of unique catalysts to the automotive industry (gasoline and diesel engines) but also to a provider of both catalysts and systems in growing clean technology markets, including heavy duty diesel systems and catalysts for energy systems. CSI’s emissions control systems and products are designed to deliver high value to its customers while benefiting the global environment through air quality improvement, sustainability and energy efficiency.

 

Merger Sub

 

CDTI Merger Sub, Inc. is a California corporation and wholly-owned subsidiary of Clean Diesel. Merger Sub was formed solely for the purposes of carrying out the Merger and it has not conducted any business operations.

 

The Merger (see page 37)

 

Through a merger, CSI will become a wholly-owned subsidiary of Clean Diesel, subject to possible future dilution. The business of CSI and Clean Diesel will be combined and Merger Sub will merge with and into CSI, with CSI as the surviving corporation.

 

In exchange for their shares of CSI common stock, all CSI shareholders will receive shares of Clean Diesel common stock and each holder of shares designated as Class A common stock will also receive a warrant to purchase shares of Clean Diesel common stock at an exercise price to be set pursuant to a formula at the effective time of the Merger. Each warrant to purchase CSI common stock outstanding and not terminated or exercised immediately prior to the effective time of the Merger is expected to be converted into a warrant to purchase shares of Clean Diesel common stock, except for warrants held by Silicon Valley Bank, which could remain outstanding after the effective time of the Merger. All options to purchase shares of CSI common stock issued under CSI’s 1997 Stock Option Plan that are outstanding and unexercised immediately prior to the effective time of the Merger will be terminated and cancelled. Options issued under the 2006 Equity Compensation Plan will not terminate, but will continue to be exercisable for shares of the Surviving Subsidiary. However, CSI has undertaken to obtain the consent of each current executive officer and director of CSI to agree that options under the 2006 Equity Compensation Plan will expire at the effective time of the Merger. CSI has undertaken to use commercially reasonable efforts to obtain similar agreements from each

other holder. Options to purchase only 686,000 shares under the 2006 Equity Compensation Plan are not subject to such agreements and could remain exercisable after the effective time of the Merger.

 

The precise numbers of shares and warrants CSI shareholders will receive cannot be determined now, and depend on a formula set out in the Merger Agreement. In general, CSI shareholders will receive such numbers of Clean Diesel common stock so that after the Merger they will own 60% of the outstanding shares of Clean Diesel common stock, subject to adjustment for the cash position of each of CSI and Clean Diesel at closing. Each share of CSI common stock to be designated “Class A” will also be converted into the right to receive a ratable portion (based on the number of shares of CSI Class A common stock outstanding and “in-the-money” warrants) of warrants to purchase up to 3,000,000 shares of Clean Diesel common stock. A number of warrants will be reserved for possible issuance to holders of warrants to purchase CSI common stock that are “in-the-money.”

 

Both CSI and Clean Diesel intend to issue additional shares of common stock prior to the Merger in order that they can finance current operations and have, at the earlier of the effective time of the Merger or June 30, 2010, a cash position of at least $2,000,000 in the case of CSI, and at least $4,500,000 in the case of Clean Diesel. As a result, neither the number of outstanding shares of CSI common stock immediately prior to the effective time of the Merger nor the number of outstanding shares of Clean Diesel common stock immediately prior to the effective time of the Merger can be known.

 

Although the interim capital raise is still subject to definitive agreement between CSI and its accredited investors, it is currently anticipated that CSI will sell an aggregate $4,000,000 of convertible subordinated notes at par to a group of accredited investors, $2,000,000 of which is expected to be sold by CSI in four equal installments prior to the CSI special meeting of shareholders, and the remaining $2,000,000 of which is expected to be sold after shareholder approval of the merger and necessary approvals under CSI’s articles of incorporation but prior to the effective time of the Merger. An aggregate of approximately 137,887,188 shares of CSI common stock is potentially issuable upon conversion of these notes. Clean Diesel currently expects that its interim capital raise will take the form of a sale of approximately 650,197 shares of its common stock and warrants to purchase up to 1,000,000 shares of its common stock in a Regulation S offering to raise approximately $1 million. If these financing activities are completed in this form, after the effective date of the Merger, and without taking into account the further adjustment described in the next paragraph, ownership of Clean Diesel would be distributed approximately as follows:

 

 

 

 

In addition, for every $166,666.66 by which CSI’s cash position at the earlier of the effective time of the Merger or June 30, 2010 is less than $2,000,000, the percentage of post-closing outstanding common stock of Clean Diesel to be held by CSI shareholders will be reduced by 1%, but not below 48% (and the percentage of post-closing outstanding common stock of Clean Diesel to be held by Clean Diesel stockholders will be increased by 1%, but not above 52%). For every $116,666.66 by which Clean Diesel’s cash position at the earlier of the effective time of the Merger or June 30, 2010 is less than $4,500,000, the percentage of post-closing outstanding common stock of Clean Diesel to be held by CSI shareholders will be increased by 1%, but not above 90% (and the percentage of post-closing outstanding common stock of Clean Diesel to be held by Clean Diesel stockholders will be reduced by 1%, but not below 10%).

Reasons for the Merger (see page 40)

 

Clean Diesel’s Reasons for the Merger

 

In reaching its unanimous decision to approve the Merger, the Clean Diesel board of directors considered a number of factors including, among other factors:

 

 

 

For a complete list of Clean Diesel’s reasons for approving the Merger, see the section entitled “The Merger — Clean Diesel’s Reasons for the Merger; Recommendation of Clean Diesel’s Board of Directors.”

 

CSI’s Reasons for the Merger

 

In reaching its unanimous decision to approve the Merger, the CSI board of directors considered a number of factors including, among other factors:

 

 

For a complete list of CSI’s reasons for approving the Merger, see the section entitled “The Merger — The CSI Reasons for the Merger.”

 

Both Clean Diesel and CSI believe that the Merger will be in the best interests of their respective stockholders and shareholders. However, achieving these anticipated benefits of the Merger is subject to risk and uncertainty, including those risks discussed in the section entitled “Risk Factors.”

 

Risk Factors (see page 13)

 

Clean Diesel and CSI are subject to numerous risks associated with their businesses and their industries. In addition, the Merger, including the possibility that the closing of the Merger may be delayed or not be completed at all, poses a number of unique risks to both Clean Diesel stockholders and the CSI shareholders, including the following risks:

 

 

 

These risks and other risks are discussed in greater detail in the section entitled “Risk Factors” in this joint proxy statement/information statement and prospectus. Clean Diesel and CSI encourage Clean Diesel stockholders and CSI shareholders to read and consider all of these risks carefully.

 

Market Price And Dividend Information (see page 39)

 

The closing sale price per share of Clean Diesel common stock as reported on the NASDAQ Stock Market on May 13, 2010, the last full trading day prior to the public announcement of entry into the Merger Agreement, was $1.57, and the closing sale price per share of Clean Diesel common stock on                    , 2010 (the last practicable date before the date of this joint proxy statement/information statement and prospectus) as reported on the NASDAQ Stock Market was $      per share. Following the consummation of the Merger, Clean Diesel’s common stock, including the shares of Clean Diesel common stock issued in

connection with the Merger, are expected to continue to trade on the NASDAQ Stock Market under the symbol “CDTI.”

 

Clean Diesel has never declared nor paid cash dividends on its capital stock. Clean Diesel currently intends to retain earnings, if any, to finance the growth and development of its business, and does not expect to pay any cash dividends to its stockholders in the foreseeable future.

 

The closing price per share of CSI common stock as reported on the AIM of the London Stock Exchange on May   , 2010, the last full trading day prior to the public announcement of entry into the Merger Agreement was GPX (pence sterling)           (U.S.$     ), and the closing price per share of CSI common stock on          , 2010 (the last practicable date before the filing of this joint proxy statement/information statement and prospectus) as reported on AIM was GBX          (U.S.$     ). The exchange rate at the close of business on May   , 2010 and          , 2010 was           and          , respectively. At the effective time of the Merger, CSI will cease trading on AIM. As of May   , 2010, CSI had approximately           shareholders of record. CSI has never declared or paid any cash dividends on its capital stock, nor does it intend to do so in the foreseeable future.

 

For more information, see the section entitled “Market Price and Dividend Information.”

 

Opinion of the Financial Advisor to the Board of Directors of Clean Diesel (see page 50)

 

In deciding to recommend the merger, Clean Diesel’s board of directors considered an opinion from its financial advisor, Ardour Capital Investments, LLC, or Ardour Capital. Ardour Capital rendered its opinion to Clean Diesel’s board of directors that, as of May 11, 2010, based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the merger consideration to be paid to the shareholders of CSI was fair, from a financial point of view, to the Clean Diesel stockholders.

 

The full text of the written opinion of Ardour Capital, dated May 11, 2010, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C to this joint proxy/information statement and prospectus. Ardour Capital provided its opinion for the information and assistance of Clean Diesel’s board of directors in connection with its consideration of the merger. The Ardour Capital opinion is not a recommendation as to how any holder of Clean Diesel common stock should vote with respect to the adoption of the merger agreement or any other matter.

 

Pursuant to a letter agreement dated March 8, 2010, Clean Diesel engaged Ardour Capital to render an opinion to the Clean Diesel board of directors as to the fairness, from a financial point of view, of the consideration to be paid to the CSI common shareholders in connection with the merger. As compensation for its services in connection with the merger, Clean Diesel paid Ardour Capital $85,000 upon the delivery of Ardour Capital’s fairness opinion. In addition, Clean Diesel has agreed to reimburse Ardour Capital for reasonable out-of-pocket expenses, including attorneys’ fees and disbursement, and to indemnify Ardour Capital and related persons against various liabilities.

 

Opinion of the Financial Advisor to the Board of Directors of CSI (see page 54)

 

In deciding to recommend the merger, CSI’s board of directors considered an opinion from one of its financial advisors, Marshall & Stevens, Inc., or Marshall & Stevens. Marshall & Stevens rendered its opinion to CSI’s board of directors that, as of May 11, 2010, based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the merger consideration to be paid to the shareholders of CSI was fair, from a financial point of view, to the CSI shareholders. The full text of the written opinion of Marshall & Stevens, dated May 11, 2010, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex D to this joint proxy/information statement and prospectus. Marshall & Stevens provided its opinion for the information and assistance of CSI’s board of directors in connection with its consideration of the merger. The Marshall & Stevens opinion is not a recommendation as to how any holder of CSI common stock should vote with respect to the adoption of the merger agreement or any other matter.

Pursuant to a letter agreement dated March 11, 2010, CSI engaged Marshall & Stevens to render an opinion to the CSI board of directors as to the fairness, from a financial point of view, of the consideration to be paid to the CSI common shareholders in connection with the merger. As compensation for its services in connection with the merger, CSI agreed to pay Marshall & Stevens a fee of $65,000, of which $22,000 was payable upon execution of the letter agreement, $22,000 upon the delivery of Marshall & Stevens’ fairness opinion and $21,000 on June 30, 2010 or any earlier date on which the merger may occur, plus negotiated fees for services beyond those contemplated. In addition, CSI has agreed to reimburse Marshall & Stevens for reasonable out-of-pocket expenses, including attorneys’ fees and disbursement, and to indemnify Marshall & Stevens and related persons against various liabilities.

 

Overview of the Merger Agreement (see page 68)

 

The Merger Agreement contains the terms and conditions of the proposed combination of the businesses of Clean Diesel and CSI. You are encouraged to read it carefully.

 

Merger Consideration

 

At the effective time of the Merger, each share of issued and outstanding CSI common stock existing immediately prior to the effective time of the Merger will, without any action on the part of the shareholder thereof, automatically be retired and cease to exist, and be converted into the right to receive a number of shares of Clean Diesel common stock to be determined, and, in the case of shares to be designated as “Class A,” a warrant to purchase shares of Clean Diesel common stock pursuant to a formula set out in the Merger Agreement; provided that the following shares will not be so converted:

 

 

The number of shares of Clean Diesel common stock into which each share of CSI common stock will be converted will be that number of shares that will result in the holders of CSI common stock holding 60% of the outstanding Clean Diesel common stock after the merger, subject to adjustment for each of CSI’s and Clean Diesel’s cash position at the earlier of June 30, 2010 or the effective time of the merger, but not more than 90% and not less than 48%. The fractional share of Clean Diesel common stock represented by a warrant issuable in respect of each share of CSI common stock (to be designated as Class A) will be a ratable portion of up to 3,000,000 shares of Clean Diesel common stock.

 

All issued and outstanding options to purchase CSI common stock are currently out-of-the-money (e.g., the exercise price exceeds the current trading price of shares of CSI common stock). Prior to the effective time of the Merger, each option to purchase shares of CSI common stock issued under CSI’s 1997 Stock Option Plan, in accordance with the terms of such Plan, will be given a window of time in which to exercise following which any options issued under the 1997 Stock Option Plan that remain outstanding will terminate at the effective time of the Merger. The terms of outstanding options issued under CSI’s 2006 Equity Compensation Plan differ from the 1997 Stock Option Plan, and as such, will not terminate at the effective time of the Merger but will continue to be exercisable for shares of the Surviving Subsidiary. However, CSI has undertaken in the Merger Agreement to obtain the consent of each of CSI’s directors and executive officers who has options outstanding under CSI’s 2006 Equity Compensation Plan and to use commercially reasonable efforts to obtain the consent of the other holders of any options, grant or other awards granted under CSI’s 2006 Equity Compensation to terminate such awards at the effective time of the Merger, and to terminate its 2006 Equity Compensation Plan.

 

At the effective time, certain warrants to purchase shares of CSI common stock outstanding and not terminated or exercised immediately prior to the effective time of the Merger are expected to be assumed by Clean Diesel in accordance with their terms and thus become exercisable for that number of shares of Clean Diesel common stock and warrants to purchase Clean Diesel common stock calculated according to the conversion ratio as defined in the Merger Agreement. One of these warrants is “in-the-money” and two of

these warrants are “out-of-the-money.” For one outstanding warrant that is out-of-the-money whose terms do not provide for assumption by Clean Diesel, CSI has agreed in the Merger Agreement to use commercially reasonable efforts to obtain the consent of the holder of such warrants to a cancellation or an assumption of the CSI’s obligations thereunder by Clean Diesel similar to CSI’s other warrants. For a more complete description of the merger consideration, see the section entitled “The Merger Agreement — Merger Consideration” in this joint proxy statement/information statement and prospectus.

 

For a more complete description of the merger consideration, see the section entitled “The Merger Agreement — Merger Consideration” in this joint proxy statement/information statement and prospectus.

 

The merger consideration will be appropriately and proportionately adjusted to reflect any stock dividend, subdivision, reclassification, recapitalization, split, combination, or exchange of shares with respect to CSI common stock and Clean Diesel common stock between the date of the Merger Agreement and the effective time of the Merger.

 

Acquisition Proposals

 

CSI and Clean Diesel agreed that immediately following the execution and delivery of the Merger Agreement, each of Clean Diesel and CSI will not and, will cause its subsidiaries not to and will use commercially reasonable efforts to cause its representatives not to, directly or indirectly:

 

 

For a more complete discussion of the restrictions described above, see the section entitled “The Merger Agreement — Certain Covenants of both Clean Diesel and CSI.”

 

Conditions to Completion of the Merger

 

In addition to the requirement of obtaining Clean Diesel stockholder approval and CSI shareholder approval, each of the other closing conditions set forth in the Merger Agreement must be satisfied or waived by the appropriate party, including in particular minimum cash positions. For a summary of the conditions that need to be satisfied to consummate the Merger, see the section entitled “The Merger Agreement — Conditions to Each Party’s Obligation to Effect the Merger” in this joint proxy statement/information statement and prospectus.

 

Termination of the Merger Agreement

 

It is possible that the Merger and the other transactions contemplated by the Merger Agreement will not be completed. This might happen if, for example, Clean Diesel’s stockholders do not approve the issuance of the Clean Diesel shares and warrants in connection with the Merger, or if CSI’s shareholders do not approve the Merger or if other conditions to the Merger are not satisfied. Should that occur, neither Clean Diesel nor CSI will be under any obligation to make or consider any alternative proposal regarding the combination of Clean Diesel and CSI. For a more complete discussion of the manners in which the Merger Agreement may terminate, see the section entitled “The Merger Agreement — Termination” in this joint proxy statement/information statement and prospectus.

 

Termination Fee

 

In certain circumstances, Clean Diesel or CSI may be obligated to pay the other party a termination fee of $300,000, plus an amount equal to all out-of-pocket expenses (excluding the cost of employee time), up to

a maximum of $350,000, incurred by the recipient party in connection with the Merger Agreement, the ancillary agreements, and the transactions contemplated thereby. For a more complete discussion of the termination fee, see the section entitled “The Merger Agreement — Termination Fees” in this joint proxy statement/information statement and prospectus.

 

Interests of Directors, Executive Officers and Affiliates of CSI & Clean Diesel (see pages 57-58)

 

CSI

 

Certain directors and executive officers of CSI have interests in the Merger that differ from, or are in addition to, their interests as CSI stockholders. Specifically:

 

 

As of the record date for the CSI special shareholder meeting, the directors and executive officers of CSI, together with their affiliates, owned in the aggregate approximately [          ] shares of CSI common stock, entitling them to exercise approximately [     ]% of the voting power of the CSI common stock at the CSI annual meeting.

 

Clean Diesel

 

Certain directors and executive officers of Clean Diesel have interests in the Merger that differ from, or are in addition to, their interests as Clean Diesel stockholders. Specifically:

 

 

As of the record date for the Clean Diesel annual meeting, the directors and executive officers of Clean Diesel, together with their affiliates, owned in the aggregate approximately [          ] shares of Clean Diesel common stock, entitling them to exercise approximately [     ]% of the voting power of the Clean Diesel common stock at the Clean Diesel annual meeting. Clean Diesel cannot complete the Merger unless the issuance of the shares of Clean Diesel common stock and warrants to purchase shares of Clean Diesel common stock in connection with the Merger is approved by the affirmative vote of the holders of a majority of the shares of Clean Diesel common stock voting at the Clean Diesel annual meeting.

 

Ownership of Clean Diesel Following the Merger (see page 64)

 

After the Merger, CSI will be a wholly-owned subsidiary of Clean Diesel subject to possible future dilution, and CSI shareholders will no longer have any direct interest in CSI, but will have an equity stake in Clean Diesel. Immediately after the Merger, Clean Diesel stockholders are expected to own approximately 40% of the outstanding shares of Clean Diesel common stock and the former CSI shareholders are expected to

own approximately 60% of the outstanding shares of Clean Diesel common stock, in each case assuming that no adjustment is made for the cash position of each of CSI and Clean Diesel at the effective time of the Merger. For a more complete discussion of ownership of Clean Diesel after the Merger, see the section entitled “The Merger — Ownership of Clean Diesel Following the Merger.”

 

Material U.S. Federal Income Tax Consequences of the Merger (see page 65)

 

Clean Diesel and CSI have structured the Merger with the intent that it qualify as a reorganization under Section 368 of the Internal Revenue Code of 1986 (the “Code”). If the Merger qualifies as such a reorganization, CSI shareholders who exchange CSI common shares for shares of Clean Diesel common stock and warrants to purchase shares of Clean Diesel common stock pursuant to the Merger will not recognize gain in respect of the shares of Clean Diesel common stock and warrants to purchase shares of Clean Diesel common stock received in the exchange (but may recognize an immaterial gain in the amount of any cash received in respect of fractional shares). If the Merger qualifies as such a reorganization, CSI warrant holders will not be subject to tax as a result of the Merger. The qualification of the Merger as a reorganization depends on numerous factors including whether CSI shareholders will receive a sufficient amount of Clean Diesel common stock to satisfy the “continuity of interest” and “control” tests applicable to reorganizations under Section 368(a)(2)(E) of the Code. Whether the Merger meets those tests depends in large part on the value of the Clean Diesel common stock issued to CSI shareholders as compared to the value of all consideration issued to CSI shareholders. Based on an estimated valuation, the Merger should satisfy the continuity of interest and control tests. If, however, the Internal Revenue Service were to challenge the valuation and successfully contend that the Merger failed to qualify as a reorganization, the Merger would be a fully taxable transaction to CSI shareholders and warrant holders. In such case, CSI shareholders and warrant holders would recognize gain or loss measured by the difference between the value of all consideration received by them in the Merger and their tax basis in the CSI common stock and the warrants, as the case may be, surrendered in the Merger. For additional discussion of the tax treatment of the Merger, see the section entitled “Material United States Federal Income Tax Consequences of the Merger” in this joint proxy statement/information statement and prospectus.

 

CSI had approximately $89.8 million and $70.5 million of federal and state income tax net operating loss carry forwards at December 31, 2009, respectively and Clean Diesel had approximately $53.7 million and $39.9 million of federal and state income tax net operating loss carry forwards at December 31, 2009, respectively. The federal and state income tax net operating loss carry forwards for CSI expire starting in 2017 and 2012, respectively and those of Clean Diesel expire starting in 2010.

 

Future utilization of the net operating losses and credit carry forwards are subject to a substantial annual limitation due to ownership change limitations as required by Sections 382 and 383 of the Code, as well as similar state limitations. Due to previous share ownership changes and the substantial change in capitalization and share ownership caused by this merger, both companies are expected to be subjected to such limitations. As such, tax loss carryforwards will be limited if the Merger is completed.

 

Tax matters are very complicated, and the tax consequences of the Merger to a particular CSI shareholder or warrant holder will depend in part on such shareholder’s or warrant holder’s circumstances and jurisdiction. Accordingly, CSI shareholders and warrant holders should consult their tax advisors for a full understanding of the tax consequences of the Merger, including the applicability and effect of federal, state, local and foreign income and other tax laws. For additional discussion of the tax treatment of the Merger, see the section entitled “Material United States Federal Income Tax Consequences of the Merger” in this joint proxy statement/information statement and prospectus.

 

NASDAQ Stock Market Listing (see page 63)

 

Prior to consummation of the Merger, Clean Diesel intends to cause all shares of Clean Diesel common stock to be issued in connection with the Merger and all shares of Clean Diesel common stock to be issued upon exercise of the warrants to purchase shares of Clean Diesel common stock to be approved for listing (subject to notice of issuance) on the NASDAQ Stock Market as of the effective time of the Merger, including filing any required additional listing applications or notices with the NASDAQ Stock Market pursuant to NASDAQ Stock Market LLC rules.

Anticipated Accounting Treatment (see page 65)

 

For accounting purposes, CSI will be acquiring Clean Diesel, which means that the assets and liabilities of Clean Diesel will be recorded at their fair value and the results of operations of Clean Diesel will be included in CSI’s results from the effective date of the Merger in accordance with Statement of Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 805, Business Combinations.

 

Appraisal Rights and Dissenters’ Rights (see page 61)

 

Clean Diesel stockholders are not entitled to appraisal rights in connection with the Merger under Delaware General Corporation Law. CSI shareholders are entitled to appraisal rights in connection with the Merger under California law. For more information about such rights, see the provisions of Sections 1300 through 1313 of Chapter 13 of the California Corporations Code, attached hereto as Annex E, and the section entitled “The Merger — Appraisal Rights and Dissenters’ Rights” in this joint proxy statement/information statement and prospectus.

 

Failure to follow precisely any of the statutory procedures set forth in Annex E may result in the loss or waiver of dissenters’ rights under California law.

 

Directors’ and Executive Compensation (see page 110)

 

Clean Diesel currently anticipates that Charles F. Call, Alexander (“Hap”) Ellis, III, Charles R. Engles, Ph.D., Bernard H. Cherry, Mungo Park, Derek R. Gray and Michael L. Asmussen will serve as its board of directors following completion of the Merger. For a complete discussion of the expected board of directors following the Merger, compensation of directors, and compensation of executives, see the section entitled “Management Following the Merger.”

 

Comparison of Stockholder Rights (see page 122)

 

The rights of CSI shareholders are currently governed by the California Corporations Code, CSI’s articles of incorporation, as amended, and the bylaws of CSI. The rights of Clean Diesel stockholders are currently governed by the Delaware General Corporation Law, the restated certificate of incorporation of Clean Diesel, as amended, and the bylaws of Clean Diesel. If the Merger is completed, CSI shareholders will become stockholders of Clean Diesel, and their rights will be governed by the Delaware General Corporation Law, and the restated certificate of incorporation, as amended, of Clean Diesel and bylaws of Clean Diesel. The rights of CSI shareholders contained in the articles of incorporation and bylaws of CSI differ from the rights of Clean Diesel stockholders under the certificate of incorporation of Clean Diesel and bylaws of Clean Diesel, as more fully described under the section entitled “Comparison of Clean Diesel Stockholders and CSI Shareholders Rights and Corporate Governance Matters” in this joint proxy statement/information statement and prospectus.

 

The Clean Diesel Annual Meeting Of Stockholders (see page 130)

 

The Clean Diesel annual meeting will be held at the Holiday Inn Bridgeport, 1070 Main Street, Bridgeport, CT 06604, at [          ], local time, on [          ], 2010. Only holders of record of Clean Diesel common stock at the close of business on [          ], 2010 (the “Clean Diesel record date”) are entitled to notice of, attendance at and to vote at, the Clean Diesel annual meeting. As of the record date for the Clean Diesel annual meeting, there were [          ] shares of Clean Diesel common stock outstanding and entitled to vote at the Clean Diesel annual meeting, held by approximately [          ] holders of record. Each holder of Clean Diesel common stock is entitled to one vote for each share of Clean Diesel common stock owned as of the Clean Diesel record date.

 

Clean Diesel stockholders will vote on four proposals at the Clean Diesel annual meeting. The first proposal at the Clean Diesel annual meeting is a proposal to elect five directors. These directors will be the directors of Clean Diesel in the event the Merger does not become effective. If the Merger is effective, two of these directors are expected to resign and will be replaced by four former directors of CSI. The second proposal is to ratify the selection of Eisner LLP to be Clean Diesel’s independent public accountants for 2010. The third proposal is to (i) approve an amendment to Clean Diesel’s certificate of incorporation to increase the authorized capital of Clean Diesel to 35,100,000 shares, and effect a reverse split of the issued and outstanding shares of Clean Diesel common stock, to occur immediately before the closing of the proposed Merger, at an exchange ratio of 3 to 1 and (ii) approve the issuance of new shares of Clean Diesel common stock, par value $0.01 per share, and warrants to purchase shares of Clean Diesel common stock to securityholders of CSI, in connection with Merger.

The fourth proposal at the Clean Diesel annual meeting is a proposal to consider and vote upon an adjournment of the Clean Diesel annual meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the first proposal described immediately above. If you are a Clean Diesel stockholder and fail to return your proxy card or otherwise provide proxy instructions or vote your shares in person will result in your shares not being counted for purposes of determining whether a quorum is present at the Clean Diesel annual meeting. In the event that a quorum is not reached or the necessary votes are not received, the Clean Diesel annual meeting will have to be adjourned and recalled to obtain a quorum and the necessary votes.

 

The CSI Special Meeting Of Shareholders (see page 139)

 

The CSI special meeting will be held at CSI’s Oxnard facility located at 1621 Fiske Place, Oxnard, CA 93003, at [          ], local time, on [          ], 2010. Only holders of record of CSI stock at the close of business on [          ], 2010 are entitled to notice of, attendance at and to vote at the CSI special meeting. As of the record date for the CSI special meeting, there were [          ] shares of CSI stock outstanding and entitled to vote at the CSI special meeting, held by approximately [          ] holders of record. Each holder of CSI stock is entitled to one vote for each share of CSI stock owned as of the CSI record date.

 

There are four proposals at the CSI special meeting. The first proposal at the CSI special meeting is a proposal to adopt the Merger Agreement. The second proposal at the CSI special meeting is a proposal to approve an amendment to CSI’s articles of incorporation to designate CSI’s current outstanding shares of common stock as “Class A” common stock, to create a new class of common stock to be designated as “Class B” common stock, and to increase its authorized share capital. The third proposal at the CSI special meeting is a proposal to disapply the pre-emption rights provided in CSI’s articles of incorporation. The fourth proposal at the CSI special meeting is a proposal to consider and vote upon an adjournment of the CSI special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of the proposals described immediately above to satisfy each of the conditions to closing concerning the vote set forth in the Merger Agreement. If you are a CSI shareholder, the failure to return your proxy or otherwise provide proxy instructions or vote your shares in person will have the same effect as voting against CSI Proposals No. 1, No. 2 and No. 3 and your shares will not be counted for purposes of determining whether a quorum is present at the CSI special meeting. In the event that a quorum is not reached or the necessary votes are not received, the CSI special meeting will have to be adjourned and recalled for another vote.