PRE 14A
1
dpre14a.txt
PRELIMINARY PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
CECO ENVIRONMENTAL CORP.
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(Name of Registrant as Specified in Its Charter)
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(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)(1) and 0-11.
(1) Title of each class of securities to which transactions applies:
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(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):
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(5) Total fee paid:
[ ] Fee paid if previously with preliminary materials.
[ ] Check box if any part 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:
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CECO ENVIRONMENTAL CORP.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 11, 2002
To the Stockholders of CECO Environmental Corp.
Notice is hereby given that the annual meeting of the stockholders of CECO
Environmental Corp. ("CECO") will be held at , on November
11, 2002 at 10:00 A.M., eastern standard time, for the following purposes:
1. to elect 6 directors;
2. to approve the issuance of additional stock to certain investors;
3. to ratify the appointment of Deloitte & Touche LLP as the independent
public accountants of CECO Environmental Corp. for fiscal year 2002; and
4. to transact such other business as may properly come before the
meeting or any adjournments thereof.
Stockholders of record at the close of business on October 11, 2002, are
entitled to notice of and to vote at the annual meeting.
Your attention is directed to the accompanying Proxy Statement and proxy.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR
MAILING IN THE UNITED STATES.
By Order of the Board of Directors
Phillip DeZwirek
Chairman of the Board of Directors and
Chief Executive Officer
, 2002
Table of Contents
Page
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NOTICE OF ANNUAL MEETING.................................... Cover
PROXY STATEMENT............................................. 1
ELECTION OF DIRECTORS....................................... 2
APPROVE AND AUTHORIZE ADDITIONAL SHARES TO CERTAIN INVESTORS 16
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS............... 17
ADDITIONAL INFORMATION...................................... 18
CECO ENVIRONMENTAL CORP.
, 2002
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 11, 2002
The enclosed proxy is solicited by the Board of Directors of CECO
Environmental Corp., a Delaware corporation ("CECO"), to be voted at the annual
meeting of stockholders to be held at 10:00 a.m. at on November
11, 2002, or any postponement or adjournment thereof ("Annual Meeting"). The
mailing address of the principal office of CECO is 3120 Forrer Street,
Cincinnati, Ohio, 45209. These proxy solicitation materials and CECO's Annual
Report for the year ended December 31, 2001, including financial statements,
were first mailed to stockholders entitled to notice of and to vote at the
Annual Meeting on or about , 2002.
Who Can Vote
Only stockholders of record at the close of business on October 11, 2002
(the "Record Date") are entitled to notice of and to vote at the Annual
Meeting. As of the Record Date, there were [9,581,983] shares of CECO Common
Stock ("Common Stock") outstanding and entitled to vote at the Annual Meeting,
each such share being entitled to cast one vote.
Revocability of Proxies
A stockholder returning a proxy may revoke it at any time prior to exercise
of the proxy at the Annual Meeting by executing and delivering a later-dated
proxy which is voted at the Annual Meeting, by voting in person at the Annual
Meeting or by delivering written notice to the Secretary of CECO at any time
before the proxy is exercised. A proxy returned by a stockholder which is not
subsequently revoked will be voted in accordance with the instructions
indicated thereon.
Quorum Required
In order for business to be conducted, a quorum must be represented at the
Annual Meeting. A quorum is a majority of the shares entitled to vote at the
Annual Meeting. The presence in person or by proxy of stockholders entitled to
cast a majority of all the votes entitled to be cast at the meeting will
constitute a quorum. Shares represented by a proxy in which authority to vote
for any matter considered is "withheld," a proxy marked "abstain" or a proxy as
to which there is a "broker non-vote" will be considered present at the meeting
for purposes of determining a quorum.
Required Vote to Elect Directors
Directors will be elected by a plurality of the votes cast at the Annual
Meeting, meaning the 6 nominees receiving the most votes will be elected. Only
votes cast for a nominee will be counted. Unless indicated otherwise by your
proxy, the shares will be voted for the 6 nominees named in this proxy
statement. Instructions on the accompanying proxy to withhold authority to vote
for one or more of the nominees will result in those nominees receiving fewer
votes but will not count as a vote against the nominees.
Required Votes to Pass Other Proposals
In order to (i) approve issuance of additional shares to certain investors
and (ii) ratify the selection of Deloitte & Touche LLP as the independent
accountants of CECO, an affirmative vote of a majority of the shares present in
person or by proxy and entitled to vote at the Annual Meeting is required. For
each of these proposals, an abstention will have the same effect as a vote
against the proposal. Broker non-votes will not be voted for or against any of
these proposals and will have no effect on any of those proposals.
Other Information
If no instructions are indicated on a duly executed and returned proxy, the
shares represented by the proxy will be voted FOR the ratification of the 6
nominees for director proposed by the Board of Directors and set forth herein,
FOR the approval of the issuance of additional shares to certain investors, and
FOR the ratification of the appointment of Deloitte & Touche LLP as the
independent public accountants of CECO for fiscal year 2002, and in accordance
with the judgment of the persons named in the proxy as to such other matters as
may properly come before the Annual Meeting.
PROPOSAL I
ELECTION OF DIRECTORS
The names of, and certain information with respect to, the nominees of the
Board of Directors for election as directors, to serve until the year 2003
annual meeting of stockholders and until their successors are elected and
qualify, are set forth below. All nominees are now CECO directors. If, for any
reason, any nominee should become unable to serve as a director, the persons
named in the enclosed proxy may exercise their discretion to vote for any
substitute proposed by the Board of Directors.
The following information is provided with respect to each nominee for
election as a director. The ages of the nominees are as of September 6, 2002.
Richard J. Blum, age 55, became President and a director of CECO on July 1,
2000 and the Chief Executive Officer and President of CECO Group, Inc. ("CECO
Group") on December 10, 1999. Mr. Blum has been a director and the President of
The Kirk & Blum Manufacturing Company ("Kirk & Blum") since February 28, 1975
and the Chairman and a director of kbd/Technic since November 1988. Kirk and
Blum and kbd/Technic were acquired by CECO on December 7, 1999. Mr. Blum is
also a director of The Factory Power Company, a privately held company of which
CECO owns a minority interest and that provides energy to various companies,
including CECO. Mr. Richard Blum is the brother of Mr. David Blum.
Phillip DeZwirek, age 64, became a director, the Chairman of the Board and
the Chief Executive Officer of CECO in August 1979. Mr. DeZwirek also served as
Chief Financial Officer until January 26, 2000. Mr. DeZwirek's principal
occupations during the past five years have been as Chairman of the Board and
Vice President of CECO Filters, Inc. ("Filters"), a Delaware corporation (since
1985); Treasurer and Assistant Secretary of CECO Group (since December 10,
1999); a director of Kirk & Blum and kbd/Technic (since 1999); President of
Can-Med Technology, Inc. d/b/a Green Diamond Oil Corp. ("Can-Med") (since
1990); and Vice Chairman and Chief Executive Officer of API Electronics Group,
Inc. Mr. DeZwirek has also been involved in private investment activities for
the past five years.
Jason Louis DeZwirek, age 32, the son of Phillip DeZwirek, became a director
of CECO in February, 1994. He became Secretary of CECO on February 20, 1998,
following the resignation of Josephine Grivas as Secretary. Mr. DeZwirek from
October 1, 1997 to January 1, 2002 was a member of the Committee that was
established to administer CECO's stock option plan. He also serves as Secretary
of CECO Group, Inc. (since December 10, 1999). Mr. DeZwirek's principal
occupation since October 1999 has been as the President of Kaboose Inc., a
company that owns a children's portal. Mr. DeZwirek is (and has been since
2001) the Chairman of the Board of API Electronics Group, Inc., a publicly
traded company, that is a manufacturer of power semi-conductors primarily for
military use. From 1993 until he commenced employment with Kaboose Inc., Mr.
DeZwirek was President of Digital Fusion Multimedia Corp., a company that
adapted books and movies to the CD Rom medium.
Josephine Grivas, age 62, has been a director of CECO since February, 1991.
She was its Secretary from October 1992, until she resigned as of February 2,
1998. Ms. Grivas has since October 1, 1997, also been a member of the Committee
that was established to administer CECO's stock option plan. She is also one of
the
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initial administrators of the CECO Environmental Corp. 1999 Employee Stock
Purchase Plan. Since February 20, 1998, Ms. Grivas has been a member of the
Audit Committee, which assists the Board of Directors in its general oversight
of CECO's financial reporting process and such other matters that are properly
referred to the Audit Committee by the Board of Directors. Ms. Grivas had been
an administrative assistant for Phillip DeZwirek since 1975. She retired from
this position in February 1998.
Paul Voet, age 56, became a director and a member of the Audit Committee on
August 14, 2002. Mr. Voet is currently a self-employed consultant. From 1991 to
2001 Mr. Voet served as Executive Vice President of Chemed Corporation, which
stock trades on the New York Stock Exchange and which provides homeowners,
businesses, individuals and families with plumbing and drain clearing services,
home healthcare services and residential appliance and air-conditioning repair
services. He also served as a director of Chemed Corporation from 1980 through
2001. Mr. Voet also served as President (from 1983 to 1997) and Director (from
1986 to 1997) of National Sanitary Supply Co., which stock traded on the Nasdaq
and which was a $350,000,000 nationwide distributor of cleaning and maintenance
supplies. He also has since 2000 served as a director of The Drees Company, a
privately held company that is a builder of residential homes.
Donald A. Wright, age 64, became a director of CECO on February 20, 1998.
Mr. Wright has also been a member of the Audit Committee since February 20,
1998. He is also one of the initial administrators of the CECO Environmental
Corp. 1999 Employee Stock Purchase Plan and since January 1, 2002 has been a
member of the Committee established to administer CECO's stock option plan. Mr.
Wright has been a principal of and real estate broker with The Phillips Group
in San Diego, California, a company which is a real estate developer and
apartment building syndicator, since 1992. Since November 1996, Mr. Wright has
also been a real estate broker with Prudential Dunn Realtors in Pacific Beach,
California. From August 1995 until October 1996, he was the principal of and
real estate broker with Barbour Real Estate Sales and Leasing in La Costa,
California.
BOARD OF DIRECTORS AND COMMITTEES
During the fiscal year ended December 31, 2001, the Board of Directors held
no meetings. During and since the end of such period, action has been taken by
unanimous and written consent of the Board of Directors.
The Board has a standing Audit Committee and separate committees established
to administer the CECO Environmental Corp. 1997 Stock Option Plan and the CECO
Environmental Corp. 1999 Employee Stock Purchase Plan.
The members of the Audit Committee are Directors Grivas, Wright, and as of
July 2002, Director Voet. Each member of the Committee is independent as
defined under the National Association of Securities Dealers' ("NASD") listing
standards. The Audit Committee held telephonic meetings on March 30, 2001, May
14, 2001 and November 12, 2001. The Audit Committee did not have any other
meetings during 2001. The Audit Committee held telephonic meetings in 2002 on
February 4/th/, March 27/th/, May 15/th/, and August 9/th/. See the Audit
Committee Report below.
The members of the Committee that administers CECO's stock option plan are
Directors Grivas and Wright. Director Wright replaced Jason DeZwirek as a
member of this Committee on January 1, 2002. This Committee held no meetings
during 2001. Directors Grivas and Wright also administer the CECO Environmental
Corp. 1999 Employee Stock Purchase Plan. This Committee held no meetings during
2001.
The directors of CECO received no consideration for serving in their
capacity as directors of CECO or as members of any committee of the Board
during its last fiscal year, other than Donald Wright, Richard J. Blum and
Jason Louis DeZwirek who received options to purchase 10,000, 25,000, and
25,000 shares of common stock, respectively. Phillip DeZwirek, a director,
receives compensation in his capacity as an executive officer. CECO has no
annuity pension or retirement plans.
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In order to be elected, a nominee must receive a plurality of the votes cast
at the meeting in person or by proxy. THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" APPROVAL OF THE ELECTION OF THE NOMINEES NAMED HEREIN AS DIRECTORS.
REPORT OF THE CECO BOARD OF DIRECTORS AUDIT COMMITTEE
The primary purpose of the Audit Committee is to assist the Board of
Directors in its general oversight of the Company's financial reporting process
and approval of the services provided the Company by its auditors. The Audit
Committee also evaluates transactions where the potential for a conflict of
interest exists. The Audit Committee's purposes are more fully described in its
Charter, which the Board adopted on June 5, 2000.
The Audit Committee has reviewed and discussed the audited financial
statements of CECO for the fiscal year ended December 31, 2001, with the
Company's management and has discussed with Deloitte & Touche LLP the matters
required to be discussed by Statement on Auditing Standards Board Standard No.
61, as amended, "Communication with Audit Committees". In addition, Deloitte &
Touche LLP has provided the Audit Committee with the written disclosures and
the letter required by the Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees", and the Audit Committee has
discussed with Deloitte & Touche LLP their independence.
Based on these reviews and discussions, the Audit Committee recommended to
the Board of Directors that the audited financial statements be included in
CECO's Form 10-K for the fiscal year ended December 31, 2001, for filing with
the Securities and Exchange Commission.
Audit Committee*
Josephine Grivas
Donald A. Wright
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* Members as of August 13, 2002. The Audit Committee, since August 14, 2002,
has consisted of three independent members, Directors Grivas, Voet and
Wright.
EXECUTIVE OFFICERS
The executive officers of CECO are appointed by the Board of Directors of
CECO and serve at the discretion of the Board of Directors. Information
concerning each executive officer's age, position and certain other information
with respect to each executive officer can be found herein under the section
entitled "Election of Directors", except for information with respect to David
D. Blum and Marshall J. Morris (each of whom serves as a CECO officer).
Summarized information for Messrs. Blum and Morris is as follows (ages are as
of July 31, 2002):
David D. Blum, age 47, became the Senior Vice President-Sales and Marketing
of CECO on July 1, 2000. Mr. Blum served as an Assistant Secretary from July 1,
2000 until March 1, 2001. Mr. Blum served as Vice President of Kirk & Blum from
1997 to 2000 and was Vice President-Division Manager Louisville at Kirk & Blum
from 1984 to 1997. Mr. David Blum is the brother of Mr. Richard Blum.
Marshall J. Morris, age 43, became the Chief Financial Officer of CECO on
January 26, 2000, the Vice President-Finance and Administration on July 1,
2000, and an Assistant Secretary on March 1, 2001. Mr. Morris also serves as
Chief Financial Officer (since January 26, 2000) and Secretary (since November
1, 2001) of CECO Group, Inc. From 1996 to 1999 Mr. Morris was Treasurer of
Calgon Carbon Corporation which stock trades on the New York Stock Exchange and
which is a worldwide producer of specialty chemicals and supplier of pollution
control technologies and services with annual sales of approximately $300
million. From 1995 to 1996 he served as a consultant with respect to business
management and strategic planning. From 1989 through 1995 Mr. Morris also
served as the Treasurer of Trico Products Corporation, an international
manufacturer and distributor of original equipment automotive parts with annual
sales of approximately $350 million.
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BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth the name and address of each beneficial owner
of more than five percent (5%) of CECO's common stock known to CECO, the number
of shares of common stock of CECO beneficially owned as of August 6, 2002, and
the percent of the class so owned by each such person.
No. of Shares of % of Total
Name and Address Common Stock Common Shares
of Beneficial Owner Beneficially Owned Outstanding(1)
------------------- ------------------ --------------
Phillip DeZwirek (2,3)......... 4,508,557 38.1%
Chief Executive Officer and
Chairman of the Board
505 University Avenue
Suite 1400
Toronto, Ontario M5G 1X3
Jason Louis DeZwirek (2,4,5)... 3,758,026 39.1%
Secretary
247 Erskine Avenue
Toronto, Ontario M4P 1Z6
Icarus Investment Corp. (2,6).. 2,134,360 22.3%
505 University Avenue
Suite 1400
Toronto, Ontario M5G 1X3
IntroTech Investments, Inc. (4) 1,598,666 16.7%
247 Erskine Avenue
Toronto, Ontario M4P 1Z6
Can-Med Technology, Inc. (6)... 800,000 8.3%
d/b/a Green Diamond Oil Corp.
505 University Avenue,
Suite 1400
Toronto, Ontario M5G 1X3
Crestview Capital Fund L.P. (7) 650,001 6.6%
95 Revere Drive, Suite F
Northbrook, IL 60062
Harvey Sandler (8)............. 511,000 5.3%
17591 Lake Estates Drive
Boca Raton, FL 33496
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(1) Based upon 9,581,983 shares of common stock of CECO outstanding as of
August 6, 2002. For each named person, this percentage includes Common
Stock of which such person has the right to acquire beneficial ownership
either currently or within 60 days of August 8, 2002, including, but not
limited to, upon the exercise of an option; however, such Common Stock
shall not be deemed outstanding for the purpose of computing the percentage
owned by any other person.
(2) Icarus Investment Corp. ("Icarus") is owned 50% by Phillip DeZwirek and 50%
by Jason Louis DeZwirek. Ownership of the shares of common stock of CECO
owned by Icarus Investment Corp. also are attributed to both Messrs.
Phillip DeZwirek and Jason Louis DeZwirek. With respect to the shares owned
by Icarus, Icarus has sole dispositive and voting power and Phillip
DeZwirek and Jason Louis DeZwirek are deemed to have shared voting and
shared dispositive power.
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(3) Includes (i) 750,000 shares of CECO's common stock that Phillip DeZwirek
can purchase on or prior to November 7, 2006 from CECO at a price of $1.75
per share pursuant to warrants granted to Mr. DeZwirek by CECO on November
7, 1996; (ii) 250,000 shares that may be purchased pursuant to warrants
granted January 14, 1998 at a price of $2.75 per share prior to January 14,
2008; (iii) 250,000 shares of CECO's common stock that may be purchased
pursuant to warrants granted September 14, 1998 at a price of $1.626 per
share prior to September 14, 2008; (iv) 500,000 shares that may be
purchased pursuant to warrants granted to Mr. DeZwirek by CECO January 22,
1999, which are exercisable prior to January 22, 2009 at a price of $3.00
per share; and (v) 500,000 shares that may be purchased pursuant to
warrants granted to Mr. DeZwirek by CECO August 14, 2000, which are
exercisable prior to August 14, 2010 at a price of $2.0625 per share.
(4) IntroTech Investments, Inc. ("IntroTech") is owned 100% by Jason Louis
DeZwirek. Ownership of the shares of common stock of CECO owned by
IntroTech also are attributed to Jason Louis DeZwirek. IntroTech and Jason
Louis DeZwirek are each deemed to have sole dispositive and sole voting
power with respect to such shares.
(5) Includes 25,000 shares of CECO's common stock that Jason Louis DeZwirek can
purchase on or prior to October 5, 2011 at a price of $2.01 per share
pursuant to options granted to Mr. DeZwirek on October 5, 2001.
(6) 50.1% of the shares of Green Diamond are owned by Icarus. Ownership of the
shares of common stock of Green Diamond also are attributed to Icarus.
Icarus has voting and dispositive power, with respect to such shares which
is shared with the other shareholders of Green Diamond.
(7) Includes 216,667 shares of common stock that Crestview Capital Fund L.P.
can purchase on or prior to December 31, 2006 from CECO at a price of $3.60
per share pursuant to warrants granted December 31, 2001.
(8) Includes 20,000 shares held in the name of Phyllis Sandler, Mr. Sandler's
spouse.
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SECURITY OWNERSHIP OF MANAGEMENT
As of August 6, 2002, the present directors and executive officers of CECO
are the beneficial owners of the numbers of shares of common stock of CECO set
forth below:
% Total
Number of Shares Company
of Common Stock Common
Name and Address Beneficially Shares
of Beneficial Owner Owned Outstanding(1)
------------------- ---------------- --------------
Phillip DeZwirek (2)......................... 4,508,557 38.1%
505 University Avenue
Suite 1400
Toronto, Ontario M5G 1P7
Jason Louis DeZwirek (3)..................... 3,758,026 39.1%
247 Erskine Avenue
Toronto, Ontario M4P 1Z6
Richard J. Blum (4).......................... 275,241 2.8%
3120 Forrer Street
Cincinnati, Ohio 45209
David D. Blum (5)............................ 184,290 1.9%
3120 Forrer Street
Cincinnati, Ohio 45209
Donald A. Wright (6)......................... 50,000 .5%
4538 Cass Street
San Diego, California 92109
Marshall J. Morris (7)....................... 30,600 .3%
3120 Forrer Street
Cincinnati, Ohio 45209
Josephine Grivas............................. -- --
505 University Avenue
Suite 1400
Toronto, Ontario M5G 1P7
Paul Voet.................................... 2,500 .03%
8180 Graves Road
Cincinnati, Ohio 45243
Officers and Directors as a group (8 persons) 6,674,854 54.2%
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(1) See Note 1 to the foregoing table.
(2) See Notes 2 and 3 to the foregoing table.
(3) See Notes 2, 4 and 5 to the foregoing table.
(4) Includes 224,000 shares of CECO's common stock that Mr. Richard Blum has
the right to purchase for $2.9375 per share pursuant to a warrant granted
to Mr. Richard Blum on December 7, 1999, in connection with the acquisition
of Kirk & Blum and kbd/Technic to purchase 448,000 shares of common stock
in CECO. This warrant became exercisable on December 7, 2000, with respect
to 112,000 of such shares, on December 7, 2001, with respect to another
112,000 shares and becomes exercisable with respect to an additional 25% of
such shares on each of the next two anniversaries of such date. Also
includes 25,000 shares that may be purchased pursuant to Options granted to
Mr. Blum October 5, 2001 at a price of $2.01 per share.
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(5) Includes 167,500 shares of CECO's common stock that Mr. David Blum has the
right to purchase for $2.9375 per share pursuant to a warrant granted to
Mr. David Blum on December 7, 1999, in connection with the acquisition of
Kirk & Blum and kbd/Technic to purchase 335,000 shares of stock in CECO.
This warrant became exercisable on December 7, 2000, with respect to 83,750
of such shares, on December 7, 2001 with respect to another 83,750 shares,
and is exercisable with respect to an additional 25% of such shares on each
of the next two anniversaries of such date.
(6) Includes (i) 10,000 shares of the CECO common stock that may be purchased
pursuant to Options granted June 30, 1998, at a price of $2.75 per share
prior to June 30, 2008; (ii) 5,000 shares of CECO's common stock that may
be purchased pursuant to Options granted September 18, 2000 at a price of
$2.0625 per share prior to September 18, 2010; and (iii) 10,000 shares that
may be purchased pursuant to Options granted October 5, 2001 at a price of
$2.01 per share.
(7) Includes 400 shares held in the name of Cynthia S. Morris, the spouse of
Mr. Morris. Also includes 20,000 shares of common stock of CECO that may be
purchased pursuant to options granted to Mr. Morris to purchase 50,000
shares of CECO's common stock on January 20, 2000. This option became
exercisable on January 20, 2001, with respect to 10,000 of such shares, on
January 20, 2002 with respect to another 10,000 shares, and becomes
exercisable with respect to an additional 20% of the 50,000 shares on each
of the next three anniversaries of such date. The exercise price of the
options is $2.50 per share.
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CHANGES IN CONTROL
CECO is not aware of any current arrangement(s) that may result in a change
in control of CECO. However, we completed a sale of shares of common stock and
warrants to a group of accredited investors (the "Investors") led by Crestview
Capital Fund, L.P., a Chicago-based private investment fund. Under the
Subscription Agreement ("Subscription Agreement") we entered into with the
Investors, we are required to issue to such Investors additional shares for
every $100,000 our EBITDA for fiscal year 2002 is below $7,800,000 for a
maximum of 826,802 additional shares. The Investors, therefore, could
potentially own up to 19% of CECO common stock if our EBITDA is significantly
below $7,800,000, assuming the exercise of their warrants. In such event, such
group could significantly influence our business.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
CECO is not aware of any persons who beneficially own or owned more than 10
percent of the outstanding common stock of CECO or any officer, director or
other person subject to the requirements of Section 16 of the Securities
Exchange Act of 1934 who, during the fiscal year 2001, failed to file, or
failed to file on a timely basis, any reports or forms required to be filed
under said Section 16 or the rules and regulations promulgated thereunder.
CERTAIN TRANSACTIONS
Since January 1, 2001, the following transactions have occurred in which
persons who, at the time of such transactions, were directors, officers or
owners of more than 5% of CECO's common stock, had a direct or indirect
material interest.
Andrew Halapin, former President of Busch, is the beneficial owner of the
building in which Busch leased its principal office. The lease was a triple net
lease, with annual rent in the amount of approximately $88,000 for 2001. The
lease terminated July 31, 2002 and we did not renew the lease.
As a condition to obtaining the Bank Facility, CECO placed $5 million of
subordinated debt. Green Diamond provided $4,000,000 of the subordinated debt.
The promissory notes which were issued to evidence the subordinated debt
provide that they accrue interest at the rate of 12% per annum, payable
semi-annually. Actual payment is subject to the subordination agreement with
the banks providing the Bank Facility. As of August 15, 2002, the notes
evidencing the $5,000,000 of subordinated debt, including the Green Diamond
note, were amended to be convertible notes. The principal, but not the
interest, of each note is convertible, at the election of the holder, into the
Common Stock of CECO at a conversion price of $2.00 per share. Five million
shares of Common Stock have been reserved for issuance upon conversion of the
notes. The Audit Committee, in addition to the Board of Directors, approved the
transaction.
In consideration for the subordinated lenders making CECO the subordinated
loans, CECO issued to the subordinated lenders warrants to purchase up to
1,000,000 shares of CECO's common stock for $2.25 per share, the closing price
of CECO's common stock on the day that the subordinated lenders entered into an
agreement with CECO to provide the subordinated loans. Green Diamond was issued
800,000 of such warrants. Green Diamond exercised the warrants on December 21,
2001 for all 800,000 shares.
During the fiscal year ended December 31, 2001, CECO reimbursed Can-Med
Technology d/b/a Green Diamond Oil Corp. $5,000 per month for use of the space
and other office expenses of CECO's Toronto office. Green Diamond is owned
50.1% by Icarus Investment Corp., which is controlled by Phillip DeZwirek, the
Chief Executive Officer and Chairman of the Board of CECO, and Jason Louis
DeZwirek, the Secretary of CECO.
9
During the fiscal year ended December 31, 2001, CECO advanced $336,999.98 to
Green Diamond (see description above). Green Diamond repaid this advance in
March 2002. CECO did not receive interest on these advances.
During the fiscal year ended December 31, 2001, CECO paid fees of $139,000
to Green Diamond for management consulting services. The services were provided
by Phillip DeZwirek, the Chief Executive Officer and Chairman of the Board of
CECO, through Green Diamond. Such amount is included as compensation paid to
Mr. DeZwirek under "Executive Compensation."
EXECUTIVE COMPENSATION
Except for the compensation described below, neither CECO nor any of its
subsidiaries paid, set aside or accrued any salary or other remuneration or
bonus, or any amount pursuant to a profit-sharing, pension, retirement,
deferred compensation or other similar plan, during its last fiscal year, to or
for any of CECO's executive officers or directors.
The following table summarizes the total compensation of Phillip DeZwirek,
Richard J. Blum, David D. Blum and Marshall J. Morris for 2001 and the two
previous years. Richard J. Blum, who also serves as Chief Executive Officer and
President of CECO Group, is paid the amounts set forth below by CECO Group. Mr.
DeZwirek and Mr. Morris are paid by CECO. David D. Blum, who also serves as
Vice-President of Kirk & Blum, is paid by Kirk & Blum. No other officer of CECO
made in excess of $100,000.
Summary Compensation Table For CECO
Annual Compensation
---------------------
Long-Term
Name/Principal Compensation All Other
Position Year Salary Bonus Options (#) Compensation
-------- ---- -------- -------- ------------ ------------
Phillip DeZwirek............. 2001 $111,000 $139,000(1)
Chairman of the Board 2000 $137,545 500,000(2)
& Chief Executive Officer 1999 $100,000 500,000(3)
Richard J. Blum.............. 2001 $227,538 25,000(4) $ 25,406(5)
President of CECO & 2000 $206,000 $122,224 $ 19,883(6)
President & Chief Executive 1999 $ 13,972(7) 448,000(8)
Officer of CECO Group
David D. Blum................ 2001 $170,106 $ 17,104(9)
Senior Vice President-Sales 2000 $154,000 $ 76,388 $ 10,873(10)
& Marketing and Assistant 1999 $ 10,548(11) 335,000(12)
Secretary of CECO and
Vice President of Kirk & Blum
Marshall J. Morris........... 2001 $155,769 $ 1,377(13)
Vice President-Finance & 2000 $133,211 50,000(14) $ 22,040(15)
Administration and Chief
Financial Officer
--------
(1) Includes $139,000 paid to Can-Med Technology, Inc. d/b/a Green Diamond Oil
Corp. for consulting services provided by Mr. DeZwirek through Green
Diamond.
(2) Represents 500,000 Warrants issued to Phillip DeZwirek on August 14, 2000.
(3) Represents 500,000 Warrants issued to Phillip DeZwirek on January 22, 1999.
10
(4) Represents options to purchase 25,000 shares of CECO's stock granted on
October 5, 2001. Such options are exercisable at any time between April 5,
2002 and October 5, 2011 at a price of $2.01 per share.
(5) Represents Company contribution of $22,475 to 401(k) plan on behalf of Mr.
Richard Blum and $2,931 of insurance premiums paid for term life insurance
for his benefit.
(6) Represents Company contribution of $18,315 to 401(k) plan on behalf of Mr.
Richard Blum and $1,568 of insurance premiums paid by CECO for term life
insurance for the benefit of Mr. Richard Blum
(7) Based on an annual salary of $206,000; Mr. Richard Blum commenced
employment with CECO Group on December 7, 1999.
(8) Represents Warrants to purchase 448,000 shares of CECO's stock granted in
Mr. Richard Blum's Employment Agreement. Such Warrants become exercisable
at the rate of 25% per year over the four years following December 7, 1999
at a price per share of $2.9375.
(9) Represents Company contribution of $16,362 to 401(k) plan on behalf of Mr.
David Blum and $742 of insurance premiums paid for term life insurance for
his benefit.
(10) Represents Company contribution of $10,134 to 401(k) plan on behalf of Mr.
David Blum and $740 of insurance premiums paid by CECO for term life
insurance for the benefit of Mr. David Blum.
(11) Based on an annual salary of $154,000; amount shown is from December 7,
1999, the date CECO Group acquired Kirk & Blum.
(12) Represents Warrants to purchase 335,000 shares of CECO's stock granted in
Mr. David Blum's Employment Agreement. Such Warrants become exercisable at
the rate of 25% per year over the four years following December 7, 1999 at
a price per share of $2.9375.
(13) Represents Company contribution of $897 to 401(k) plan on behalf of Mr.
Morris and $480 of insurance premiums paid for term life insurance for his
benefit.
(14) Represents Options to purchase 50,000 shares of CECO's stock granted on
January 20, 2000. Such options become exercisable at the rate of 20% per
year over the five years following January 20, 2000 at a price per share
of $2.50.
(15) Represents Company contribution of $436 to 401(k) plan on behalf of Mr.
Morris, $284 of insurance premiums paid by CECO for term life insurance
for the benefit of Mr. Morris and $21,320 of reimbursement of relocation
expenses.
Option Grants and Exercises in Last Fiscal Year
The following tables set forth information with respect to CECO's executive
officers concerning grants and exercises of options on stock of CECO during the
last fiscal year and unexercised options on stock of CECO held as of the end of
the fiscal year.
Option/SAR Grants By CECO
For The Year Ended December 31, 2001
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Option Term (2)
--------------------
% of Total
Options/SARs
Number of Securities Granted to
Underlying Options Employees in Exercise or Base Expiration
Name Granted (#) Fiscal Year(1) Price ($/SH)(3) Date 5%($) 10%($)
---- -------------------- -------------- ---------------- ------------ ------- -------
Jason Louis DeZwirek 25,000 41.7% $2.01 Oct. 5, 2011 $31,602 $80,086
Richard J. Blum..... 25,000 41.7% $2.01 Oct. 5, 2011 $31,602 $80,086
--------
(1) Based on options to purchase an aggregate of 60,000 shares granted to
employees and officers during 2001.
(2) Potential realizable value is based on an assumption that the stock price
appreciates at the annual rate shown (compounded annually) from the date of
grant until the end of the ten-year option term. These numbers are
calculated based on the requirements promulgated by the Securities and
Exchange Commission ("SEC") and do not reflect our estimate of future stock
price.
(3) Granted at fair market value on the date of issuance.
11
Aggregated Option/SAR On CECO
Exercises For The Year Ended December 31, 2001
And Option/SAR Values On CECO As Of December 31, 2001
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Options/SARs at Options/SARs at
12/31/01 12/31/01
- ------------------------- -------------------------
Shares Value
Acquired on Realized
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ -------- ----------- ------------- ----------- -------------
Phillip DeZwirek.... 0 0 2,250,000 0 $2,412,250 N/A
Richard J. Blum..... 0 0 224,000 249,000 $ 81,200 $113,450
David D. Blum....... 0 0 167,500 167,500 $ 60,719 $ 60,719
Marshall J. Morris.. 0 0 10,000 40,000 $ 8,000 $ 32,000
Jason Louis DeZwirek 0 0 0 25,000 N/A $ 32,250
Board Compensation Report On Executive Compensation
The Board of Directors does not have a compensation committee. Richard J.
Blum, Phillip DeZwirek and Jason Louis DeZwirek, all executive officers, have
participated in deliberations of the Board of Directors concerning executive
officer compensation.
Our employee compensation policy is to offer a package including a
competitive salary, competitive benefits, and an efficient workplace
environment. We also encourage broad-based employee ownership of CECO stock
through our Stock Purchase Plan in which most employees are eligible to
participate. Our officers may also participate in the Stock Purchase Plan.
The Company's compensation policy for officers is similar to that for other
employees, and is designed to promote excellent performance and attainment of
corporate and personal goals.
The Board of Directors (comprised of three executive officers and two, and
as of August 14, 2002, three, non-employee directors) reviews and approves
individual officer salaries and bonuses.
Officers of CECO are paid salaries in line with their responsibilities.
These salaries are structured so they are comparable with salaries paid by
competitors in the relevant industries. Officers (and other employees) are also
eligible to receive stock option grants, which are intended to promote success
by aligning employee financial interests with long-term shareholder value.
Stock option grants are based on various subjective factors primarily relating
to the responsibilities of the individual officers, and also to their expected
future contributions and prior option grants.
The Board of Directors annually reviews and approves the compensation of
Phillip DeZwirek, Chief Executive Officer and Chairman of the Board. His
compensation is tied to revenues and profits, strategic goals, capital raising
efforts, and his general performance. In addition, Mr. DeZwirek is a
significant shareholder in CECO; to the extent his performance translates into
an increase in the value of CECO's stock, all shareholders, including Mr.
DeZwirek, share the benefit.
Employment Contracts
Richard J. Blum entered into an Employment Agreement dated December 7, 1999
with CECO Group. The Employment Agreement, which was recently extended for an
additional year, has a term through December 7, 2005. Either party may
terminate the Employment Agreement for cause. Mr. Richard Blum's base salary is
set annually, at the Board's discretion, and is currently $228,400 per year. In
addition to his base salary, Mr. Richard Blum is entitled to a bonus, depending
upon whether CECO exceeds certain targets, and four weeks paid vacation.
12
David D. Blum entered into an Employment Agreement dated December 7, 1999
with Kirk & Blum. The Employment Agreement, which was recently extended for an
additional year, has a term through December 7, 2005. Either party may
terminate the Employment Agreement for cause. Mr. David Blum's base salary is
set annually, at the Board's discretion, and is currently $170,750 per year. In
addition to his base salary, Mr. David Blum is entitled to a bonus, depending
upon whether CECO exceeds certain targets, and four weeks paid vacation.
Options
In consideration for Jason Louis DeZwirek's valuable service to CECO as an
officer and director, CECO granted Mr. DeZwirek options on October 5, 2001 to
purchase up to 25,000 shares of CECO's common stock, which are exercisable at
any time between April 5, 2002 and October 5, 2011, inclusive, at a price of
$2.01, the closing price of CECO's common stock on October 5, 2001. Such
options are not transferable other than by will or the laws of descent.
Compensation Under CECO Stock Option Plan and Stock Purchase Plans
Stock Option Plan
Our Stock Option Plan was adopted by our board of directors on October 1,
1997 and approved by the shareholders on September 10, 1998. This plan provides
for the grant of incentive stock options to our employees and nonstatutory
stock options to our employees, consultants, advisors and directors. The number
of shares of common stock reserved under the Stock Option Plan are 1,500,000.
Of these shares, 182,500 shares were subject to outstanding options and
1,317,500 shares were available for future grant as of March 15, 2002. No
options have been exercised as of March 15, 2002.
A committee of our board administers the stock plan and determines the terms
of awards granted, including the exercise price, the number of shares subject
to individual awards and the vesting period of awards. Directors Grivas and
Wright currently serve on such committee. In the case of options intended to
quality as "performance-based compensation" within the meaning of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), the
committee will consist of two or more "outside directors" within the meaning of
Section 162(m) of the Code. The committee determines the exercise price of
options granted under the Stock Option Plan, but with respect to nonstatutory
stock options intended to qualify as "performance-based compensation" within
the meaning of Section 162(m) of the Code and all incentive stock options, the
exercise price must at least be equal to the fair market value of our common
stock on the date of grant. The term of an incentive stock option may not
exceed ten years, except that with respect to any participant who owns 10% of
the voting power of all classes of our outstanding capital stock, the term must
not exceed five years and the exercise price must equal at least 110% of the
fair market value on the grant date. The committee determines the term of all
other options.
In the year 2001, options to purchase 35,000 shares of stock of CECO were
granted under the Stock Option Plan.
On October 5, 2001, Richard J. Blum, in consideration for his valuable
services as an executive officer and director was granted an option under the
Stock Option Plan to purchase up to 25,000 shares of stock of CECO. The option
becomes exercisable on April 5, 2002 and expires on October 5, 2011. The
exercise price per share is $2.01, the closing price for CECO's common stock on
the date of the grant. On October 5, 2001, Donald Wright, in consideration for
his valuable services as a director of CECO, was granted an option under the
Plan to purchase up to 10,000 shares of stock of CECO. The option becomes
exercisable on April 5, 2002 and expires on October 5, 2011. The exercise price
per share is $2.01, the closing price for CECO's common stock on the date of
the grant.
Stock Purchase Plan
On September 21, 1999, the Board of Directors of CECO adopted the Stock
Purchase Plan which was approved by the stockholders on November 16, 1999.
Employees, other than certain part-time employees, are
13
eligible to participate in the Stock Purchase Plan, which provides employees
the opportunity to purchase stock of CECO at a discounted price. The maximum
number of shares of common stock of CECO that will be offered under the Stock
Purchase Plan is 1,000,000. Such shares will be offered in nine separate
consecutive offerings, which commenced October 1, 1999, with the final offering
terminating on September 30, 2004. The purchase price per share will be the
lesser of 85% of the market price of the stock on the last business day of the
offering or 85% of the market price of the stock on the offering date. Payment
for the stock under the Stock Purchase Plan is paid through employee payroll
deductions. The Stock Purchase Plan is administered by CECO's board of
directors, however, the board of directors may delegate its authority to a
committee of the board or an officer of CECO. Directors Grivas and Wright
currently administer the Stock Purchase Plan.
As of August 1, 2002, 53,144 shares of stock have been issued under the
Stock Purchase Plan; 6,241 of which have been issued to Mr. Richard Blum to
date, and 6,790 of which have been issued to Mr. David Blum to date. No other
shares of stock under the Stock Purchase Plan have been issued to an executive
officer or director of CECO.
Director Compensation
The directors of CECO received no consideration for serving in their
capacity as directors of CECO or as members of any committee of the Board
during its last fiscal year, other than Donald Wright, Richard J. Blum and
Jason Louis DeZwirek who received options to purchase 10,000, 25,000 and 25,000
shares of common stock, respectively. Phillip DeZwirek, a director, receives
compensation in his capacity as an executive officer.
14
Stock Performance Graph
The line graph below compares the annual percentage change in CECO's
cumulative total shareholder return on its Common Stock with the cumulative
total return of the Russell 2000 Stock Index (a broad-based market index) and
The Dow Jones Industry Group--Pollution Control (a "Peer Group Index") for the
five-year period ending December 31, 2001. The graph and table assumes $100
invested on December 31, 1996 in the Company's Common Stock, the Russell 2000
Stock Index and The Dow Jones Industry Group--Pollution Control and that all
dividends were reinvested. The Dow Jones Industry Group--Pollution Control
Index total return is weighted by market capitalization.
The Dow Jones Industry Group--Pollution Control reflects CECO's performance
against pollution control businesses, the Company's principal industry group,
and provides an appropriate indicator of cumulative total shareholder returns.
There are 60 companies included in this industry group.
Based on an Initial Investment of $100 on
December 31, 1996, with Dividends Reinvested
[CHART]
Dec. Dec. Dec. Dec. Dec. Dec.
Company Name/Index 1996 1997 1998 1999 2000 2001
---- ------ ------ ------ ------ ------
CECO ENVIRONMENTAL CORP. 100 153.13 150.00 125.00 68.75 165.00
RUSSELL 2000 INDEX 100 122.34 118.91 142.21 136.07 137.46
PEER GROUP INDEX 100 124.53 129.64 77.42 103.54 123.49
15
PROPOSAL II
APPROVE AND AUTHORIZE ADDITIONAL SHARES TO CERTAIN INVESTORS
The Transaction and Reason for Issuance
The shareholders are being asked to approve the issuance of 114,228 shares
of Common Stock of CECO to the Investors upon the occurrence of certain events.
On December 31, 2001, we completed the sale of 706,668 shares of our common
stock, at a price of $3.00 per share, and the issuance of warrants to purchase
353,334 shares of our common stock at an initial price of $3.60 per share (the
"Warrants"), to the Investors. The proceeds raised from the offering were used
to pay down our credit facility. Pursuant to the Subscription Agreement, we are
required to issue additional shares of CECO Common Stock at no additional cost
to the Investors if our earnings before interest, taxes, depreciation and
amortization ("EBITDA") for our 2002 fiscal year is less than $7,800,000 (based
on the consolidated financial statements prepared in accordance with GAAP
(except that adjustments to earnings attributable to the issuance of the
Warrants or any options/warrants issued to The Shemano Group will not be taken
into account), without any "pro forma adjustments" and as indicated on our Form
10-K, including any amendment thereto).
We will be required to issue a number of shares to each Investor equal to
1.5% of the initial number of shares issued to such Investor for every $100,000
under $7,800,000 that our EBITDA is. For instance, if our EBITDA is $7,550,000
for fiscal 2002 and an Investor initially received 100,000 shares, then we
would be required to issue an additional 3,750 Shares to such Investor at no
additional cost to such Investor. If our EBITDA is zero for fiscal year 2002,
we would be required to issue 826,802 additional shares in the aggregate to the
Investors. We will also be required to use our best efforts to register all
such shares on a registration statement with the SEC.
However, we are prohibited under NASD Rule 4350 from issuing common stock or
warrants equal to 20% or more of our common stock outstanding prior to the
issuance for less than market value, without receiving shareholder approval.
The stock was issued to the Investors at a price below market value. On the
closing date of the sale of the 706,668 shares of common stock, the closing
price for our common stock based upon the last sale on such day as quoted on
Nasdaq was $3.30. The sale price for the shares was $3.00 per share. Under the
terms of the Subscription Agreement we are not required to issue to the
Investors in excess of 1,772,576 shares in the aggregate (including shares
underlying the Warrants), which represented 19.9% of our Common Stock at such
time, without first obtaining shareholder approval. The aggregate amount of
shares we would be required to issue if our EBITDA is zero is 1,886,804, and
the terms of the Subscription Agreement obligate us to seek shareholder
approval for such issuance. Therefore, we are asking CECO's shareholders to
approve the issuance of 114,228 shares of Common Stock (the "Additional
Shares") of CECO to the Investors. Such Additional Shares would be issued only
if and to the extent required under the Subscription Agreement.
Effect of Issuance Upon Existing Shareholders
Set forth below is a table listing each Investor entitled to additional
shares if our EBITDA for 2002 is below $7,800,000, and with respect to each
such Investor, the number of shares initially issued to such shareholder, the
number of shares underlying the warrants issued to such shareholder, the
maximum number of additional shares to be issued if shareholder approval is not
received, the total number of shares that may be issued without shareholder
approval (including initially issued shares), the maximum number of additional
shares that may be issued if shareholder approval is obtained, and the total
maximum number of shares that could be issued if shareholder approval is
obtained (including initially issued shares).
16
Maximum Total
Number of Maximum Maximum
Additional Total Maximum Number Number of
Shares That Number of of Additional Shares That
May Be Shares That Shares That May May Be Issued
Shares Issued May Be Issued Be Issued If
Shares Underlying Without Without if Shareholder Shareholder
Initially Warrants Shareholder Shareholder Approval is Approval is
Selling Shareholder Issued Issued Approval Approval* Obtained Obtained*
------------------- --------- ---------- ----------- ------------- --------------- -------------
Crestview Capital Fund, L.P... 433,334 216,667 436,955 1,086,956 507,001 1,157,002
Robert Geras.................. 140,000 70,000 141,170 351,170 163,800 373,800
Steven Erlbaum................ 50,000 25,000 50,418 125,418 58,500 133,500
Erlbaum Family L.P............ 50,000 25,000 50,418 125,418 58,500 133,500
Friedman Investment Group, LLC 33,334 16,667 33,613 83,614 39,001 89,002
------- ------- ------- --------- ------- ---------
TOTAL......................... 706,668 353,334 712,574 1,772,576 826,002 1,886,804
======= ======= ======= ========= ======= =========
--------
* Includes shares initially issued and shares underlying Warrants
If shareholder approval is obtained, and the Investors sell a substantial
portion of their shares, such sales may cause our stock price to decline.
However, management believes that the issuance of the Additional Shares does
not substantially increase such risk, as the Investors in the aggregate would
own 19% of the Common Stock if the Additional Shares are issued instead of
17.8% of the Common Stock if the Additional Shares are not issued, assuming in
both cases exercise of their Warrants. Further, if our EBITDA for our 2002
fiscal year is sufficient, we may not have to issue any Additional Shares. The
Board of Directors determined that the terms of the deal with the Investors,
including if necessary the full issuance of 862,002 shares, was in the best
interests of CECO, and therefore, recommends a vote for the issuance of the
Additional Shares.
Vote Required for Approval
Approval of the issuance of the Additional Shares to the Investors will
require the affirmative vote of the majority of the shareholders present in
person or by proxy, however, the shares held by the Investors will not be
counted for this proposal. Each of Phillip DeZwirek, Green Diamond, Introtech
and Icarus have agreed to vote their shares in favor of the proposal to issue
the Additional Shares. As of the record date for the Annual Meeting, such
parties control the right to vote 3,857,223 shares, representing 40.25% of the
outstanding Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE ISSUANCE OF
ADDITIONAL SHARES TO THE INVESTORS.
PROPOSAL III
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Subject to ratification by the stockholders at the Annual Meeting, the Board
of Directors has appointed Deloitte & Touche LLP ("Deloitte") to serve as the
independent public accountants of CECO for its fiscal year ending December 31,
2002. Deloitte was engaged to act as CECO's public accountants on September 28,
2000. Accordingly, the engagement of Margolis & Company P.C. ("Margolis") was
discontinued effective September 28, 2000. Margolis served as the independent
public accountants of CECO since 1993. Notwithstanding the appointment, the
Board of Directors, in its discretion, may direct appointment of new
independent auditors at any time during the year, if the Board of Directors
believes that such a change would be in the best interests of CECO and its
stockholders. Neither representatives of Deloitte nor Margolis are expected to
be present at the Annual Meeting. If the appointment of Deloitte is not
ratified by the stockholders, the Board of Directors will appoint other
independent public accountants.
The reports of Margolis on CECO's consolidated financial statements for
fiscal year ended December 31, 1999 did not contain an adverse opinion or a
disclaimer of opinion and were not qualified or modified as to
17
uncertainty, audit scope or accounting principles. In connection with the
audits of CECO's consolidated financial statements for each of the two fiscal
years ended December 31, 1998 and December 31, 1999 and the subsequent interim
period prior to June 30, 2000, there were no disagreements between CECO and
Margolis on any matters of accounting principles or practices, financial
statement disclosure, or audit scope and procedures which, if not resolved to
the satisfaction of Margolis, would have caused Margolis to make reference to
the matter in their reports. CECO did not consult with Deloitte during the last
two fiscal years in the period ended December 31, 1999 or the subsequent
interim period prior to June 30, 2000 on either the application of accounting
principles or type of opinion Deloitte might issue on CECO's financial
statements.
CECO reported the change in principal accountants on a Current Report on
Form 8-K filed September 29, 2000. CECO provided Margolis with a copy of the
disclosures it made in the Current Report on Form 8-K prior to the filing of
the report with the Securities and Exchange Commission. Margolis has furnished
CECO a copy of a letter addressed to the Securities and Exchange Commission
stating that Margolis agrees with the statements made by CECO in this Proxy
Statement.
Audit Fees
Deloitte billed CECO $115,901 and Margolis billed CECO $4,000 for the
professional services rendered for the audit of CECO's annual financial
statements for fiscal year 2001 and the reviews of the financial statements
included in CECO's Quarterly Reports on Form 10QSB filed for the first three
quarters of 2001.
Financial Information Systems Design and Implementation Fees
Deloitte did not render professional services for the design and
implementation of financial information systems to CECO during fiscal year 2001.
All Other Fees
Deloitte billed CECO $58,350 for all professional services rendered during
fiscal year 2001 other than audits, reviews and financial information systems
design and implementation.
The Audit Committee has considered whether the provision of services by
Deloitte other than the audit of the financial statements of CECO for the
fiscal year 2001 and the review of the financial statements for the third
quarter of the fiscal year 2001 is compatible with maintaining Deloitte's
independence.
The affirmative vote of a majority of the votes cast on this proposal at the
Annual Meeting with a quorum present is required to approve this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF CECO
FOR FISCAL YEAR 2002.
ADDITIONAL INFORMATION
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
matters which will be presented for consideration at the Annual Meeting other
than the proposals set forth in this Proxy Statement. If any other matters
properly come before the Annual Meeting, it is intended that the persons named
in the proxy will vote the shares they represent as the Board of Directors may
recommend.
A COPY OF CECO'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2001, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
18
WITHOUT EXHIBITS, WILL BE SENT TO ANY STOCKHOLDER WITHOUT CHARGE UPON WRITTEN
REQUEST ADDRESSED TO CECO ENVIRONMENTAL CORP., TO THE ATTENTION OF THE
SECRETARY, 3120 FORRER STREET, CINCINNATI, OHIO 45209.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
In order to be considered for inclusion in CECO's proxy materials for the
year 2003 annual meeting of stockholders, a stockholder proposal must be
received by CECO no later than , 2003. Proposals may be mailed to
CECO Environmental Corp., to the attention of the Secretary, 3120 Forrer
Street, Cincinnati, Ohio 45209.
METHOD OF PROXY SOLICITATION
The cost of solicitation of the proxies will be borne by CECO. In addition
to solicitation of the proxies by use of the mails, employees of CECO or its
subsidiaries, without extra remuneration, may solicit proxies personally or by
telephone. CECO will reimburse brokerage firms, nominees, custodians and
fiduciaries for their out-of-pocket expenses for forwarding proxy materials to
beneficial owners and seeking instruction with respect thereto.
FINANCIAL STATEMENTS
CECO's audited consolidated financial statements and notes thereto,
including selected financial data and management's discussion and analysis of
financial condition and results of operations for the fiscal year ended
December 31, 2001, are included on pages f-1 through f- of CECO's 2002 Annual
Report to Shareholders, which is being mailed concurrently herewith. Additional
copies of the Annual Report are available without charge upon request. The
financial statements, the report of independent accountants thereon, selected
financial data and management's discussion and analysis of financial condition
and results of operations included in the Annual Report are incorporated herein
by reference. Copies of the unaudited financial statements for the interim
periods ended March 31, 2002 and June 30, 2002 as filed by CECO on Form 10-Q
also are being mailed concurrently herewith and are incorporated herein by
reference.
By Order of the Board of Directors
Phillip DeZwirek
Chairman of the Board of Directors and
Chief Executive Officer
, 2002
19
EXHIBIT A
Independent Auditors' Report
To the Board of Directors and Shareholders
CECO Environmental Corp.
We have audited the accompanying consolidated balance sheet of CECO
Environmental Corp. and subsidiaries (the "Company") as of December 31, 2001
and 2000, and the related consolidated statements of operations, shareholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 2001 and 2000, and the results of its operations and its
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche LLP
Cincinnati, Ohio
March 27, 2002
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
CECO Environmental Corp.
Toronto, Ontario Canada
We have audited the consolidated statement of operations, shareholders'
equity, and cash flows of CECO Environmental Corp. and subsidiaries for the
year ended December 31, 1999. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion of
these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of CECO
Environmental Corp. and subsidiaries for the year ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States
of America.
MARGOLIS & COMPANY P.C.
--------------------------------------
Certified Public Accountants
Bala Cynwyd, PA
March 27, 2002
CECO ENVIRONMENTAL CORP.
3120 Forrer Street
Cincinnati, Ohio 45209
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Phillip DeZwirek as Proxy, with the power
to appoint his substitute, and hereby authorizes him, to represent and vote, as
designated on the reverse, all shares of Common Stock of CECO Environmental
Corp. (the "Company") held of record by the undersigned on October 11, 2002, at
the Annual Meeting of Stockholders to be held on November 11, 2002 or any
adjournment thereof.
(To Be Signed on the Reverse Side.)
Please mark your
----------------
A [X] votes as in this example
The Board of Directors recommends a vote FOR the proposals listed.
(1) ELECTION OF DIRECTORS For [_]
Withhold Authority [_] Nominees:
FOR, except vote withheld from the following nominees: Richard J. Blum
------------------------------------------------------ Jason Louis DeZwirek
____________________________ Phillip DeZwirek
Josephine Grivas
Paul Voet
Donald A. Wright
For Against Abstain
(2) PROPOSAL NO. II [_] [_] [_]
Approve and Authorize
Additional Shares
to Certain Investors
For Against Abstain
(3) PROPOSAL NO. III [_] [_] [_]
Deloitte & Touche LLP as
Independent Public Accountants
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
Signature:___________________ Date:______, 2002 ______________ Date:______, 2002
Signature of Joint
Stockholder if Held
Jointly
NOTE: Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give your full title as such. If a corporation,
please sign in full corporate name by the president or other authorized officer.
If a partnership, please sign the partnership's name by an authorized person.