UQM UQM Technologies Inc

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.     )

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Dear Shareholder:

The Board of Directors (the “Board”) of UQM Technologies, Inc. (“UQM” or the “Company”) has unanimously approved a Stock Issuance and Purchase Agreement (the “Purchase Agreement”) providing for American Compass, Inc. (“American Compass”), a California corporation and wholly owned U.S. subsidiary of Hybrid Kinetic Group Limited, a publicly traded Bermuda company listed on the Hong Kong Stock Exchange (“Hybrid Kinetic”), to purchase 66.5 million newly issued shares of the Company’s common stock for an aggregate purchase price of $47,880,000 (the “Transaction”).  Following the closing of the Transaction, Hybrid Kinetic will own through American Compass approximately [58%] of the Company, or [54%] on a fully-diluted basis accounting for all currently outstanding stock options and warrants.  You are cordially invited to attend the annual meeting of UQM shareholders to be held at       a.m., local time, on             , 2016 at                     , Colorado.

At the annual meeting, you will be asked to consider and vote on:

·                   A proposal to approve the Transaction, which results in a “change of control” of the Company;

·                   A proposal to amend and restate the Company’s articles of incorporation to, among other changes, increase the number of authorized shares of common stock by 100,000,000 to 175,000,000

·                   A proposal to further amend the Company’s articles of incorporation to decrease the shareholder vote needed to approve future amendments to the articles of incorporation and certain corporate actions from two-thirds of the outstanding shares to a majority of the outstanding shares;

·                   A proposal to elect a Board of five directors (which will be increased upon closing of the Transaction);

·                   A proposal to approve, on an advisory (nonbinding) basis, the compensation for our named executive officers;

·                   A proposal to amend our 2012 equity incentive plan to increase the number of shares available for grant by 2,500,000 shares;

·                   A proposal to amend our stock bonus plan to increase the number of shares available for grant by 300,000 shares; and

·                   A proposal to ratify the appointment of Hein & Associates LLP to act as our independent auditors.

If the Transaction contemplated by the Purchase Agreement is completed, UQM’s existing shareholders shall continue to hold their shares of the Company and Hybrid Kinetic will indirectly become the majority shareholder of the Company.  The Company’s stock will continue to be listed on the NYSE MKT Stock Exchange (the “NYSE MKT”) and the Company will continue as a public reporting company under the rules of the U.S. Securities and Exchange Commission.

After thoughtful consideration and consultation with UQM’s financial and legal advisors, the Board of UQM approved and adopted the Purchase Agreement and unanimously declared that the Purchase Agreement and the Transaction are advisable, fair to and in the best interests of the shareholders of the Company.

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THE BOARD OF UQM UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE TRANSACTION AS CONTEMPLATED BY THE AGREEMENT, FOR THE TWO PROPOSALS TO AMEND AND RESTATE THE COMPANY’S ARTICLES OF INCORPORATION, AND FOR THE OTHER PROPOSALS PRESENTED AT THE ANNUAL MEETING.

The Proxy Statement attached to this letter provides you with information about the Transaction and the terms of the Purchase Agreement and the annual meeting of UQM’s shareholders.  UQM encourages you to read the entire Proxy Statement carefully, including the annexes and documents incorporated by reference.   You may also obtain more information about the Company from documents the Company has filed with the Securities and Exchange Commission.

Your vote is important.  Under the rules of NYSE MKT, approval of holders of a majority of the shares represented at the annual meeting is necessary for this “change of control” Transaction.  In addition, the approval of holders of two-thirds of our outstanding shares is necessary to amend the articles of incorporation to, among other things, provide a sufficient number of shares for Hybrid Kinetic to purchase in the Transaction.  The failure of any shareholder to vote will have the same effect as a vote against amending and restating the articles of incorporation, which is a condition to closing the Transaction.  Accordingly, whether or not you plan to attend the annual meeting, you are requested to promptly vote your shares by completing, signing and dating the enclosed proxy card and returning it in the envelope provided, or by voting over the telephone or over the Internet as instructed in those materials.  If you sign, date and mail your proxy card without indicating how you wish to vote, your vote will be counted as a vote FOR approval of the Transaction, FOR the amended and restated articles of incorporation to increase the number of authorized shares, FOR the further amendment of the articles of incorporation to decrease the shareholder vote needed to approve future amendments and certain corporate actions, FOR the election of directors, FOR the advisory approval of compensation to our executive officers, FOR the amendment of our 2012 equity incentive plan, FOR the amendment of our stock bonus plan, and FOR the ratification of Hein & Associates LLP as our independent auditors.

Voting by proxy will not prevent you from voting your shares in person if you subsequently choose to attend the annual meeting.

If you hold your shares in “street name,” you should instruct your bank, broker, other nominee how to vote your shares in accordance with the voting instructions form you will receive from your bank, broker or other nominee.  Your bank, broker or other nominee cannot vote on any of the proposals, other than for the ratification of our independent auditors, without your instructions.  Thank you for your cooperation and continued support.

Neither the Purchase Agreement nor the Transaction have been approved or disapproved by the Securities and Exchange Commission or any state securities commission.  Neither the Securities and Exchange Commission nor any state securities commission has passed upon the merits of fairness of the

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Purchase Agreement or the Transaction contemplated by the Purchase Agreement or accuracy of the information contained in this document or the accompanying Proxy Statement.  Any representation to the contrary is a criminal offense.

THIS PROXY STATEMENT IS DATED             , 2016 AND IS FIRST BEING MAILED TO SHAREHOLDERS OF UQM TECHNOLOGIES, INC. ON OR ABOUT            , 2016.

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UQM TECHNOLOGIES, INC.

4120 Specialty Place

Longmont, Colorado 80504

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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDERS MEETING TO BE HELD ON           , 2016

Our P roxy Statement and Fiscal Year 2016 Annual Report on Form 10-K are available online at [www.envisionreports.com/UQM].

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You also will vote on two proposals to amend our equity compensation plans to authorize additional shares of Common Stock to be granted under such plans:

·                   approval of an amendment to our 2012 Equity Incentive Plan to increase the number of shares available for grant by 2,500,000 shares; and

·                   approval of an amendment to our Stock Bonus Plan to increase the number of shares available for grant by 300,000 shares.

What are the primary terms of the Transaction with Hybrid Kinetic?

Hybrid Kinetic will purchase 66,500,000 newly issued shares of the Company’s common stock for a purchase price of $47,880,000.  Following the purchase, Hybrid Kinetic will be the majority shareholder of the Company.  Closing of this Transaction is subject to usual and customary terms, including the approval of the shareholders of UQM and the shareholders of Hybrid Kinetic.  For more details about the Transaction, please see the sections “Summary,” “The Transaction” and “The Purchase Agreement.”

If shareholders approve the Transaction, will we be required to sell our stock of UQM?

The Transaction involves the purchase by Hybrid Kinetic of newly issued shares of UQM.  It is not a purchase of shares from UQM’s existing shareholders or a merger agreement, pursuant to which UQM shareholders would receive consideration in exchange for their common stock .  Shareholders of the Company prior to the Transaction’s closing will continue to own their shares of UQM stock following the closing.

If the Transaction is approved will UQM remain a public company?

Following closing of the Transaction, UQM will continue to remain a public company with its shares listed for trading on the NYSE MKT and the requirement to file its annual reports (including the audited financial statements contained therein) and other reports with the U.S. Securities and Exchange Commission (“SEC”).  Indeed, it is a condition to Hybrid Kinetic’s obligation to close the Transaction that UQM’s common stock remain listed for trading on the NYSE MKT.

What is the effect to UQM and its other shareholders of having Hybrid Kinetic as UQM’s majority shareholder?

Under Colorado corporate law, all shares of the Company, regardless of who owns them, have the same rights and privileges.  Because Hybrid Kinetic will own a majority of the Company’s common stock, it will have sufficient votes to elect all of the directors of the Company and to approve any other corporate action requiring the affirmative vote of holders of a majority of the Company’s outstanding shares.

Because of Hybrid Kinetic’s significant ownership of the Company following the Transaction, any transaction or arrangement between the Company, on the one hand, and Hybrid Kinetic or any of its affiliates, on the other hand, will need to be approved by the Board consistent with its fiduciary duties to all shareholders of the Company.  This will entail full disclosure to the Board as well as separate approval by the Audit Committee of the Board, which is composed solely of the independent directors.  In addition, relationships, transactions or other arrangements between the Company and Hybrid Kinetic and/or its affiliates must be disclosed by the Company in its filings with the SEC, other than in very limited circumstances.

Following the Transaction, UQM will be treated as a “controlled company” under the rules of the NYSE MKT because Hybrid Kinetic will own a majority of UQMs outstanding shares.  As a controlled company, UQM’s Compensation and Benefits Committee and its Governance and Nominating Committee will no longer be required to be composed solely of independent directors.  Under the rules of the NYSE MKT and SEC, UQM’s Audit Committee must continue to be composed solely of independent directors.

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Does the Board recommend the Transaction?

Our Board determined that the issuance and sale of stock to Hybrid Kinetic, on the terms and conditions set forth in the Purchase Agreement, are fair to and in the best interests of the Company and our shareholders. The Board approved the Purchase Agreement and the Transaction and directed the officers of the Company to sign the Purchase Agreement and to perform all of the obligations on the part of the Company under the Purchase Agreement in order that the Transaction may be closed as expeditiously as possible.

Accordingly, our Board recommends that our shareholders vote:

·                   “FOR” Proposal 1 : Approval of the issuance and sale of our stock to Hybrid Kinetic pursuant to the terms of the Purchase Agreement.

·                   “FOR” Proposal 2 : Approval of the Amended and Restated Articles of Incorporation to, among other things, increase the number of authorized shares of common stock from 75,000,000 to 175,000,000.

·                   “FOR” Proposal 3 : Approval of the First Amendment to the Amended and Restated Articles of Incorporation to decrease the shareholder vote needed to approve future amendments to the articles of incorporation, and certain other corporate actions, from two-thirds of the outstanding shares to a majority of the outstanding shares.

What factors did the Board consider and what were its reasons for approving the Transaction and recommending that the shareholders approve the Transaction?

In making its determinations, our Board considered various factors, including:

·                   the immediate and long-term benefit to UQM’s financial condition of receiving approximately $47.9 million in cash from the sale of stock, in light of UQM’s current cash position and longer-term liquidity concerns;

·                   the position, apparent prospects and confirmed financial condition of Hybrid Kinetic, as UQM’s controlling shareholder and as a guiding “partner” in helping UQM establish its China business;

·                   UQM had conducted, with the assistance of a business development firm focused on Asian opportunities, a formal process over several years to seek strategic partners and/or investors for its electric motors and controllers business in the growing Chinese market as well as explored other opportunities for strategic partnership and/or investment and based on that process believes that this Purchase Agreement offers the best opportunity with greater financial benefit and likelihood of successful closure than that presented by any other potential Chinese market partner or investor; and

·                   the opinion of its financial advisor Duff & Phelps that the consideration to be received by UQM pursuant to the Purchase Agreement is fair from a financial point of view to UQM’s shareholders.

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

This Proxy Statement contains statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, including statements about our beliefs or current expectations of the future financial prospects, operations and corporate governance procedures of the Company following the closing of the Transaction with Hybrid Kinetic as well as our current beliefs of the future prospects of the Company if the Transaction does not occur, whether as a result of a failure of our shareholders to approve the Transaction or otherwise. We intend the forward-looking statements throughout this Proxy Statement to be covered by the safe harbor provisions for forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual outcomes to differ materially from our expectations.

THE ANNUAL MEETING OF THE COMPANY’S STOCKHOLDERS

Time, Place and Purpose of the Annual Meeting

Our annual meeting will be held at       a.m., local time, on             , 2016 at                     , Colorado.  The annual meeting is being held for UQM’s shareholders to vote on the Transaction and the proposed amendments of our articles of incorporation.  The two amendments are required, respectively, in order for there to be sufficient shares to issue to Hybrid Kinetic in the Transaction, and to satisfy a condition to the parties’ obligations under the Purchase Agreement.  Shareholders will also vote at the annual meeting on the customary matters presented at every annual meeting—election of directors, a non-binding advisory vote on executive compensation and ratification of the audit committee’s appointment of our independent auditors.  In addition, shareholders will also vote to approve the amendment of our 2012 equity incentive plan and our stock bonus plan.

If we do not receive sufficient votes by proxy or in person to constitute a quorum or to approve the items presented at the annual meeting, as permitted under Colorado law and by our bylaws, we will adjourn the meeting until a future date.

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Because approval of Proposal 2 and Proposal 3 (both regarding amendment of our articles of incorporation) are each a required condition for the closing of the Transaction, as a practical matter, the approval of holders of two-thirds of our outstanding shares is required for approval of the Transaction.  An abstention from voting on Proposal 2 or Proposal 3 is the same as a vote against that proposal.

Shares that abstain from voting on a proposal presented will be counted toward the presence of a quorum.  No cumulative voting rights are authorized, and dissenters’ rights are not applicable to the matters on which shareholders are voting at the annual meeting.

Voting Your Shares

Method of Voting.  Shareholders of record may vote by using the Internet, by telephone or (if you received a proxy card by mail) by mail as described below. While shareholders also may attend the meeting and vote in person, we strongly encourage you to vote in advance by using the Internet, by telephone or (if you received your proxy card by mail) by signing and returning your proxy card.  If you own common shares through a bank or broker, please refer to your proxy card, Notice or other information forwarded by your bank or broker to see which voting options are available to you.

·                   You may vote by using the Internet.   The address of the website for Internet voting is www.envisionreports.com/UQM .   Internet voting is available 24 hours a day and will be accessible until    a.m. Eastern Time on        , 2016. Easy-to-follow instructions allow you to vote your shares and confirm that your instructions have been properly recorded.

·                   You may vote by telephone.   The toll-free telephone number is noted on your proxy card. Telephone voting is available 24 hours a day and will be accessible until     a.m. Eastern Time on     , 2016. Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded.

·                   You may vote by mail.   If you received a proxy card by mail and choose to vote by mail, simply mark your proxy card, date and sign it, and return it in the postage-paid envelope.

When you vote by using the Internet, by telephone or (if you received your proxy card by mail) by signing and returning the proxy card, you appoint Joseph R. Mitchell and David I. Rosenthal as your representatives at the annual meeting. They will vote your shares at the annual meeting as you have instructed them or, if an issue that is not on the proxy card comes up for vote, in accordance with their best judgment. This way, your shares will be voted whether or not you attend the annual meeting.

The method you use to vote will not limit your right to vote at the annual meeting if you decide to attend in person. Written ballots will be passed out to anyone who wants to vote at the annual meeting. If you hold your shares in “street name,” you must obtain a proxy, executed in your favor, from the holder of record to be able to vote in person at the annual meeting.

Changing your Vote.  You may revoke your proxy and change your vote at any time before the polls close at the annual meeting. You may do this by:

·                   submitting a subsequent proxy by using the Internet, by telephone or by mail with a later date;

·                   sending written notice of revocation to our Corporate Secretary at 4120 Specialty Place, Longmont, CO 80504; or

·                   voting in person at the annual meeting.

Attendance at the meeting will not by itself revoke a proxy.

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Voting of Shares if You Take no Action. If your shares are held in “street name” through a bank or broker, your bank or broker may only vote your shares under certain limited circumstances if you do not provide voting instructions before the annual meeting, in accordance with New York Stock Exchange (“NYSE”) rules that govern the banks and brokers. These circumstances include voting your shares on “routine matters,” such as the ratification of the appointment of our independent registered public accountants described in this proxy statement (Proposal 8). With respect to Proposal 8, therefore, if you do not vote your shares, your bank or broker may vote your shares on your behalf or leave your shares unvoted.

The remaining proposals are not considered routine matters under NYSE rules relating to voting by banks and brokers. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a “broker non-vote.” Broker non-votes that are represented at the annual meeting will be counted for purposes of establishing a quorum, but generally not for determining the number of shares voted for or against any non-routine matter, and therefore will have no effect on the outcome of the vote with respect to any non-routine matter. Because Proposals 2 (adoption of the Amended and Restated Articles of Incorporation) and 3 (adoption of the First Amendment to the Restated Articles of Incorporation) require approval of the votes of two-thirds of the shares outstanding, a broker non-vote will count as a vote against Proposals 2 and 3.

IN ORDER TO HAVE YOUR VOTING PREFERENCES ON PROPOSALS 1, 2, 3, 4, 5, 6 and 7 REFLECTED IN THE VOTING TABULATION, YOU MUST PROVIDE INSTRUCTIONS DIRECTLY TO YOUR BANK OR BROKERAGE FIRM VIA TELEPHONE OR THE INTERNET OR BY SIGNING AND RETURNING THE PAPER PROXY CARD MAILED TO YOU.

Voting Recommendations of UQM’s Board

For the reasons described below in the proxy statement, our Board of Directors unanimously recommends voting your shares: FOR approval of the Transaction (Proposal 1), FOR the Amended and Restated Articles of Incorporation (Proposal 2), FOR the First Amendment to the Amended and Restated Articles of Incorporation (Proposal 3), FOR the election of each of the five nominated directors (Proposal 4), FOR the approval (on an advisory basis) of compensation to our executive officers (Proposal 5), FOR the amendment of the 2012 Equity Incentive Plan (Proposal 6), FOR the amendment of the Stock Purchase Plan (Proposal 7) and FOR the ratification of Hein & Associates LLP as our independent auditors (Proposal 8).

Announcement of Voting Results

We will report the voting results on Form 8-K within four business days following the conclusion of the annual meeting.  The Form 8-K will be available through our website at www.uqm.com or at www.sec.gov.

Householding

We, along with some banks, brokers and other nominee record holders may be participating in the practice of “Householding” proxy statements and annual reports.  This means that only one copy of the Company’s Notice of Internet Availability Proxy Statement or Annual Report on Form 10-K may have been sent to multiple shareholders sharing a household.  The Company will promptly deliver a separate copy of either document to any shareholder upon written or oral request to the Secretary of the Company, UQM Technologies, Inc., 4120 Specialty Place, Longmont, Colorado 80504, telephone: (303) 682-4900.  Any shareholder who wants to receive separate copies of the Proxy Statement or Annual Report on Form 10-K in the future, or any shareholder who is receiving multiple copies and would like to receive only one per household, should contact the shareholder’s bank, broker, or other nominee record holder, or the shareholder may contact the Company at the above address and phone number.

Solicitation of Proxies

The Company has engaged Alliance Advisors LLC to assist it in soliciting proxies for the annual meeting.  Further solicitation of proxies may be made by telephone or oral communication by regular employees of the Company,

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who will not be additionally compensated for this work.  The expense of this solicitation is being borne by the Company.

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arrangement, the concept evolved to also include a potential investment by Hybrid Kinetic in the Company.  A draft memorandum of understanding and a supply agreement were exchanged, however, these discussions did not progress to a final agreement.  In mid-2014, Hybrid Kinetic contacted Mr. Ridenour, the Company’s former CEO, indicating they were interested in pursuing a joint venture and technical services license agreement with the Company.  Consequently, a team from Hybrid Kinetic visited the Company on September 21, 2014 to further discuss the terms of the proposed joint venture. The Company and Hybrid Kinetic signed a non-binding memorandum of understanding on October 20, 2014 to explore this potential joint venture to produce electric motor and controller systems in China.  The Company engaged BDA Advisors to assist it in evaluating the new business proposal from Hybrid Kinetic, however, the discussions concluded without consummating a joint venture or license agreement between the parties.

In March 2015, Jason Xu, the CEO of Hybrid Kinetic, again contacted Mr. Ridenour indicating that Hybrid Kinetic would be interested in re-opening discussions with the Company.  During April and May 2015, the parties exchanged draft agreement documents based upon the drafts partially negotiated in the parties’ discussions in 2013 and 2014. This negotiation was ended on June 18, 2015 for various reasons, primarily due to the fact that Hybrid Kinetic was not prepared at the time to invest in an electric vehicle drive company.  In addition, the single source of vehicle transmissions supplied for purposes of the trial testing at the time could not meet the required product and commercial parameters established by Hybrid Kinetic, an issue which has since been rectified through alternative sourcing arrangements for transmission.

Although these exploratory discussions during the years 2013-15 did not result in a definitive sales supply agreement or joint venture agreement, they provided management and the Board an opportunity to conduct due diligence on Hybrid Kinetic, and provided management with valuable information regarding, and familiarity with, Hybrid Kinetic’s management team, financial position, operations, facilities, and its complementary products.

BDA Advisors Marketing Efforts

In 2015, the Company directed BDA Advisors to engage in a broader canvassing of the Chinese and East Asian markets to seek potential investors/partners, which led to increased interest and activity with potential investors and partners in late 2015 and early 2016.

In its preliminary screening effort, BDA Advisors prepared a list of nearly 100 public and private companies who they believed would be interested in a strategic investment in or other arrangement with the Company.  The Company reviewed and finalized the list with BDA Advisors, including adding other companies the Company wished to approach, resulting in a list of 85 potential strategic investors and/or partners who the Company and BDA Advisors believed would be a good fit for the Company and its strategic plans.

Through the remainder of 2015 and into 2016, BDA Advisors contacted a total of approximately 50 target companies at the direction of the Company. While 21 of these declined further discussion, BDA Advisors and the Company discussed an investment in or strategic partnership or joint venture with the remainder.

ITL Agreement

On October 20, 2015, the Company and ITL Efficiency Energy Tech CO. Ltd. (“ITL”), an electric vehicle system supplier company headquartered in Beijing, China, executed a supply agreement, under which ITL agreed to exclusively purchase all of its required electric motor and controller products from the Company for ten years.

The arrangement with ITL provides for the first 3,000 units to be manufactured at the Company’s Colorado manufacturing facility in calendar year 2017.  Beginning in 2018, the Company is required to manufacture the products under the ITL supply agreement from a manufacturing facility located in China.  This condition added extra urgency for the Company to complete a significant investment or strategic partnership to provide it with the financial resources and local expertise necessary to operate a manufacturing facility in China and comply with its obligations under the ITL supply agreement.

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Discussions with Various Parties in Early 2016

In late 2015 and early 2016, the Company’s management continued to work with BDA Advisors to review and meet with various potential investors and joint venture partners.  On February 16, 2016, the Board held a meeting to discuss the progress of the Company’s business development efforts in China.  At the direction of the Board, on February 19-26, 2016, Joseph Mitchell, the Company’s CEO, led a delegation of Company representatives to meet with these potential investors, with a focus on potential sales or venture partners, including a vehicle components company headquartered in mainland China that had expressed interest in an equity investment in the Company (the “Alternate Investor”).

Following this meeting in China, on February 29, 2016, the Board held a meeting attended by selected members of management and legal and financial advisors. The legal counsel advised the Board on its fiduciary responsibilities and the structure for an investment agreement. During the meeting, Mr. Mitchell updated the Board on the status of the discussions in China, with an emphasis on those companies the Company determined have the (i) financial capability, (ii) infrastructure, and (iii) access to China’s markets necessary to enable the Company to develop its manufacturing and sales activity in the China electrical vehicle market.  Mr. Mitchell indicated that the Alternate Investor had expressed an interest in acquiring a controlling interest in the Company through issuance of new shares of common stock.  The Board approved continued discussions with the Alternate Investor while Hybrid Kinetic continued at this time to also be viewed as a potential investor or partner the Company.

Discussions with Alternate Potential Investor

Following Mr. Mitchell’s return to the United States in February 2016, the Alternate Investor proposed commercial terms of its potential investment in the Company.  The proposal was for a majority investment in the Company and a target price range, which was subsequently negotiated among the parties to be a specified percentage premium above the 90 day trading average of the Company’s stock, subject to a cap on the maximum price per share.

On March 22, 2016, Mr. Mitchell provided a further update to the Board regarding the China initiative. The Board asked questions regarding the financial capacity and fit of the potential investors.  Following discussion with management, the Company’s attorneys and the representatives from BDA Advisors, the Board determined that the Alternate Investor offered the most favorable commercial terms of the proposals received, and directed management to deliver a memorandum of understanding to the Alternate Investor to frame the required terms of the transaction and to engage in further transaction discussions. A draft memorandum of understanding was delivered to the Alternate Investor on March 24, 2016.

Following the March discussions, no discussions were held between the Company and Alternate Investor in April 2016, as the Alternate Investor conducted due diligence in China regarding the fit of the Company’s products and potential market in China.

On May 6, Mr. Mitchell met with the senior management team of the Alternate Investor in China and discussed the terms of a potential investment transaction along with reasons for the delay in a response from the Alternate Investor.  Based on this meeting, the companies agreed to resume discussions, and scheduled a full team negotiation to be held in California on May 14-16.

At the direction of the Board, in early May the parties agreed to focus on a definitive purchase agreement rather than continuing to negotiate terms of the memorandum of understanding.  The Company (through BDA Advisors) presented the draft definitive purchase agreement to the Alternate Investor to be discussed at the California meetings on May 14-16, 2016.

On May 10, 2016, the Board held a meeting to discuss the status of the negotiations with the Alternate Investor and Mr. Mitchell’s meetings with Hybrid Kinetic. The directors asked questions regarding the proposed terms and the anticipated timetable as well as management’s assessment of the future business potential from partnering with the Alternative Investor.  The Company’s counsel provided guidance regarding fiduciary responsibilities of the Board and the Special Committee.  Mr. Mitchell also reviewed the proposed terms from Hybrid Kinetic and described the meeting he held with Hybrid Kinetic executives at their offices in Hong Kong and at Hybrid Kinetic’s plant in the LYG province.

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Although it was agreed that Hybrid Kinetic represented a very strong investor candidate, following discussion with management, Company counsel and the representatives from BDA Advisors, the Alternate Investor’s proposal in the form presented was still determined to be the best current proposal by the Special Committee and the Board, based primarily on the pricing and cash consideration, timing, and other terms. In addition, it was agreed that Alternate Investor had expressed the greatest level of interest in proceeding quickly to consummating a transaction.  The Board of Directors directed management to continue negotiations with Alternate Investor, but to report back to the Special Committee regarding the status after the next round of discussions to be held in California on May 14-16, 2016.

On May 11, 2016, the Special Committee also directed that Duff and Phelps be engaged to provide a fairness opinion for the proposed transaction with the Alternate Investor.  In addition, on May  , 2016, the Special Committee engaged Reid Godbolt, a partner of the firm Jones Keller, to serve as special independent counsel to the committee, so that he could provide the Special Committee with independent guidance regarding its fiduciary obligations and the proposed terms of the transactions under discussion.

In telephone conferences between May 11 and the May 15 meetings, the parties resolved many of the primary business issues, but reserved comments on a few key business points to be discussed by the business principals at an in-person meeting followed by a negotiation session to include the parties’ legal counsel.  On May 14, Messrs. Mitchell, Rosenthal and Schaeffer, together with an advisor from BDA Advisors, met in Southern California to discuss the primary business terms of an investment by the Alternate Investor in the Company and the terms of the draft definitive purchase agreement prepared by the Company.  On May 15 the negotiation session continued with both parties’ legal counsel present.  While many primary business and legal issues were agreed, a number of key issues remained unresolved between the Company and the Alternate Investor.

For the next five weeks following the May 14-16 meetings, the Company and the Alternate Investor continued to negotiate various points. A number of the key business points still remained unresolved, including matters the Board felt were fundamental terms to a transaction.  On May 24, 2016, the Board met to review the status of completing the agreement with the Alternate Investor.  The directors discussed the unresolved terms in the stock purchase agreement with the Alternate Investor, and alternatives available.  The Company continued its conversations and discussions with the Alternate Investor through early June.  However, despite repeated attempts to resolve open issues by the Company and the Alternate Investor’s counsel as well as between the senior leadership of the Company and the Alternate Investor, the parties were unable to resolve the last key terms of a business transaction.

Negotiations with Hybrid Kinetic that Lead to Execution of Purchase Agreement

In April 2016, Jason Xu, CEO of Hybrid Kinetic, contacted Mr. Mitchell on an unsolicited basis to inquire about the Company’s interest in reopening discussions about a potential investment in the Company.  As a result of its successful launch of a manufacturing facility in China and conclusion of other recent transactions, Mr. Xu indicated that Hybrid Kinetic was now in a better position, financially and operationally, to conclude a transaction with the Company.  Because discussions with the Alternate Investor had stalled during April, Mr. Mitchell indicated the Company would be willing to consider Hybrid Kinetic as an alternate investor on a non-exclusive basis but also explained the conditions to any such discussions, including a requirement that Hybrid Kinetic deposit earnest money into escrow before resuming negotiations, to demonstrate Hybrid Kinetic’s dedication to completing a transaction and in light of the other opportunities the Company was continuing to pursue.

In April 2016, the Company’s attorneys prepared a draft memorandum of understanding and draft definitive purchase agreement, which were circulated to Hybrid Kinetic.  Hybrid Kinetic had engaged new U.S. counsel since its previous discussions with the Company and this counsel began additional due diligence on the Company.  The Company sent Hybrid Kinetic and its counsel additional materials for it to update its due diligence pursuant to an existing non-disclosure and confidentiality agreement.

On May 3-5, 2016, Mr. Mitchell met with the Hybrid Kinetic executive team in Hong Kong.  Mr. Mitchell toured Hybrid Kinetic’s new manufacturing plant, and reviewed Hybrid Kinetic’s business plan.  He found that their business plan and its execution had progressed significantly.  At the meeting, Hybrid Kinetic expressed interest in certain new technologies that the Company was developing and how such technologies would fit within the Hybrid Kinetic technology portfolio.  The parties also discussed fundamental terms of a transaction.  Hybrid Kinetic

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proposed a small premium to the current market share price, with a fixed number of shares and a request for warrants to be issued by the Company in addition to shares of common stock.  Following the Company’s meeting with Hybrid Kinetic in Hong Kong, Mr. Mitchell had also travelled to China to meet with the Alternate Investor. On or about May 18, 2016, BDA Advisors informed Hybrid Kinetic that its proposal was not determined to be the superior proposal to invest in the Company.

In late May 2016 Mr. Xu of Hybrid Kinetic contacted Mr. Mitchell to discuss whether there was any way Hybrid Kinetic could be reconsidered for the transaction.  Mr. Mitchell and Mr. Xu discussed ways for Hybrid Kinetic to improve its proposal, including an increase in the premium offered over the average share price, and removal of certain elements of its previous proposal.  Mr. Mitchell also indicated that in order to demonstrate Hybrid Kinetic’s dedication to completing a transaction in a timely manner, that the Company would require an earnest money deposit by Hybrid Kinetic of $3,000,000 (the “Deposit”) to be held in a U.S. bank as escrow pending completion of the negotiations.  Hybrid Kinetic agreed to significantly increase its share price bid, to provide the Deposit and the other terms, and resubmitted a new proposal on this basis.

By mid-June 2016, negotiations with the Alternative Investor had reached an impasse as to several key business and contract terms.  On June 13, 2016, the Board of Directors and the Special Committee met, joined by their attorneys and BDA Advisors.  Mr. Mitchell reported on the continuing impasse in negotiations with the Alternate Investor in connection with several key terms.  He then outlined the new proposal offered by Hybrid Kinetic, including an increase in the share price premium offered over the 90-day volume-weighted average trading price of the Company’s common stock.  It was agreed that the revised Hybrid Kinetic proposal provided a superior share price premium over the Alternative Investor capped price. The Board also discussed that Hybrid Kinetic had indicated that the Company should maintain its headquarters, executive officers and employees and would initially maintain three of its independent directors on the Board of Directors.  Mr. Mitchell also noted the higher level of autonomy for the operation of the Company that was expected from Hybrid Kinetic as compared to the Alternate Investor, as well as the more favorable regulatory review and cultural fit associated with Hybrid Kinetic, a publicly traded Bermuda company listed on the Hong Kong Stock Exchange. Consequently, the Special Committee and Board directed management to reengage Hybrid Kinetic to finalize an agreement.  Duff & Phelps were instructed to revise their fairness opinion to focus on the terms presented by Hybrid Kinetic rather than the Alternate Investor.  The Alternate Investor was advised that negotiations were being suspended.

Following the June 13 Board meeting, counsel for the Company and Hybrid Kinetic negotiated an escrow agreement to govern the $3,000,000 Deposit from Hybrid Kinetic, and a letter of intent to frame the next steps for negotiation of the Purchase Agreement. In the letter of intent, the Company agreed to negotiate exclusively with Hybrid Kinetic for a period of two weeks, to allow due diligence to be completed and to complete accelerated negotiation of the Purchase Agreement.  On June 17, 2016, the parties executed and delivered the escrow agreement and letter of intent to memorialize this framework arrangement, and Hybrid Kinetic deposited into escrow the $3,000,000 payment.  BDA Advisors informed the Alternative Investor of the exclusivity period with Hybrid Kinetic and the Company’s decision to focus its discussions with Hybrid Kinetic.

Over the next two weeks, Hybrid Kinetic completed its due diligence and the Company and Hybrid Kinetic negotiated all terms of the final Purchase Agreement.  The parties agreed on steps to obtain regulatory approvals, and to present the Purchase Agreement to their respective boards and shareholders.

On June 28, 2016, the Board, including all of the members of the Special Committee, held a telephonic meeting to consider and vote on the Purchase Agreement.  Duff & Phelps rendered its opinion to the Board and the Special Committee that the transaction with Hybrid Kinetic is fair from a financial point of view to the Company and its shareholders and answered all questions from the Board and the Special Committee to the satisfaction of all members.  Following a discussion with the Company’s management, legal advisors, and representatives from BDA Advisors, the Special Committee and the Board determined that the Agreement and the Transaction are in the best interests of the Company and its shareholders because, among other things, (a) the investment provides needed capital to continue operations in the U.S. and expand into China, (b) the negotiated terms of the Purchase Agreement are superior to the proposal offered by the Alternate Investor, (c) the comprehensive search undertaken by BDA Advisors in marketing the potential investment to a wide group of interested investors had results in serious offers from only the Alternate Investor and Hybrid Kinetic, (d) a favorable opinion of Duff & Phelps, and (e) the Transaction aligns the strategies and interests of both the Company and Hybrid Kinetic.  For these reasons and those

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discussed below in “The Recommendation of UQM’s Board and UQM’s Reasons for the Transaction,” the Special Committee approved the Transaction and execution of the Purchase Agreement and determined to recommend the Purchase Agreement and Transaction to the shareholders of the Company for their approval.  The remaining member of the Board then joined in and ratified the action of the Special Committee.  The Board also approved the Amended and Restated Articles of Incorporation and recommended to the shareholders its approval.

On the afternoon of the same day after the U.S. trading markets closed, the Company and Hybrid Kinetic executed the Purchase Agreement.

Following execution of the Purchase Agreement, BDA Advisors notified a representative of Alternative Investor that the Company was terminating further discussions with the Alternate Investor as it had entered into a definitive agreement with a different party.

Hybrid Kinetic

Hybrid Kinetic Group Limited is a Bermuda incorporated corporation and headquartered in Hong Kong and publically listed on the Hong Kong Stock Exchange (Stock Code: 01188).  Hybrid Kinetic is principally engaged in the environmental friendly automobile and related business and in particular develops and manufactures lithium-ion powered batteries and is in the business of development and manufacturing of electric and hybrid vehicles. Hybrid Kinetic has a market capitalization of approximately US$650 million. Dr. Yeung Yung is one of the executive directors and the chairman of the board of directors of Hybrid Kinetic.  He was previously the chairman, chief executive officer and president of Brilliance China Automotive Holdings Limited and was also the chairman and president of Shenyang Jinbei Passenger Vehicle Manufacture Co., Ltd. from 1992 to 2002.  Dr. Yeung is a well-known, highly successful automotive industrialist with over 18 years’ experience in the automobile industry as well as a pioneering international financier from China.

American Compass, Inc. is a California corporation and wholly owned U.S. subsidiary of Hybrid Kinetic.  Pursuant to the Transaction, shares of the Company’s common stock will be issued and sold to American Compass Inc. For purposes of this Proxy, all references to “Hybrid Kinetic” include its subsidiary American Compass, Inc.

The Recommendation of UQM’s Board and UQM’s Reasons for the Transaction

Our Board held 16 meetings beginning in 2013, through January 2016, at which extensive discussions regarding the various requirements to implement the Company’s strategic plans to expand its business into China took place.  These Board discussions included reviewing and considering the prior discussions with Hybrid Kinetic as well as the other discussions described in “Background of the Transaction.”  The Company’s Board held eight meetings from February through June, 2016 during which the Transaction with Hybrid Kinetic in its ultimate form and contemporaneous alternative transactions were discussed.   The Company’s outside legal advisor, Sherman & Howard L.L.C., and its China investment bank advisor BDA Advisors, LLC, participated in portions of certain of these meetings.  Special independent counsel to the Special Committee also attended certain of those meetings following its engagement in May 2016.

After careful consideration of various factors described below, the Board has unanimously (i) determined that the issuance and sale of new stock of the Company to Hybrid Kinetic, on the terms and conditions set forth in the Purchase Agreement are fair to, and in the best interests of, the Company and its shareholders, (ii) approved and ratified the Purchase Agreement and Transaction and directed the officers of the Company to sign the Purchase Agreement and to perform all of the obligations on the part of the Company under the Purchase Agreement in order that the Transaction may be closed as expeditiously as possible, (iii) resolved that the Purchase Agreement be submitted for consideration by the Company’s shareholders at its annual meeting, and (iv) recommended that the Company’s shareholders vote to approve the Purchase Agreement and the Transaction.

Accordingly, our Board recommends that our shareholders vote:

·                   “FOR” Proposal 1 : Approval of the issuance and sale of our stock to Hybrid Kinetic pursuant to the terms of the Purchase Agreement.

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·                   “FOR” Proposal 2 : Approval of the Amended and Restated Articles of Incorporation to, among other things, increase the number of authorized shares of common stock from 75,000,000 to 175,000,000.

·                   “FOR” Proposal 3 : Approval of the First Amendment to the Amended and Restated Articles of Incorporation to decrease the shareholder vote needed to approve future amendments to the articles of incorporation and other corporate actions from two-thirds of the outstanding shares to a majority of the outstanding shares.

In making these determinations, the Board and the Special Committee considered various factors, including the following (not necessarily in order of importance):

1.               Strategic objective of entry into China :

·                   Based on the understanding of the management team and the Board of the Company’s business, operations, financial condition and financing needs, earnings, growth prospects and products, they determined that it is critical that the Company expand its manufacturing, marketing and sales capacity into the growing Chinese market, the largest market in the world for electric vehicles. Accordingly, the Company conducted, with the assistance of a business development firm focused on Asian opportunities, a formal process over the past few years to seek strategic partners and/or investors for the Company’s electric motors and controllers business in China, as well as to explore other opportunities for strategic partnership and/or investment.

·                   The Company and its Board determined that to be a successful entrant into China, the Company would need capital reserves and a strong business affiliation with a local partner.

·                   The proposed Transaction enables expansion into China and other international markets while providing the immediate and long-term financial benefit to the Company of receiving approximately $47.9 million in cash from the sale of its stock, thereby significantly enhancing the Company’s current cash position and alleviating longer-term liquidity concerns.

·                   The proposed Transaction permits the Company to execute on the ITL supply agreement by establishing its manufacturing footprint in Hong Kong to support the China market requirements without restrictions or additional duties per the China Mainland and Hong Kong Closer Economic Partnership Arrangement (“CEPA”).

2.               The sale of a majority interest in the Company to Hybrid Kinetic :

·                   The Board believes that the proposed Transaction represents the best offer following an exhaustive market search aided by independent advisors with knowledge of the Asian markets.   The Company’s management team and its Board have not secured any opportunity with greater financial benefit and likelihood of a successful near-term closure than that presented by Hybrid Kinetic.

·                   The Company’s management team and Board determined that Hybrid Kinetic met their three most important criteria needed for a strategic partner: (1) capital; (2) infrastructure; and (3) access to the Asia market.

·                   The Transaction enables the Company to leverage the market share, future prospects and healthy financial condition of Hybrid Kinetic, as the Company’s controlling shareholder and as a guiding “partner” in helping UQM establish its business in China, and possibly other Asian markets.

·                   Although Hybrid Kinetic reported a net loss from operations for the six months ended June 30, 2016, Hybrid Kinetic has a healthy financial position and is an emerging player in the market in China, with an experienced and highly successful management team.

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·                   Hybrid Kinetic in its current stage of growth and development is complimentary with the Company and the Company will be an important member of the Hybrid Kinetic family of operating companies.  Management of the Company has been favorably impressed with Hybrid Kinetic’s plant in China, based on tours of the facilities and information provided by Hybrid Kinetic’s management and from other independent sources.

·                   Hybrid Kinetic is ready to proceed at all due speed, demonstrating its dedication to timely consummating the proposed Transaction by making an earnest money deposit into an escrow account.

·                   The respective management teams of the Company and Hybrid Kinetic have established a good working relationship from the many face-to-face meetings held between the parties, and the Board anticipates that Hybrid Kinetic will provide greater operational autonomy for the Company’s current management team than that offered by other proposed strategic partners and/or investors.

·                   The Company’s management team and Board, working with their financial advisors and legal counsel, have been in preliminary discussions with 50 potential partners over the past 18 months. During that time, only one other potential investor, the Alternative Investor, presented a serious investment or partnership offer to the Company.  The Company’s management team and Board have concluded that if the Company had proceeded with the transaction with the Alternative Investor, the Company would have likely lost its independence.  Based on its negotiation of terms with the Alternative Investor, management also was concerned about the success and benefit to the Company and its shareholders of a long-term partnership with the Alternative Investor. Negotiations with the Alternative Investor reached an impasse due to several key unresolved terms associated with the proposed investment by the Alternative Investor.

3.               The terms of the Purchase Agreement :

·                   Structured as an issuance of new shares of the Company common stock, the Transaction provides $47.9 million in critical funding and access to capital to enable expansion into China, while at the same time enabling the shareholders of the Company to participate in the upside of successful expansion into China and other global growth opportunities.

·                   Following the closing of the Transaction, the Company will continue to act as a stand-alone company, the headquarters will remain in Colorado, and its shareholders will be able to maintain their current shares of the Company if they so wish.

·                   The Purchase Price of $47.9 million represents approximately a 6.4% premium to the volume-weighted average trading price of the Company’s common stock for the 90 day period ending on June 27, 2016.

·                   The terms and conditions of the Purchase Agreement with Hybrid Kinetic, including, among other things, the representations, warranties, covenants and agreements of the parties, the conditions to closing of the Transaction, the form and governance of the Company post-closing and the termination rights of the parties, taken as a whole, were more favorable than those terms and conditions negotiated with other potential strategic partners and/or investors.

·                   Pursuant to the terms of the Purchase Agreement, the Company will use its reasonable efforts to maintain the continuity of its management through June 30, 2017.

·                   Pursuant to the terms of the Purchase Agreement, three of the Company’s independent directors will continue to serve on the Board.

·                   The Company engaged separate counsel to advise the Special Committee, as well as the Company’s counsel, to ensure independence and careful consideration of alternative strategies by the Board and the Company’s management team.  The separate counsel confirmed that the proposed Transaction was

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properly negotiated at arm’s length and that the terms and conditions that were of greatest concern with the Alternative Investor were not concerns in the Purchase Agreement with Hybrid Kinetic.

·                   The opinion of the Company’s financial advisor Duff & Phelps that the consideration to be received by the Company pursuant to the Purchase Agreement was fair from a financial point of view to the Company’s shareholders.

·                   The Purchase Agreement allows the Board to change or withdraw its recommendation in favor of the Purchase Agreement in response to a superior proposal if the Board determines in good faith, after consultation with its financial advisors and outside legal counsel, that the failure to change or withdraw its recommendation would be inconsistent with the Board’s fiduciary duties.

·                   The Purchase Agreement is subject to approval by the Company’s shareholders. In addition, provisions in the Purchase Agreement and provisions under Colorado corporate law and U.S. securities laws provide certain protections to the Company’s current shareholders after they become minority shareholders upon consummation of the Transaction.

4.               Concerns if the Company is unable to close the Transaction or a similar transaction :

·                   The Board and the Special Committee also considered the effect to the Company of not pursuing the Transaction or a similar transaction to acquire additional funds to continue its operations and pursue its desired strategy, and the consequences to the Company and its shareholders of this inaction, including:

·                   At June 30, 2016, the Company had cash and cash equivalents of $5,497,556 and working capital of $7,328,236. The Company’s net loss for the quarter ended June 30, 2016 was $1,954,030 and its operating loss for the same quarter was $1,964,520.  The Company’s current levels of cash and working capital will not continue to support this rate of operating losses until the future time at which the Company’s management and Board believes the Company will become profitable.

·                   Even if the Company’s level of operations did not result in a continuing operating loss or the Company had sufficient cash and working capital on hand to satisfy its current rate of losses, the Company does not currently have sufficient funds for capital expenditures and initial working capital necessary to establish an Asia-based manufacturing facility to support the Chinese and other Asian markets.  The Company needs to establish an Asian-based manufacturing facility to satisfy its manufacturing obligations under the ITL supply contract after the first year’s products that the Company is permitted to supply from its U.S. manufacturing facility.  The Company’s management also believes, from its discussion with numerous China-based potential customers, that having an Asia-based manufacturing facility rather than exporting product from the United States is essential to its ability to generate sales in the China electric vehicle market.

·                   Based on the analysis of the Company’s management on alternative sources of capital, including public or private sales of common stock, warrants, or convertible or nonconvertible debt securities and the likely price and other terms and conditions of such sales, the Board and the Special Committee determined that the significant cost of such financing, even if it could be obtained, to the Company and the attendant significant dilution to its shareholders was substantially less favorable to the Company than pursuing the Transaction.

5.               Adverse Factors :

·                   The Board and the Special Committee also considered the potential adverse effects of the consummation of the transactions contemplated by the Purchase Agreement on the Company compared to the favorable aspects of the Transaction, including:

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·                   that the Transaction might be delayed or might not close, including the risk that the required CFIUS approvals might not be obtained, and the likely loss of value to the Company if there is a delay or the Transaction fails to close for any reason;

·                   that there will be a change of ownership control, resulting in a decrease of the current shareholders’ ownership interest percentages, with Hybrid Kinetic assuming majority control of the Board, and the reduced independence and autonomy of current management and Board members;

·                   that there may be difficult hurdles in executing the strategy of establishing a market of the Company’s products in China;

·                   that the Termination Payment required to be made to Hybrid Kinetic under certain circumstances specified in the Purchase Agreement, (although within a customary range for similar transactions based on a percentage of the equity value of the proposed Transaction), may discourage other parties that might be interested in an acquisition, merger or other business combination with the Company (see section entitled “Summary of the Transaction” for discussion of the Termination Payment); and

·                   that the Company’s executive officers may have interests in the proposed Transaction that differ from or are in addition to the interests of the Company’s shareholders, including the accelerated vesting of equity awards held by executive officers, and required cash severance payments to certain executives if their employment is terminated under certain circumstances (as set forth in their executive employment agreements).

The foregoing discussion of the information and factors considered by the Company’s management team, the Board, and the Special Committee is not intended to be exhaustive, but includes the material factors considered by them. The Board based its favorable recommendation to the Company’s shareholders on the totality of the information presented.

Portions of this explanation of the reasons for the Transaction and other information presented in this section are forward-looking in nature and, therefore, should be read in light of the section entitled “Cautionary Statement Regarding Forward-Looking Statements.”

Interests of the Company’s Directors and Executive Officers in the Transaction

None of the directors of UQM have any interest in Hybrid Kinetic or any relationship with Hybrid Kinetic other than from association with Hybrid Kinetic and its executives through the course of the negotiation of the Purchase Agreement. Following the closing of the Transaction, Joseph Mitchell, a director and our Chief Executive Officer, and three of the four current independent directors will continue as directors of the Company.

The Purchase Agreement provides that following the closing of the Transaction, UQM’s existing management shall continue as the management of UQM, subject to such subsequent election or removal of such member of management as are approved by the Company’s Board following the closing of the Transaction.  Mr. Mitchell and our other executive officers are parties to employment agreements with the Company, the terms of which end on June 30, 2017 in each case.  The parties have agreed that following the closing of the Transaction, the Company will continue to honor the terms of those employment agreements.

Each of the employment agreements with our executive officers provide certain rights in certain circumstances to the executive upon a change in control of the Company.  Consummation of the Transaction would constitute a change of control pursuant to the terms of the employment agreements.  Upon a change in control of the Company, all stock options and bonus stock awards held by the executives become immediately vested under the terms of the employment agreements.  In addition, upon a termination of the executive officer’s employment (or a material diminution to his responsibilities or other material changes) within twelve months following a change of control, the executive will receive a lump sum equal to one year’s base salary (two years’ base salary in the case of Mr.

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Mitchell), a cash bonus (equal to two times the average of the annual cash bonus paid for the preceding three fiscal years), and two times his respective retention bonus. See “Payments and Potential Payments Upon Termination or Change in Control” for identification of the potential payments to each of our executive officers.

Opinion of the Company’s Financial Advisor, Duff & Phelps

On May 11, 2016, the Company engaged Duff & Phelps to serve as an independent financial advisor to the Board (solely in their capacity as members of the Board) to provide an opinion as to the fairness, from a financial point of view, to the public stockholders of the Company of the Consideration (as defined below) to be received by the Company in the Transaction (without giving effect to any impact of the Transaction on any particular stockholder other than in its capacity as a stockholder).

The Company and Hybrid Kinetic entered into the Purchase Agreement, which provides, among other things, that the Transaction will be effected pursuant to the terms and subject to the conditions set forth therein: (i) the Company shall issue 66,500,000 shares of the Company’s common stock (the “Purchased Stock”) to Hybrid Kinetic, and (ii) as consideration for the issuance of the Purchased Stock, the Company shall receive $47,880,000 in the aggregate (the “Consideration”).  Upon issuance, the Purchased Stock will constitute a majority of the total issued and outstanding shares of common stock of the Company on a fully diluted basis.

Duff & Phelps rendered its written opinion to the Board on June 28, 2016 (the “Opinion”), that, subject to the assumptions, qualifications and limiting conditions set forth in the Opinion, as of such date, the Consideration to be received by the Company pursuant to the Purchase Agreement was fair, from a financial point of view, to the public stockholders of the Company (without giving effect to any impact of the Transaction on any particular stockholder of the Company other than in its capacity as a stockholder).

The full text of the Opinion of Duff & Phelps is attached as Annex B to this Proxy Statement and is incorporated herein by reference.  The full text of the Opinion should be read carefully in its entirety for a description of the assumptions made, procedures followed, matters considered and qualifications and limitations of the review undertaken in rendering the Opinion.

Duff & Phelps provided the Opinion for the information and assistance of the Board in connection with, and for the purposes of its evaluation of, the Transaction.  The Opinion (i) does not address the merits of the underlying business decision to enter into the Transaction versus any alternative strategy or transaction; (ii) does not address any transaction related to the Transaction; (iii) is not a recommendation as to how the Board or any stockholder should vote or act with respect to any matters relating to the Transaction, or whether to proceed with the Transaction or any related transaction, and (iv) does not indicate that the consideration received is the best possibly attainable under any circumstances. Instead, the Opinion merely states whether the Consideration to be received by the Company pursuant to the Purchase Agreement is within a range suggested by certain financial analyses.  The decision as to whether to proceed with the Transaction or any related transaction may depend on an assessment of factors unrelated to the financial analysis on which the Opinion is based.

In connection with the Opinion, Duff & Phelps made such reviews, analyses and inquiries as it deemed necessary and appropriate under the circumstances.  Duff & Phelps also took into account its assessment of general economic, market and financial conditions, as well as its experience in securities and business valuation, in general, and with respect to similar transactions, in particular.  Duff & Phelps’ procedures, investigations, and financial analysis with respect to the preparation of the Opinion included, but were not limited to, the items summarized below:

·                   Reviewed the following documents:

·                   The Company’s annual reports and audited financial statements on Form 10-K filed with the SEC for the years ended March 31, 2013 through March 31, 2016;

·                   Other internal documents relating to the history, operations, and probable future outlook of the Company as of such time, including financial projections for the Company (the “Management Projections”), provided by management of the Company (“Company Management”);

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·                   Documents related to the Transaction, including a draft, dated as of June 20, 2016, of the Purchase Agreement; and

·                   A letter dated June 28, 2016 from Company Management which made certain representations as to historical financial statements, the Management Projections and the underlying assumptions;

·                   Discussed the information referred to above and the background and other elements of the Transaction with Company Management;

·                   Reviewed the historical trading price and trading volume of the Company’s common stock;

·                   Performed certain valuation and comparative analyses using generally accepted valuation and analytical techniques, including a discounted cash flow analysis, an analysis of selected public companies that Duff & Phelps deemed relevant, and an analysis of selected transactions that Duff & Phelps deemed relevant, in each case as described in more detail below; and

·                   Conducted such other analyses and considered such other factors as Duff & Phelps deemed appropriate.

In performing its analyses and rendering the Opinion with respect to the Transaction, Duff & Phelps, with the Company’s consent:

·                   Relied upon the accuracy, completeness, and fair presentation of all information, data, advice, opinions and representations obtained from public sources or provided to it from private sources, including Company Management, and did not independently verify such information;

·                   Relied upon the fact that the Board and the Company were advised by counsel as to all legal matters with respect to the Transaction, including whether all procedures required by law to be taken in connection with the Transaction had been duly, validly and timely taken;

·                   Assumed that any estimates, evaluations, forecasts and projections furnished to Duff & Phelps were reasonably prepared and based upon the best available information at such time and good faith judgment of the person furnishing the same, and Duff & Phelps expressed no opinion with respect to such projections or the underlying assumptions;

·                   Assumed that information supplied and representations made by Company Management on or prior to the delivery of the Opinion were substantially accurate regarding the Company and the Transaction;

·                   Assumed that the representations and warranties made in the Purchase Agreement were substantially accurate;

·                   Assumed that the final versions of all documents reviewed by Duff & Phelps in draft form conformed in all material respects to the drafts reviewed;

·                   Assumed that there was no material change in the assets, liabilities, financial condition, results of operations, business, or prospects of the Company since the date of the most recent financial statements and other information made available to Duff & Phelps at or prior to the delivery of the Opinion, and that there was no information or facts that would have made the information reviewed by Duff & Phelps incomplete or misleading as of such time;

·                   Assumed that all of the conditions required to implement the Transaction would be satisfied and that the Transaction would be completed in accordance with the Purchase Agreement without any amendments thereto or any waivers of any terms or conditions thereof; and

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·                   Assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction would be obtained without any adverse effect on the Company or the contemplated benefits expected to be derived in the Transaction.

To the extent that any of the foregoing assumptions or any facts on which the Opinion was based prove to be untrue in any material respect, the Opinion cannot and should not be relied upon.  Furthermore, in Duff & Phelps’ analysis and in connection with the preparation of the Opinion, Duff & Phelps made numerous assumptions with respect to industry performance, general business, market and economic conditions and other matters, many of which are beyond the control of any party involved in the Transaction.

Although developments following the date the Opinion was delivered may affect the Opinion, Duff & Phelps assumes no obligation to update, revise or reaffirm the Opinion.  The Opinion was necessarily based upon market, economic financial and other conditions as they existed and could be evaluated on the date of the Opinion. Developments subsequent to June 28, 2016 may affect the conclusion expressed in the Opinion.  Duff & Phelps disclaims any undertaking or obligation to advise any person of any change in any fact or matter affecting the Opinion arising or brought to the attention of Duff & Phelps after the date of the Opinion.

Duff & Phelps did not evaluate the Company’s solvency or conduct an independent appraisal or physical inspection of any specific assets or liabilities (contingent or otherwise).  Duff & Phelps was not requested to, and did not, (i) initiate any discussions with, or solicit any indications of interest from, third parties with respect to the Transaction, the assets, businesses or operations of the Company, or any alternatives to the Transaction, (ii) negotiate the terms of the Transaction, and therefore, Duff & Phelps assumed that such terms were the most beneficial terms, from the Company’s perspective, that could, under the circumstances, be negotiated among the parties to the Purchase Agreement and the Transaction, or (iii) advise the Board of Directors or any other party with respect to alternatives to the Transaction.

Duff & Phelps did not express any opinion as to the market price or value of the Company’s common stock (or anything else) after the announcement or the consummation of the Transaction.  The Opinion should not be construed as a valuation opinion, credit rating, solvency opinion, an analysis of the Company’s credit worthiness, as tax advice, or as accounting advice.  Duff & Phelps did not make, and assumed no responsibility to make, any representation, or render any opinion, as to any legal matter.  The issuance of the Opinion was approved by an authorized fairness opinion committee of Duff & Phelps.

In rendering the Opinion, Duff & Phelps did not express any opinion with respect to the amount or nature of any compensation to any of the Company’s officers, directors, or employees, or any class of such persons, relative to the Consideration to be received by the Company pursuant to the Purchase Agreement, or with respect to the fairness of any such compensation.

Summary of Financial Analyses by Duff & Phelps

Set forth below is a summary of the material analyses performed by Duff & Phelps in connection with providing the Opinion to the Board.  This summary is qualified in its entirety by reference to the full text of the Opinion, attached hereto as Annex B .  While this summary describes the analyses and factors that Duff & Phelps deemed material in its presentation to the Board, it is not a comprehensive description of all analyses and factors considered by Duff & Phelps.  The preparation of a fairness opinion is a complex process that involves various determinations as to appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances.  Therefore, neither the Opinion nor Duff & Phelps’ underlying analysis is susceptible to partial analysis or summary description.  In arriving at its opinion, Duff & Phelps did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor.  Accordingly, Duff & Phelps’ analyses must be considered as a whole and selecting portions of its analyses and of the factors considered by it in rendering the Opinion, without considering all analyses and factors, could create a misleading or incomplete view of the evaluation process underlying the Opinion.  The conclusion reached by Duff & Phelps was based on all analyses and factors taken as a whole, and also on the application of Duff & Phelps’ own experience and judgment.

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The financial analyses summarized below include information presented in tabular format.  In order for Duff & Phelps’ financial analyses to be fully understood, the tables must be read together with the text of each summary.  The tables alone do not constitute a complete description of the financial analyses undertaken by Duff and Phelps.  Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Duff & Phelps’ financial analyses.

Discounted Cash Flow Analysis

Duff & Phelps performed a sum-of-the-parts analysis for the Company by utilizing a discounted cash flow analysis of the projected unlevered free cash flows of each of the Company’s China operations (the “China Business”) and North America operations (the “North America Business”) for the fiscal years ending March 31, 2017 through March 31, 2026.  Duff & Phelps defines “free cash flow” as the cash generated by the Company that is available either to reinvest or to distribute to security holders.  The discounted cash flow analysis was used to determine the net present value of projected unlevered free cash flows utilizing an appropriate cost of capital for the discount rate, which reflects the relative risk associated with these cash flows as well as the rates of return that security holders could expect to realize on alternative investment opportunities with similar risk profiles to the Company.  Company Management provided Duff & Phelps financial projections for the fiscal years ending March 31, 2017 through March 31, 2026 for the Company’s China Business and North America Business.

Duff & Phelps used discount rates based on a three-stage approach for the Company’s China Business reflecting Duff & Phelps’ estimate of the China Business’s cost of capital, to discount the projected unlevered free cash flows and terminal value.  The three stages include the following:

·                   High-Growth Stage : Due to favorable industry dynamics, including numerous government initiatives to grow the electric vehicle market in China, the Company has the potential to generate significant free cash flow growth from the fiscal years ending March 31, 2017 through March 31, 2021. However, there is a high level of risk associated with these cash flows due to a lack of experience operating in the country, as well as obstacles in navigating through the country’s regulatory hurdles. Based on these factors, a discount rate range commensurate with an early stage venture capital investment of 37.5% to 42.5% was used for this period;

·                   Stable-Growth Stage : Free cash flow growth is expected to gradually moderate for the fiscal years ending March 31, 2022 through March 31, 2026 as the Company establishes a track record and market share in the country, decreasing the riskiness of the cash flows. As a result, a discount rate range commensurate with a later stage venture capital investment of 22.5% to 27.5% was used for this period; and

·                   Normalized-Growth Stage : As the terminal period cash flows represent a normalized level of expected operations going forward into perpetuity, the terminal value for the China Business was estimated utilizing a discount rate range commensurate with its weighted average cost of capital of 16.0% to 18.0%.

Duff & Phelps calculated the China Business’s projected unlevered free cash flows by taking its earnings before interest and taxes (“EBIT”), subtracting taxes, adding back depreciation, subtracting capital expenditures, the change in working capital and withholding tax.  Duff & Phelps calculated the China Business’s terminal value in 2026 using a perpetuity growth formula assuming a 3.0% terminal growth rate and the normalized-growth stage discount rate.  Duff & Phelps believed at the time it gave the Opinion that this range of discount rates is consistent with the rate of return that security holders could expect to realize on alternative investment opportunities with similar risk profiles to the China Business.

Based on these assumptions, Duff & Phelps’ discounted cash flow analysis indicated an estimated enterprise value for the Company’s China Business of $29.0 million to $39.0 million. Future facility capital expenditures planned for 2019 of $8.0 million were then subtracted, yielding an estimated enterprise value of $21.0 million to $31.0 million.

Duff & Phelps used a discount rate of 18.0% to 20.0% for the Company’s North America Business to discount the projected unlevered free cash flows and terminal value.  Duff & Phelps calculated the North America Business’s projected unlevered free cash flows by taking its EBIT, subtracting taxes, adding back depreciation, subtracting

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capital expenditures and the change in working capital.  Duff & Phelps estimated the North America Business’s terminal value in 2026 using a perpetuity growth formula assuming a 3.0% terminal growth rate and a discount rate, based on the North America Business’s weighted average cost of capital of 18.0% to 20.0%.  Duff & Phelps believed at the time it gave the Opinion that this discount rate is consistent with the rate of return that security holders could expect to realize on alternative investment opportunities with similar risk profiles to the North America Business.

Based on these assumptions, Duff & Phelps’ discounted cash flow analysis indicated an estimated enterprise value for the Company’s North America Business of negative $1.0 million to positive $2.5 million.

Selected Public Companies Reviewed

Duff & Phelps compared certain financial performance metrics of the Company’s China Business and North America Business to corresponding data and ratios from publicly traded companies in the electric vehicle component manufacturing and Tier 1 automotive supplier industries that Duff & Phelps deemed relevant to its analysis. The six companies reviewed in the electric vehicle component manufacturing industry were:

·                   China BAK Battery, Inc.

·                   Kandi Technologies Group, Inc.

·                   Power Solutions International, Inc.

·                   Tenneco Inc.

·                   Westport Fuel Systems Inc.

·                   Workhorse Group Inc.

Duff & Phelps also reviewed the following six companies in the Tier 1 automotive supplier industry due to similarities to the Company’s China Business and North America Business in terms of business model:

·                   Allison Transmission Holdings, Inc.

·                   BorgWarner Inc.

·                   Cummins Inc.

·                   Delphi Automotive PLC

·                   Federal-Mogul Holdings Corporation

·                   Metaldyne Performance Group Inc.

Although none of these selected public companies is directly comparable to the Company’s China Business and North America Business, Duff & Phelps reviewed these companies based on their relative similarity, primarily in terms of business model and primary customers, to that of the Company’s China Business and North America Business.  For purposes of its analysis, Duff & Phelps used certain publicly available historical financial data and consensus equity analyst estimates for the selected public companies.

As the Company’s China and North America Businesses each, at the time the Opinion was delivered, had profits below normalized levels due to expected future growth prospects, Duff & Phelps determined it was not possible to develop a meaningful valuation indication of the Company using selected public companies or precedent M&A transactions.

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The tables below summarize certain observed trading multiples and historical and projected financial performance, on an aggregate basis, of the selected public companies as of June 27, 2016.  The revenue and EBITDA estimates for 2016 and 2017 in the tables below for the selected public companies were derived based on information for the 12-month periods ending closest to the Company’s 2016 and 2017 fiscal years for which information was available.

LTM = Latest twelve months for which financial information was available

Enterprise Value = (Market Capitalization) + (Debt + Preferred Stock + Non-Controlling Interest) - (Cash & Cash Equivalents + Net Non-Operating Assets)

EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization

Source: S&P Capital IQ, SEC Filings, Annual and Interim Reports

Selected M&A Transactions Reviewed

Duff & Phelps reviewed the target companies involved in the six selected merger and acquisition transactions listed in the below table.  The selection of these transactions was based, among other things, on the target company’s industry, the relative size of the transaction compared to the Transaction, and the availability of public information related to the selected transaction.  The selected transactions indicated (i) enterprise value to last twelve months’ EBITDA multiples ranging from 7.3x to 13.3x, with a median of 8.7x and a mean of 9.2x, and (ii) enterprise value to last twelve months’ revenue multiples ranging from 0.16x to 2.50x, with a median of 0.80x and a mean of 1.08x.

(1)          Transaction was announced but had not closed at the time of the analysis

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Summary of Analyses

The combined range of estimated enterprise values for the Company’s China and North America Businesses that Duff & Phelps derived from its discounted cash flow analysis was $20.0 million to $33.5 million. Duff & Phelps’ concluded enterprise value does not include the selected public companies and M&A transaction analyses, as described above.

Based on the concluded enterprise value, Duff & Phelps estimated the range of aggregate common equity value of the Company to be $30.2 million to $42.9 million by adjusting the enterprise value as follows:

·                   Adding cash and equivalents of $7.0 million as of March 31, 2016;

·                   Adding the present value of the tax benefit of net operating losses of approximately $3.4 million to $3.6 million;

·                   Adding the after-tax value of surplus land as provided by Company Management of $0.8 million; and

·                   Subtracting the fair value of options and warrants (which were valued using the Black Scholes option pricing model) of approximately $1.1 million to $2.1 million.

Based on the foregoing analysis, Duff & Phelps estimated the value of each common share, including restricted stock units, on a fully diluted basis, to range from $0.62 to $0.89. Subsequently, given the 66,500,000 shares to be issued for 54% fully diluted ownership of the Company as per the Purchase Agreement, the value of the Purchased Stock was estimated to be $41.5 million to $59.0 million. Duff & Phelps noted that the Consideration to be received by the Company pursuant to the Purchase Agreement was within the range of the per share value indicated by its analyses.

The Opinion and financial analyses were only one of the many factors considered by the Board of Directors in their evaluation of the Transaction and should not be viewed as determinative of the views of the Board of Directors.

Miscellaneous

Duff & Phelps is the premier global valuation and corporate finance advisor with expertise in complex valuation, dispute and legal management consulting, M&A, restructuring, and compliance and regulatory consulting.  Since 2005, Duff & Phelps has rendered over 595 fairness opinions in transactions aggregating more than $175 billion and is regularly engaged in the valuation of businesses and securities in the preparation of fairness opinions in connection with mergers, acquisitions and other strategic transactions.

Fees and Expenses

The aggregate amount of the fees that the Company has agreed to pay Duff & Phelps for its services in connection with the rendering of the Opinion to the Board of Directors, is $275,000 due and payable as follows: $87,500 in cash upon execution of the engagement letter for Duff & Phelps to serve as financial advisor to the Board of Directors in its review of the Transaction; and the remaining $187,500 in cash upon the delivery of Duff & Phelps’ opinion.  No portion of Duff & Phelps’ fee is contingent upon either the conclusion expressed in the Opinion or whether the Transaction is successfully consummated.  Furthermore, Duff & Phelps is entitled to be paid additional fees at Duff & Phelps’ standard hourly rates for any time incurred should Duff & Phelps be called upon to support its findings subsequent to the delivery of the Opinion.  The Company has also agreed to reimburse Duff & Phelps for its out-of-pocket expenses and reasonable fees and expenses of counsel, consultants and advisors retained by Duff & Phelps in connection with the engagement.  The Company has also agreed to indemnify Duff & Phelps for certain liabilities arising out of its engagement.

The terms of the fee arrangements with Duff & Phelps, which the Company believes are customary in transactions of this nature, were negotiated at arm’s length, and the Board of Directors has approved these fee arrangements.

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Other than this engagement, during the two years preceding the date the Opinion was delivered, Duff & Phelps has not had any material relationship with any party to the Purchase Agreement for which compensation has been received or is intended to be received, nor is any such material relationship or related compensation mutually understood to be contemplated.

Required Regulatory Approvals

Closing of the Transaction is subject to clearance by the Committee on Foreign Investment in the United States (CFIUS), pursuant to the Defense Protection Act of 1950, as amended (the “DPA”). The Purchase Agreement provides for the Company and Hybrid Kinetic to file a joint voluntary notice for clearance by CFIUS.  The parties submitted their draft joint voluntary notice to CFIUS on September    , 2016.  Based on comments by CFIUS, on       , 2016, the parties submitted its final joint voluntary notice. On        , 2016, CFIUS accepted the parties’ joint voluntary notice and began its initial 30-day review period.  Following its review, CFIUS may either (i) provide the parties written notice that such review has been concluded and that either the Transaction does not constitute a “covered transaction” under the DPA or that the Transaction creates no unresolved national security concerns, (ii) commence a further investigation after such 30-day review period to determine if the Transaction may constitute a “covered transaction” under the DPA or that there are unresolved national security concerns, or (iii) send a report to the President of the United States requesting the President’s decision. In the joint voluntary notice, the parties have provided evidence to support their position that the Purchase Agreement is not a “covered transaction” within the meaning of the DPA, and thus no further review of potential national security impacts is required under the DPA.

Hybrid Kinetic Shareholder Approval

Each party’s obligation to close the Transaction is subject to the satisfaction or (to the extent permitted by law) waiver of conditions precedent to closing of the Purchase Agreement and the Transaction having been duly approved by holders of at least a majority of the outstanding shares of Hybrid Kinetic in a general meeting to be held by Hybrid Kinetic, which shall be no later than November 25, 2016.

Conduct of Business of UQM if the Transaction is Not Completed

While the Company continues its work to increase long term sales and customer orders, it is still operating at a level that produces net losses and negative cash flow.  The Company’s net loss for the quarter ended June 30, 2016 was $1,954,030.  At June 30, 2016, the Company had cash and cash equivalents of $5,497,556 and working capital of $7,328,236.

The Company expects to fund its operations over the next year from existing cash and cash equivalent balances, the reduction of inventories, as well as the anticipated proceeds upon the successful closing of the Transaction.  If the Transaction does not close, the Company will try to raise funds by issuing equity or debt securities in the future, although there can be no assurance that the Company will be able to secure additional capital if the Transaction does not close.  The Company will also approach other parties with whom it had previously discussed transactions similar to the Transaction with Hybrid Kinetic, but there can be no assurance that the Company will be able to conclude an agreement with such parties on terms as good as that of the Transaction if at all.

THE PURCHASE AGREEMENT

The following discussion sets forth the principal terms of the Purchase Agreement, a copy of which is attached as Annex A to this proxy statement and is incorporated by reference herein. The rights and obligations of the parties are governed by the express terms and conditions of the Purchase Agreement and not by this discussion, which is intended to be summary by nature. This discussion is not complete and is qualified in its entirety by reference to the complete text of the Purchase Agreement. You are encouraged to read the Purchase Agreement carefully in its entirety, as well as this proxy statement and any documents incorporated by reference herein, before making any decisions regarding the Transaction.

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The Transaction

Pursuant to a Stock Issuance and Purchase Agreement dated June 28, 2016, the Company will issue and sell to American Compass, a wholly-owned U.S. subsidiary of Hybrid Kinetic, 66,500,000 newly issued shares of the Company’s common stock for an aggregate purchase price of $47,880,000, which is equal to $0.72 per share, representing approximately fifty-four percent (54%), on a fully diluted basis, of the total outstanding shares of Common Stock of the Company, and priced at a 6.4% premium over the volume weighted average of the closing market price of the Company’s common stock for the 90-day period ended on June 27, 2016, the date before the Purchase Agreement was approved by our Board of Directors and signed by the parties.  The Purchase Agreement does not provide for any adjustment to the purchase price.

Representations and Warranties

The Purchase Agreement contains customary representations and warranties made by the Company to Hybrid Kinetic that are subject to specified exceptions identified in schedules attached to the Purchase Agreement. Certain of these representations and warranties are subject to knowledge qualifications, meaning those representations and warranties are true to the actual knowledge of specified officers of the Company.  Certain of the representations and warranties are also subject to a “materiality” or “material adverse effect” qualification, meaning that they will not be deemed to be untrue or incorrect unless their failure to be true or correct is material or would result in a material adverse effect on the operations or financial position of the Company.

In the Purchase Agreement, the Company made representations and warranties to Hybrid Kinetic regarding, among other things:

·                   the Company’s due organization, valid existence, good standing and authority to carry on its businesses;

·                   the Company’s  capitalization, including the number of shares of common stock and equity-based awards outstanding;

·                   ownership of the Company’s subsidiaries;

·                   the Company’s corporate power and authority to execute and deliver, and perform its obligations under, the Purchase Agreement;

·                   no conflicts with the Company’s organizational documents, applicable laws or contracts, subject to certain exceptions;

·                   the absence, with certain exceptions, of required approvals of governmental authorities to complete the Transaction;

·                   the proper filing of documents by the Company with the SEC and the accuracy of the information contained in those documents and conformity with generally accepted accounting principles of the Company’s financial statements and no undisclosed liabilities;

·                   the conduct of business, in all material respects, in the ordinary course of business since the date of its last financial statements, and the absence of a material adverse effect or certain other changes during such period;

·                   the Company’s intellectual property;

·                   matters relating to the Company’s owned and leased property;

·                   the absence of certain legal proceedings, investigations and governmental orders against the Company;

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·                   compliance with applicable laws and the existence, effectiveness and status of necessary licenses and permits;

·                   certain environmental matters;

·                   certain employee benefits matters, including matters related to employee benefit plans;

·                   compliance with certain employment and labor matters;

·                   certain tax matters;

·                   insurance matters;

·                   compliance with, and enforceability of certain material contracts;

·                   the information to be included in this proxy statement;

·                   matters relating to the fairness opinion from Duff & Phelps, LLC;

·                   the absence of any undisclosed brokerage or finders fees; and

·                   compliance with customs and international trade laws.

The Purchase Agreement also contains customary representations and warranties made by Hybrid Kinetic to UQM that are subject, in some cases, to specified exceptions and qualifications contained in the Purchase Agreement including knowledge qualifications, which means that those representations and warranties would not be deemed untrue, inaccurate or incorrect as a result of matters of which Hybrid Kinetic did not have knowledge. The representations and warranties of Hybrid Kinetic relate to, among other things:

·                   its due organization, valid existence, good standing and authority to carry on its businesses;

·                   its corporate power and authority to execute and deliver, and perform its obligations under, the Purchase Agreement, and the enforceability of the Purchase Agreement;

·                   no conflicts with its organizational documents, applicable laws or contracts, subject to certain exceptions;

·                   the absence, with certain exceptions, of required approvals of governmental authorities to complete the merger;

·                   the availability of sufficient funds to consummate the Transaction contemplated by the Purchase Agreement;

·                   the absence of certain legal proceedings, investigations and governmental orders against it;

·                   that the acquisition of shares of the Company’s common stock is solely for its own account and not with a view to resell or distribute such shares;

·                   the independent investigation of the Company and its business and the absence of reliance by Hybrid Kinetic on any representation, warranty or other statement by any person on behalf of the Company other than the representations and warranties expressly set forth in the Purchase Agreement, and acknowledgement that Hybrid Kinetic has been provided access to all personnel, properties, books and records and other documents as necessary to make its decision to enter into the Transaction; and

·                   the absence of any undisclosed brokerage or finders fees.

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Conduct of Business Pending the Closing

The Company has agreed to restrictions on the operation of our business until the earlier of the closing of the Transaction or the termination of the Purchase Agreement. In general, we have agreed to conduct our business in all material respects in the ordinary course of business and use commercially reasonable efforts to preserve intact our business organization, and to maintain our existing material business relationships with customers, suppliers and other persons with which we have business relations. In addition, we have agreed that, subject to specified exceptions, we will not, without the prior written consent of Hybrid Kinetic:

·                   enter into or amend any employment, consulting, indemnification, severance or termination agreement with any third party or enter into any severance or termination agreements or plan or any union or labor agreement;

·                   establish, adopt, enter into or amend in any material respect any benefit plan except as required by applicable law;

·                   take any action to accelerate any rights or benefits, or make any material determinations not in the ordinary and usual course of business, under any benefit plan;

·                   hire as an employee, consultant or independent contractor any person other than in the ordinary course of business; or

·                   make any change to the 2017 fiscal year budget of the Company.

No Solicitation; Changes in Recommendations

Under the Purchase Agreement , our Board shall not, and shall not authorize its directors, officers, employees and representatives to:

·                   solicit, initiate or knowingly take any action to facilitate or encourage the submission of any takeover proposal by a third party,

·                   conduct or engage in any discussions or negotiations with, disclose any non-public information relating to the Company to, provide access to the business or records of the Company to, or knowingly assist or encourage any effort by, any third party that is seeking to make any takeover proposal; or

·                   enter into any agreement in principle, letter of intent, term sheet, or agreement relating to any takeover proposal by a third party.

Notwithstanding these restrictions, prior to the time that the Company shareholder approval is obtained and so long as the Company is not in violation of the above non-solicitation obligations, the Company’s Board may effect a change of recommendation in response to a superior proposal that was not withdrawn at the time of the change of recommendation or cause the Company to terminate the Purchase Agreement (subject to Hybrid Kinetic’s right to match) for the purpose of entering into a definitive agreement with respect to a superior proposal (subject to paying the required termination payment to Hybrid Kinetic, as described below), in each case, if the Board determines in good faith, after consultation with its financial advisor and outside legal counsel, that the failure to take such action would be inconsistent with the directors’ fiduciary duties under applicable law.  As defined in the Purchase Agreement, a “superior proposal” means an acquisition proposal is reasonably likely to result in a transaction that is more favorable from a financial point of view to shareholders of the Company than the Transaction, taking into account all financial considerations, the identity of the third party making such proposal, the anticipated timing, conditions (including any financing conditions) and prospects for completion of such proposal, other aspects of the proposal deemed relevant by the Company’s Board, and any subsequent revisions to the Purchase Agreement by Hybrid Kinetic in order to match such proposal.

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Conditions to Closing the Transaction

The obligations of each of the Company and American Compass to consummate the Transaction will be subject to the following conditions:

·                   Approvals, by requisite vote, of the Company’s shareholder at this annual meeting of Proposal 1,  Proposal 2 and Proposal 3;

·                   Approval, by requisite vote, of the shareholders of Hybrid Kinetic;

·                   Approvals of and compliance with the requirements of any appropriate governmental or regulatory authorities, including CFIUS, the NYSE MKT and the Hong Kong Stock Exchange;

·                   That there is no pending lawsuit seeking to restrain or prohibit the Transaction, and no governmental order in effect restraining or prohibiting the Transaction.

In addition, the obligations of Hybrid Kinetic to consummate the Transaction will be subject to the following additional conditions:

·                   That the representations and warranties of the Company set forth in the Purchase Agreement are materially true and correct as of the closing date;

·                   That the Company has complied in all material aspects with all covenants in the Purchase Agreement;

·                   Delivery by the Company of stock certificates representing the shares of the Company’s common stock being issued to Hybrid Kinetic;

·                   Appointment of the five directors nominated by Hybrid Kinetic to the Company’s Board;

·                   Adoption by Company’s Board of the amendment to the Company’s bylaws consistent with the amended articles of incorporation (as described below);

·                   Receipt of a legal opinion from Sherman & Howard, L.L.C., counsel to the Company;

·                   Continued listing of the Company’s common stock on the NYSE MKT; and

·                   Delivery by Hybrid Kinetic of customary closing certificates.

Furthermore, the obligations of the Company to consummate the Transaction will be subject to the following additional conditions:

·                   That the representations and warranties of Hybrid Kinetic set forth in the Purchase Agreement are materially true and correct as of the closing date;

·                   That Hybrid Kinetic has complied in all material aspects with all covenants in the Purchase Agreement;

·                   Delivery of the purchase price in cash; and

·                   Delivery by the Company of customary closing certificates.

Either the Company or Hybrid Kinetic may choose to consummate the Transaction even though a condition to that party’s obligation is not satisfied.

Amendment to UQM’s Bylaws

Subject to Company shareholder approval of Proposal 3 in connection with this proxy statement, the Company will amend its bylaws to provide that a vote to approve (i) any future amendment to the Company’s amended articles of incorporation, (ii) any plan or merger or share exchange, (iii) any sale, lease, exchange or other disposition of all or substantially all of the Company’s assets other than in the usual course of business, or (iv) any proposal to dissolve the Company, shall require the approval of a majority of the shares outstanding entitled to vote on such mater.  Currently, the Company’s bylaws require a vote of 66 2/3 % of the shares outstanding to effect such corporate actions.

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In addition, the Company will also amend its bylaws to allow the Company’s shareholders to take actions by written consent as long as such written consent is signed by shareholders holding a majority of the outstanding shares entitled to vote with respect to the subject matter thereof.  Currently, the Company’s bylaws require that shareholder actions by written consent must be unanimous.

The form of the amendment to the Company’s bylaws has been agreed upon by the Company and Hybrid Kinetic and is attached to the Purchase Agreement (Annex A) as an exhibit.

Covenants Following Closing of the Transaction

The Company and Hybrid Kinetic have agreed that following closing of the Transaction, the management of the Company will remain as the management of the Company, subject to such subsequent election or removal as are approved by the Board following the closing.  The headquarters of the Company will remain in Colorado for at least three years following the closing of the Transaction and the Board following the closing shall take such efforts as are necessary to ensure that the Company’s core technology will remain in the United States and its primary research and development efforts will continue to be conducted at its Colorado facility for at least three years.  The Company will continue to support its current customers and seek new customers on a world-wide basis for its products.  The Purchase Agreement contains other usual and customary post-closing covenants.

Deposit and Escrow Agreement

Pursuant to an Escrow Agreement entered into between the Company and Hybrid Kinetic dated June 17, 2016, Hybrid Kinetic deposited $3,000,000 (the “Deposit”) into an escrow account at US Bank in Atlanta.  The Deposit will be applied as a credit toward the purchase price, unless the Purchase Agreement is terminated without the Transaction closing, in which case the Deposit may either be returned to Hybrid Kinetic, paid to the Company, or applied toward the purchase of a an agreed number of shares of the Company’s common stock, as described in the section entitled “Termination of the Purchase Agreement,” below.

Termination of the Purchase Agreement

The Purchase Agreement can be terminated:

(1) by mutual written consent of the Buyer and Company;

(2)          by either party (notwithstanding receipt of the Company shareholder approval):

(a) if the Company shareholder approval has not been received on or prior to 180 days after the date of the Purchase Agreement;

(b) if the Hybrid Kinetic shareholder approval has not been received on or prior  to December 25, 2016 (subject to extensions by mutual agreement, the “End Date”);

(c) if any governmental authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any law or governmental order that is permanent and nonappealable, making illegal, permanently enjoining or otherwise permanently prohibiting the consummation of the Transaction;

(d) if the clearance from CFIUS has not been received prior to the End Date,

(e) if notification is required to be filed pursuant to the HSR Act and the waiting period with respect to such notification has not expired or early termination for such waiting period has not been received by the End Date,

(f) if the closing condition that (i) no suit, action or other proceeding shall be pending which seeks to restrain or prohibit the transaction or (ii) no governmental authority shall have enacted, issued, promulgated, enforced or entered any law or governmental order that is permanent and nonappealable,

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making illegal, permanently enjoining or otherwise permanently prohibiting the consummation of the transaction, is not reasonably capable of being satisfied on or prior to the End Date;

(3)          by Hybrid Kinetic at any time prior to closing:

(a) if the Company (i) has issued an adverse recommendation change in its recommendation in support of the Transaction, as such change is defined in the Purchase Agreement, (ii) has entered into, or publicly announced its intention to enter into, a Company acquisition agreement with a third party purchaser, (iii) has breached or failed to perform in any material respect any of its non solicitation covenants and agreements or failed to call or hold the Company shareholder meeting by the End Date, or if (iv) a tender offer or exchange offer relating to Company common stock shall have been commenced by a person unaffiliated with Buyer and the Company shall not have sent to its shareholders pursuant to Rule 14e-2 under the Securities Act, within ten Business Days, a statement reaffirming the Company’s Board recommendation that shareholders reject such tender offer or exchange offer, or if (v) the Company or the Company Board (or any committee thereof) shall publicly announce its intentions to terminate the Purchase Agreement under this section; or

(b) if has been a breach of any representation, warranty, covenant or agreement on the part of the Company set forth in the Purchase Agreement, and such breach is not cured by the Company within 20 days following receipt of written notice of such breach from Hybrid Kinetic, or if such breach is not reasonably capable of being satisfied or on or prior to the End Date.

(4) by the Company at any time prior to closing:

(a) if prior to the receipt of the Company shareholder approval, the Company Board authorizes the Company, in full compliance with the terms of the Purchase Agreement, to enter into a Company acquisition agreement in respect of a superior proposal; provided that in the event of such termination, the Company substantially concurrently enters into such Company acquisition agreement and the Company must pay the Termination Payment defined below; or

(b) if there shall have been a breach of any representation, warranty, covenant or agreement on the part of Hybrid Kinetic set forth in the Purchase Agreement, and such breach is not cured by Hybrid Kinetic within 20 days following receipt of written notice of such breach from the Company, or if such breach is not reasonably capable of being satisfied or on or prior to the End Date.]

If the Purchase Agreement is terminated without the Transaction closing, then the circumstances under which it was terminated will determine which of three results will occur: (i) the Deposit is retained by the Company, (ii) the Deposit is returned to Hybrid Kinetic, or (iii) in certain limited circumstances, the Deposit is returned to Hybrid Kinetic in addition to the requirement for the Company to pay a termination payment in the amount of $3,000,000 (the “Termination Payment”) to Hybrid Kinetic, each as briefly summarized below:

·                   If the Purchase Agreement is terminated by the Company as a result of uncured breach of any representation, warranty, covenant or agreement on the part of Hybrid Kinetic, and all other closing conditions are satisfied (excluding such conditions which, by their nature, must be satisfied on the closing date) then the Deposit will be retained by the Company.

·                   If the Purchase Agreement is terminated by the Company due to the failure to obtain clearance from CFIUS prior to the End Date, and all other terms relevant to the Purchase Agreement have been satisfied or duly waived, then the Deposit will be retained by the Company in exchange for the issuance of new shares of the Company’s common stock at an agreed exchange price (the “Conversion Shares”, as defined below), and Hybrid Kinetic will receive registration rights with respect to the Conversion Shares pursuant to the Registration Rights Agreement.

·                   If the Purchase Agreement is terminated by mutual written consent of the Company and Hybrid Kinetic at any time prior to the date of the closing, then the parties will, as part of that mutual determination, agree either (i) to

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return the Deposit to Hybrid Kinetic, or (ii) for the Company to retain the Deposit in exchange for the Conversion Shares.

·                   If the Purchase Agreement is terminated by either the Company or Hybrid Kinetic (i) as a result of failure to obtain the approval of the Company’s shareholders by the End Date, (ii) as a result of failure to obtain the approval of Hybrid Kinetic’s shareholders by the End Date, (iii) due to any government order permanently enjoining or prohibiting the Transaction, or (iv) due to any pending lawsuit seeking to restrain or prohibit the Transaction that is not resolved prior to the End Date, then the Deposit plus interest will be returned to Hybrid Kinetic.

·                   If the Purchase Agreement is terminated by the Company in favor of a superior proposal by a third party, or if the Purchase Agreement is terminated by either party because of the failure to receive approval from the Company’s shareholders by the End Date but the Company completes another bona fide takeover transaction within six months of the termination date, then the Deposit will be returned to Hybrid Kinetic and the Company will be contractually required to pay the Termination Payment to Hybrid Kinetic.

·                   If the Purchase Agreement is terminated by Hybrid Kinetic as a result of the Company accepting a third party superior proposal or due to uncured breach of any representation, warranty, covenant or agreement on the part of the Company, and all other pre-closing conditions and obligations on the part of Hybrid Kinetic are satisfied (excluding such conditions which, by their nature, must be satisfied on the closing date) then the Deposit will be returned to Hybrid Kinetic and the Company will be contractually required to pay the Termination Payment to Hybrid Kinetic.

As specified above, in certain circumstances the Deposit will be retained by the Company in exchange for issuance of new shares of common stock of the Company, called “Conversion Shares”.  The number of Conversion Shares of the Company’s common stock to be issued will be equal to the amount of the Deposit divided by the agreed exchange price per share, calculated as the greater of:

(i)                                      US$0.60 per share if the 90 day volume weighted average closing price, as reported on the NYSE MKT (the “VWAP Price”) is equal to or less than US$0.60 per share, and

(ii)                                   the actual VWAP Price per share, if the VWAP Price is greater than US$0.60 per share and less than US$0.72 per share; and

(iii)                                US$0.72 per share if the VWAP Price is equal to or greater than US$0.72,

Accordingly, in the event Conversion Shares are issued, the exchange price will result in the issuance and sale of between 4,166,666 and 5,000,000 Conversion Shares to Hybrid Kinetic, representing between approximately   % and   % of the total outstanding shares of the Company, on a fully diluted basis as of the date of this proxy statement.

Governing Law and Dispute Resolution

The Agreement will be governed by Colorado law, and any legal suit, action or proceeding arising out of the Purchase Agreement will be brought in either federal court or the state court in the city and county of Los Angeles, California.  The Company and Hybrid Kinetic agreed to waive their respective rights to a trial by jury.

Registration Rights Agreement

The Company and Hybrid Kinetic have agreed that within five days of the closing of the Transaction, or in the event that the Transaction does not close but Conversion Shares are issued to Hybrid Kinetic (as described in the section above entitled “Termination of the Purchase Agreement”), then the Company and Hybrid Kinetic will execute a Registration Rights Agreement granting Hybrid Kinetic the right to request that the shares of the Company’s common stock issued to Hybrid Kinetic will be registered under the Securities Act of 1933, as amended. The Registration Rights Agreement also provides for piggyback registration rights in the event that the Company proposes to register any of its equity securities for sale to the public, subject to certain exclusions. The Registration

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Rights Agreement provides for one request for registration per twelve month period of all or a portion of the registrable securities held by Hybrid Kinetic.

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Even though the Amended and Restated Articles of Incorporation will permit action by shareholders by written consent, the Company is still required to hold an annual meeting at least once a year pursuant to the rules of the NYSE MKT.  Following adoption of the Amended and Restated Articles of Incorporation, the Company, however, may use written consent of its majority shareholder in lieu of holding any special meeting.

Other Provisions of the Amended and Restated Articles of Incorporation

The Amended and Restated Articles of Incorporation make other changes to the Company’s current articles of incorporation to reflect current practice by many Colorado corporations and streamline the procedural operation of the Company.  These changes include:  (a) describing the general business purpose of the Company rather than enumerating numerous specific objectives and purposes; (b) removing a list of enumerated powers for which the Board is authorized as such powers are already specified in the CBCA; and (c) elaborating on indemnification and advance expenses provided to directors of the Company as permitted by the CBCA.

Other provisions of the Amended and Restated Articles of Incorporation that have not changed from the current articles of incorporation, include, among other things:  (a) specifying that the Company has perpetual existence; (b) not permitting cumulative voting in the election of directors; (c) providing that the number of directors on the Board may from time to time be increased or decreased as provided by the Company’s bylaws, provided that the number of directors should not be reduced to less than three; and (d) specifying that no shareholder of the Company has the preemptive right to subscribe to any additional shares of stock that may be issued by the Company.

Recommendation by UQM Board

The Company negotiated the provisions of the Amended and Restated Articles of Incorporation as part of its negotiation of the Purchase Agreement.  The Board unanimously approved, and recommends to the shareholders for their approval, the First Amended and Restated Articles of Incorporation because it believes the Transaction to be in the best interest of the Company and its shareholders.  Because the Transaction cannot be achieved without increasing the authorized capital stock of the Company and, pursuant to the Purchase Agreement with Hybrid Kinetic, adoption of the other provisions of the First Amended and Restated Articles of Incorporation, the Board believes its adoption is in the best interest of the shareholders of the Company.  If a shareholder approves the Transaction (Proposal 1), the shareholder also needs to approve adoption of the Amended and Restated Amended and Restated Articles of Incorporation (Proposal 2) and the First Amendment to the Amended and Restated Articles of Incorporation (Proposal 3) for the Transaction to occur.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “ FOR ” ADOPTION OF THE AMENDED AND RESTATED ARTICLES OF INCORPORATION.

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needs to approve adoption of the Amended and Restated Articles of Incorporation (Proposal 2), and the First Amendment to the to the Amended and Restated Articles of Incorporation (Proposal 3).

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “ FOR ” ADOPTION OF THE FIRST AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION.

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Mr. Vanlandingham, our Chairman, has been an independent director of the Company for 13 years.  He brings many years of leadership and management experience as Chairman and Chief Executive Officer of a major technology and manufacturing company to his role on the Board.  With experience in overseeing development of technology and complex equipment with attention to development schedules, production, quality, business development and budgets, he brings valuable insight to the Board as it oversees the Company’s operations and strategy.

Mr. Mitchell is our President and Chief Executive Officer.  Mr. Mitchell has over 25 years of experience in the automotive sector with particular focus in operations and quality, and over 15 years of experience in hybrid electric automotive applications.  Mr. Mitchell brings operational and management experience specific to UQM’s business and is a recognized leader in the electric propulsion industry.

Mr. Roy has been an independent director of the Company for over 16 years.  With 30 years of investment banking experience and ten years’ experience as a principal and co-founder of a private equity business, Mr. Roy brings valuable insight to the Company in finance and accounting, capital markets, business analysis and strategy.  Mr. Roy has the financial background and skills to serve as an “audit committee financial expert.”

Mr. Sellinger has been an independent director of the Company since 2008.  He brings extensive senior management experience with a major manufacturing company to his role on the Board.  From his experience running a high volume manufacturing business with annual sales in excess of $1 billion, he provides valuable insight to the Board on operations, planning and implementation of strategy, risk management and other issues as the Company launches volume production of its products.

Mr. Sztykiel has been an independent director of the Company since 2012.  Mr. Sztykiel was the Chief Executive Officer of a manufacturer of trucks and truck components for 12 years.  In this capacity, Mr. Sztykiel has extensive senior management and marketing experience in the North American truck market. Mr. Sztykiel’s extensive management experience in a manufacturing company servicing the truck market provides valuable insight to the Board on strategy, marketing and manufacturing of the Company’s products.

No family relationship exists between any director, executive officer, significant employee or person nominated or chosen by the Company to become a director or executive officer.  There are no arrangements or understandings between any director and any other person pursuant to which any director was nominated as a director.

During the fiscal year ended March 31, 2016, the Board of Directors held twelve meetings. Each incumbent director attended or participated in more than 80 percent of the meetings of the Board of Directors and Board committees on which he served during the period he was a director.  Participation at meetings was sometimes by telephone, which is authorized under Colorado law.  The Company encourages directors to attend the Annual Meeting each year.  At the last Annual Meeting of Shareholders held September 24, 2015, all members of the Board of Directors attended.  The independent directors serving on the Board of Directors periodically meet as a group without management present.  None of the directors listed above have been involved during the last ten years in any legal proceedings that are material to an evaluation of the ability or integrity of that person to serve as a director of the Company.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “ FOR ” EACH OF THE NOMINEES PRESENTED.

Changes to Board if the Transaction Occurs

The Company and Hybrid Kinetic have agreed to increase the size of the Board to nine members following the closing of the Transaction.  The Board following the closing will be composed of five members nominated by Hybrid Kinetic, including a director who will be named chairman, the Company’s existing CEO, and three of the Company’s current four independent directors.  Shareholders should note that while they will elect five directors at this annual meeting, one of these directors will step down immediately following the closing of the Transaction.  Our Board has not yet determined which of Messrs. Vanlandingham, Roy, Sellinger or Sztykiel will step down upon the closing of the Transaction.

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Hybrid Kinetic has indicated that it intends to designate the following five individuals as directors of the Company following the closing of the Transaction:

·                   Jianguo Xu, 49, CEO of Hybrid Kinetic

·                   Chunhua Huang, 52, Vice-Chairman of Hybrid Kinetic

·                   Chuantan Wang, 63, Vice-Chairman of Hybrid Kinetic

·                   Junwen Hou, 56, Vice President of Hybrid Kinetic

·                   Junhua Chen, 44, Vice President of Hybrid Kinetic

Board and Corporate Governance Matters

Selecting Nominees for Director

The Board has delegated to the Governance and Nominating Committee the responsibility for reviewing and recommending to the Board nominees for director.  The Governance and Nominating Committee, in evaluating director candidates, considers factors such as professional background and skills, age and business experience, personal character and values, ethical standards, diversity, existing outside commitments and planned future commitments, among other things.  However, the Governance and Nominating Committee has not established any specific minimum criteria or qualifications that a nominee must possess.

The Governance and Nominating Committee is responsible for recommending nominees for election at the Annual Meeting and for identifying one or more candidates to fill any vacancies that may occur on the Board.  The Governance and Nominating Committee may use a variety of sources to identify new candidates such as recommendations from independent directors or members of management, search firms, discussions with business associates and other persons who may know of suitable candidates to serve on the Board and shareholder recommendations.  Evaluation of candidates typically includes a review of the candidate’s qualifications by the Governance and Nominating Committee based upon the factors described above, interviews with one or more members of the committee and interviews with one or more members of the Board.  The Governance and Nominating Committee then recommends suitable candidates to the full Board who then approves or rejects the nominee.

The Governance and Nominating Committee will consider director candidates proposed by shareholders using the same evaluation criteria as for candidates recommended from other sources.  Any shareholder interested in submitting a prospective nominee for consideration by the Board of Directors should submit the candidate’s name and qualifications addressed to: Corporate Secretary at 4120 Specialty Place, Longmont, Colorado 80504.

Board Diversity

Our Board is comprised of accomplished professionals who represent diverse and key areas of expertise including, national and international business, operations, marketing, manufacturing, finance and investing, management, entrepreneurship, government and science, research and technology.  While we do not have a formal diversity policy with respect to director nominations, we believe that the diversity of skills, knowledge, opinions and fields of expertise represented on our Board is one of the Board’s core strengths. When identifying and selecting director nominees, the Governance and Nominating Committee considers the impact a nominee would have in terms of increasing the diversity of the Board with respect to professional experience, background, viewpoints, skills and areas of expertise together with considering diversity of race, gender and national origin of potential director candidates.  We believe that the resulting diversity of directors allows the Board to engage in honest and challenging discussions, in service of the best decisions for the Company and its shareholders. The diversity of our directors’ skills allows each director an opportunity to provide specific leadership in his respective areas of expertise.

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Board Leadership Structure

We have a Board leadership structure whereby the positions of Chairman of the Board of Directors and Chief Executive Officer are separate.  We believe this structure provides the Board with independent leadership and oversight of management and allows the Chief Executive Officer to concentrate on the Company’s business operations.

Our Board of Directors is comprised of five directors, four of whom are independent directors.  All of our independent directors are highly accomplished and experienced business leaders in their respective fields, who have demonstrated leadership in significant enterprises and are familiar with Board processes.

We believe the current Board leadership structure facilitates effective communication, oversight and governance of the Company consistent with the best interests of the Company’s shareholders and other stakeholders.

Board Risk Oversight

Our Company faces a number of risks including financial, operational, reputational, credit and liquidity, governance and regulatory.  The Chief Executive Officer and Chief Financial Officer are primarily responsible for identifying, assessing and managing these risks.  The Board of Directors provides additional risk oversight in several ways, including:  (a) discussing internal controls and financial reporting annually through review and approval of the Company’s annual budget, including a review of potential risks that could negatively impact the proposed budget and plan; (b) performing regular reviews with management regarding the Company’s liquidity and capital requirements; and (c) engaging in periodic discussions regarding operational, asset protection and security, regulatory and other risks with our Chief Executive Officer, Chief Financial Officer, and other Company officers, as it deems appropriate.

Communications from Shareholders to the Board of Directors

The Board of Directors recommends that any communications from shareholders be in writing and addressed to the Board in care of the Corporate Secretary, 4120 Specialty Place, Longmont, Colorado 80504.  The name of any specific intended Board members should be noted in the communication.  The Board has instructed the Corporate Secretary to forward such correspondence only to the intended recipients; however, the Board has also authorized the Corporate Secretary, prior to forwarding any correspondence, to review the correspondence, and in his discretion, not to forward certain items if they are deemed frivolous, of inconsequential commercial value or otherwise inappropriate for Board consideration.

Code of Ethics

The Company has adopted a Code of Business Conduct Ethics that applies to all directors, officers, employees, consultants, representatives and agents. The Code of Business Conduct Ethics is available on our website at www.uqm.com “Investors — Corporate Governance.”  If the Company makes any substantive amendments to the Code of Business Conduct Ethics or grants any waiver from a provision of the Code to any executive officer or director, the Company will promptly disclose the nature of the amendment or waiver on its website.

Committees of the Board

Our Board has three standing committees - Audit, Compensation and Benefits, and Governance and Nominating.  Each of the Audit, Compensation and Benefits, and Governance and Nominating committees is comprised entirely of independent directors and is led by a committee chair.  In connection with the Company’s strategic partnership exploration activities that eventually lead to the signing of the investment agreement with Hybrid Kinetic, the Board created a special committee of all four of its independent directors to oversee management’s efforts to identify a strategic partner and approve the terms of any such transaction.  All of our independent directors are encouraged to, and do, actively participate in the development of the Company’s business strategy in collaboration with the Chief Executive Officer and in the general oversight of the Company’s operations and financial affairs.

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Mr. Roy serves as the committee chair of the Audit Committee. In this role, he exercises substantial influence and judgment over the Company’s financial affairs and financial reporting. The Audit Committee has a written charter adopted by the Board of Directors that specifies its duties including assisting the Board of Directors in its general oversight of the Company’s financial reporting, internal controls and audit functions, and its direct responsibility for the appointment, retention, compensation and oversight of the independent auditors.  A copy of the Company’s Audit Committee charter is available on our website at www.uqm.com “Investors — Corporate Governance”.  The Audit Committee consists of three directors, Messrs. Roy, Sellinger and Sztykiel and met five times during Fiscal Year 2016.  All members of the Audit Committee are independent directors as defined in applicable rules of the NYSE MKT and the Securities and Exchange Commission (“SEC”).  The Board has determined that Mr. Roy meets the qualifications of an “audit committee financial expert” in accordance with SEC rules.  See also “Report of the Audit Committee” below.

Mr. Sztykiel serves as the committee chair of the Governance and Nominating Committee. In this role, he exercises substantial influence and judgment over the Company’s governance policies and the identification and evaluation of candidates for our Board of Directors.  The Governance and Nominating Committee considers such matters as whether the size and composition of the Board is appropriate in the context of the Company’s business operations, monitors and addresses issues related to corporate governance and suggests changes when it deems appropriate and oversees the annual assessment of Board performance.  The Governance and Nominating Committee has a written charter specifying its responsibilities.  See also “Selecting Nominees for Director” above. The Governance and Nominating Committee consists of three directors, Messrs. Sellinger, Sztykiel and Vanlandingham and met eight times during Fiscal Year 2016.  All members of the Governance and Nominating Committee are independent directors as defined in applicable rules of the NYSE MKT and the SEC.

Mr. Sellinger serves as the committee chair of the Compensation and Benefits Committee.  In this role, he exercises substantial influence and judgment over the Company’s compensation practices, particularly as it relates to the structure and competitiveness of the Company’s executive compensation.  The Compensation and Benefits Committee reviews the performance and compensation of the Company’s Chief Executive Officer and administers the 2012 Equity Incentive Plan, Employee Stock Purchase Plan, Non-Employee Director Stock Option Plan and Stock Bonus Plan.  The Compensation and Benefits Committee consists of three directors. Messrs. Roy, Sellinger and Vanlandingham, and met nine times during Fiscal Year 2016.  All members of the Compensation and Benefits Committee are independent directors as defined in applicable rules of the NYSE MKT and the SEC.  The Compensation and Benefits Committee has a written charter specifying its responsibilities which is available on our website at www.uqm.com “Investors — Corporate Governance.”

Changes to Committees of the Board if the Transaction Occurs

Following the Transaction, UQM will be treated as a “controlled company” under the rules of the NYSE MKT because Hybrid Kinetic will own a majority of UQM’s outstanding shares.  As a controlled company, UQM’s Compensation and Benefits Committee and its Governance and Nominating Committee will no longer be required to be composed solely of independent directors.  Under the rules of the NYSE MKT and SEC, UQM’s Audit Committee must continue to be composed solely of independent directors.  Hybrid Kinetic has indicated that following completion of the Transaction, it may propose changes to the composition of the Company’s Compensation and Benefits Committee and/or its Governance and Nominating Committee.

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On January 5, 2016, Joseph R. Mitchell was appointed our President and Chief Executive Officer in conjunction with already being appointed Chief Operating Officer on July 20, 2015.  Mr. Mitchell served as our interim President and Chief Executive Officer from July 20, 2015 until January 5, 2016.  Mr. Mitchell joined the Company on June 1, 2012 and served as Senior Vice President of Operations.  From March 2012 until joining the Company, Mr. Mitchell was Director of Quality, North America, for A123 Systems, Inc. Mr. Mitchell served as Director, Operations and Quality - North American Hybrid Electric Drives for Continental Automotive from January 2008 through March 2012. From January 2007 through January 2008, Mr. Mitchell served as Director of Operations and Hybrid Drive Segment Manager for Siemens VDO. Prior to that, Mr. Mitchell held a series of manufacturing and quality positions at Ballard Power Systems and Ford Motor Company.

David I. Rosenthal joined the Company as Treasurer, Secretary and Chief Financial Officer on May 1, 2013.  From March 2011 until joining the Company, Mr. Rosenthal was a Financial Consultant for start-up and turnaround companies. From February 2010 until February 2011, Mr. Rosenthal was Interim President and Chief Executive Officer of Cyanotech Corporation, a publicly-traded manufacturer of nutritional supplement products.  Mr. Rosenthal served as a director of Cyanotech from August 2000 until September 2011.  From May 2008 until March 2009, Mr. Rosenthal served as Chief Financial Officer for Hickory Farms and from June 2007 until November 2007 served as Chief Financial Officer of Sanz, Inc., both portfolio companies of the private-equity firm Sun Capital Partners.

Adrian P. Schaffer joined the Company on December 1, 2011 as Vice President of Sales and Business Development.  From February 2006 until joining the Company, Mr. Schaffer served as Vice President of Sales for the Industrial, Commercial and Energy Group of Linamar Corporation, a leading supplier to the global vehicle and mobile industrial markets. Mr. Schaffer also spent thirteen years with Motorola Corporation where he held positions in sales, business development and account management in Motorola’s Telematics, Powertrain, Autobody and Heavy Vehicle Electronics Groups, including most recently as Director of Global Marketing for the global automotive group.

Josh M. Ley joined the Company in January 1994 and was appointed Vice President of Engineering on March 4, 2015.  Mr. Ley previously served as Motor Design Engineer and Manager of Motor Design Engineering for the Company.

There are no arrangements or understandings between any executive officer and any other person pursuant to which any executive officer was selected as an executive officer.  None of the executive officers listed above have been involved during the last ten years in any legal proceedings that are material to an evaluation of the ability of that person to serve as an executive officer of the Company.

Section 16(a) Beneficial Ownership Reporting Compliance

Under the securities laws of the United States, the Company’s directors, its executive (and certain other) officers, and any persons holding more than ten percent of the Company’s common stock are required to report their ownership of the Company’s common stock and any changes in that ownership to the Securities and Exchange Commission.  The Company is required to report in this statement any failure to file timely reports with the Securities and Exchange Commission during Fiscal Year 2016.  Based solely on its review of Form 3, Form 4 and Form 5 filings, the Company believes that 10 of the 21 required reports were filed timely during Fiscal Year 2016.

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COMPENSATION DISCUSSION AND ANALYSIS

Compensation Philosophy and Objectives

Our executive compensation program is designed to attract, motivate and retain highly qualified executives, while providing performance-based incentives for the attainment of strategic business objectives, rewarding superior performance and aligning the interests of our executives with those of our shareholders.

Our management compensation program has three primary components:

The minimum base pay component of executive compensation is specified in employment agreements with our executive officers.  Bonus payments are performance-based payments that are payable annually in cash. Long-term equity-based incentive awards consist of shares of the Company’s common stock, stock options to acquire shares of the Company’s common stock or a combination of both.

Bonus payments and long-term incentive grants are determined by the Compensation and Benefits Committee based principally on objective criteria consisting of each executive officer’s achievement of personal and Company-wide goals.  Payments of bonus awards each fiscal year are based on a retrospective review of the prior fiscal year’s performance.  The amount of the cash bonus payment and long-term incentive grant for each executive is determined based on the Committee’s deliberations regarding attainment of individual and Company-wide goals by Company executives.  The Committee’s determination of the degree of attainment of these goals by each executive was subjective and based on the Committee’s deliberations.  The Compensation and Benefits Committee also annually reviews the base pay of our executive offices and may increase (but not decrease) the amount of base pay as specified in the respective employment agreement with each executive.

The Compensation and Benefits Committee is composed of three members of our Board of Directors, each of which is independent as defined in applicable rules of the NYSE MKT and the SEC.  The Compensation and Benefits Committee does not delegate its authority to establish executive compensation to any other persons.  The Compensation and Benefits Committee approved the total compensation (and each of the individual elements of compensation) for Joseph R. Mitchell, President and Chief Executive Officer.  The Committee also approved the compensation of the other named executive officers with input from the Chief Executive Officer.

In Fiscal Year 2015, the Compensation and Benefits Committee engaged Pay Governance LLC to provide consulting services on executive compensation, pay scales and alternative executive compensation plans.  The Compensation and Benefits Committee anticipates that it may engage a compensation consultant at an interval of every three to five years to assist it in evaluating the competitiveness of its executive compensation program.

The Compensation and Benefits Committee has also reviewed compensation data from a peer group of alternative energy companies that it believed to be in competition with the Company in the marketplace for executive talent.  While the Compensation and Benefits Committee does not set benchmark percentile targets for executive compensation, the compensation levels for the three primary elements of executive compensation are generally set to establish pay levels that are competitive with those of the identified peer group of companies.

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The Compensation and Benefits Committee has reviewed all compensation policies and practices for executive officers and employees to determine if there is risk arising from such policies and practices that could reasonably have a material adverse effect on the Company. The Compensation and Benefits Committee reviews all aspects of performance in determining bonus awards and there are no specific threshold targets that increase bonuses.  In addition, the Company’s maximum bonus award in any year is limited to two times the target bonus, and the Company has to date never exceeded a bonus payout of more than 100% of the target.  Further, bonuses awarded may be recouped pursuant to our Clawback Policy.  Therefore, the Committee believes there is a low risk for any material adverse effect on the Company arising from compensation policies and practices.

We have entered into employment agreements with our executive officers that contain retention and severance payment provisions, including change in control severance payments, and provide a modest program of executive perquisites and personal benefits as are further described in the section “Employment Agreements” below.  The purpose of the employment agreements is to provide financial security for the executive, to aid in retention and to encourage loyalty to and long-term employment with the Company.

2015 Say-on-Pay Advisory Vote

At our 2015 Annual Meeting of the Company’s shareholders, over 80% of the Company’s voting shareholders approved, on an advisory basis, the compensation of our named executive officers.  Our Compensation and Benefits Committee considered the results of the advisory vote on executive compensation, and made the changes to our executive compensation program including adoption of a clawback policy.  These changes are described in greater detail below.

Adoption of Compensation Clawback Policy

On July 7, 2015, our Board of Directors adopted the UQM Technologies, Inc. Clawback Policy.  This clawback policy allows us to recoup executive incentive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under the federal securities laws.  The clawback policy applies to all forms of incentive compensation previously granted to executive officers, including stock options, cash bonuses, and restricted stock, that were granted during the three years prior to any accounting restatement.

Elements of Compensation

Base Salary .  Base salaries for our executives are established based on the scope of their responsibilities, taking into account competitive market compensation for similar positions in the peer group of companies, as well as the experience and performance of the individual, our ability to replace the individual and other primarily judgmental factors deemed relevant by the Compensation and Benefits Committee.  Base salaries are reviewed annually by the Compensation and Benefits Committee and the Board of Directors and may be increased, but not decreased without the consent of the executive, by the Board from time to time coincident with our annual review.

During the fiscal year ended March 31, 2016, the Compensation and Benefits Committee increased annual base salary for each executive by approximately 3.3%. Mr. Mitchell received an additional annual base salary increase of 47% because of his promotion to President and Chief Executive Officer on January 5, 2016.  Mr. Ley received an additional annual base salary increase of 36% due to his promotion of Vice President of Engineering. These increases consisted of cost of living and merit based adjustments.

Cash Bonus Compensation . The Compensation and Benefits Committee annually considers the award of performance-based cash bonuses to compensate executives for achieving financial, operational and strategic goals and for individual performance.  The amount of cash bonuses, if any, is established during deliberations by the Compensation and Benefits Committee using its judgment after considering the objective and subjective factors discussed above and the individual’s performance. As a result, bonuses may vary greatly from one year to the next.

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level of target cash bonus payments by the peer group of companies. The target cash bonus levels for each of the Company’s executive officers as a percentage of each officer’s base salary is as follows:

(1)          Mr. Mitchell was appointed President and Chief Executive Officer on January 5, 2016 and served as interim President and Chief Executive Officer from July 20, 2015 until January 5, 2016.

(2)          Mr. Ridenour served as the Company’s President and Chief Executive Officer until July 20, 2015.

Actual cash bonus payments may either exceed or be less than the target level based on the Compensation and Benefit Committee’s judgment as to whether individual and Company-wide goals were met, exceeded or partially-met, subject to a maximum bonus award in any year of two times the target bonus.

For Fiscal Year 2016, cash bonuses paid to executive officers as a percentage of their base salary, were as follows:

(1)          Mr. Mitchell was appointed President and Chief Executive Officer on January 5, 2016 and served as interim President and Chief Executive Officer from July 20, 2015 until January 5, 2016.

(2)          Mr. Ridenour served as the Company’s President and Chief Executive Officer until July 20, 2015.

The principal Company-wide goals for Fiscal Year 2016 used by the Compensation and Benefits Committee for purposes of determining bonus payments included solidifying the Company’s base revenue, maintaining and improving gross margins, securing a long-term supply contract, controlling the rate of cash outflows with cost management and efficiencies, product innovation and product quality.  In reviewing management’s performance at the end of Fiscal Year 2016 against the goals, the Compensation and Benefits Committee noted management’s success in securing a long-term supply agreement and controlling cash outflows, and its less satisfactory performance in solidifying base revenue and adding new growth opportunities.  Based on this performance, the Compensation and Benefits Committee determined that a cash bonus of 57% of the target level be awarded to the executives.

When the Company entered into new employment agreements with its named executive officers in July 2015, it agreed to provide retention bonuses to its named executive officers to incent them to remain employees of the Company while it explored strategic alternatives which eventually led to the execution of the stock issuance and purchase agreement with Hybrid Kinetic Group Limited.  If the executive remains an employee of the Company continuously through June 30, 2017, he will be paid a cash bonus after that date in the amount specified in his respective employment agreement.

Long-Term Incentive Compensation .  The Compensation and Benefits Committee annually considers the award of long-term incentive compensation to compensate executive officers for their efforts in positioning the Company for long-term growth. The Compensation and Benefits Committee considers a number of qualitative factors in setting the long-term incentive compensation for each executive officer, including the specific goals listed above as well as each executive officer’s contribution to a variety of  other Company-wide goals such as new customer and

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market development activities, supply chain optimization and improvement, technology base enhancements, new product development and launch activities, enhanced investor relations and implementation of certain extraordinary transactions, among other things.

Long-term incentive compensation may be paid in the form of Company common stock or in the form of a grant of stock options or any combination of stock and stock options.  The Committee believes that equity-based compensation awards aid in the retention of the executive and serve to align the interests of the executive with those of the Company’s other shareholders. Equity-based compensation awards have a future service requirement (vesting period) of three years.

Qualitative criteria are generally used to establish goals and objectives that the Board believes add value to the Company and enhance its prospects for long-term growth and success.  The Compensation and Benefits Committee has established target levels for long-term incentive compensation for each executive officer based on the level of responsibility for each executive position and the peer group of companies. The target long-term incentive compensation level (as a percentage of each officer’s base salary) for each of the Company’s executive officers is as follows:

(1)          Mr. Mitchell was appointed President and Chief Executive Officer on January 5, 2016 and served as interim President and Chief Executive Officer from July 20, 2015 until January 5, 2016. During 2015, Mr. Mitchell’s target was 55% which was increased to 100% when he became President and Chief Executive Officer on January 5, 2016.

(2)          Mr. Ridenour served as the Company’s President and Chief Executive Officer until July 20, 2015.

The Compensation and Benefits Committee evaluated the performance of the executives against the Company goals and determined that the executives be awarded long-term incentive compensation for Fiscal Year 2015 performance at 40% of the target level.  The fair value of long-term incentive compensation awards granted to executive officers in early Fiscal Year 2016 for their performance against Fiscal Year 2015 goals, as a percentage of their base salary, were as follows:

(1)          Mr. Mitchell was appointed President and Chief Executive Officer on January 5, 2016 and served as interim President and Chief Executive Officer from July 20, 2015 until January 5, 2016.

(2)          Mr. Ridenour served as the Company’s President and Chief Executive Officer until July 20, 2015.

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The Compensation and Benefits Committee reviewed Fiscal Year 2016 performance in July 2016 and determined to award long-term incentive compensation to the executive officers for Fiscal Year 2016 performance at 57% of the target level.  The fair value of long-term incentive compensation awards granted to executive officers in early Fiscal Year 2017 for their performance against Fiscal Year 2016 goals, as a percentage of their base salary, were as follows:

Employment Agreements

Each of our executive officers has an employment agreement with the Company, as described below.  The agreements provide for compensation in the form of annual base salary, which cannot be decreased during the term of the agreement without the consent of the executive, a monthly automobile allowance, the opportunity for cash bonuses, stock awards and stock options and employee benefits available to other Company employees.  The agreements also provide for potential payments upon termination without cause, termination upon a change in control, disability or death.  See “Employment Agreements.”

Tax and Accounting Considerations

All elements of our employee and executive compensation program generate charges to earnings under generally accepted accounting principles in the United States.  Our allocations of the elements of total compensation are generally not influenced by the accounting treatment of each element.  We do, however, consider the tax treatment of compensation elements as one factor in the allocation of each element.

Clawback Policy

On July 28, 2015, our Board of Directors adopted a clawback policy pursuant to which executive compensation will be recouped by the Company from our named executive officers if our financial statements are subsequently restated due to the our material noncompliance with any financial reporting requirement under the securities laws.  The amount to be recovered will be the excess of the executive compensation paid to the named executive officer based on the erroneous data over the executive compensation that would have been paid to the named executive officer had it been based on the restated results, as determined by the Compensation Committee.

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