SCHEDULE 14A INFORMATION
------------------------
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
DECTRON INTERNATIONALE INC.
---------------------------
(Name of Registrant as specified in its charter)
(Name of Person(s) Filing Proxy Statement), if other than Registrant
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[DECTRON LOGO]
NOTICE
OF
ANNUAL MEETING OF SHAREHOLDERS
NOTICE is hereby given that the Annual Meeting of Shareholders (the "Meeting")
of Dectron Internationale Inc. (the "Corporation") will be held at the Fairmont
The Queen Elizabeth, 900 Rene-Levesque Blvd. West, Montreal, Quebec H3B 4A5 in
the Hochelaga Room on June 29, 2005 at 11:00 a.m., Montreal time, for the
following purposes:
i. To receive and consider the consolidated financial statements of the
Corporation for the fiscal year ended January 31, 2005 and the
auditors' report thereon;
ii. To elect directors for the ensuing year;
iii. To appoint auditors and authorize the directors to fix their
remuneration; and
iv. To transact such other business as may be properly brought before the
Meeting.
If you are unable to attend the Meeting in person, please date, sign and return
the enclosed form of proxy. Proxies to be used at the Meeting must be deposited
with Computershare Investor Services Inc., 9th Floor, 100 University Avenue,
Toronto, Ontario M5J 2Y1 or with the Secretary of the Corporation, 4300 Poirier
Blvd., Montreal, Quebec H4R 2C5, no later than Monday, June 27, 2005 at 5:00
p.m.
UNLESS OTHERWISE INDICATED, ALL REFERENCES TO "DOLLARS" AND THE SYMBOL "$" IN
THE ANNEXED MANAGEMENT PROXY CIRCULAR ARE TO UNITED STATES DOLLARS.
DATED at Montreal, Quebec
June 3, 2005
BY ORDER OF THE BOARD OF DIRECTORS
(signed) Ness Lakdawala
Ness Lakdawala
Chairman and Chief Executive Officer
DECTRON INTERNATIONALE INC.
MANAGEMENT PROXY CIRCULAR
SOLICITATION OF PROXIES BY MANAGEMENT
THIS MANAGEMENT PROXY CIRCULAR (THE "CIRCULAR") IS FURNISHED IN CONNECTION WITH
THE SOLICITATION BY THE MANAGEMENT OF DECTRON INTERNATIONALE INC. ("THE
"CORPORATION") OF PROXIES TO BE VOTED AT THE ANNUAL MEETING OF SHAREHOLDERS (THE
"MEETING") OF THE CORPORATION, TO BE HELD AT THE TIME AND FOR THE PURPOSES SET
FORTH IN THE NOTICE OF MEETING AND ALL ADJOURNMENTS THEREOF. It is expected that
the solicitation will be made primarily by mail. However, officers and employees
of the Corporation may also solicit proxies by telephone, telecopier, e-mail or
in person. The total cost of solicitation of proxies will be borne by the
Corporation.
APPOINTMENT AND REVOCATION OF PROXIES
The persons named in the enclosed form of proxy are directors or officers of the
Corporation. EACH SHAREHOLDER HAS THE RIGHT TO APPOINT AS HIS OR HER PROXY A
PERSON, WHO NEED NOT BE A SHAREHOLDER, OTHER THAN THE INDIVIDUALS NAMED IN THE
ACCOMPANYING FORM OF PROXY BY INSERTING SUCH OTHER PERSON'S NAME IN THE BLANK
SPACE PROVIDED IN THE FORM OF PROXY AND SIGNING THE FORM OF PROXY OR BY
COMPLETING AND SIGNING ANOTHER PROPER FORM OF PROXY. To be valid, the duly
completed form of proxy must be deposited with the Secretary of the Corporation,
4300 Poirier Blvd., Montreal, Quebec H4R 2C5, or with Computershare Investor
Services Inc., 9th Floor, 100 University Avenue, Toronto, Ontario M5J 2Y1, no
later than Monday, June 27, 2005 at 5:00 p.m. The instrument appointing a
proxyholder must be executed by the shareholder or by his attorney authorized in
writing or, if the shareholder is a corporate body, by its authorized officer or
officers.
A shareholder who has given a proxy may revoke it, as to any motion on which a
vote has not already been cast pursuant to the authority conferred by it, by an
instrument in writing executed by the shareholder or by his attorney authorized
in writing or, if the shareholder is a company, by an instrument in writing
executed by an officer or attorney thereof duly authorized. The revocation of
proxy, in order to be acted upon, must be deposited at the office of the
Secretary of the Corporation, 4300 Poirier Blvd., Montreal, Quebec H4R 2C5, at
any time up to and including the last business day preceding the Meeting, or any
adjournment thereof at which the proxy is to be used, or with the Chairman of
such Meeting, on the day of the Meeting or any adjournment thereof, or in any
other manner permitted by law.
EXERCISE OF DISCRETION BY PROXIES
SHARES REPRESENTED BY PROPERLY EXECUTED PROXIES IN FAVOUR OF THE PERSONS
DESIGNATED IN THE ENCLOSED FORM OF PROXY, IN THE ABSENCE OF ANY DIRECTION TO THE
CONTRARY, WILL BE VOTED FOR: (I) THE ELECTION OF DIRECTORS; AND (II) THE
APPOINTMENT OF AUDITORS, AS STATED UNDER SUCH HEADINGS IN THE CIRCULAR.
Instructions with respect to voting will be respected by the persons designated
in the enclosed form of proxy. With respect to amendments or variations to
matters identified in the Notice of Meeting and with respect to other matters
which may properly come before the Meeting, such shares will be voted by the
persons so designated in their discretion. At the time of printing the Circular,
management of the Corporation knows of no such amendments, variations or other
matters. All matters will be decided by a majority of the votes cast by the
shareholders entitled to vote thereon.
NON-REGISTERED HOLDERS
Only registered shareholders of the Corporation, or the persons they appoint as
their proxyholders, are permitted to vote at the Meeting. However, in many
cases, shares of the Corporation beneficially owned by non-registered
shareholders ("NON-REGISTERED HOLDERS") are registered either: (i) in the name
of an intermediary (an "INTERMEDIARY") that the Non-Registered Holder deals with
in respect of the common shares (such as banks, trust companies, securities
dealers or brokers and trustees or administrators of self-administered RRSPs,
RRIFs, RESPs and similar plans); or (ii) in the name of a clearing agency of
which the Intermediary is a participant. In accordance with the requirements of
National Instrument 54-101 of the Canadian Securities Administrators, the
Corporation has distributed copies of this Circular to clearing agencies and
Intermediaries for distribution to Non-Registered Holders. Intermediaries are
required to forward this Circular to Non-Registered Holders unless a
Non-Registered Holder has waived the right to receive it. Intermediaries often
use service companies to forward meeting materials to Non-Registered Holders.
Generally, Non-Registered Holders who have not waived the right to receive this
Circular will either:
(a) typically, be given a form of proxy which is not signed by the
Intermediary and which, when properly completed and signed by
the Non-Registered Holder and returned to the Intermediary or
its service company, will constitute voting instructions (often
called a "proxy authorization form") which the Intermediary must
follow. The Non-Registered Holder will generally be given a page
of instructions which contains a removable label containing a
bar-code and other information. In order for the applicable form
of proxy to validly constitute a proxy authorization form, the
Non-Registered Holder must remove the label from the
instructions and affix it to the form of proxy, properly
complete and sign the form of proxy and submit it to the
Intermediary or its service company in accordance with the
instructions of the Intermediary or service company. In some
cases, the Non-Registered Holder may provide such voting
instructions to the Intermediary or its service company through
the internet or by telephone; or
(b) less commonly, be given a form of proxy which has already been
signed by the Intermediary (typically by a facsimile, stamped
signature) which is restricted to the number of shares
beneficially owned by the Non-Registered Holder but which is
otherwise not completed. The Non-Registered Holder who wishes to
submit a proxy should properly complete the form of proxy and
deposit it with the Secretary of the Corporation or
Computershare Investor Services Inc., as described above.
In either case, the purpose of these procedures is to permit Non-Registered
Holders to direct the voting of the common shares they beneficially own.
Should a Non-Registered Holder who receives a voting instruction form wish to
vote at the Meeting in person (or have another person attend and vote on behalf
of the Non-Registered Holder), the Non-Registered Holder should print his or her
own name, or that of such other person, on the voting instruction form and
return it to the Intermediary or its service company. Should a Non-Registered
Holder who receives a proxy form wish to vote at the Meeting in person (or have
another person attend and vote on behalf of the Non-Registered Holder), the
Non-Registered Holder should strike out the names of the persons set out in the
proxy form and insert the name of the Non-Registered Holder or such other person
in the blank space provided and submit it to Computershare Investor Services
Inc. at the address set out above.
IN ALL CASES, NON-REGISTERED HOLDERS SHOULD CAREFULLY FOLLOW THE INSTRUCTIONS OF
THEIR INTERMEDIARY, INCLUDING THOSE REGARDING WHEN, WHERE AND BY WHAT MEANS THE
VOTING INSTRUCTION FORM OR PROXY FORM MUST BE DELIVERED.
A Non-Registered Holder may revoke voting instructions which have been given to
an Intermediary at any time by written notice to the Intermediary.
VOTING SHARES
As at May 3, 2005, there were 3,155,000 common shares of the Corporation issued
and outstanding. Each common share entitles the holder thereof to one vote. The
Corporation has fixed May 3, 2005 as the record date (the "RECORD DATE") for the
purpose of determining shareholders entitled to receive notice of the Meeting.
Pursuant to the Canada Business Corporations Act, the Corporation is required to
prepare, no later than ten days after the Record Date, an alphabetical list of
shareholders entitled to vote as of the Record Date that shows the number of
shares held by each shareholder. A shareholder whose name appears on the list
referred to above is entitled to vote the shares shown opposite his or her name
at the Meeting. The list of shareholders is available for inspection during
usual business hours at the registered office of the Corporation and at the
Meeting.
PRINCIPAL SHAREHOLDERS
As at May 3, 2005, to the best knowledge of the Corporation, the following
persons beneficially owned, directly or indirectly, or exercised control or
direction over, more than 10% of the common shares of the Corporation:
-2-
NAME AND PLACE OF RESIDENCE NUMBER OF SHARES HELD PERCENTAGE OF CLASS
--------------------------- --------------------- -------------------
Ness Lakdawala........................ 1,745,309 (1) 55.2 %
St-Lambert, Quebec
-------------------
(1) Represents: (i) 43,562 common shares owned directly by Mr. Lakdawala; (ii)
127,934 common shares and 11,250 options to purchase common shares owned by Mr.
Lakdawala's spouse, Ms. Roshan Katrak, Vice-President Human Relations of the
Corporation; (iii) 69,684 common shares owned by Roshaness Inc., a company
controlled by Mr. Lakdawala; and (iv) 1,492,879 common shares owned by 3103-7195
Quebec Inc., a company controlled by Mr. Lakdawala's spouse and children.
ELECTION OF DIRECTORS
The Board of Directors is currently composed of seven directors. The persons
named in the enclosed form of proxy intend to vote for the election of the five
nominees whose names are set forth below. Each director elected will hold office
until the next annual meeting of shareholders or until his successor is duly
elected, unless his office is earlier vacated in accordance with the by-laws of
the Corporation. All of the persons named in the table below are currently
members of the Board of Directors.
The following table sets out the name of the persons proposed to be nominated
for election as directors, all other positions and offices with the Corporation
now held by such persons, their principal occupation, the year in which they
first became directors of the Corporation and the number of shares of the
Corporation beneficially owned, directly or indirectly, by each of them or over
which each of them exercises control or direction as at the date indicated
below.
NUMBER OF COMMON SHARES
BENEFICIALLY OWNED,
NAME, MUNICIPALITY OF RESIDENCE FIRST YEAR AS DIRECTLY OR INDIRECTLY,
AND POSITION WITH THE CORPORATION PRINCIPAL OCCUPATION DIRECTOR AS AT MAY 29, 2005
----------------------------------- --------------------------------- -------------- -----------------------
Ness Lakdawala President and Chief Executive 1998 1,745,309
St-Lambert, Quebec Officer of the Corporation
President, Chief Executive
Officer, Chairman and Director
Mauro Parissi, C.A. Chief Financial Officer of the
St-Laurent, Quebec Corporation 1998 23,390
Chief Financial Officer,
Secretary and Director
Dick W. Driggs(1) Corporate Director 2004 -
Eustis, Florida, USA
Director
Gilles Richard(1) Corporate Director 2001 2,250
Brossard, Quebec
Director
Rustom M. Ghadiali(1) Corporate Director 2004 -
Singapore
Director
--------------------------
(1) Member of the Audit Committee.
The Board of Directors does not have an Executive Committee. The information as
to shares beneficially owned or over which the above-named individuals exercise
control or direction is not within the knowledge of the Corporation and has been
furnished by the respective nominees individually.
The following is a biographical description of each nominee for election as
director based on information supplied by them:
-3-
NESS LAKDAWALA has served as the President, Chief Executive Officer and Chairman
of the Corporation since its inception, and has also served as the President and
Chief Executive Officer of Dectron, Inc. since 1994. Prior to joining Dectron,
Inc., Mr. Lakdawala was President of Blanchard Ness Limited, a company which he
founded in 1976. From 1987 to the present, Mr. Lakdawala has served as the
President of ThermoPlus. In January 1996, ThermoPlus filed a proposal under the
provisions of the Bankruptcy Act which gave full payment to secured creditors
who filed a proof of claim. From 1987 to 1988, Mr. Lakdawala was Chairman of the
Heating Refrigeration Air Conditioning Institute of Canada. Mr. Lakdawala has
also served as the Governor of the American Society of Heating, Refrigeration
and Air Conditioning Engineers, Inc. ("ASHRAE"), the organization that sets
ventilation standards in Canada and the United States. Mr. Lakdawala is
currently a member of ASHRAE and the Refrigeration Service Engineers Society.
Ness Lakdawala is the husband of Roshan Katrak and the father of Leena
Lakdawala.
MAURO PARISSI, C.A. has served as the Chief Financial Officer, Secretary and
director of the Corporation since its inception, and has also served as the
Controller of Dectron, Inc. since 1996. From 1995 to 1996, Mr. Parissi was an
auditor with the firm of Mizgala & Cie. From 1990 to 1995, Mr. Parissi was an
auditor with the firm of Hart, David Lloyd, F.C.A., C.I.P. Mr. Parissi is
currently a member of the Canadian Institute of Chartered Accountants and the
Order of Chartered Accountants of Quebec. Mr. Parissi received his graduate
diploma in Public Accountancy from McGill University in 1995.
DICK W. DRIGGS joined the Corporation as director in 2004. Mr. Driggs retired in
2003 as Chairman of the Board of Heat Controller, Inc. and President of Addison
Products Co. where he was in the position from 1996 to 2003. Mr. Driggs
previously held various executive positions with Addison Products, AAF-McQuay
Corporation and Snyder General Corporation. Mr. Driggs is still active as a
member of the Board of Directors for Heat Controller, Inc., Airguide
Manufacturing, LLC and Thermoguard, Triple-E USA. Mr. Driggs is a member of the
following Professional Organizations: ASQC, APICS, IIE and ISA and of the
following Military Professional Organizations: MCA, MCROA, ROA, TROA and MOAA,
MCL, NL, MCMA, USNI, American Legion and VFW. Mr. Driggs retired in 1995 from
USMCR after 41 years of service and held the unique position of being the first
CWO-5 (Chief Warrant Officer) ever appointed in the USMC.
GILLES RICHARD has served as director of the Corporation since 2001. Mr. Richard
is a semi-retired businessman who was previously the President of Le Circuit
Lincoln Mercury, the sixth largest car dealership in Canada. Mr. Richard was
also involved with partners in a distributorship of lift-trucks (Mitsubishi's
M-Lift), two computer companies which created software applications for car
dealerships and most recently the construction of commercial and residential
buildings. Over the years, Mr. Richard was a director or officer of various
organizations such as the Nada (National Automobile Association) and CADA
(Canadian Automobile Association).
RUSTOM M. GHADIALI joined the Corporation as director in 2004. Mr. Ghadiali
retired from International Rectifier S.E. A. PVT Ltd., a leader in Power
Management Technology, after more than thirty-five years in various positions
within the International Rectifier Group. From 2002 to 2004, Mr. Ghadiali was
Vice-President-Director International Rectifier S.E. A. PVT Ltd., Administration
Asian Operations. From 1994 to 2002, he was Vice-President, International
Rectifier Offshore Assembly Operations, South East Asia, India and China. Mr.
Ghadiali is a Chartered Secretary & Administrator.
None of the foregoing nominees for election as director of the Corporation:
(a) is, or within the last ten years has been, a director or
executive officer of any company that, while that person was
acting in that capacity:
(i) was the subject of a cease trade or similar order, or
an order that denied such company access to any
exemption under applicable securities legislation for
a period of more than 30 consecutive days;
(ii) was subject to an event that resulted, after the
director or executive officer ceased to be a director
or executive officer, in such company becoming the
subject of a cease trade or similar order, or an
order that denied such company access to any
exemption under applicable securities legislation for
a period of more than 30 consecutive days; or
(iii) within a year of that person ceasing to act in that
capacity, became bankrupt, made a proposal under any
legislation relating to bankruptcy or insolvency or
was subject to or instituted any proceedings,
arrangement or compromise with creditors or had a
receiver, receiver manager or trustee appointed to
hold its assets; or
-4-
(b) has, within the last ten years, become bankrupt, made a
proposal under any legislation relating to bankruptcy or
insolvency or become subject to or instituted any proceedings,
arrangement or compromise with creditors or had a receiver,
receiver manager or trustee appointed to hold his assets.
COMPENSATION OF DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION
The following table sets out compensation information for the three fiscal years
ended January 31, 2005 of the Chief Executive Officer and Chief Financial
Officer of the Corporation (collectively, the "NAMED EXECUTIVE OFFICERS"). None
of the other executive officers of the Corporation earned a salary and bonus
exceeding CDN$150,000.
SUMMARY COMPENSATION TABLE
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NAME AND PRINCIPAL POSITION ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------------------------------------------
AWARDS PAYOUTS ALL
-------------------------------- OTHER
OTHER ANNUAL NUMBER OF RESTRICTED
SALARY BONUS COMPENSATION OPTIONS STOCK LTIP
YEAR ($) ($) ($) GRANTED AWARDS PAYOUTS
----------------------------------------------------------------------------------------------------------------------------
Ness Lakdawala 2005 154,641 - - - - - -
President, Chief Executive 2004 154,508 - - - - - -
Officer and Chairman of the 2003 102,847 - - - - - -
Board of Directors (1)
----------------------------------------------------------------------------------------------------------------------------
Mauro Parissi 2005 73,477 - - - - - -
Chief Financial Officer 2004 73,788 - - - - - -
2003 70,074 - - - - - -
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EMPLOYMENT AGREEMENT
The Corporation entered into an employment agreement with Mr. Ness Lakdawala,
President and Chief Executive Officer of the Corporation on October 5, 1998. The
employment agreement was for an initial term of two years, renewable for
additional one-year periods. The employment agreement entitles Mr. Lakdawala to
an annual salary of $200,000, adjusted annually for increases in the Consumer
Price Index. In the event that the Corporation is the subject of a takeover or a
change of control, Mr. Lakdawala will be entitled to a bonus equal, on an after
tax basis, to five times of his then current annual base salary. Mr. Lakdawala's
employment agreement contains a non-competition provision, which prevents him
from engaging in a competitive business during his employment and for a period
of one year after termination thereof. Mr. Lakdawala's employment agreement was
extended for an additional two-year period on the same terms and conditions as
set out above in October 2000, October 2002 and October 2004. The Corporation
currently intends to renew the employment agreement with Mr. Lakdawala on
substantially the same terms and conditions as set out above.
COMPENSATION OF DIRECTORS
Outside directors may be paid an attendance fee for meetings of the Board of
Directors or committees of the Board of the Corporation, in an amount that
management anticipates will not exceed $1,000 per meeting. For the fiscal year
ended January 31, 2005, Mr. Dick W. Driggs and Mr. Rustom M. Ghadiali received
an aggregate of $500 and $1,000, respectively, for their attendance at Board and
committee meetings.
2001 STOCK OPTION PLAN
The shareholders of the Corporation adopted on August 9, 2001, the 2001 Stock
Option Plan (the "2001 PLAN") pursuant to which 500,000 common shares are
reserved for issuance of which 108,500 options are currently issued and
outstanding.
The 2001 Plan is administered by the Board of Directors or a committee thereof,
which determines, among other things, those individuals who shall receive
options, the time period during which the options may be partially or fully
exercised, the number of common shares issuable upon the exercise of the options
and the option exercise price.
-5-
The 2001 Plan is effective for a period of ten years, expiring in 2011, or
earlier as provided. Options may be granted to officers, employees, directors,
consultants, advisors and other persons who perform significant services for or
on behalf of the Corporation. The 2001 Plan is designed to enable management to
attract and retain qualified and competent directors, employees, consultants and
independent contractors. Options granted under the 2001 Plan may be exercisable
for up to ten years and have an exercise price determined by the Board subject
to the terms of the 2001 Plan. Options are non-transferable except by the laws
of descent and distribution or a change in control of the Corporation, as
defined in the 2001 Plan, and are exercisable only by the participant during his
or her lifetime. A change in control includes: (i) the sale of substantially all
of the assets of the Corporation and merger or consolidation with another
company; or (ii) a majority of the Board changes other than by election by the
shareholders pursuant to Board solicitation or by vacancies filled by the Board
caused by death or resignation of such persons.
If a participant ceases affiliation with the Corporation by reason of death,
permanent disability or retirement, the option remains exercisable for one year
from such occurrence but not beyond the option's expiration date. Other types of
termination allow the participant three months to exercise, except for
termination for cause, which results in immediate termination of the option.
The exercise price of an option may not be less than the fair market value per
common share on the day immediately preceding the date that the option is
granted in order to receive certain tax benefits under the Income Tax Act
(Canada) (the "ITA"). The ITA requires that the exercise price of all future
options will be at least 85% of the fair market value of the common share on the
day immediately preceding the date of grant of the options. A benefit equal to
the amount by which the fair market value of the shares at the time the employee
acquires them exceeds the total of the amount paid for the shares or the amount
paid for the right to acquire the shares shall be deemed to be received by the
employee in the year the shares are acquired pursuant to paragraph 7(1) of the
ITA. Where the exercise price of the option is equal to the fair market value of
the shares at the time the option is granted, paragraph 110(1)(d) of the ITA
allows a deduction from income equal to one quarter of the benefit as calculated
above. If the exercise price of the option is less than the fair market value at
the time it is granted, no deduction under paragraph 110(1)(d) is permitted.
Options granted to any non-employees, whether directors or consultants or
otherwise will confer a tax benefit in contemplation of the person becoming a
shareholder pursuant to subsection 15(1) of the ITA.
Any unexercised options that expire or that terminate upon an employee's ceasing
to be employed by the Corporation become available again for issuance under the
2001 Plan.
The 2001 Plan may be terminated or amended at any time by the Board of
Directors, except that the number of common shares reserved for issuance upon
the exercise of options granted under the 2001 Plan may not be increased without
the consent of stockholders.
OPTION GRANTS DURING THE MOST RECENTLY COMPLETED FISCAL YEAR
There were no options to purchase common shares of the Corporation granted to
the Named Executive Officers during the fiscal year ended January 31, 2005.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
There were no options to purchase common shares of the Corporation exercised by
any of the Named Executive Officers during the fiscal year ended January 31,
2005. The following table indicates for each of the Named Executive Officers the
total number of unexercised options held as at January 31, 2005 and the value of
such unexercised options at that date:
-6-
------------------------ ---------------- ------------------------ --------------------------- ----------------------------
VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
JANUARY 31, 2005 JANUARY 31, 2005
NAME SHARES VALUE REALIZED EXERCISABLE / EXERCISABLE /
ACQUIRED ON UNEXERCISABLE UNEXERCISABLE
EXERCISE ($) (#) ($)
------------------------ ---------------- ------------------------ --------------------------- ----------------------------
Ness Lakdawala -- -- -- / -- -- / --
------------------------ ---------------- ------------------------ --------------------------- ----------------------------
Mauro Parissi 4,500 2,250 4,500 / 1,500 -- / --
------------------------ ---------------- ------------------------ --------------------------- ----------------------------
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLAN
The following table sets out certain details as at January 31, 2005, the end of
the Corporation's last fiscal year, with respect to the 2001 Plan, the
compensation plan pursuant to which equity securities of the Corporation is
authorized for issuance.
NUMBER OF SHARES
REMAINING AVAILABLE FOR
FUTURE ISSUANCE UNDER
NUMBER OF SHARES TO BE WEIGHTED-AVERAGE THE EQUITY COMPENSATION
ISSUED UPON EXERCISE OF EXERCISE PRICE OF PLANS (EXCLUDING
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED IN
WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN (A))
PLAN CATEGORY (A) (B) (C)
------------------------------------- -- -------------------------- -- ------------------------ -- --------------------------
The 2001 Plan 108,500 $4.20 500,000
Equity compensation plans not Nil Nil Nil
previously approved by shareholders
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
As at May 29, 2005, none of the executive officers, directors, employees or
former executive officers, directors or employees of the Corporation were
indebted to the Corporation or a subsidiary of the Corporation in connection
with a purchase of securities or for any other matter with the exception of Mr.
Mauro Parissi, Chief Financial Officer, and Ms. Leena Lakdawala, Executive
Vice-President. Between March 1999 and January 2005, the Corporation made loans
totaling $159,954 to Mr. Parissi and $253,415 to Ms. Lakdawala. The loans were
used to finance the purchase of the Corporation's common shares and bear
interest cumulatively at an annual interest rate of five percent (5%). As of May
27, 2005, the loan balances to Mr. Parissi and Ms. Lakdawala were $264,400 and
$326,305, respectively. Mr. Parissi and Ms. Lakdawala are in the process of
seeking to refinance such loans with independent outside sources.
-------------------------------------------------------------------------------
AGGREGATE INDEBTEDNESS ($)
-------------------------------------------------------------------------------
PURPOSE TO THE COMPANY OR ITS SUBSIDIARIES TO ANOTHER ENTITY
-------------------------------------------------------------------------------
Share purchases $590,705 --
-------------------------------------------------------------------------------
During the fiscal year ended January 31, 2005, none of the executive officers or
directors of the Corporation, proposed nominees for election as a director of
the Corporation, or any associate of the foregoing was indebted to the
Corporation or any subsidiary of the Corporation with the exception of the
following:
-7-
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS UNDER SECURITIES PURCHASE
PROGRAMS
-----------------------------------------------------------------------------------------------------------------------------
FINANCIALLY
ASSISTED
INVOLVEMENT LARGEST AMOUNT SECURITIES AMOUNT FORGIVEN
OF THE OUTSTANDING DURING PURCHASES DURING DURING FISCAL
NAME AND CORPORATION FISCAL YEAR ENDED AMOUNT OUTSTANDING FISCAL YEAR YEAR ENDED
PRINCIPAL OR A JANUARY 31, 2005 AS AT MAY 27, 2005 ENDED JANUARY SECURITY FOR JANUARY 31,
POSITION SUBSIDIARY ($) ($) 31, 2005 (#) INDEBTEDNESS 2005 ($)
-----------------------------------------------------------------------------------------------------------------------------
Mauro Parissi
Chief Financial Lender $264,400 $264,400 3,000 -- --
Officer
-----------------------------------------------------------------------------------------------------------------------------
Leena Lakdawala
Executive Lender $326,305 $326,305 18,600 -- --
Vice-President
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INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
No executive officer or director of the Corporation, person proposed for
election as a director, or any associate of the foregoing had an interest in any
material transaction effected by the Corporation since February 1, 2004 or in
any proposed material transaction with the exception of the lease by the
Corporation of its Grande Allee manufacturing facilities from Investiness Inc.,
a company controlled by Mr. Ness Lakdawala's spouse, Ms. Roshan Katrak,
Vice-President Human Relations of the Corporation, and their children, at a cost
of $19,942 per month or $239,304 per year. In management's opinion, the lease
was entered into on terms no less favorable than what could be obtained from
unaffiliated third parties.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
The Corporation provides insurance for the benefit of its directors and officers
against liability incurred by them in these capacities, subject to certain
limitations contained in the Canada Business Corporations Act. The current
aggregate policy limit is CDN$5,000,000. The first CDN$75,000 of any claim,
subject to certain conditions, is deductible and payable by the Corporation. The
Corporation paid the premiums, which amounted to CDN$60,600 for insurance
coverage of the period from September 30, 2004 to September 30, 2005.
REPORT ON EXECUTIVE COMPENSATION
Until such time as a compensation committee is created by the Board, the
Corporation's executive compensation policy is reviewed and determined by the
Board of Directors. The compensation policy was designed to reward and retain
the key executive talent necessary to achieve the Corporation's business
objectives and contribute to its success. In order to meet these goals, the
Corporation's compensation policy for its executive officers focuses primarily
on determining appropriate salary levels and providing incentives, as necessary.
To a lesser extent, the Corporation's compensation policy also contemplates
performance-based cash bonuses. The Corporation's compensation principles for
its Chief Executive Officer are identical to those of the Corporation's other
executive officers.
Cash Compensation. In determining its recommendations for adjustments to
officers' base salaries for fiscal year 2006, the Board has focused primarily on
the scope of each officer's responsibilities, each officer's contributions to
the Corporation's success in moving toward its long-term goals during the fiscal
year, the accomplishment of goals set by the officer and approved by the Board
for that year, the Board's assessment of the quality of services rendered by the
officer, comparison with compensation for officers of comparable companies and
an appraisal of our financial position. In certain situations, relating
primarily to the completion of important transactions or developments, the Board
may also pay cash bonuses, the amount of which will be determined based on the
contribution of the officer and the benefit to the Corporation of the
transaction or development.
Equity Compensation. The grant of stock options to executive officers
constitutes an important element of long-term compensation for the executive
officers. The grant of stock options increases management's equity ownership in
the Corporation with the goal of ensuring that the interests of management
remain closely aligned with those of the Corporation's shareholders. The Board
of Directors believes that stock options provide a direct link between executive
compensation and stockholder value. By imposing vesting conditions, stock
options also create an incentive for executive officers to remain with the
Corporation for the long term.
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CHIEF EXECUTIVE OFFICER COMPENSATION
As indicated above, the factors and criteria upon which the compensation of Mr.
Ness Lakdawala, the Corporation's Chief Executive Officer, is based are
identical to the criteria used in evaluating the compensation packages of the
other executive officers of the Corporation. The Chief Executive Officer's
individual contributions to the Corporation include his leadership role in
establishing and retaining a strong management team, developing and implementing
the Corporation's business plans and attracting investment capital to the
Corporation. In addition, compensation levels of chief executive officers at
comparable companies within the Corporation's industry were studied.
OTHER COMPENSATION
Outside directors may be paid an honorarium for attending meetings of the Board
of Directors of the Corporation, in an amount that management anticipates will
not exceed $1,000 per meeting.
PERFORMANCE GRAPH
The Corporation commenced trading on the Toronto Stock Exchange on May 16, 2005
and is therefore unable, at this time, to provide a meaningful graph comparing
the total return of a CDN$100 investment in the Corporation with the cumulative
return on the S&P/TSX Composite Index.
The Corporation has been trading on the NASDAQ Small Cap market since 1998. The
following graph compares the total return on $100 invested in the Corporation's
common stock for the five-year period from January 21, 2000 through January 31,
2005 with a similar investment in the NASDAQ Industrial Average and with the
market value weighted returns of a Peer Group Index consisting of four
industrial products companies of similar size that sell products world-wide. The
cumulative return includes reinvestment of dividends.
[GRAPH]
2000 2001 2002 2003 2004 2005
($) ($) ($) ($) ($) ($)
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Peer Group(1) 100 129 125 110 157 168
Dectron Internationale Inc. 100 110 177 102 109 107
Nasdaq Industrial Average 100 76 63 46 76 79
(1) Peer Group Companies consist of: Lennox International Inc., United
Technologies Corp., York International Corp. and Emerson Electric Co.
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APPOINTMENT OF AUDITORS
Except where authorization to vote with respect to the appointment of auditors
is withheld, the persons named in the accompanying form of proxy intend to vote
in favour of the reappointment of Schwartz Levitsky Feldman LLP, Chartered
Accountants, as auditors of the Corporation for the term expiring at the next
annual meeting of shareholders and to authorize the directors to fix their
remuneration.
Audit Fees
The aggregate fees billed by Schwartz Levitsky Feldman LLP, Chartered
Accountants, for the audit of the Corporation's annual financial statements for
the fiscal year ended January 31, 2005 and the reviews of the financial
statements included in the Corporation's Forms 10-Q for the fiscal year ended
January 31, 2005 were $108,075.
Audit Related Fees
No fees were billed by Schwartz Levitsky Feldman LLP, Chartered Accountants, for
the fiscal years ended January 31, 2005 for services related to the audit or
review of the Corporation's financial statements that are not included under the
caption "Audit Fees".
No fees were billed by Schwartz Levitsky Feldman LLP, Chartered Accountants, for
the fiscal years ended January 31, 2005 for designing, operating, supervising or
implementing any of the Corporation's financial information systems or any
hardware or software systems for our financial information.
Tax Fees
Fees totaling $15,143 were billed by Schwartz Levitsky Feldman LLP, Chartered
Accountants, for tax compliance, tax advice and tax planning in the fiscal year
ended January 31, 2005.
All Other Fees
Fees totaling $5,199 were billed by Schwartz Levitsky Feldman LLP, Chartered
Accountants, for all other services rendered by them during the fiscal years
ended January 31, 2005.
The Audit Committee has considered whether provision of the services described
above under the caption "Financial Information Systems Design and Implementation
Fees and All Other Fees" is compatible with maintaining the independent
accountants' independence and has determined that such services have not
adversely affected the independence of Schwartz Levitsky Feldman LLP, Chartered
Accountants.
A representative of Schwartz Levitsky Feldman LLP, Chartered Accountants, is
expected to be present at the Meeting and will have the opportunity to make a
statement, and will be available to respond to appropriate questions from
shareholders.
OTHER MATTERS
Management of the Corporation knows of no other matter to come before the
Meeting other than those referred to in the Notice of Meeting. However, if any
other matters that are not known to management should properly come before the
Meeting, the accompanying form of proxy confers discretionary authority upon the
person named therein to vote on such matters in accordance with their best
judgment.
CORPORATE GOVERNANCE
In December 1994, the Toronto Stock Exchange Committee on Corporate Governance
in Canada issued a report (the "TSX REPORT") containing a series of guidelines
for effective corporate governance. The guidelines address matters such as the
composition and independence of corporate boards, the functions to be performed
by boards and their committees and the effectiveness and education of board
members. To implement these guidelines, the Toronto Stock Exchange adopted a
requirement stipulating that each listed company must disclose on an annual
basis its approach to corporate governance with reference to the guidelines. The
following are the guidelines established by the Toronto Stock Exchange with
respect to corporate governance and the Corporation's practice as regards each
of the guidelines.
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1. The board of directors of every corporation should explicitly assume
responsibility for the stewardship of the corporation.
Under the Canada Business Corporations Act, the directors are required
to manage the Corporation's business and affairs and in doing so to act
honestly and in good faith with a view to the best interests of the
Corporation. In addition, each director must exercise the care,
diligence and skill that a reasonably prudent person would exercise in
comparable circumstances.
The Board of Directors of the Corporation recognizes that it is
ultimately responsible for ensuring that the business and affairs of
the Corporation are managed properly to protect and enhance shareholder
value, including the financial viability of the business.
There are four scheduled Board of Directors meetings per year.
Additional meetings of the Board of Directors are held as required. In
addition, communications between the directors and management occur
apart from regularly scheduled Board of Directors and committee
meetings.
2. As part of the overall stewardship responsibility, the board of
directors of every corporation should assume responsibility for the
following matters:
(a) adoption of a strategic planning process
The Board of Directors reviews the objectives of the Chief
Executive Officer and provides guidance for the development of
corporate strategy.
(b) identification of the principal risks of the corporation's
business and ensuring the implementation of appropriate
systems to manage these risks
The Board of Directors from time-to-time identifies the
Corporation's principal risks. The Board of Directors will
implement systems to address these risks as necessary.
(c) succession planning, including appointing, training and
monitoring senior management
The Board of Directors reviews and discusses organizational
structure and succession planning matters as required.
(d) communications policy for the corporation
The Corporation considers investor relations to be important.
Every shareholder inquiry receives a prompt response from an
appropriate officer of the Corporation. The Audit Committee
reviews and the Board of Directors approves quarterly and
annual financial statements prior to their distribution to the
shareholders.
(e) integrity of the corporation's internal control and management
information systems
The Board of Directors has, through its oversight and the
appointment of the Audit Committee, put in place an effective
system for monitoring the implementation of corporate
strategies. The Audit Committee is responsible for the
compliance of financial reporting with accounting principles.
3. (a) The board of directors of every corporation should be
constituted with a majority of individuals who qualify as
"unrelated" directors.
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An "unrelated" director is defined in the TSX Report as a
director who is independent of management and is free from any
interest and any business or other relationship which could,
or could reasonably be perceived to, materially interfere with
the director's ability to act with a view to the best
interests of the Corporation, other than interests and
relationships arising from shareholding. The Board of
Directors considers that three out of five nominees for
election as director are unrelated to management.
(b) The board of directors should include a number of directors
who do not have interests in or relationships with either the
corporation or the significant shareholder and which fairly
reflects the investment in the corporation by shareholders
other than the significant shareholder.
A "significant shareholder" is defined in the TSX Report as a
shareholder with the ability to exercise a majority of the
votes for the election of the board of directors. The Board of
Directors considers that Ness Lakdawala is a significant
shareholder of the Corporation.
4. Disclosure for each director whether he or she is related, and how that
conclusion was reached.
The Board of Directors considers that Ness Lakdawala and Mauro Parissi
are related to management in that they are senior officers of the
Corporation. None of the three other nominees for election as directors
is related to management, in that none is employed by, or receives
payment from, the Corporation, other than directors' fees.
5. The board of directors of every corporation should appoint a committee
of directors composed exclusively of outside (i.e. non-management)
directors, a majority of whom are unrelated directors, with the
responsibility for proposing to the full board new nominees to the
board and for assessing directors on an ongoing basis.
The Board of Directors is responsible for assessing the performance of
directors and for seeking potential nominees for Board membership, as
the need arises.
6. Every board of directors should implement a process to be carried out
by the nominating committee or other appropriate committee for
assessing the effectiveness of the board as a whole, its committees and
the contribution of individual directors.
The Corporation has no formal policy for assessing the effectiveness of
the Board of Directors, its committees and individual directors. The
directors from time-to-time comment on the effectiveness of the Board
of Directors operations.
7. Every corporation, as an integral element of the process for appointing
new directors, should provide an orientation and education program for
new recruits to the board.
Where necessary, the Corporation provides an orientation program for
new appointees to the Board of Directors and various committees in the
form of informal meetings with members of senior management and
complemented by presentations on the main areas of the Corporation's
business.
8. Every board of directors should examine its size and, with a view to
determining the impact of the number upon effectiveness, undertake
where appropriate, a program to reduce the number of directors to a
number which facilitates more effective decision-making.
The Board of Directors currently consists of seven directors.
Shareholders will be asked to consider five nominees for director at
the Meeting. The Board of Directors is of the view that a Board of
Directors consisting of five directors is large enough to present a
diversity of views and experience, but also small enough to carry out
its duties efficiently.
9. The board of directors should review the adequacy and form of the
compensation of directors and ensure the compensation realistically
reflects the responsibilities and risk involved in being an effective
director.
The Board of Directors reviews and determines the remuneration of
directors. The Board of Directors considers time commitment,
comparative fees and responsibilities in determining remuneration.
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10. Committees of the board of directors should generally be composed of
outside directors, majorities of whom are unrelated directors, although
some board committees, such as the executive committee, may include one
or more inside directors.
The Board of Directors of the Corporation has established one
committee, the Audit Committee.
All three members of the Audit Committee are outside, unrelated
directors. The members of the Audit Committee are Rustom M. Ghadiali
(Chairman), Dick Driggs and Gilles Richard.
11. Every board of directors should expressly assume responsibility for, or
assign to a committee of directors the general responsibility for,
developing the corporation's approach to governance issues.
The Board of Directors has expressly assumed this responsibility and
has not created a Corporate Governance Committee.
12. The board of directors, together with the CEO, should develop position
descriptions for the board and for the CEO, involving the definition of
the limits to management's responsibilities. In addition, the board
should approve or develop the corporate objectives which the CEO is
responsible for meeting.
There is no specific mandate for the Board of Directors, since the
Board of Directors has plenary power. Any responsibility that is not
delegated to senior management or a Board of Directors committee
remains with the full Board of Directors.
The Chief Executive Officer's objectives constitute a mandate on a
year-to-year basis. These objectives include the general mandate to
maximize shareholder value. The Board of Directors approves the Chief
Executive Officer's objectives for the Corporation on an annual basis.
13. Every board of directors should have in place appropriate structures
and procedures to ensure that the board can function independently of
management. An appropriate structure would be to: (i) appoint a chair
of the board who is not a member of management with responsibility to
ensure the board discharges its responsibilities; or (ii) adopt
alternate means such as assigning this responsibility to a committee of
the board or to a director, sometimes referred to as the "lead
director". Appropriate procedures may involve the board meeting on a
regular basis without management present or may involve expressly
assigning the responsibility for administering the board's relationship
to management to a committee of the board.
Meetings of the Board of Directors are chaired by the Chief Executive
Officer of the Corporation, Mr. Ness Lakdawala, who is not independent
of the Corporation's management. The Board of Directors believes that
setting the agenda and ensuring that the relevant information is made
available to the Board of Directors, a key element for an efficient
corporate governance practice, is best served by a person who has
intimate knowledge of the Corporation and its business.
14. The audit committee of every board of directors should be composed only
of outside directors. The roles and responsibilities of the audit
committee should be specifically defined so as to provide appropriate
guidance to audit committee members as to their duties. The audit
committee should have direct communication channels with the internal
and external auditors to discuss and review specific issues as
appropriate. The audit committee duties should include oversight
responsibility for management reporting on internal control. While it
is management's responsibility to design and implement an effective
system of internal control, it is the responsibility of the audit
committee to ensure that management has done so.
All three members of the Audit Committee are outside directors. The
Audit Committee is expressly mandated to monitor external audit
functions and the preparation of financial statements. The Audit
Committee meets with the Chief Executive Officer of the Corporation and
the outside auditors independently of management to review and inquire
into matters affecting financial reporting, the system of internal
accounting and financial controls and procedures and the audit
procedure and audit plans. The Audit Committee also recommends to the
Board of Directors the auditors to be appointed. In addition, the Audit
Committee reviews and recommends to the Board of Directors for approval
the quarterly and annual financial statements. The Audit Committee also
reviews with management and reports to the Board of Directors, on an
annual basis, on the financial plans and objectives of the Corporation.
The Audit Committee also provides a direct communication channel
between directors, the external auditors, the internal auditors and the
Corporation executives responsible for financial matters.
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15. The board of directors should implement a system which enables an
individual director to engage an outside adviser at the expense of the
corporation in appropriate circumstances. The engagement of the outside
advisor should be subject to the approval of an appropriate committee
of the board.
If necessary, the Board of Directors may authorize individual directors
to engage outside advisers at the Corporation's expense.
ADDITIONAL INFORMATION
The Corporation's financial information is included in the consolidated
financial statements of the Corporation and the notes thereto for the fiscal
year ended January 31, 2005. Copies of the foregoing document and additional
information concerning the Corporation can be found on SEDAR at www.sedar.com
and may also be obtained upon request to the Secretary of the Corporation at its
registered office, 4300 Poirier Blvd., Montreal, Quebec H4R 2C5, Telephone:
(514) 337-3331.
Copies of the Corporation's annual report (Form 10-K) for the year ended January
31, 2005, as filed with the Securities and Exchange Commission (without
exhibits), and any amendments thereto, are available to stockholders free of
charge by writing to the Corporation at its registered office, 4300 Poirier
Blvd., Montreal, Quebec H4R 2C5.
AUTHORIZATION
The contents and the mailing of this Management Proxy Circular have been
approved by the Board of Directors of the Corporation.
DATED at Montreal, Quebec, this 3rd day of June, 2005.
(signed) Ness Lakdawala
Ness Lakdawala
Chairman and Chief Executive Officer