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CLEAN DIESEL TECHNOLOGIES, INC . 

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Proxy Statement
for the 2015 Annual Meeting of Stockholders

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QUESTIONS AND ANSWERS ABOUT THIS PROXY STATEMENT AND VOTING

Why did I receive these proxy materials?

We are providing these proxy materials in connection with the solicitation by the Board of Directors of Clean Diesel Technologies, Inc., a Delaware corporation (sometimes referred to as “we,” “our,” “us,” the “Company,” the “Corporation”  or “CDTi”), of proxies to be voted at our 2015 Annual Meeting of Stockholders (the “Annual Meeting”) and at any adjournment or postponement thereof.

You are invited to attend the Annual Meeting, which will take place on May 20, 2015, beginning at 10:00 a.m., Pacific Time, at our corporate headquarters located at 1621 Fiske Place, Oxnard, California 93033, U.S.A . Directions to the Annual Meeting may be found at http://www.cdti.com/proxy. Stockholders will be admitted to the Annual Meeting beginning at 9:30 a.m., Pacific Time. Seating will be limited. 

We first mailed this Proxy Statement and accompanying proxy card on April 2 , 2015 to stockholders of record entitled to vote at the Annual Meeting.

Who is entitled to attend the Annual Meeting?

Stockholders of record and beneficial owners as of March 24, 2015 are invited to attend the Annual Meeting. If your shares are held in the name of a broker, bank or other holder of record and you plan to attend the Annual Meeting, you must present proof of your ownership of CDTi stock, such as a bank or brokerage account statement, to be admitted to the Annual Meeting.

Who is entitled to vote at the Annual Meeting?

Only stockholders of record at the close of business on March 24, 2015 (the “Record Date”), are entitled to vote at the Annual Meeting. On the Record Date, there were 14,187,202 shares of CDTi’s  common stock outstanding and entitled to vote. Each share of common stock is entitled to one vote on each matter properly brought before the Annual Meeting.

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

If on March 24, 2015 your shares were registered directly in your name with CDTI’s transfer agent, American Stock Transfer & Trust Company, LLC, then you are the “stockholder of record.” Whether or not you plan to attend the Annual Meeting, we urge you to fill out and return the enclosed proxy card or vote via the Internet or by telephone to ensure your vote is counted.

If on March 24, 2015 your shares were held in a stock brokerage account or by a bank or other similar organization, then you are considered the “beneficial owner” of those shares. These proxy materials have been forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As the beneficial owner, you have the right to direct your broker, bank or other agent how to vote the shares in your account. You are also invited to attend the Annual Meeting. However, because you are not the stockholder of record, you may not vote your shares in person at the Annual Meeting unless you request and obtain a valid proxy from your broker, bank or other agent.

What am I voting on?

There are four matters scheduled for a vote:

• Election of Matthew Beale, Dr. Till Becker, Lon E. Bell, Ph.D., Bernard H. “Bud” Cherry, Charles R. Engles, Ph.D. and Mungo Park as Directors to hold office for one-year terms;
• Ratification of the appointment of BDO USA, LLP as CDTi’s independent registered public accounting firm for the 2015 fiscal year;
• Approval of the Clean Diesel Technologies, Inc. Amended and Restated Stock Incentive Plan; and
• Non-binding advisory vote to approve the compensation of our named executive officers.

How do I vote?

Stockholders of record; Shares registered directly in your name.

If you are a stockholder of record, you may vote in person at the Annual Meeting or vote by proxy using the enclosed proxy card, the Internet or telephone. Whether or not you plan to attend the Annual Meeting, we urge you to vote by proxy to ensure your vote is counted. Even if you have already voted by proxy, you may still attend the Annual Meeting and vote in person, if you choose.

• To vote in person, attend the Annual Meeting, and we will give you a ballot during the Annual Meeting.
• To vote using the proxy card, please complete, sign and date the proxy card and return it in the prepaid envelope. If you return your signed proxy card to us before the Annual Meeting, we will vote your shares as you direct. If you do not have the prepaid envelope, please mail your completed proxy card to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717, U.S.A.
• To vote via the telephone, y ou can vote by calling the telephone number on your proxy card. Please have your proxy card handy when you call. Easy-to-follow voice prompts will allow you to vote your shares and confirm that your instructions have been properly recorded. 
• To vote via the Internet, please go to www.voteproxy.com and follow the instructions. Please have your proxy card handy when you go to the website. As with telephone voting, you can confirm that your instructions have been properly recorded.

Telephone and Internet voting facilities for stockholders of record will be available 24 hours a day until 11:59 p.m. Eastern Time on May 19, 2015. After that, telephone and Internet voting will be closed, and if you want to vote your shares, you will either need to ensure that your proxy card is received by the Company before the date of the Annual Meeting or attend the Annual Meeting to vote your shares in person. 

Beneficial owner; shares held in account at brokerage, bank or other organization.

If you are a beneficial owner of shares registered in the name of your broker, bank, or other agent, you should have received a proxy card and voting instructions with these proxy materials from that organization rather than from CDTi. Simply complete and mail the proxy card as directed in those voting instructions to ensure that your vote is counted. Alternatively, you may vote by telephone or over the Internet as instructed by your broker or bank or other agent. To vote in person at the Annual Meeting, you must obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker, bank or other agent included by it with these proxy materials, or contact your broker, bank or other agent to request a proxy form.

What if I return a proxy card but do not make specific choices?

If your card does not indicate your voting preferences, the persons named in the proxy card will vote the shares represented by your proxy card as recommended by the Board of Directors. CDTi does not expect that any matters other than the election of Directors and the other proposals described herein will be brought before the Annual Meeting. If any other matter is properly presented at the Annual Meeting, your proxy (one of the individuals named on your proxy card) will vote your shares using their best judgment.

What can I do if I change my mind after I vote?

If you are a stockholder of record, you can revoke your proxy at any time before the final vote at the Annual Meeting by:

• giving written notice that you are revoking your proxy to the Secretary, Clean Diesel Technologies, Inc., 1621 Fiske Place, Oxnard, California, 93033, U.S.A. ; 
• delivering a properly completed proxy card with a later date, or vote by telephone or on the Internet at a later date (we will vote your shares as directed in the last instructions properly received from you prior to the Annual Meeting); or
• attending and  voting by ballot at the Annual Meeting (note, simply attending the Annual Meeting will not, by itself, revoke your proxy).

If you are a beneficial owner of shares, you may submit new voting instructions by contacting your broker, bank or other agent that is the holder of record and following its instructions.

Please note that to be effective, your new proxy card, Internet or telephonic voting instructions or written notice of revocation must be received by the Secretary prior to the Annual Meeting and, in the case of Internet or telephonic voting instructions, must be received before 11:59 p.m. Eastern Time on Tuesday, May 19, 2015.

What shares are included on the proxy card?

If you are a stockholder of record, you will receive only one proxy card for all the shares you hold of record in certificate and book-entry form.

If you are a beneficial owner, you will receive voting instructions from your broker, bank or other agent that is the holder of record.

Is there a list of stockholders entitled to vote at the Annual Meeting?

The names of stockholders of record entitled to vote at the Annual Meeting will be available at the Annual Meeting and for ten days prior to the Annual Meeting for any purpose relevant to the Annual Meeting, by contacting the Secretary of CDTi . 

How are votes counted ? 

Votes will be counted by the inspector of election appointed for the Annual Meeting, who will separately count “For” and “Against” votes, and broker non-votes.

What is a broker non-vote?

If you are a beneficial owner whose shares are held of record by a broker, you must instruct the broker how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker does not have discretionary authority to vote. This is called a “broker non-vote.” In these cases, the broker can register your shares as being present at the Annual Meeting for purposes of determining the presence of a quorum but will not be able to vote on those matters for which specific authorization is required.

If you are a beneficial owner whose shares are held of record by a broker, your broker has discretionary voting authority to vote your shares on Proposal No. 2, the ratification of BDO USA, LLP, even if the broker does not receive voting instructions from you. However, your broker does not have discretionary authority to vote on Proposal No. 1, the election of Directors, Proposal No. 3, the Amended and Restated Stock Incentive Plan, nor Proposal No. 4, the non-binding advisory vote. Accordingly, it is important that beneficial owners instruct their brokers how they wish to vote their shares.

What is the quorum requirement for the Annual Meeting?

A quorum of stockholders is necessary to hold a valid Annual Meeting. A quorum will be present if the holders of at least one-third (1/3) of the outstanding shares are represented by proxy or by stockholders present and entitled to vote at the Annual Meeting. On the Record Date, there were 14,187,202 shares outstanding and entitled to vote. Thus, 4,729,068 shares must be represented by proxy or by stockholders present and entitled to vote at the Annual Meeting.  Abstentions and broker non-votes are counted as present and entitled to vote for purposes of determining a quorum.

If there is no quorum, the chairman or secretary of the Annual Meeting may adjourn the Annual Meeting to another time or date.

How many votes are required to approve each proposal?

Proposal No. 2 – Ratification of BDO USA, LLP; majority vote

Under our By-laws, the votes cast “For” must exceed the votes cast “Against” to approve the ratification of BDO USA, LLP as our independent registered public accounting firm. Abstentions will not be counted as votes cast and accordingly, will not have an effect on this Proposal No. 2.

Proposal No. 3 – Approval of Amended and Restated Stock Incentive Plan; majority vote

Under our By-laws, the votes cast “For” must exceed the votes cast “Against” to approve the Amended and Restated Stock Incentive Plan. Abstentions and broker non-votes will not be counted as votes cast and accordingly, will not have an effect on this Proposal No. 3.

Proposal No. 4 – Non-binding advisory vote to approve the compensation of our named executive officers

Under our By-laws, the advisory vote will be approved if the votes cast “For” the proposal exceed the votes cast “Against” the proposal. While this advisory vote on executive compensation is non-binding, the Board of Directors and the Compensation and Nominating Committee will review the voting results and seek to determine the cause or causes of any significant negative voting result. Abstentions and broker non-votes will not be counted as votes cast and accordingly, will not have an effect on this Proposal No. 4.

How will my shares be voted at the Annual Meeting?

At the Meeting, the persons named in the proxy card will vote your shares as you instruct. If you sign your proxy card and return it without indicating how you would like to vote your shares, your proxy will be voted as the Board of Directors recommends, which is:

• FOR the election of each of the Director nominees named in this Proxy Statement;
• FOR the ratification of the appointment of BDO USA, LLP as our independent registered public accounting firm for the 2015 fiscal year;
• FOR the approval of the Amended and Restated Stock Incentive Plan; and
• FOR the non-binding advisory vote to approve the compensation of our named executive officers.

Do I have cumulative voting rights?

No, our Certificate of Incorporation does not provide for cumulative voting.

Am I entitled to dissenter rights or appraisal rights?

No, our stockholders are not entitled to dissenters’ rights or appraisal rights under the Delaware General Corporation Law for the matters being submitted to stockholders at the Annual Meeting.

Could other matters be decided at the Annual Meeting?

At the date of this Proxy Statement, we did not know of any matters to be considered at the Annual Meeting other than the items described in this Proxy Statement. If any other business is properly presented at the Annual Meeting, your proxy card grants authority to the proxy holders to vote on such matters in their discretion.

Can I access the Notice of Annual Meeting and Proxy Statement and the 2014 Annual Report on Form 10-K via the Internet?

This Notice of Annual Meeting and Proxy Statement and the 2014 Annual Report are available on our website at http://www.cdti.com/proxy . Instead of receiving future proxy statements and accompanying materials by mail, most stockholders can elect to receive an e-mail that will provide electronic links to them. Opting to receive your proxy materials online will save us the cost of producing documents and mailing them to your home or business, and also gives you an electronic link to the proxy voting site.

Stockholders of Record : You may enroll in the electronic proxy delivery service at any time by accessing your stockholder account at www.amstock.com and following the enrollment instructions.

Beneficial Owners : You also may be able to receive copies of these documents electronically. Please check the information provided in the proxy materials sent to you by your broker, bank or other holder of record regarding the availability of this service.

Who will pay for the cost of this proxy solicitation?

CDTi will pay the cost of soliciting proxies. Proxies may be solicited on our behalf by Directors, officers or employees in person or by telephone, electronic transmission and facsimile transmission or by other means of communication. Directors, officers or employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to the beneficial owners.

We have retained D.F. King to act as proxy solicitor for the Annual Meeting for a fee of $6,500 plus reasonable out-of-pocket expenses.

When are stockholder proposals or nominations due for next year’s annual meeting?

In accordance with CDTi’s By-laws, if you wish to submit a proposal for consideration at next year’s annual meeting but are not requesting that such proposal be included in next year’s proxy materials, or if you wish to nominate a person for election to the Board of Directors at next year’s annual meeting, your notice of such a proposal or nomination must be submitted in writing and delivered to, or mailed and received at, the principal executive offices of the Company not later than 90 days nor earlier than 150 days before the one year anniversary of the 2015 Annual Meeting of Stockholders. Accordingly, any such proposal or nomination must be received by the Secretary no later than February 20, 2016 (but no earlier than December 22, 2015), and should be delivered or mailed to the following address: Secretary, Clean Diesel Technologies, Inc., 1621 Fiske Place, Oxnard, California 93033, U.S.A.

In order to be properly submitted to the Secretary of the Company, a proposal or nomination by a CDTi stockholder must contain specific information as required under CDTi’s By-laws, including without limitation (i) the name and address of the stockholder making the proposal, (ii) the class and number of shares that are owned of record or beneficially owned by such stockholder, (iii) any material interest of such stockholder in the proposal, and (iv) certain information regarding the proposal or director nominee and such nominee’s relationship to the proposing stockholder. If you would like a copy of CDTI’s current By-laws, please write to the Secretary, Clean Diesel Technologies, Inc., 1621 Fiske Place, Oxnard, California 93033, U.S.A. CDTi’s current By-laws may also be found on the Company’s website at www.cdti.com.

To be considered for inclusion in CDTi’s proxy statement and form of proxy for the 2016 Annual Meeting of Stockholders, your stockholder proposal must be submitted in writing by December 4, 2015 to the Secretary, Clean Diesel Technologies, Inc., 1621 Fiske Place, Oxnard, California 93033, U.S.A.

Without limiting the advance notice provisions in the Company’s By-laws, which contain procedures that must be followed for a matter to be properly presented at an annual meeting, CDTi management who are proxy holders will have discretionary authority to vote all shares for which they hold proxies with respect to any stockholder proposal or nomination received after the deadline for such proposals or nominations set forth in the By-laws. Such discretionary authority may be exercised to oppose a proposal or nomination made by a stockholder.

How can I find out the results of the voting at the Annual Meeting?

Preliminary voting results will be announced at the Annual Meeting. Final voting results will be reported in a Current Report on Form 8-K filed with the Securities and Exchange Commission.

  DIRECTORS AND EXECUTIVE OFFICERS OF CDTi

The following table sets forth the name, age and positions, as of April 2 , 2015 (the date of this Proxy Statement), of individuals who are currently Directors and executive officers of CDTi. Following the table is a brief biography of each nominee for Director and of each current executive officer of CDTi. To CDTi’s knowledge, there are no family relationships between any Director or executive officer and any other Director or executive officer of CDTi. Executive officers serve at the discretion of the Board of Directors. Additionally, executive officers may be elected to the Board of Directors.

Mr. Beale’s experience as an executive officer of a public company and his finance and operations leadership experience in the automotive industry provides him with the continued business experience and acumen to advise CDTi on its financial and strategic initiatives and led the Board to conclude that he should be nominated to continue to serve as a Director of CDTi.

Dr. Till Becker, Director. Dr. Becker joined the CDTi Board of Directors in February 2015. Dr. Becker has over 25 years of international experience in the automotive, consumer goods and energy industries, including 19 years in leadership roles at Daimler AG, and an extensive background in corporate restructuring and M&A transactions. Dr. Becker currently serves as a Senior Advisor at Global Board Room Advisors, an Asia-focused M&A consulting firm which he co-founded in 2011. Additionally, he has served as Senior Advisor to Holland Private Equity Growth Capital, an investment firm focused on growth-stage investments in small to mid-market technology companies in the Benelux and Germany, since 2014 and Senior Consultant to Artris Management Ltd., a European M&A and consulting company, since 2010. In 2013, Dr. Becker served as CEO of Hess AG, a provider of world-class lighting systems, where he implemented a successful restructuring plan that lead to the company’s sale. From 2010 to 2011, he served as interim CEO of MPS Micropaint Holding AS, an international distributor of premium spot repair systems for small paint damages and as an advisor to RealEyes GmbH, a three-dimensional display imaging firm. From 2008 to 2010, Dr. Becker served as an advisor to Capital Dynamics Ltd., an independent, global asset management firm that invests in private equity and clean energy infrastructure. From 1987 to 2006, Dr. Becker served in numerous roles at Daimler AG, including Chairman and CEO of Daimler Northeast Asia, Mercedes-Benz Türk A.S., Istanbul, Mercedes-Benz India Pvt. Ltd. and Mercedes-Benz Portugal SA as well as Executive Vice President of the parent company. In addition to CDTi, Dr. Becker currently serves as chairman of the board of ArmonicAudiomotive Limited and MPS Micropaint Holding AS and as director of Automotive Business Consulting AG and Equity Gate Advisors GmbH. He previously served as chairman the board of PAS Management Holding GmbH (2008 to 2010) and Lombardium Hamburg GmbH & Co KG (2009 to 2011). Dr. Becker received a law degree from the University of Münster. 

Dr. Becker’s experience as a director and extensive international leadership experience, technology and commercialization experience and first-hand understanding of the automotive industry led the Board to conclude that he should be nominated to continue to serve as a Director of CDTi.  

Lon E. Bell, Ph.D., Director. Dr. Bell joined the CDTi Board of Directors in June 2013. He founded Gentherm Inc. (NASDAQ:THRM), formerly Amerigon Inc., a global developer and marketer of innovative thermal management technologies for a broad range of heating and cooling and temperature control applications, in 1991, and was a consultant to Gentherm from December 2010 to December 2012. Dr. Bell served many roles at Gentherm, including Chief Technology Officer until December 2010, Director of Technology until 2000, Chairman and Chief Executive Officer until 1999, and President until 1997. Dr. Bell served as the Chief Executive Officer and President of BSST LLC, a subsidiary of Gentherm, from September 2000 to December 2010. He served as a Director of Gentherm from 1991 to 2012. Previously, Dr. Bell co-founded Technar Incorporated, which developed and manufactured automotive components, and served as Technar’s Chairman and President until selling majority ownership to TRW Inc. in 1986. Dr. Bell continued managing Technar, then known as TRW Technar, as its President until 1991. Dr. Bell co-founded Mahindra REVA Electric Vehicle Pvt Ltd in 1994 and currently serves as a Director. He has served as a director for Ideal Power Converters, Inc. (NASDAQ:IPWR) since 2012 and ClearSign Combustion Corporation (NASDAQ:CLIR) since November 2011. From January 2012 to January 2014, Dr. Bell served as a Director of Aura Systems Inc. (OTC:AUSI) and through 2012, Dr. Bell was a director of the non-profit CALSTART. Dr. Bell received a BS degree in Mathematics, MS degree in Rocket Propulsion, and a Ph.D. in Mechanical Engineering from the California Institute of Technology.

Dr. Bell’s experience as a director of public companies, significant business acumen, technology and commercialization experience and first-hand understanding of the automotive industry led the Board to conclude that he should be nominated to continue to serve as a Director of CDTi.  

Bernard H. “Bud” Cherry, Director . Mr. Cherry joined the CDTi Board of Directors in October 2010, immediately following the business combination of CDTi and Catalytic Solutions, Inc. Mr. Cherry served as a Director of Catalytic Solutions, Inc. from January 2008 to October 2010. Mr. Cherry has served as Chief Executive Officer and Director of Eagle Creek Renewable Energy, LLC, a privately owned developer and operator of hydroelectric generating facilities, since June 2011. Mr. Cherry is also the Principal Founder and Chief Executive Officer of Energy 5.0 LLC, a privately held energy solutions company established in November 2006, that develops, finances, constructs and operates complex renewable energy production facilities. Mr. Cherry has over 40 years' experience in the energy sector. He served as Executive Vice Chairman of the Board of Northern Power Systems, Inc., a wind energy company from August 2008 to July 2009 and Chief Executive Officer from August to December 2008. In February 2007, Mr. Cherry joined the Board of Directors of Distributed Energy Systems Corporation (NASDAQ:DESC), a renewable energy generation and technology equipment manufacturer, and became Chairman of the Board in August 2007. In October 2007, Mr. Cherry was named Chief Executive Officer and served until August 2008, at which time he also left the Board. Distributed Energy Systems Corporation filed for Chapter 11 bankruptcy protection in June 2008. Prior to that, Mr. Cherry was Chief Executive Officer of the Foster Wheeler Global Power Group, one of the two major business groups of Foster Wheeler Limited (NASDAQ:FWLT), a provider of construction and engineering services, from November 2002 until June 2006. Prior to his tenure at Foster Wheeler, Mr. Cherry was a member of the senior management team of the Oxbow Group for 17 years. Mr. Cherry was the President and Chief Operating Officer of the Oxbow Energy and Minerals Group and played a key leadership role in the creation and growth of Oxbow's global energy activities. In addition to CDTi, Mr. Cherry serves on the board of Fabrico, Inc. Mr. Cherry began his career as a Nuclear Engineer at United Nuclear Corporation and holds a BS degree in Chemistry and MS degree in Nuclear Engineering, both earned at the University of Illinois.

Mr. Cherry’s experience as a director of public companies, over 40 years of experience in the energy sector and performance as a member of our Board led the Board to conclude that he should be nominated to continue to serve as a Director of CDTi.

Mungo Park, Director . Mr. Park has been a Director of CDTi since September 2009 and served as Chairman from September 2009 to October 2010. Mr. Park is the Chairman and Founder of Innovator Capital Limited, a financial services company of London, England established in 2003. He has over 30 years of investment banking experience, focusing primarily on the technology, industrial technology and the biomedical industries.

Mr. Park’s fundraising experience and experience in advising “Greentech” companies on financial matters led the Board to conclude that he should be nominated to continue to serve as a Director of CDTi.

Executive Officers

Christopher J. Harris, President and Chief Executive Officer . Mr. Harris was appointed President and Chief Executive Officer in July 2014. Prior to that, he served as Chief Operating Officer and Vice President – Integrated Supply Chain and Research and Engineering from April 2012 to July 2014. Mr. Harris joined CDTi as Chief Operations Officer in October 2010, following the business combination of CDTi and Catalytic Solutions, Inc. Mr. Harris served as President of Catalytic Solutions, Inc.'s catalyst business from August 2008 to October 2010. Mr. Harris has more than 25 years of technical, commercial and general management experience in both privately-held and publicly-traded specialty chemicals and materials companies. From May 2007 to August 2008, Mr. Harris served as Chief Operating Officer of Aculon, Inc., an early-stage nanotechnology company, and prior to that, he was Global Vice President/General Manager of Avery Dennison Corporation's (NYSE:AVY) Performance Polymers business. Earlier in his career, Mr. Harris held various management positions in North America and Europe during eleven years with Rohm and Haas Company, acquired by The Dow Chemical Company (NYSE:DOW) in 2009. Mr. Harris earned his BS degree in Chemical Engineering from Cornell University and completed graduate business coursework at Temple University.

Stephen J. Golden, Ph.D., Chief Technology Officer and Vice President . Dr. Golden has served as Chief Technology Officer and Vice President – Business Development and Strategy since April 2012. Dr. Golden joined CDTi as Chief Technical Officer in October 2010, immediately following the business combination of CDTi and Catalytic Solutions, Inc. Dr. Golden is one of the founders of Catalytic Solutions, Inc. and the developer of its technology and had served as the Chief Technical Officer and Director of Catalytic Solutions, Inc. since 1996. From 1994 to late 1995, Dr. Golden was the Research Director for Dreisbach Electromotive Incorporated, a developer of advanced batteries based in Santa Barbara, California. Dr. Golden received his doctorate in Material Science at Imperial College of Science and Technology in London, England. Dr. Golden did extensive post-doctoral work at the University of California, Santa Barbara, and the University of Queensland, Australia in ceramic oxide and mixed metal oxide materials.

Pedro J. Lopez-Baldrich, General Counsel, Corporate Secretary and Vice President, Administration. Mr. Lopez-Baldrich has served as General Counsel and Vice President, Administration since September 2013 and Corporate Secretary since December 2013. He served as a member of the Office of the Chief Executive Officer from December 2013 to July 2014. Mr. Lopez-Baldrich has over 15 years of legal and operational experience in both public and private companies. Prior to joining CDTi, from August 2005 to March 2012, he served as General Counsel, Secretary and Vice President of Operations for Patagonia, Inc., a global designer and manufacturer of outdoor clothing and gear. From May 2001 to August 2005, he served as in-house counsel for Burton Snowboards, a snowboard manufacturer. Prior to joining Burton Snowboards, Mr. Lopez-Baldrich was an attorney with Blank Rome LLP practicing in their Corporate, Mergers & Acquisitions and Securities Department. Mr. Lopez-Baldrich holds a BS degree in International Business from Drake University and Master of Law degree from Georgetown University as well as a Juris Doctorate from St. John’s University.

David E. Shea, Chief Financial Officer and Treasurer. Mr. Shea was appointed Chief Financial Officer in July 2014 following his service as Corporate Controller from April 2014 to July 2014 and Vice President of Finance from May 2013 to July 2014. Mr. Shea has served as Treasurer since May 2013. Mr. Shea joined CDTi as Corporate Controller in October 2010, following the business combination of CDTi and Catalytic Solutions, Inc. Mr. Shea served as Corporate Controller of Catalytic Solutions, Inc. from 2009 and as Manager of Financial Planning and Analysis from October 2005 to 2009. Mr. Shea has over 20 years of financial management experience in a number of different industries. From 2001 to 2005, Mr. Shea served as Director of Finance for ENCO Utility Services, a privately held utility services outsourcing provider. From 1998 to 2001, Mr. Shea was the Manager of Business Planning and Development for Edison Enterprises, an unregulated subsidiary of Edison International (NYSE:EIX). From 1986 to 1998, Mr. Shea held several of financial positions, the last being Manager of Material Estimating and Cost Management at Northrop Grumman (NYSE:NOC). Mr. Shea received a BA degree in Economics/Mathematics from the University of California at Santa Barbara and MBA degree from the University of Southern California Marshall School of Business.

PROPOSAL No. 1

ELECTION OF DIRECTORS

The Nominees

We are asking you to vote for the election of six (6) nominees as Directors of CDTi. Each of the nominees is currently a Director of CDTi and was selected by the Board of Directors upon the recommendation of the Compensation and Nominating Committee of the Board. The term of office of each Director is until the 2016 annual meeting or until a successor is duly elected or, if before then, a Director resigns, retires or is removed by the stockholders. 

The following table sets forth certain information with respect to each person nominated and recommended to be elected as a Director of CDTi. 

ROLE AND COMPOSITION OF THE BOARD OF DIRECTORS

The Board of Directors, which is elected by the stockholders, is the ultimate decision-making body of the Company, except with respect to those matters reserved to the stockholders. It selects the Chief Executive Officer, or person or persons performing similar functions, and other members of the senior management team, and provides an oversight function for the Chief Executive Officer’s execution of overall business strategy and objectives. The Board acts as an advisor and counselor to senior management and validates business strategy and direction. The Board’s primary function is to monitor the performance of senior management and facilitate growth and success by providing mentoring and actionable business advice honed by substantial substantive knowledge of the Company's business and history tempered with significant outside business experience. 

Our By-laws state that the number of Directors shall be determined from time to time by the Board of Directors or by the stockholders. On February 9, 2015, our Board of Directors fixed the number of Directors at six (6).

Each Director shall be elected for a term of one year and until a successor is duly elected or until the Director shall sooner resign, retire, become deceased or be removed by the stockholders. Any Director may be removed by the stockholders with or without cause at any time. Any Director may resign at any time by submitting an electronic transmission or by delivering a written notice of resignation, signed by such Director to the Chairman, the Chief Executive Officer or the Secretary. Unless otherwise specified therein, such resignation shall take effect upon delivery. Vacancies in the Board may be filled by a majority of the Directors then in office (although less than a quorum), by the sole remaining Director, or by the stockholders. Any decrease in the authorized number of Directors shall not become effective until the expiration of the term of the Directors then in office unless, at the time of such decrease, there shall be vacancies on the Board that are being eliminated by the decrease. The Board is currently comprised of a Non-Executive Chairman and five Non-Executive Directors.

Director Independence

The Board of Directors has affirmatively determined that each of Charles R. Engles, Ph.D., Matthew Beale, Dr. Till Becker, Lon E. Bell, Ph.D., Bernard H. “Bud” Cherry and Mungo Park is “independent” under the NASDAQ listing standards. In addition, the Board of Directors has determined that the members of CDTi’s Audit and Compensation and Nominating Committees, Dr. Engles, Mr. Beale and Mr. Cherry are “independent” under the heightened independence standards applicable to Committee members under applicable NASDAQ listing standards and SEC rules.

2014 Meetings and Attendance

During 2014, the Board held twenty-one meetings. All Directors attended at least 75% or more of the aggregate number of meetings of the Board and Board Committees on which they served. All Directors standing for re-election attended the 2014 annual meeting of CDTI held on May 21, 2014, except for Mr. Beale who joined the Board on September 4, 2014 and Dr. Becker who joined the Board on February 9, 2015. CDTi has a formal policy mandating Director Attendance at annual meetings.

Executive Sessions

In 2014, the Non-Executive Directors met in executive session of the Board on six occasions; the members of the Audit Committee met in executive session on six occasions; and the Compensation and Nominating Committee met in executive session on seven occasions. The policy of the Board is to hold at least two executive sessions of the Board annually and executive sessions of committees when needed.

Board Leadership Structure

The CDTi Board is led by a Chairman who is a Non-Executive Director selected by the full Board on nomination of the Compensation and Nominating Committee. The Board believes that the Chairman is responsible for Board leadership and the Chief Executive Officer is responsible for leading the management, employees and operations of CDTi and that these are two distinct and separate responsibilities. The Board believes this leadership structure is efficient and promotes good corporate governance. However, the Board continues to evaluate its leadership structure and may change it, if, in the opinion of the Board, a change is required by the needs of CDTi’s business and operations.

Risk Oversight

The Board of Directors exercises ultimate risk oversight responsibility for CDTi directly and through its committees. The direct role for the Board is to assist management in identifying risk, to evaluate management’s performance in managing risk, and, when appropriate, to request information and data to assist in that process. The Board believes that its leadership structure of a separate Chairman and Chief Executive Officer enhances the Board’s assessment of risk. The Audit Committee assists the Board of Directors in its oversight of risk management in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements. The Compensation and Nominating Committee oversees risks relating to CDTi’s compensation policies and practices. Each Committee reports its activities and recommendations to the Board, including assessment of risk, when appropriate.

COMMITTEES OF THE BOARD

The standing Committees of the Board of Directors are an Audit Committee, Compensation and Nominating Committee and Technology Committee. Special committees may be formed from time to time as determined by the Board of Directors. The Charters of the Audit Committee and Compensation and Nominating Committee are available on CDTi’s website at www.cdti.com under “Investor Relations”. The following table sets out the current membership of the standing Committees of our Board of Directors and the number of Committee meetings held in 2014:

Executive compensation awards are approved by the Compensation and Nominating Committee on recommendation of the Chief Executive Officer, except that the compensation of the Chief Executive Officer is determined by the Committee itself.  Compensation of executives is considered for approval by the Board of Directors upon the recommendation of the Compensation and Nominating Committee.  

In determining executive compensation, the Committee considers:

·          the executive’s performance in light of Company goals and objectives;

·          competitive market data at comparable companies;

·          our overall budget for base salary increases; and

·          such other factors as it shall deem relevant.

The Compensation and Nominating Committee is authorized to engage and retain independent third party compensation and legal advisors to obtain advice and assistance on all matters related to executive compensation and benefit plans, as well as external consultants to provide independent verification of market position and consider the appropriateness of executive compensation.

Nominating

The Compensation and Nominating Committee also identifies Director Nominees for election to fill vacancies on CDTi’s Board. Nominees are considered for approval by the Board on recommendation of the Committee. In evaluating nominees, the Committee seeks candidates of high ethical character with significant business experience at the senior management level who have the time and energy to attend to Board responsibilities. Candidates should also satisfy such other particular requirements that the Committee may consider important to CDTI’s business at the time. When a vacancy occurs on the Board, the Committee will consider nominees from all sources, including stockholders, nominees recommended by other parties, and candidates known to the Directors or CDTi’s management. The Committee may, if appropriate, make use of a search firm and pay a fee for services in identifying candidates. The best candidate from all evaluated will be recommended to the Board to consider for nomination.

The Compensation and Nominating Committee does not have a formal affirmative diversity policy for identifying nominees for the Board of Directors. When evaluating nominees, however, the Committee considers itself diversity neutral and examines a candidate’s background, experience, education, skills and individual qualities that could contribute to heterogeneity and perspective in Board deliberations.

Stockholders who wish to recommend candidates for consideration as nominees should furnish in writing detailed biographical information concerning the candidate to the Committee addressed to the Secretary of CDTi at 1621 Fiske Place, Oxnard, California, 93033, U.S.A. No material changes have been made to the procedures by which security holders may recommend nominees to CDTi’s Board of Directors.

Technology Committee 

On February 20, 2014, the Board of Directors established the Technology Committee, whose responsibility is to represent and assist the Board of Directors in its review and oversight of the Company’s technology strategy and investment in research and development and technological and scientific initiatives and to review and identify specific technology, science and innovation matters that could have a significant impact on Company operations.  

CORPORATE GOVERNANCE

The Board is committed to sound and effective corporate governance principles and practices. The role of our Board of Directors is to effectively govern the affairs of our Company for the benefit of our stockholders. Our Board of Directors strives to ensure the success and continuity of our Company and its mission through the election and appointment of qualified management. It is also responsible for ensuring that CDTi’s activities are conducted in a responsible and ethical matter.

Code of Business Ethics and Conduct

The Board has adopted a Code of Ethics and Business Conduct (the “Code”) that applies to all employees, executive officers and Directors. A copy of the Code is available free of charge on written or telephone request to Investor Relations, CDTi, 1621 Fiske Place, Oxnard, California 93033, U.S.A., or +1 805 639 9458. The Code is also available on CDTi’s website at www.cdti.com under “Investor Relations”. Changes to the Code or waivers granted under the Code will be posted on CDTi’s website at www.cdti.com under “Investor Relations”.

Communicating with the Board of Directors

Stockholders and other interested parties may contact any of CDTi’s Directors, including the Chairman or the Non-Executive Directors as a group, by writing a letter to the CDTi Director(s) c/o Secretary, CDTi, 1621 Fiske Place, Oxnard, California 93033, U.S.A. Communications will be forwarded directly to the Chairman , unless a different Director is specified.

Corporate Governance Materials

Materials relating to corporate governance at CDTi are published on our website at www.cdti.com under “Investor Relations”.

• Board of Directors—Background and Experience
• Audit Committee Charter
• Compensation and Nominating Committee Charter
• Code of Ethics and Business Conduct
• By-laws of Clean Diesel Technologies, Inc.
• Restated Certificate of Incorporation of Clean Diesel Technologies, Inc.

Transactions with Related Parties

Since January 1, 2013, aside from those transactions listed below and compensation and other arrangements described elsewhere in this Proxy Statement, there has not been nor is there currently proposed any transaction or series of similar transactions to which the Company was or is to be a party in which the amount involved exceeds $120,000 or one percent of the Company’s average total assets at year end for the last two completed fiscal years and in which any of the Company’s Directors, executive officer, persons who we know hold more than five percent of our common stock, or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest other than compensation agreements and other arrangements, which are described elsewhere in this Proxy Statement.

Lon E. Bell, Ph.D.

On July 3, 2013, we completed a public offering under an existing shelf registration statement in which our Director Lon E. Bell, Ph.D. participated. We sold Dr. Bell 80,000 units for $1.25 per unit, with each unit consisting of one share of common stock and one half of a warrant to purchase one share of common stock with an exercise price of $1.25 per share.

Derek R. Gray

In July 2013, we sold 54,347 shares of common stock to our former Director, Derek R. Gray, in a private placement pursuant to an agreement dated June 28, 2013. The shares were sold at $1.84 per share.

Kanis S.A.

We have entered into certain transactions involving the issuance of indebtedness by us to Kanis S.A., a former holder of more than five percent of our outstanding shares of common stock.  For more information, see Note 9 to the Company’s consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission on March 18, 2015.

In connection with these transactions, we have issued equity securities to Kanis S.A. in return for Kanis S.A. agreeing to loan funds to us or amend related debt instruments and/or agreements, including the issuance on: (i) December 30, 2010 of warrants to acquire up to 25,000 shares of common stock at $10.40 per share in connection with the entry into a loan commitment letter on such date providing for a loan by Kanis S.A. to us of $1.5 million; (ii) July 3, 2013 of 188,000 shares of common stock and warrants to acquire up to 94,000 shares of common stock at $1.25 per share in satisfaction of a $100,000 payment premium due June 30, 2013 and $135,000 of accrued interest as of June 30, 2013 relating to an 8% promissory note due 2016 in the aggregate principal amount of $1.5 million; (iii) on February 16, 2012 of warrants to acquire up to 5,000 shares of common stock at $3.80 per share in connection with an amendment to our 8% subordinated convertible note due 2016 issued pursuant to a subordinated notes commitment letter dated April 11, 2011; (iv) on July 27, 2012 of warrants to acquire up to 45,000 shares of  common stock at $2.09 per share in connection with a 8% promissory note in the principal amount of in the initial aggregate principal amount of $3.0 million; and (v) on November 11, 2014 of warrants to acquire up to 80,000 shares of common stock at $1.75 per share in connection with the entry into a letter agreement amending the terms of various loans made by Kanis S.A. to us.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s Directors and executive officers, and persons who own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, Directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.

To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company, all Section 16(a) filing requirements applicable to CDTi’s executive officers, Directors and greater than ten percent beneficial owners during the year ended December 31, 2014 were complied with.

PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT

The following table sets forth information known to us regarding the beneficial ownership of common stock as of March 24, 2015 by: 1) each person known to CDTi to beneficially own more than five percent of its outstanding shares of common stock; 2) each of the Directors (including all nominees for Director); 3) CDTi’s “Named Executive Officers” as set forth in the Summary Compensation Table included under “Executive Compensation”; and 4) all current Directors and executive officers as a group at such date.

Unless otherwise noted below, the address of each beneficial owner listed in the table is in care of CDTi, 1621 Fiske Place, Oxnard, California, 93033.

⁷ For Mr. Cherry, includes 15,000 shares subject to options immediately exercisable and 5,882 shares subject to restricted share units issuable within 60 days.

⁸ For Mr. Park, reflects 15,000 shares subject to options immediately exercisable and 5,882 shares subject to restricted share units issuable within 60 days.

⁹ For Mr. Harris, includes 61,517 shares subject to options immediately exercisable and 16,430 shares subject to restricted share units issuable within 60 days.

¹⁰ For Mr. Lopez-Baldrich, includes 4,610 shares subject to restricted share units issuable within 60 days.

¹¹ For Dr. Golden, includes 74,821 shares subject to options immediately exercisable and 20,567 shares subject to restricted share units issuable within 60 days. 8,556 shares are held in the Golden Family Trust for which Dr. Golden serves as Trustee.

¹² For Mr. Shea, includes 28,529 shares subject to options immediately exercisable and 11,693 shares subject to restricted share units issuable within 60 days.

¹³ Includes warrants to acquire 40,000 shares, 209,867 shares subject to options immediately exercisable and 90,611 shares subject to restricted share units issuable within 60 days.

⁴ The amounts indicated do not necessarily correspond to any actual value that will be realized by a recipient. Such amounts reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. For a discussion of the assumptions and methodologies used to value the awards reported in the Summary Compensation Table, see Note 12 to the Company’s consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2014.

⁵ The amounts in this column represent c ash incentive awards made by the Company under the 2014 Management Short Term Incentive Plan (“STIP”) based upon Company and personal performance targets. Cash incentive payments earned under the STIP were based upon a target eligibility of 60% of base salary for Mr. Harris, and 40% of base salary for each of Mr. Lopez-Baldrich, Dr. Golden and Mr. Shea, and are payable by the second quarter of the following year, provided the participant is employed by the Company at such time. Mr. Mehta’s target eligibility of 50% for the 2014 STIP was pro-rated and paid per the terms of a separation agreement and release dated July 31, 2014 which provided for a pro-rated payment of $27,125 although Mr. Mehta received an additional $2,875 for a month of transitional services for a total pro-rated payment of $31,000.

⁶ The amounts indicated reflect dollar value of premiums paid by CDTi for group term life and accidental death and dismemberment insurance and the following additional amounts: (i) Mr. Mehta’s amount for 2013 includes $2,000 per month for a housing allowance totaling $24,000, and amount for 2014 includes (a) $2,000 per month housing allowance through August totaling $16,000, and (b) $23,846 vacation accrual paid upon termination; and (ii) Mr. Lopez-Baldrich’s amount for 2013 includes a $20,000 employment signing bonus.

⁷ Mr. Shea first became a named executive officer of the Company in 2014.

Narrative Disclosure to Summary Compensation Table

Employment Agreements

We entered into an employment agreement with Mr. Harris on March 25, 2014 (the “Original Employment Agreement”), which was amended and restated on December 22, 2014 (the “Amended Employment Agreement”), and employment agreements with Mr. Shea on December 22, 2014, Mr. Mehta on May 2, 2012 and Mr. Lopez-Baldrich on March 25, 2014. We also entered into a separation agreement with Mr. Mehta on July 31, 2014. Our subsidiary, Catalytic Solutions, Inc. (“CSI”), entered into an employment agreement with Dr. Golden on October 17, 2006.

The employment agreements provide for an annual base salary of $250,000 for Mr. Harris under his Original Employment Agreement, $275,000 for Mr. Harris, under his Amended Employment Agreement effective as of December 1, 2014, $310,000 for Mr. Mehta, $250,000 for Mr. Lopez-Baldrich, $257,500 for Dr. Golden, and $225,000 for Mr. Shea, subject to potential adjustments based on an annual review of each named executive officer’s salary. Under his employment agreement, Mr. Mehta was eligible to receive a monthly housing allowance of $2,000.

The employment agreements also provide for certain incentive compensation, including:

·          for Mr. Harris, (i) the opportunity to receive long-term incentive awards correlated to his salary and calculated using a multiplier determined by the Board, (ii) an annual bonus based on the Company’s achievement of financial objectives established by the Board and Mr. Harris’ achievement of agreed upon personal business objectives, which varies from 0% to 68% of base salary with a target of 40% of such base salary under his Original Employment Agreement and 0% to 102% of Mr. Harris’ base salary with a target of 60% of such base salary under his Amended Employment Agreement;

·          for Mr. Mehta, (i) RSUs covering 81,699 shares of common stock granted on February 22, 2012, with 1/3 vesting on each of March 20, 2013, 2014 and 2015; (ii) non-qualified stock options granted on February 22, 2012, having an exercise price equal to the closing price of a share of our common stock as reported on the NASDAQ on such date, with 1/3 vesting on each of the first, second and third anniversaries of the grant date; and (iii) an annual bonus based on the Company’s achievement of financial objectives established by the Board which, if earned, varies from 50% to 100% of Mr. Mehta’s base salary;

·          for Mr. Lopez-Baldrich, (i) the opportunity to receive long-term incentive awards correlated to his salary and calculated using a multiplier determined by the Board, and (ii) an annual bonus based on the Company’s achievement of financial objectives established by the Board and Mr. Lopez-Baldrich’s achievement of agreed upon personal business objectives, which varies from 0% to 68% of Mr. Lopez-Baldrich’s base salary with a target of 40% of such base salary;

·          for Dr. Golden, (i) the opportunity to obtain a bonus of up to 60% of his base salary, dependent on the attainment of certain goals and objectives, and (ii) any equity incentive awards that may be granted to Dr. Golden under the Company’s Stock Incentive Plan; and

·          for Mr. Shea, (i) the opportunity to receive long-term incentive awards correlated to his salary and calculated using a multiplier determined by the Board, and (ii) an annual bonus based on the Company’s achievement of financial objectives established by the Board and Mr. Shea’s achievement of agreed upon personal business objectives, which varies from 0% to 68% of Mr. Shea’s base salary with a target of 40% of such base salary.

On July 31, 2014, Mr. Mehta and the Company entered into a separation agreement and release, pursuant to which the parties agreed:

·          to Mr. Mehta’s resignation, effective as of July 31, 2014, from all officer and director positions with the Company, and that Mr. Mehta remained an employee of the Company in a transitional capacity through August 30, 2014;

·          that Mr. Mehta’s resignation shall be treated as a resignation for good reason under Mr. Mehta’s employment agreement, generally entitling him to the benefits discussed under “— Potential Payments upon Termination of Employment or Change in Control ” below;

·          that Mr. Mehta shall be entitled to receive the payments and benefits specified in his employment agreement upon a resignation for good reason beginning after August 30, 2014;

·          that, in accordance with Mr. Mehta’s employment agreement, the Board exercised its discretion to accelerate the vesting of 27,233 of Mr. Mehta’s stock option awards and 42,036 of Mr. Mehta’s RSU awards on the date of Mr. Mehta’s termination;

·          that Mr. Mehta shall be entitled to receive a prorated annual bonus for 2014; and

·          that Mr. Mehta would continue to be entitled to payment of only those benefits to which he may be entitled under the Company’s Executive Long-Term Incentive Plan as of the date of Mr. Mehta’s termination.

Short-Term Incentives

All executive officers of the Company are eligible to participate in CDTi’s STIP.  Participation levels, business and personal objectives, and financial targets are established and determined by the Board upon recommendation of the Compensation and Nominating Committee and may include an incremental pay scale that includes linear payout levels. Plan payments are determined by CDTi’s senior management with approval of the Compensation and Nominating Committee and the Board of Directors. Individual employee payment recommendations are then submitted to the Company’s Chief Executive Officer, Compensation and Nominating Committee and Board for final approval before any payments can be made. Cash incentives under the STIP are paid out on an annual basis by the end of the second quarter of each year upon review of financial results from the previous year. To be eligible for the cash incentive payout, participants must remain employed by CDTi on the date of the payout.

Upon recommendation by the Compensation and Nominating Committee, on February 20, 2014, the Board set specific performance goals and business target criteria pertaining to the STIP for fiscal 2014. Cash incentive potential was based upon CDTi’s business objectives and financial performance. Criteria for financial performance targets include sales growth, operating income and free cash flow.

Long-Term Incentives

Executive Long-Term Incentive Plan . The Executive Long-Term Incentive Plan was established in 2012 as a cash incentive plan for key executives of the Company. The Plan occurs over three-year periods with the first period having commenced with the Company’s 2012 calendar year. Under the Plan, the Company’s Named Executive Officers and other key executives are provided with specific three-year target incentives based upon their salary, which are payable in cash if the Company achieves certain performance goals set by the Board of Directors for each rolling three-year cycle. Awards are to be paid out following the end of the three-year period if the specified performance goals are met. For example, goals set in calendar year 2012 pertained to calendar years 2012, 2013 and 2014, and became eligible for payment in early calendar year 2015, at the Board of Director’s discretion. The Board of Directors has the discretion to establish new performance goals for subsequent three-year cycles on an annual basis.

Performance goals for the three-year period beginning on January 1, 2012 and ending on December 31, 2014 were not achieved and therefore, no executive was eligible to receive payment under the Plan for calendar year 2014.

Stock Incentive Plan . CDTi has one equity based employee compensation plan, the Stock Incentive Plan (formerly known as the 1994 Incentive Plan), which was approved by our stockholders in 1994 upon adoption and again in 2002 and 2012 upon amendments. We are seeking approval for further amendments to the Plan as discussed under Proposal No. 4 of this Proxy Statement. Under the Plan currently, awards may be granted to participants in the form of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted share units, performance awards, or any combination of the foregoing. Participants in the Plan may be CDTi’s Directors, employees, consultants or advisors (except consultants or advisors in capital-raising transactions) as the Directors determine are key to the success of our business. The Compensation and Nominating Committee grants stock options and restricted stock (or restricted share units) as long-term equity incentive awards. These awards are designed to focus management on the long-term success of CDTi and thereby align the interests of the recipients with the interests of the stockholders.

Under the Plan, the Board grants stock option awards and restricted share units upon the recommendation of the Compensation and Nominating Committee. Awards are generally granted annually during the first half of the calendar year. Stock options are granted for a term of not more than ten years and at an exercise price per share equal to fair market value on the grant date.  

The following table sets out information as to the grant awards made to the Named Executive Officers during fiscal year 2014.

The following summarizes the potential payments upon employment termination and change in control events provided for in Dr. Golden’s employment agreement:

REPORT OF THE AUDIT COMMITTEE

As more fully described in its Charter, the Audit Committee assists the Board of Directors in its oversight of CDTi’s corporate accounting and financial reporting process and interacts directly with and evaluates the performance of CDTi’s independent registered public accounting firm.

In the performance of its oversight function, the Audit Committee has reviewed Clean Diesel’s audited consolidated financial statements for the year ended December 31, 2014 and has met with both management and CDTi’s independent registered public accounting firm, BDO USA, LLP, to discuss those consolidated financial statements. The Audit Committee has discussed with BDO USA, LLP those matters related to the conduct of the audit that are required to be communicated by the independent registered public accounting firm to the Audit Committee under Auditing Standard No. 16, Communications with Audit Committees , issued by the Public Company Accounting Oversight Board (“PCAOB”), including BDO USA, LLP’s judgments as to the quality, not just the acceptability, of CDTi’s accounting principles. In addition, the Audit Committee has reviewed and discussed with management the assessment of the effectiveness of CDTi’s internal control over financial reporting.

The Audit Committee discussed with CDTi’s independent registered public accounting firm the overall scope and plans for its audit. The Audit Committee met separately with the independent registered public accounting firm, without management present, to discuss the results of its audit, CDTi’s internal controls and the overall quality of CDTi’s financial reporting.

The Audit Committee has received from BDO USA, LLP the required written disclosures and letter regarding its independence from CDTi, as required by the PCAOB Rule 3526, and has discussed with BDO USA, LLP its independence. The Audit Committee has also reviewed and considered whether the provision of other non-audit services by BDO USA, LLP is compatible with maintaining the auditor’s independence.

Based on these reviews and discussions, the Audit Committee recommended to the Board of Directors, and the Board of Directors approved, that the audited financial statements of CDTi for the year ended December 31, 2014 be included in CDTi’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 18, 2015.

It is not the duty of the Audit Committee to conduct audits, to independently verify management’s representations or to determine that CDTi’s financial statements are complete and accurate, prepared in accordance with United States generally accepted accounting principles or fairly present the financial condition, results of operations and cash flows of CDTi. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal control over financial reporting. The independent registered public accounting firm retained by the Audit Committee is responsible for performing an independent audit of the consolidated financial statements, and for reporting the results of their audit to the Audit Committee. The Audit Committee reviews and monitors these processes. In giving its recommendation to the Board of Directors, the Audit Committee has expressly relied on (i) management’s representation that such financial statements have been prepared in conformity with United States generally accepted accounting principles and (ii) the report of the Company’s independent registered public accounting firm, with respect to such financial statements.

The Audit Committee

Matthew Beale, Chairman

Bernard H. “Bud” Cherry

Charles R. Engles, Ph.D.

The foregoing Report is not soliciting material, is not deemed filed with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

PROPOSAL No. 2

RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has reappointed the firm of BDO USA, LLP to be CDTi’s independent registered public accounting firm for the year 2015 and the Board of Directors is submitting the appointment of the independent registered public accounting firm to stockholders for ratification at the Annual Meeting. BDO USA, LLP has served as CDTi’s independent registered public accounting firm since September 18, 2012. A representative of BDO USA, LLP is expected to be present at the Annual Meeting and will have the opportunity to respond to appropriate questions and, if the representative desires to do so, to make a statement.

Neither the Company’s By-laws nor other governing documents or applicable law require stockholder ratification of the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm. However, the Audit Committee of the Board of Directors recommended, and the Board of Directors is, submitting the appointment of BDO USA, LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether or not to retain that firm although the Audit Committee will not be required to select a different independent auditor for the Company. Even if the appointment is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time if it determines that such a change would be in the best interests of the Company and its stockholders.

The affirmative vote of a majority of the votes cast on this proposal, assuming a quorum is present at the Annual Meeting, is required to ratify the appointment of BDO USA, LLP.

Considerations for the Amended and Restated Plan

Our Board has given careful consideration to each of the changes reflected in the amended and restated Plan, highlighting their importance to align the long-term interests of our employees with our stockholders and to maintain the good corporate governance practices that we require.

In its determination to increase the number of shares reserved for issuance under the Plan from 1,400,000 to 2,400,000 , which represents an increase of 1, 000,000 shares to the 180,538 currently available for future grants, the Board of Directors considered the historical rate at which shares have been granted and expect to be granted in the future as well as the burn-rate and overhang. If our Board of Directors continues to make equity grants at the average rate it has made grants in the last three years, the number of shares available under the Plan, if the amended and restated Plan is approved by the stockholders, would be sufficient to allow for grants for the next three years. Our average three-year burn-rate, using the publicly disclosed methodology of ISS Proxy Advisory Services, which adjusts the calculation by a multiple of two for full value awards such as restricted stock units, was approximately 6.5% as of December 31, 2014. We believe this is below the GICS group burn rate cap of 7.85% applied by ISS Proxy Advisory Services. Our overhang as of December 31, 2014, which equaled our equity awards outstanding plus the shares available for future grant divided by our common shares outstanding, represented 6.72% of our total shares outstanding, below the 25 ^th  percentile of our peer group . The Board of Directors believes that it is necessary to increase the number of shares available for stock awards to 2,400,000 to ensure that there are sufficient shares available to issue future stock awards in order to attract, incentivize, and retain the Company's key employees.

Unless the amended and restated Plan is approved by our stockholders at the Annual Meeting, we would be unable to grant certain performance-based awards under the Plan that would allow us to deduct certain compensation under Section 162(m).  In general, Section 162(m) disallows a deduction to any publicly held corporation and its affiliates for certain compensation paid to covered employees in a taxable year to the extent that compensation to a covered employee exceeds $1 million. However, some kinds of compensation, including qualified “performance-based compensation,” are not subject to this deduction limitation. For compensation awarded under a plan to qualify as “performance-based compensation” under Section 162(m), among other things, the following terms must be disclosed to and approved by the stockholders before the compensation is paid: (i) a description of the employees eligible to receive such awards; (ii) a per-person limit on the number of shares subject to stock options, stock appreciation rights, and performance-based stock awards, and the amount of cash subject to performance-based cash awards, that may be granted to any employee under the plan in any year; and (iii) a description of the business criteria upon which the performance goals for performance-based awards may be granted (or become vested or exercisable). Accordingly, we are requesting that our stockholders approve the amended and restated Plan, which includes terms regarding eligibility for awards, annual per-person limits on awards and the business criteria for performance-based awards granted under the Plan (as described in the summary below).  Stockholder approval of the amended and restated Plan is intended to constitute approval of the material terms of the performance goals of certain awards for purposes of the approval requirements of Section 162(m). While not currently a factor in our compensation decisions given our compensation levels, our Board of Directors considered that it  would be desirable, and in the best interests of the Company and our stockholders, if grant awards were under a plan that allowed for grants qualifying for an exemption from the deductibility limitations under Section 162(m).  However, in certain circumstances, we may determine to grant compensation to covered employees that will not qualify as “performance-based compensation” for purposes of Section 162(m). Moreover, even if we intend to grant compensation that qualifies as “performance-based compensation” for purposes of Section 162(m), we cannot guarantee that such compensation ultimately will be deductible by us.

The text of the proposed amendment and restatement of the Plan is set forth in Annex A to this Proxy Statement, and the description of the Plan set forth herein is qualified in its entirety by reference to the text thereof. If approved by stockholders, the Plan, as amended, will become effective as of May 20, 2015. If we do not obtain requisite stockholder approval of the amended Plan, the current Plan (without giving effect to the proposed share increase, term extension, performance-based award modifications or any of the other changes described above) will remain in effect.

Summary of the Amended and Restated Stock Incentive Plan

Purpose of the Plan

The purpose of the Plan is to further the interests of the Company and its stockholders by providing incentives in the form of equity awards to directors, employees, consultants or advisors to the Company as the Board of Directors or the Committee shall determine are key to the continued success and profitability of the Company. The Plan is intended to retain participants with significant training, experience and ability; to attract new participants whose services are considered valuable; and to encourage such participants to acquire a proprietary interest in the Company.     

Currently, there are six non-employee directors, four executive officers, approximately 110 other employees, one consultant and no other advisors or other individuals who perform services for the Company who are eligible to receive equity-based awards, however, any of the individuals mentioned in the previous sentence may receive equity-based or other awards under the Plan in the future in the discretion of the Committee.

The closing price of the Company’s common stock as of December 31, 2014 was $1.81.

Administration

The Plan is administered by the Board of Directors. The Board may, however, appoint a committee to administer the Plan which shall consist of not less than a sufficient number of disinterested members of the Board of Directors so as to qualify the Committee to administer this Plan as contemplated by Rule 16b-3 and Section 162(m). The Board of Directors or Committee is authorized to (i) determine the persons who shall be participants in the Plan and which awards shall be granted to participants, (ii) establish, amend and rescind rules, regulations and guidelines relating to the Plan as it deems appropriate, (iii) interpret and administer the Plan, awards and award agreements, (iv) establish, modify and terminate terms and conditions of award agreements, (v) grant waivers and accelerations of Plan, award and award Agreements restrictions and (vi) take any other action necessary for the proper administration and operation of the Plan. Except as otherwise provided in the Plan, awards shall be evidenced by award agreements, the terms of which may be amended or accelerated by the Board or Committee following the grant of any award and need not be uniform among participants.

Upon approval of the amended and restated Plan, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, distribution whether in the form of cash, common shares, other securities or other property), stock split, extraordinary cash dividend, recapitalization, change in control, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of common shares or other securities, or similar transaction(s)), the Board of Directors or Committee may not, without obtaining stockholder approval: (a) amend the terms of outstanding stock options or stock appreciation right to reduce the exercise price of such outstanding stock options or stock appreciation rights; (b) cancel outstanding options or stock appreciation right in exchange for stock options or stock appreciation rights with an exercise price that is less than the exercise price of the original stock options or stock appreciation rights; or (c) cancel outstanding stock options or stock appreciation rights with an exercise price above the current stock price in exchange for cash or other securities.  

Upon approval of the amended and restated Plan, we will have approximately 1,180,538 shares available for future issuance under the Plan, comprised of the shares available for issuance under the current Plan (without giving effect to any of the amendments described in this proposal) plus the shares which will become authorized for issuance upon such approval. Including aggregate past grants under the current Plan, the maximum number of shares of common stock reserved for the grant of awards under the Plan would be 2,400,000 upon approval of the proposed amendment, subject to adjustment as provided in the Plan. Generally, shares subject to an award that are settled in cash or remain unissued upon expiration or cancellation of the award will be available for other awards under the Plan. Upon approval of the amended and restated Plan, during any calendar year, stock options, stock appreciation rights and restricted share units, or any one or more of such awards qualified for treatment as performance shares, issued to a single participant may not exceed 400,000 shares or $2 million with respect to performance unit awards settled in cash.

The Board of Directors may, insofar as permitted by law, from time to time, with respect to any shares at the time not subject to awards, suspend or discontinue the Plan or revise or amend it in any respect whatsoever, provided, however, unless the Committee or the Board of Directors, as appropriate, specifically otherwise provides, any revision or amendment that would cause this Plan to fail to comply with any requirement of applicable law, regulation or rule if such amendment were not approved by the stockholders of the Company shall not be effective unless and until the approval of the stockholders of the Company is obtained. Subject to the terms and conditions and within the limitations of the Plan, the Board of Directors or Committee may amend, cancel, modify, or extend outstanding awards granted under the Plan. The amended and restated Plan was adopted by the Board of Directors on April 2 , 2015, and subject to stockholder approval, shall remain in effect thereafter. No incentive stock option may be granted under the amended and restated Plan after April 2 , 2025, unless further stockholder approval is obtained.

In the event of a reorganization, stock split, stock dividend, exchange of shares, combination of shares, merger, consolidation or any other change in corporate structure of the Company affecting the shares effecting without receipt of consideration by the Company, or any distribution to its stockholders other than a normal cash dividend, subject to any required action by the Company’s stockholders, the Board or Committee shall make appropriate adjustment in the number, kind, price and value of shares authorized by the Plan, the limitations on various awards specified in the Plan and to outstanding awards to as to prevent dilution or enlargement of rights.

The Board or Committee determines all of the terms and conditions of equity-based awards under the Plan, including, upon approval of the amended and restated Plan, whether the vesting or payment of an award will be subject to the attainment of performance goals.

Awards under the Plan

Eligibility . Persons eligible for awards under the Plan shall consist of directors, employees, consultants or agents who possess valuable experience and skills and have contributed, or can be expected to contribute, materially to the success and profitability of the Company.

Stock option awards . The Board of Directors or Committee may grant non-qualified stock options or incentive stock options, and shall determine the number of shares subject to each option, provided that during any fiscal year no participant shall be granted options covering more than 400,000 shares, subject to adjustment as provided in the Plan. The option price per share for all options shall be not less than one hundred percent (100%) of the fair market value per share on the date the option is granted. Award agreements for options shall conform to the requirements of the Plan, and may contain such other provisions as the Board of Directors or Committee shall deem advisable. Award agreements for options shall specify when an option may be exercisable. Shares purchased upon exercise of an option shall be paid for in full at the time the option is exercised in cash or, with the consent of the Board of Directors or Committee, consistent with applicable law, regulations and rules. If, after completion of any required period of continuous employment or affiliation in order to exercise an option as provided in an award agreement, a participant dies while employed by the Company, such option shall be exercisable by the beneficiary thereof, but after the date of death of the participant only within the period specified in the award agreement which shall not be later than the expiration date of the option. If, after completion of any required period of continuous employment in order to exercise an option as provided in an award agreement, a participant is totally disabled or retires, such option shall be exercisable by the participant, but only within the period specified in the award agreement. In the case of an incentive stock option, the option price per share shall be not less than one hundred percent (100%) of the fair market value per share on the date the option is granted; provided, however, that if on the date the option is granted, the employee (together with persons whose stock ownership is attributed to the employee pursuant to Section 424(d) of the Internal Revenue Code of 1986, as amended (the “IRC”) owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, the option price per share shall be not less than one hundred and ten percent (110%) of the fair market value per share on the date the option is granted. To the extent that the aggregate fair market value of stock with respect to which incentive stock options granted under the Plan are exercisable by a participant for the first time during any calendar year exceeds $100,000, such incentive stock options shall be treated as non-qualified stock options to the extent necessary so that such aggregate fair market value of stock does not exceed $100,000.

Stock appreciation right awards . The Board or Committee shall determine the number of shares subject to each stock appreciation right, provided that, upon approval of the amended and restated Plan, during any fiscal year, no participant shall be granted stock appreciation rights covering more than 400,000 shares. Stock appreciation rights may be granted in tandem with part of all of, in addition to, or completely independent of, an option or any other award under the Plan. A stock appreciation right issued in tandem with an option may be granted at the time of grant of the related option or at any time thereafter during the term of the option. Award agreements shall conform to the requirements of the Plan and may contain such other provisions (including but not limited to, the permitted form of payment for the exercise of the stock appreciation right, the requirement of employment for designated periods of time prior to exercise and the ability of the Board of Directors or Committee to revoke stock appreciation rights which are issued in tandem with options without compensation to the participant) as the Board of Directors or Committee shall deem advisable. For stock appreciation rights issued in tandem with options: (i) such stock appreciation rights shall be exercisable at such time or times and to the extent, but only to the extent, that the option to which they relate shall be exercisable; (ii) such stock appreciation rights shall, upon exercise, entitle the holder thereof to receive a number of shares equal in aggregate value to the amount by which the fair market value per share on the date of such exercise shall exceed the option price per share of the related option, multiplied by the number of shares in respect of which the stock appreciation right shall have been exercised; (iii) such stock appreciation rights may be settled in whole or in part upon the exercise thereof by the payment of cash equal to the aggregate value of the shares (or a fraction of a share), at the discretion of the Board or Committee; (iv) upon the exercise of such stock appreciation rights, the unexercised tandem options shall automatically terminate; and (v) upon the exercise of the tandem options, such stock appreciation rights shall automatically terminate.

Restricted Shares. Restricted shares may be granted subject to such terms, conditions and restrictions as the Board of Directors or Committee deem appropriate not inconsistent with the terms of the Plan, which may include restrictions upon the sale, assignment, transfer or other disposition of the restricted shares and the requirement of forfeiture of the restricted shares upon termination of employment under certain specified conditions.  The Board of Directors or Committee may condition the lapsing of restrictions on part or all of an award of restricted shares upon the attainment of specific performance goals or such other factors as the Board of Directors or Committee may determine. Awards of restricted shares may be granted for no cash consideration or for such minimum consideration as may be required by applicable law. To the extent permitted by the Plan, the Board of Directors or Committee may provide for the lapse of any such term or condition in installments and may accelerate or waive any such term or condition in whole or in part, based on service, performance and/or such other factors or criteria as the Board of Directors or Committee may determine. Award agreements for restricted shares shall provide that the stock certificates representing restricted shares shall be legended, that such certificates be held by a custodian or the Company, or that there be other mechanisms for maintaining control by the Company of the restricted shares until the restrictions thereon are no longer in effect.  After the lapse, waiver or release of the restrictions imposed pursuant to the award agreement on any restricted shares, the Company shall cause to be issued in the participant’s name a stock certificate evidencing the restricted shares with respect to which they restrictions have lapsed or been waived or released, free of any legend, and shall cause such stock certificate to be delivered to the participant. Except as otherwise provided in the Plan or in the award agreement, in the event of the participant’s death, total disability or retirement, all restrictions on the restricted shares shall lapse. 

Restricted Share Units. The Board or Committee may condition the grant or delivery of the shares on part or all of an award of restricted share units upon the attainment of specific performance goals or such other factors as the Board of Directors or Committee may determine, provided that, upon approval of the amended and restated Plan, subject to adjustment, during any fiscal year, no participant shall be granted restricted stock units with respect to more than 400,000 shares to the extent that the grant of such restricted share units or the delivery of shares with respect to such restricted stock units is conditioned upon the attainment of specific performance goals based on one or more performance measures set out in the Plan and described below.  Awards of restricted share units may be granted for no cash consideration or for such minimum consideration as may be required by applicable law. Any restricted share unit granted will be settled according to the terms of the Plan and at such times and under such conditions as determined by the Board of Directors or Committee and set forth in the award agreement.  Until the restricted share units are settled and the shares are delivered (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote, if applicable, or receive dividends or any other rights as a stockholder will exist with respect to the award. 

Performance Awards .  Upon approval of the amended and restated Plan, an award of a right to receive a payment of shares or cash (a “Performance Share”) or a right to receive a cash payment (a “Performance Unit” and, together with a Performance Share, a “Performance Award”), as determined by the Board or Committee, based upon attainment of applicable performance goal(s), shall be evidenced by award agreements in such form as the Board or Committee shall from time to time establish.  Subject to adjustment as provided in the Plan, no employee shall be granted within any fiscal year, one or more awards intended to qualify for treatment as Performance Shares which in the aggregate are for more than 400,000 shares or, if applicable, which could result in such employee receiving more than 400,000 shares (paid in cash or stock) for each fiscal year of the Company contained in the performance period for such award.  No employee shall be granted within any fiscal year one or more awards intended to qualify for treatment as Performance Units which in the aggregate are for more than $2 million, or, if applicable, which could result in such employee receiving more than $2 million for each full fiscal year contained in the performance period for such award. Unless otherwise provided by the Board of Directors or Committee in granting a Performance Award, each Performance Share shall have a value (payable in stock or cash) determined by reference to a number of shares of stock, subject to adjustment as provided in the Plan, and each Performance Unit shall have a monetary value established by the Board of Directors or Committee at the time of grant. The final value payable to the participant in settlement of a Performance Award determined on the basis of the applicable Performance Award formula will depend on the extent to which performance goals established by the Board of Directors or Committee are attained within the applicable performance period established by the Board of Directors or Committee. In granting each Performance Award, the Board of Directors or Committee shall establish in writing the applicable performance period, Performance Award formula and one or more performance goals which, when measured at the end of the performance period, shall determine on the basis of the Performance Award formula the final value of the Performance Award to be paid to the participant.  Unless otherwise permitted in compliance with the requirements under Section 162(m) with respect to each Performance Award intended to result in the payment of performance-based compensation, the Board of Directors or Committee shall establish the performance goal(s) and Performance Award formula applicable to each Performance Award no later than the earlier of (a) the date ninety (90) days after the commencement of the applicable performance period or (b) the date on which 25% of the performance period has elapsed, and, in any event, at a time when the outcome of the performance goals remains substantially uncertain.  Once established, the performance goals and Performance Award formula applicable to a covered employee shall not be changed during the performance period. The Corporation shall notify each participant granted a Performance Award of the terms of such award, including the performance period, performance goal(s) and Performance Award formula. Performance goals shall be established by the Board of Directors or Committee on the basis of targets to be attained (“Performance Targets”) with respect to one or more measures of business or financial performance (each, a “Performance Measure”), subject to the following:

• Performance Measures shall be calculated in accordance with the Corporation’s financial statements, or, if such terms are not used in the Corporation’s financial statements, they shall be calculated in accordance with generally accepted accounting principles, a method used generally in the Corporation’s industry, or in accordance with a methodology established by the Board of Directors or Committee prior to the grant of the Performance Award.  Performance Measures shall be calculated with respect to the Company its consolidated subsidiaries for financial reporting purposes or such division or other business unit as may be selected by the Board of Directors or Committee.  Unless otherwise determined by the Board of Directors or Committee prior to the grant of the Performance Award, the Performance Measures applicable to the Performance Award shall be calculated prior to the accrual of expense for any Performance Award for the same performance period and excluding the effect (whether positive or negative) on the Performance Measures of any change in accounting standards or any extraordinary, unusual or nonrecurring item, as determined by the Board of Directors or Committee, occurring after the establishment of the performance goals applicable to the Performance Award.  Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of Performance Measures in order to prevent the dilution or enlargement of the participant’s rights with respect to a Performance Award.  Performance Measures may be one or more of the following, as determined by the Board or Committee: revenue; sales; expenses; operating income; gross margin; operating margin; earnings before any one or more of: stock-based compensation expense, interest, taxes, depreciation and amortization; pre-tax profit; net operating income; net income; economic value added; free cash flow; operating cash flow; balance of cash, cash equivalents and marketable securities; stock price; earnings per share; return on stockholder equity; return on capital; return on assets; return on investment; total shareholder return; employee satisfaction; employee retention; market share; customer satisfaction; product development; research and development expenses; completion of an identified special project; and completion of a joint venture or other corporate transaction.
• Performance Targets may include a minimum, maximum, target level and intermediate levels of performance, with the final value of a Performance Award determined under the applicable Performance Award formula by the level attained during the applicable performance period. A Performance Target may be stated as an absolute value, an increase or decrease in a value, or as a value determined relative to an index, budget or other standard selected by the Board or Committee.

As soon as practicable following the completion of the performance period applicable to a Performance Award, the Board of Directors or Committee shall certify in writing the extent to which the applicable performance goals have been attained and the resulting final value of the award earned by the participant and to be paid upon its settlement in accordance with the applicable Performance Award formula. In its discretion, the Board of Directors or Committee may, either at the time it grants a Performance Award or at any time thereafter, provide for the positive or negative adjustment of the Performance Award formula applicable to a Performance Award granted to any participant who is not a covered employee to reflect such participant’s individual performance in his or her position with the Company or such other factors as the Board of Directors or Committee may determine.  If permitted under a covered employee’s award agreement, the Board of Directors or Committee shall have the discretion, on the basis of such criteria as may be established by the Board of Directors or Committee, to reduce some or all of the value of the Performance Award that would otherwise be paid to the covered employee upon its settlement notwithstanding the attainment of any performance goal and the resulting value of the Performance Award determined in accordance with the Performance Award formula.  No such reduction may result in an increase in the amount payable upon settlement of another participant’s Performance Award that is intended to result in performance-based compensation.

Effect of change in control . Subject to any applicable legal or regulatory requirements or restrictions, the Plan permits the Board of Directors or Committee to, at its sole discretion, provide for any one or more of the following actions upon a change in control: accelerated vesting; assumption, continuation or substitution of awards; and cash-out of outstanding awards.

Withholding taxes and deferrals . The Company and its participating subsidiaries shall have the right to deduct from any cash payment made under awards under the Plan any federal, state, provincial or local income, or other taxes required by law to be withheld with respect to such payment or to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. Any share-based award may provide by the grant thereof that the Company may elect, in accordance with any applicable law, rules and regulations, to withhold a portion or all of the amount of such minimum required withholding taxes in shares.  In such event, the participant shall authorize the Company to withhold a portion of the shares that otherwise would be distributed to such participant, having a fair market value per share equal to the amount of withholding tax liability. The Board of Directors or Committee may permit a participant to defer receipt of the payment of cash or the delivery of Shares that would otherwise be due to such participant under an award. Any such deferral elections shall be subject to such rules, conditions and procedures as shall be determined by the Board of Directors or Committee in its sole discretion, which rules, conditions and procedures shall comply with the requirements of Section 409A of the IRC.

Tax Consequences

The following summary is intended as a general guide to the United States federal income tax consequences relating to the issuance and exercise of stock options granted under the Plan. This summary does not attempt to describe all possible federal or other tax consequences of such grants or tax consequences based on particular circumstances.

Incentive Stock Options. An optionee recognizes no taxable income for regular income tax purposes as the result of the grant or exercise of an incentive stock option qualifying under Section 422 of the IRC (unless the optionee is subject to the alternative minimum tax). Optionees who dispose of their shares acquired upon the exercise of an incentive stock option (“ISO shares”) more than two years after the stock option grant date and more than one year after the exercise date normally will recognize a long-term capital gain or loss equal to the difference, if any, between the sale price and the amount paid for the ISO shares. If an optionee disposes of the ISO shares within two years after the stock option grant date or within one year after the exercise date (each a “disqualifying disposition”), the optionee will realize ordinary income at the time of the disposition in an amount equal to the excess, if any, of the fair market value of the ISO shares at the time of exercise (or, if less, the amount realized on such disqualifying disposition) over the exercise price of the ISO shares being purchased. Any additional gain will be capital gain, taxed at a rate that depends upon the amount of time the ISO shares were held by the optionee. The Company will be entitled to a deduction in connection with the disposition of the ISO shares only to the extent that the optionee recognizes ordinary income on a disqualifying disposition of the ISO shares.

Non-Qualified Stock Options. An optionee generally recognizes no taxable income as the result of the grant of a non-qualified stock option. Upon the exercise of a non-qualified stock option, the optionee normally recognizes ordinary income equal to the difference between the stock option exercise price and the fair market value of the shares on the exercise date. If the optionee is a Company employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of stock acquired by the exercise of a non-qualified stock option, any subsequent gain or loss, generally based on the difference between the sale price and the fair market value on the exercise date, will be taxed as capital gain or loss. The Company generally should be entitled to a deduction equal to the amount of ordinary income recognized by the optionee as a result of the exercise of a non-qualified stock option, except to the extent such deduction is limited by applicable provisions of the IRC.

Certain Other Tax Issues. In addition to the matters described above, (i) any entitlement to a tax deduction on the part of the Company is subject to applicable federal tax rules (including, without any limitation, Section 162(m) of the IRC regarding the $1,000,000 limitation on the Company’s deductible compensation); (ii) the exercise of an incentive stock option may have implications in the computation of the Company’s alternative minimum taxable income; (iii) certain awards under the Plan may be subject to the requirements of Section 409A of the IRC (regarding nonqualified deferred compensation); and (iv) if the exercisability or vesting of any option is accelerated because of a change in control, such option (or a portion thereof), either alone or together with certain other payments, may constitute parachute payments under Section 280G of the IRC, which excess amounts may be subject to excise taxes payable by the recipient. The Plan is not, nor is it intended to be, qualified under Section 401(a) of the IRC, and is not subject to any of the requirements of the Employee Retirement Income Security Act of 1974, as amended.

Specified Benefits

No awards have been granted, and no shares have been issued, on the basis of the proposed 1,0 00,000 share increase. Future grants under the Plan will be made at the discretion of the Board or Committee and, accordingly, are not yet determinable. In addition, the value of the awards granted under the Plan will depend on a number of factors, including the fair market value of our common stock on future dates and the exercise decisions made by the participants. Consequently, it is not possible to determine the benefits that might be received by participants receiving discretionary grants under the Plan.

Aggregate Past Grants Under the Plan

As of April 24, 2015, awards covering approximately 1.7 million shares of the Company’s common stock had been granted under the Plan, including shares subject to awards that expired or terminated without having been exercised or paid and became available for new award grants under the Plan. The following table shows information regarding the distribution of those awards among the persons and groups identified, option exercises and restricted stock units (RSUs) vesting prior to that date, and any option and RSU holdings as of such date, inclusive of historical stock splits.

HOUSEHOLDING OF PROXY MATERIALS

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement and annual report addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.

This year, a number of brokers with account holders who are CDTi stockholders will be “householding” our proxy materials. A single annual report and proxy statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement and annual report, or, if you share an address with another Company stockholder and are receiving multiple copies of annual reports and proxy statements but only wish to receive a single copy of such materials, you may:

• if you are a stockholder of record, direct your written request to our transfer agent, American Stock Transfer and Trust Company, LLC (in writing: Attn:  Proxy Dept., 6201 15th Avenue, Third Floor, Brooklyn, NY 11219, U.S.A.; or by telephone: in the United States, 1-800-PROXIES (1-800-776-9437) and outside the United States, 1-718-921-8500) ; or
• if you are not a stockholder of record, notify your broker.

CDTi will promptly deliver, upon request, a separate copy of the annual report and proxy statement to a stockholder at a shared address to which a single copy of the documents was delivered. If you currently receive multiple copies of the proxy statement at your address and would like to request “householding” of these communications, please contact your broker if you are not a stockholder of record; or contact our transfer agent if you are a stockholder of record, using the contact information provided above.