Vote Your BLUE Proxy to Bring New Energy to CVTech

• CVTech Shareholder and Director Proposes Seven New Board Nominees Including Himself.
• "The current Board and senior executives have over-promised and under-delivered".

VICTORIAVILLE, QC, May 15, 2012 /CNW Telbec/ - Gestion G. Aubert Ltée., which is controlled by Mr. Guy Aubert, a current director of CVTech Group Inc. ("CVTech") and its second biggest beneficial shareholder, today filed a proxy circular nominating seven new directors to CVTech's board with a view to replacing the incumbent directors.

The move is a response to CVTech's mediocre performance over the past three years, and the failure of the current board and senior management to take decisive corrective action.

"For three years, our current Board and senior executives have over-promised and under-delivered," Mr. Aubert said in a letter to shareholders. "CVTech's future is compromised by their inaction which is also exacting a high price on all shareholders."  The goal of the proposed nominees is to promote CVTech's growth and prosperity thereby ensuring enhanced value for all shareholders.

Mr. Aubert is the former majority owner and operator of Thirau, a company acquired by CVTech in 2005 and now part of the Energy segment. The Energy segment derives the largest part of its annual revenues from the services it provides to electric utility customers located in Quebec and south to Virginia. The Energy segment is now the sole business of CVTech since its recent announcement that its operations in the CVT and related products segment is to be sold, and thus this latter segment is now considered discontinued operations.  In 2011 the Energy segment had $233 million in revenues.

The evidence of over-promising and under-delivering is abundant:

• Despite repeated assurances that an acquisition of another company for the Energy segment is forthcoming, the current board and management have failed to conclude any transactions over the past three years. Meanwhile, several other industry participants have purchased attractive businesses.
• For six years the current management was unable to reach an agreement with India's Tata Motors, an agreement once considered critical to CVTech's future growth.
• The board and management have set a target of $1 billion in annual revenues by 2015. Revenues are currently at only a quarter of that level.
• The current board has approved very generous compensation packages for CVTech's top management. The combined compensation of the current CEO and CFO alone totaled $2.9 million over the past three years, a figure equal to 18.5% of the company's net earnings during the same period.
• Financial transparency and communication with shareholders are inadequate as compared with industry peers. The company does not even hold conference calls with analysts and shareholders to discuss quarterly earnings. Moreover, the latest management proxy circular fails to mention that the chief operating officer of the Energy segment has been demoted. His loss of title was widely communicated to the Energy segment personnel but the shareholders were not informed.
• CVTech's shares have fallen by more than 25% in the last three years despite repeated promises of profitable growth and higher revenues.

Each of the seven proposed board nominees brings extensive experience as a director and/or board member of other companies. Three have been actively involved in companies that serve the Canadian and U.S. construction markets. Mr. Aubert, who has been a member of the current board since 2005 and currently beneficially owns 13.8% of CVTech's outstanding shares, is one of the seven nominees.

The nominees intend to take decisive action to inject new energy into CVTech. They will strive to:

• Pursue the sale of the CVT Systems segment. This business has been a drain on the company's resources for an extended period.
• Seek and explore value-creating acquisitions for the Energy segment. The new board would re-evaluate the strict acquisition criteria used by its predecessors.
• Cut costs, including senior management compensation. They will explore opportunities to sell the head office in Drummondville, Quebec, which currently houses only non-operational personnel.
• Use cash to fuel operational growth, repay debt and fund potential acquisitions.
• Instill a new corporate culture of accountability by improving communications with shareholders using, for example, quarterly conference calls to discuss financial results and the progress of their proposed value enhancing plan for CVTech and its shareholders.
• Improve transparency by undertaking to provide more information concerning the Energy segment's operating results, and costs associated with the holding company head office.

CVTech's directors will be elected at the annual meeting in Montreal on May 30, 2012.

The full text of Mr Aubert's letter to shareholders on behalf of Gestion G. Aubert Ltée follows below.

In order to bring new energy to CVTech, shareholders are urged to vote their BLUE proxy before the May 28, 2012 voting deadline of 10:30 a.m. (EST).

Shareholders should call Kingsdale Shareholder Services toll-free at 1-888 518 1558 or call collect at 416-867-2272 for assistance in voting your BLUE proxy.

Dear Fellow Shareholder,

CVTech urgently needs a change of leadership, and I am asking for your support to make it happen.

For three years, our board and senior executives have over-promised and under-delivered.  Consider these facts:

• CVTech's total net earnings from 2009 to 2011 were lower than the preceding three years, even though comparable revenues climbed by 80%.
• Communication with shareholders, including financial disclosure, has been inadequate when compared to industry peers.
• As shown in the chart below, we have suffered a decline of more than 25% in the value of our investment over the past three years. Over the same period, the S&P/TSX composite index gained more than 30%.

CVTech Share Price Performance Relative to S&P/TSX Composite Index and Publicly Traded Electrical Contractors - Last 3 Years

http://files.newswire.ca/357/Performance.doc

(1)

The Electrical Contractor Index is a market weighted index composed of the following electrical contractors: Dycom Industries Inc. (NYSE:DY), EMCOR Group Inc. (NYSE:EME), MasTec, Inc. (NYSE:MTZ), Matrix Service Co. (NasdaqGS:MTRX), MYR Group, Inc. (NasdaqGS:MYRG), Pike Electric Corporation (NYSE:PIKE), and Quanta Services, Inc. (NYSE:PWR).

Shareholder return is one of the best measures of the performance of a company's directors and senior executives. As shareholders, we should not tolerate this situation any longer.

I am proposing to replace the current board with a new group of seven skilled and experienced directors with me included (hereinafter referred to throughout this letter and Circular as the "Concerned Shareholder's Nominees").  I would value your support as we seek to reinvigorate CVTech. In order to show your support, please vote your BLUE proxy or voting instruction form by 10:30 a.m. (EST) on May 28, 2012, ahead of the upcoming annual and special meeting to be held on May 30, 2012.

The Concerned Shareholder's Nominees' records as business leaders and directors alone demonstrate their exceptional talent as managers and leaders. I am confident in their ability to effect the change needed within CVTech. Three of the seven nominees have been actively involved in companies that serve the Canadian and U.S. infrastructure construction markets and their experience will prove an invaluable asset to CVTech.

Our goal is to deliver enhanced value to shareholders, while retaining crucial customer, supplier and employee relationships, as well as building solid new relationships in all these areas.

I have a significant personal stake in the transformation of CVTech:

• I am the company's second largest shareholder, with almost 10 million shares, or 13.8% of the outstanding shares.
• I am the former owner and operator of Thiro Ltd. (now Thirau), which was acquired by CVTech in 2005 and became the backbone of its Energy segment. In my capacity as COO, I was the most senior executive of CVTech's largest business segment until my retirement in 2010.
• When two colleagues and I sold Thirau to CVTech, we accepted 70% of the purchase price in CVTech shares, confident that the management of the company would ensure its growth and prosperity.  At the time, CVTech shares traded at a value of $1.11 a share, yet six years later, the share price still stands below that price.
• I have been a member of CVTech's board of directors since 2005, giving me a deep, first-hand insight into the company's operations, its management and other current board members.

For me CVTech's success is more than a mere financial interest; I take it to heart. I am convinced of the need for urgent and far-reaching change for the benefit of the company and all of its shareholders.

The Record: Three Years of Over-Promising and Under-Delivering

In 2008, with net earnings of $10 million on revenues of $148 million, CVTech posted the strongest performance in its history.

June 2009…

At the 2009 annual meeting, the chief executive officer delivered a message that promised continued growth for CVTech's two business segments:

• CVT Systems and Related Products.  The CEO highlighted that the most significant growth would come from a sales agreement he "expected to close in 2009 with a major Asian vehicle manufacturer, Tata Motors".  He also announced that "potentially supply (of the CVTs to Tata Motors) would begin by November 2009".
• Energy.  Being the larger of the two business segments, the Energy segment was in a position to almost double its revenues in 2009 with the acquisition of New Jersey based Riggs Distler. The transaction was planned as the first in a series of acquisitions that would position CVTech as a significant North American player in electrical construction contracting services for the electric power industry.    With the Riggs Distler acquisition the Energy segment's revenue driver became the services the segment provides to electric utility customers located in Quebec and now south to Virginia.

One Year Later…

At the June 2010 annual meeting the CEO's message hinted at the lack of tangible results:

• CVT Systems.  The expected 2009 contract for the CVT Systems' segment had not materialized.  Instead, he said, "development work continues" and the talks with Tata Motors had "slowed".
• Energy. The CEOs message was two-fold:  "the cross-selling efforts of Thirau, our Connecticut based subsidiary, and Riggs Distler, the subsidiary acquired in July 2009, had begun". Further, the company was "ready to proceed in late 2010 or early 2011 with another acquisition".

This more sober message was reflected in the financial results. CVTech's net earnings plummeted by 70% in 2009, from $10 million to $3 million.  To counter this disappointment, the CEO held out the promise of a new revenue goal: "$1 billion within five years".

Two Years Later…

With a full year of Riggs Distler operating results included in the 2010 consolidated financial results, CVTech announced that its revenues had grown to $260 million and net earnings had rebounded to $9 million.   However, the CEOs message at the June 2011 annual meeting was again marked by promises rather than performance:

• CVT Systems. The contract with Tata had still not materialized.  Instead, the CEO raised the prospect of "another Asian manufacturer who is interested in CVTech's products which could justify the establishment of a plant in India to be operational in late 2012".  He also announced that the company was considering the "privatization or sale" of the CVT Systems business.
• Energy.  The promise was the same as a year earlier: "The company is in a position to consider another strategic acquisition."  The CEO said that an acquisition "must meet our strict selection criteria" thus avoiding any mention of missed opportunities. In the meantime others in the industry had been able to undertake acquisitions based on criteria apparently very similar to those used by the company. Klondyke Construction, Valard and EC Source Services LLC are examples of such acquisitions.  These companies were acquired by industry participants Pike Electric Corporation, Quanta Services Inc. and Mastec Inc. respectively.

Three Years Later…

CVTech's financial performance in 2011 was dismal.  Net earnings tumbled by two-thirds to $3 million from $9 million.  Revenues were relatively flat at $253 million - in other words, only one-quarter the $1 billion level promised by the CEO for 2015.  The net earnings margin was the lowest in five years.

• CVT Systems.  According to the 2011 annual report, talks with Tata Motors ended when the parties could not come to a "mutually satisfactory commercial agreement".  The annual report mentioned that discussions with another Asian automaker were proceeding.
  Meanwhile, management added a new twist:  CVTech is "pursuing initiatives to divest of the activities of the CVT Systems and Related Products segment".  The company, at the date of the annual report, had agreed to sell the CVT Systems and Related Products segment and announced that it expected the sale to close by July 2012.
  Behind this sale is a sad reality. While the abortive Tata initiatives were underway for almost six years, the CVT division's performance steadily deteriorated, depleting shareholder value.  The proposed sale price for the segment is $18 million, little more than half the $30+ million invested in that business. For the years 2005 through 2011 the aggregate segment net losses amounted to almost $5 million on revenues of more than $150 million.  In 2011 the company wrote off $2.9 million of goodwill related to this segment. Yet, CVTech's consolidated net earnings amounted to only $3.1 million in 2011.  Additionally, another $1.9 million has been written off in the first quarter of 2012.
  This clearly demonstrates the propensity of the current board and senior executive to make ambitious yet vague promises, to avoid communication of results that are less than favourable, and to stall on decisive action.
  In contrast to the current members, we, the Concerned Shareholder's Nominees make this unambiguous commitment: We intend to sell the CVT Systems and Related Products segment, and we will ensure a transaction materializes.   
  
• Energy Segment. The 2011 annual report focused on the energy segment's "increased presence in target markets". It promised a "look to the future with renewed energy", and "remaining alert to possibilities for strategic acquisitions".
  But these messages were misleading. Once again, the promises masked a reality of under-delivery. Earnings before interest, tax and depreciation (EBITDA) were down 26%, and net earnings shrank by 41%. Revenues were also lower.
  One problem in assessing the energy segment's results is that management does not disclose the extent to which the segment absorbs the holding company's overhead costs, whereas other publicly traded companies, considered as industry peers, do make this information available.
  The Energy segment has excellent operational leaders, five of whom own a total of more than 2.2 million CVTech shares.  But their job is to manage everyday operations, not formulate overall strategy.
  CVTech's senior executives have been unable to expand the Energy segment over the past three years. To explain this shortcoming, they say they need to find a company that meets their "strict acquisition criteria".  Yet other industry leaders have made many acquisitions in the last two years ensuring the development and growth of their companies and improved return to their shareholders.  Meanwhile CVTech's shareholders have seen the value of their investment dwindle.
  In contrast to current members, we, as Concerned Shareholder's Nominees, propose this unambiguous commitment:  We will identify opportunities for new acquisitions in the Energy segment that will contribute to CVTech's continued growth, long-term prosperity and shareholder value.   We will not miss any worthy opportunities.   

2012 First Quarter Results: More Disappointment and Yet Another New Message

CVTech's first-quarter results continue to exemplify the urgent need for change. By all measures, they are a disappointment.  With the CVT Systems segment now considered discontinued operations, the focus is the Energy segment where revenues dropped by 9% to $51.6 million, compared to $56.7 million in the first quarter of 2011.  Energy segment earnings before income tax increased to $3.3 million from $2.8 million in 2011's first quarter.  However, in reality the earnings before income tax for the Energy segment operations were only $1.1 million, a dramatic drop of 61%. The reported Energy segment earnings before income tax included a one-time benefit of $2.2 million from a life insurance claim. Similarly, the Energy segment earnings before interest, taxes, depreciation and amortization (EBITDA) excluding the one-time benefit of the life insurance proceeds would be $3.5 million as opposed to the reported $5.7 million.  This is the worst first quarter Energy segment performance since the acquisition of Riggs-Distler. 

The board at last revealed some concern at CVTech's chronic under-performance by also announcing a new message. It has "initiated a review of strategic and financial alternatives with the objective of enhancing shareholder value". In keeping with the pattern of vague promises and lack of transparent communication, the announcement gives no hint of how long this process may last or its objective. Instead, the company says that it "does not intend to make any further announcements…unless it concludes they (announcements) are warranted…or required by law".

Another Problem:  Lack of Financial Transparency

CVTech Group Inc. is a holding company with two operational segments.  The holding company's role is to oversee operations, devise and implement strategic steps, handle shareholder communications, and manage treasury matters.  Each of the operating segments reports to the holding company.

Ambitious new strategies have been promised to improve shareholder value, but nothing has been delivered.  Meanwhile, shareholder communications are kept to a minimum compared to other public companies.  There is an annual meeting, but no quarterly conference call or webcast for shareholders and analysts.

The raison d'être for the holding company must be reviewed. Situated in Drummondville, with its own building separate from operations and housing 11 employees, it is difficult to gage its real cost to shareholders. The financial statements and other available public documents do not transparently report that information.  The holding company's expenses are lumped in with cost of sales, selling expenses and general and administrative expenses.  However, the proxy circular discloses that the combined compensation of the CEO and the chief financial officer totaled $2.9 million over the past three years, equal to 18.5% of the company's net earnings during that period.

What the latest proxy circular fails to mention is that the chief operating officer of the Energy segment has been demoted, and no longer is there a chief operating officer for the segment.  His employment agreement, in place since 2005, no longer appears in the circular. His loss of title was widely communicated to the Energy segment personnel, but we, as shareholders were not informed.

We, as Concerned Shareholder's  Nominees, make this unambiguous commitment:  We will bring improved transparency by disclosing the costs of maintaining the holding company. Any excessive or unnecessary costs will be pruned.  The Concerned Shareholder's Nominees will also communicate the reasons for changes related to the operational leaders of the business.

The Plummeting Share Price

The drop in CVTech shares is hardly a surprise considering the disappointing financial results and the inability of the current board and senior management to deliver on their promises.

One of the recent 2011 initiatives has been a wasteful plan to buy back shares.  During 2011 the company purchased almost 388,000 of its own shares last year at an average price of $1.20/share, although the average trading price for the year was $1.15/share, and the current price is even less. This repurchase was a waste of shareholder money.

In fact, as the table below shows, there is a clear correlation between CVTech's recent financial results and the share price.  The results missed market expectations in each of the first three quarters of 2011. As a result, the share price tumbled.

http://files.newswire.ca/357/Trade.doc

¹ - Based on results without non-operational benefits arising from life insurance policies.  Q4 2008 was larger due to the receipt of life insurance policy proceeds.

We, as Concerned Shareholder's Nominees, make this unambiguous commitment:  We will ensure that each decision we make is in the best interests of the company, designed to contribute to its growth and long-term prosperity, consequently improving shareholder value.  Each of us believes that share price performance is correlated to operational results.  Our goal is to maximize operational results, to use cash to promote the growth of the operations and to transparently report each operating segment's results.

The Concerned Shareholder's Nominees

The Concerned Shareholder's Nominees bring a diversity of experience.  Each has an expertise that should greatly contribute to CVTech's success and shareholder value enhancement.  Each has been a senior executive and board member of other companies. Three nominees have been actively involved in companies that serve the Canadian and U.S. construction markets.  The nominees are as follows:

Jean-Marie Bourassa:

A chartered accountant since 1976, Mr. Bourassa holds a Bachelor degree from l'École des Hautes Études Commerciales (HEC). He also holds a ASC certification (Administrateur de Sociétés Certifié) from the Collège des Administrateurs de Sociétés (CAS) since 2009.  He is the founder and chief executive officer of Bourassa Boyer, Inc.  Employing forty professionals, it is the most important expert accounting firm in the west of Montreal. In 1989 Mr. Bourassa became the chairman of the board of directors of Jeanne-Normandin secondary school. In 1999, he acquired Vaudreuil-Volkswagen inc. and became its president. In 2002, he was elected to the board of directors of Savaria Corporation, a company publicly traded on the TSX. In 2007, he was named director of 5N Plus, inc. as well as chairman of its audit committee. 5N Plus, inc. is a company also traded on the TSX.

François Cordeau:

Mr. Cordeau holds a Bachelor (Sherbrooke University) and Master's (Waterloo University) degree in Electrical Engineering, as well as a diploma in Business Administration (Sherbrooke University).  He has served from 2004 until 2010 as chief executive officer and member of the board of Roctest Ltd., a Canadian publicly traded company which was acquired in 2010 by Nova Metrix LLC. Prior to joining Roctest in 2004, Mr. Cordeau had been with CDP Capital-Technology Ventures (a subsidiary of the Caisse de Dépôt et Placement du Québec) as a member of its investment committee before taking on the position of senior partner in charge of high technology sector investments. As part of his duties, he served as a director on numerous company boards in Canada and in France. Prior to 2002, Mr. Cordeau was employed for more than 15 years by Mitel Corporation (predecessor to Zarlink Semiconductor Inc. which was acquired by Microsemi Corporation in October 2011). In 1992, he became general manager of Mitel's facility located in Bromont where he set up one of the first semi-autonomous team structures in Canada. From 1996 to 2001, he successively became president of Mitel's Swedish subsidiary, vice president, operations at headquarters in Ottawa, in charge of four facilities in Canada, England and Sweden, president of the British subsidiary and, lastly, head of Mitel's Semiconductor division. He is currently a director of CMC Microsystems.

Louis Potvin:

Mr. Potvin is a chartered accountant since 1988, holds a Bachelor of Commerce from McGill University and a Masters in Business Administration from the University of Sherbrooke. He is chief executive officer of Group LMT Inc. ("LMT") since April 23, 2010. LMT is the dominant player in its market and fabricates steel doors and frames and distributes wood frames and doors as well as architectural hardware for commercial, industrial, institutional and multi-residential construction projects in Québec, Ontario and the Maritimes. From May 2003 to 2010, Mr. Potvin was chief financial officer of Group ADF inc. (TSX-DRX), a steel fabrication and installation services provider for complex steel structures and heavy built-ups. Prior to this position, Mr. Potvin was president and chief operating officer of Owen Steel, a South Carolina company purchased by ADF Group inc. in March 2002. From 1999 to 2002, Mr. Potvin was president and COO of LBL Skysystems Corporation, which specializes in the design, manufacture, assembly, and installation of windows and curtain walls for commercial and industrial buildings. From 1989 to 1999, Mr. Potvin was a financial analyst and portfolio manager at the Fonds de solidarité des travailleurs du Québec (FSTQ).

George Rossi:

Mr. Rossi is a chartered accountant since 1977 and holds a Bachelor of Commerce degree from Concordia University. He brings wide experience in finance, mergers and acquisitions. For almost 20 years he held senior financial positions, including chief financial officer, at Radiomutuel, a Montreal-based public media company. From 2000 to 2003 he was responsible for the restructuring of CINAR Corporation, a Montreal-based children's entertainment company holding the positions of chief financial officer and interim president (after the events which lead to the proceedings by that company against its former officers and directors). He is currently a director of Student Transportation Inc. (TSX: STB), The Dolan Company (NYSE: DM), and serves on the investment valuation committee of Investissement Desjardins, a Montreal- based fund.

Jean-Denis Talon:

Mr. Talon has had a distinguished career at the most senior levels of the Canadian insurance industry.  During the 1980s, he served as president and chief executive of AXA Assurances Inc.  From 1993 to 2011, when AXA Canada was purchased by Intact Financial Corporation, he held various positions including chairman of the board and chief executive.  Mr. Talon is also a former president of the financial affairs committee at the Insurance Bureau of Canada. He has been a director of Theratechnologies Inc. (TSX-TH) since 2001, currently serving as chairman of the compensation committee, and a member of several other board committees. Mr. Talon served as a director of Western Financial Group Inc. from 2004 to 2010 when it was acquired by Desjardins Financial Corp.

Pierre Turcotte:

Mr. Turcotte is a Laval University graduate in Computer Science and Mathematics. He has almost 30 years of experience in the information technology industry.  From 1982 to 2011, he held increasingly senior positions in Canada and Europe at CGI, a global provider of IT services.  In April 2011 Mr. Turcotte became the first executive vice-president for strategic development and business engineering, at CIA, a privately owned IT consulting firm with offices in Canada and Europe. He acts also as executive vice president, strategic development for ReadBooks, a world wide ebookstore company based in France.

Guy Aubert:

I have been a CGA since 1974, began my career at Thiro Ltd. (now Thirau), and purchased the company in the 1980s.  In the mid-1990s we expanded Thirau operations to the U.S., starting in Connecticut.  Following the sale of Thirau to CVTech in December 2005, I continued as the chief operating officer of Thirau.  I have been retired since May 2010.  I beneficially own 9,973,388 shares of CVTech, or 13.8% of the outstanding shares.  I have been a member of the board of directors of CVTech since 2005. I resigned as a member of the Human Resources and Compensation Committee of the Corporation as of May 11, 2012.

Vote for Change - Vote Your BLUE Proxy Form

As a concerned shareholder, I have provided information that demonstrates that the current Board consistently has over promised and under-delivered during the last three years.  Indeed, what the chairman and CEO have delivered are vague or confusing messages.  CVTech's future is compromised by their inaction which is also exacting a high price on all shareholders.

This proxy contest will determine the future direction of CVTech.  We now have the ability to change the direction to pursue sustained and improved performance.

The goal of the proposed nominees is to make this publicly traded company prosperous over the long-run and to thereby ensure a valued investment for all shareholders.

We intend to provide financial information in a transparent manner.  We will be communicative at every step, and we will undertake strategic actions with efficiency and decisiveness. It is time for action; we have heard too many promises and justifications with no concrete results.

It is critical that you vote your BLUE proxy form or voting instruction form in favour of the following board nominees:

• Jean-Marie Bourassa
• François Cordeau
• Louis Potvin
• George Rossi
• Jean-Denis Talon
• Pierre Turcotte
• Guy Aubert

Please note: The deadline to send in your BLUE proxy form or voting instruction form is by 10:30 a.m. on May 28, 2012.

If you have already voted another proxy for the current members of the board, you can change your vote by voting your BLUE proxy.  Only your most recent proxy will count.

If you have any questions, want to learn more, or would like to meet us, please refer to our website at www.changecvtech.com.

The seven nominees, including myself, look forward to helping CVTech achieve its full potential, ensure its long-term prosperity and, in the process, enhancing value for all of us.

Thank you for your support,

Guy Aubert, on behalf of

Gestion G. Aubert Ltée., Concerned Shareholder 

Please go to:  www.changecvtech.com .

Media contacts:

Guy Hurd
Director, Media Relations
Renmark Financial Communications
[email protected]
514 939 3989 x1224

Other,
Bernard Simon
Vice-President - Kingsdale Communications Inc.
[email protected]
416 867 2304