**ENVOY COMMUNICATIONS GROUP INC.****MANAGEMENT INFORMATION CIRCULAR****Solicitation of Proxies****This Management Information Circular is furnished in connection with the solicitation of proxies bymanagement of ENVOY COMMUNICATIONS GROUP INC. (the “Corporation”) for the Annual Meeting ofShareholders to be held at 300 Bayview Avenue, Toronto, Ontario, on Tuesday, March 28, 2006 at11:00 a.m. (Toronto time) or any adjournment thereof (the “Meeting”).**It is expected that thesolicitation will be primarily by mail, but proxies may also be solicited personally, byadvertisement or by telephone, by regular employees of the Corporation without specialcompensation, or by the Corporation’s transfer agent, Computershare Trust Company of Canada, atnominal cost. The cost of solicitation by management will be borne by the Corporation.**Appointment of Proxies**If a shareholder cannot attend the Meeting but wishes to vote on the resolutions, the shareholdershould sign, date and deliver the enclosed form of proxy to Computershare Trust Company of Canada,100 University Avenue, 9th Floor, Toronto, Ontario, M5J 2Y1 on or before 11:00 a.m. (Toronto time)on the second business day preceding the Meeting or 48 hours (excluding Saturdays, Sundays andholidays) before any adjournment of the Meeting. **THE PERSONS NAMED IN THE ENCLOSED FORM OF PROXYARE DIRECTORS AND/OR OFFICERS OF THE CORPORATION. A SHAREHOLDER GIVING A PROXY CAN STRIKE OUT THENAMES OF THE PERSONS PRINTED IN THE ACCOMPANYING FORM OF PROXY AND APPOINT ANOTHER PERSON TOREPRESENT THE SHAREHOLDER AS PROXY AT THE MEETING BY INSERTING THE NAME OF ANOTHER PERSON IN THESPACE PROVIDED, OR THE SHAREHOLDER MAY COMPLETE ANOTHER FORM OF PROXY.**A proxy nominee need not bea shareholder of the Corporation. A shareholder giving a proxy has the right to attend, or appointsomeone else to attend as his or her proxy, at the Meeting and the proxy earlier submitted can berevoked in the manner described below under “Revocability of Proxies”.**Voting of Proxies**The common shares of the Corporation (the “Common Shares”) represented by a properly executed proxywill be voted or withheld from voting in accordance with the instructions given in the proxy on anyballot that may be called for and, if the shareholder specifies a choice with respect to any matterto be acted upon, the Common Shares will be voted accordingly. **IF NO CHOICE IS SPECIFIED IN THEPROXY, THE NOMINEE WILL VOTE THE SHARES REPRESENTED BY THE PROXY IN FAVOUR OF EACH RESOLUTION FORWHICH NO CHOICE WAS SPECIFIED.**The enclosed form of proxy confers discretionary authority upon thepersons named in the proxy. The discretionary authority so granted may be exercised with respect toamendments or variations to matters identified in the accompanying Notice of Meeting and othermatters which may properly come before the Meeting, unless the shareholder deletes thediscretionary authority from the proxy. As at the date of this Management Information Circular,management of the Corporation is not aware of any such amendment or variation or any other matterto come before the Meeting other than those referred to in the accompanying Notice of Meeting.However, if any other matters that are not now known to management should properly come before theMeeting, the Common Shares represented by proxies given in favour of management nominees will bevoted on such matters in accordance with the best judgment of such nominees.

 

2**Revocability of Proxies**A shareholder who has given a proxy has the power to revoke it by either depositing an instrumentin writing signed (in writing or by electronic signature) by the shareholder or the shareholder’sduly authorized attorney or by transmitting by telephonic or electronic means a revocation signedby electronic signature, which instrument or revocation must be delivered to the Registered Officeof the Corporation at 172 John Street, Toronto, Ontario, M5T 1X5 at any time up to and includingthe last business day preceding the day of the Meeting or to the Chair of the Meeting on the day ofthe Meeting at any time prior to its use. A shareholder may also revoke a proxy by personalappearance at the Meeting prior to the hour of commencement of the Meeting or in any other mannerpermitted by law.**Beneficial Shareholders**The information set forth in this section is of importance to many shareholders of the Corporation,as a substantial number of shareholders do not hold Common Shares in their own name. Shareholderswho do not hold their Common Shares in their own name (i.e. non-registered or beneficialshareholders) should note that only proxies deposited by shareholders whose names appear on therecords of the Corporation as the registered holders of Common Shares can be recognized and actedupon at the Meeting. If Common Shares are listed in an account statement provided to a shareholderby a broker, then, in almost all cases, those shares will not be registered in the shareholder’sname on the records of the Corporation. In Canada, the vast majority of such shares are registeredunder the name of CDS & Co. (the registration name for The Canadian Depository for SecuritiesLimited, which acts as nominee for many Canadian brokerage firms). Shares held by brokers or theiragents or nominees can be voted (for or against resolutions) only upon the instructions of thebeneficial shareholder. Without specific instructions, a broker and its agents and nominees areprohibited from voting shares for the broker’s clients. Therefore, beneficial shareholders shouldensure that instructions respecting the voting of their shares are communicated to the appropriateperson.Applicable securities legislation requires intermediaries/brokers to seek voting instructions frombeneficial shareholders in advance of shareholders’ meetings. Every intermediary/broker has its ownmailing procedures and provides its own return instructions to clients, which should be carefullyfollowed by beneficial shareholders in order to ensure that their Common Shares are voted at theMeeting. The majority of brokers delegate responsibility for obtaining instructions from clients toADP Investor Communications Corporation (“ADP”). ADP typically uses its own form of proxy or votinginstruction form, mails those forms to the beneficial shareholders and asks beneficial shareholdersto return the forms to ADP. ADP then tabulates the results of all instructions received andprovides appropriate instructions respecting the voting of shares to be represented at the Meeting.A beneficial shareholder receiving a proxy or voting instruction form from ADP cannot use that formto vote shares directly at the Meeting — the form must be returned to ADP well in advance of theMeeting in order to have the shares voted.There are two kinds of beneficial owners — those who object to their name being made known to theissuers of securities which they own (called OBOs for Objecting Beneficial Owners) and those who donot object to the issuers of the securities they own knowing who they are (called NOBOs forNon-Objecting Beneficial Owners). Subject to the provisions of National Instrument 54-101,Communication with Beneficial Owners of Securities of Reporting Issuers, after September 1, 2002issuers may request and obtain a list of their NOBOs from intermediaries via their Transfer Agents.Effective for shareholder meetings taking place on or after September 1, 2004 issuers can obtainand use this NOBO list for distribution of proxy-related materials directly (not via ADP) to NOBOs.This year, the Corporation has decided to take advantage of those provisions of National Instrument54-101 that permit it to directly deliver proxy-related materials to its NOBOs. As a result NOBOscan expect to receive a scannable Voting Instruction Form (VIF) from the Corporation’s TransferAgent, Computershare Trust Company of Canada (or Computershare Investor Services Inc. as the casemight be) (“Computershare”). These VIFs are to be completed and returned to Computershare in theenvelopeprovided or by facsimile. In addition, Computershare provides both telephone voting and internetvoting as described onthe VIF itself which contains complete instructions. Computershare willtabulate the results of

 

3the VIFs received from NOBOs and will provide appropriate instructions at the Meeting with respectto the shares represented by the VIFs they receive.These securityholder materials are being sent to both registered and non-registered owners of thesecurities. If you are a non-registered owner, and the issuer or its agent has sent these materialsdirectly to you, your name and address and information about your holdings of securities, have beenobtained in accordance with applicable securities regulatory requirements from the intermediaryholding on your behalf. By choosing to send these materials to you directly, the issuer (and notthe intermediary holding on your behalf) has assumed responsibility for (i) delivering thesematerials to you, and (ii) executing your proper voting instructions. Please return your votinginstructions as specified in the request for voting instructions.Although a beneficial shareholder may not be recognized directly at the Meeting for the purposes ofvoting Common Shares registered in the name of CDS & Co. or a broker (or an agent of the broker), abeneficial shareholder may attend at the Meeting as proxyholder for the registered shareholder andvote the Common Shares in that capacity. Beneficial shareholders who wish to attend the Meeting andindirectly vote their Common Shares as proxyholder for the registered shareholder should entertheir own names in the blank space on the form of proxy or voting instruction form provided to themand return the same to their broker (or the broker’s agent) in accordance with the instructionsprovided by such broker (or agent), well in advance of the Meeting.**Electronic Signature**A shareholder or the shareholder’s duly authorized attorney may sign by electronic signature aproxy, revocation of proxy or a power of attorney authorizing the creation of either of them, ifthe means of electronic signature permits a reliable determination that the document was created orcommunicated by or on behalf of the shareholder or the attorney, as the case may be.**Voting Shares and Principal Shareholders**As at February 22, 2006, there are 20,997,517 Common Shares outstanding and entitled to vote atthe Meeting. The number of Common Shares outstanding reflects the 1 for 5 consolidation of theCorporation’s Common Shares (see “Common Share Consolidation” below). Each Common Share carriesone vote.Any shareholder of record as at the close of business on February 22, 2006 is entitled to vote theCommon Shares registered in his or her name at that date except to the extent that such shareholderhas subsequently transferred any of such Common Shares and the transferee of those Common Sharesestablishes his or her ownership of such Common Shares and demands, not later than 10 days beforethe Meeting, that his or her name be included in the list of shareholders entitled to vote at theMeeting. In such case, the transferee is entitled to vote such Common Shares at the Meeting.To the best of the knowledge of the directors and executive officers of the Corporation, noshareholder beneficially owns, directly or indirectly, or exercises control or direction over 10%or more of the outstanding Common Shares, except as follows:     **Name** **Number of Common Shares** **Percentage**CDS &Co.1    P.O. Box 1038 Stn A 20,298,960 96.67%25 The Esplanade    Toronto, Ontario    M5W 1G5     NOTE:1. The individual beneficial owners of the Common Shares are not known by the Corporation’sdirectors or executive officers.

 

4**MATTERS REQUIRING SHAREHOLDER APPROVAL****Election of Directors**The following persons are proposed to be nominated at the Meeting for election to the Board ofDirectors (referred to as the “Board of Directors” or the “Board”) of the Corporation. Each of thedirectors who is elected will hold office until the next annual meeting of shareholders or untilthe successor of such director is duly elected, unless such office is earlier vacated inaccordance with the Corporation’s by-laws.In the absence of a contrary instruction, the persons named in the enclosed form of proxy intend tovote for the election as directors of the nominees whose names are set forth below, each of whomhas been a director since the date indicated below opposite his name and each of whom has held theposition shown as his principal occupation for the last five years unless otherwise indicated.Management does not contemplate that any of the nominees will be unable to serve as a director, butif that should occur for any reason prior to the Meeting, the persons named in the enclosed form ofproxy reserve the right to vote for another nominee in their discretion.           **Date of Becoming**  **Nominee** **Principal Occupation** **a Director** **Common Shares Held****1**GEOFFREY B. GENOVESE Chairman of the Board, President July 26, 1991 1,465,551Director, Chairman of the Board, and Chief Executive Officer,    President and Chief Executive Envoy Communications Group    Officer Inc.    Toronto, Ontario, Canada             HUGH AIRD 2,3,4,5,7 Director, Business Development, November 24, 2003 1,000Director Blackmont Capital (an investment    Toronto, Ontario, Canada bank)           JOHN H. BAILEY Lawyer April 28, 1994 37,518Director, Executive Vice President      and Secretary      Mississauga, Ontario, Canada             DAVID HULL 2,3,4 President, Hull Life Insurance January 13, 1995 30,600Director Agencies Inc. (an insurance    Toronto, Ontario, Canada agency)           DAVID PARKES 2,3,4,6 Consultant, David Parkes & October 23, 2002 10,000Director Associates (an executive    Toronto, Ontario, Canada consulting services firm)     NOTE:1. Information relating to Common Shares beneficially owned, directly or indirectly, or over which control or direction isexercised, not being within the knowledge of the Corporation, has been furnished by the respective nominee. The number ofCommon Shares reflects the 1 for 5 consolidation of the Corporation’s Common Shares (see “Common Share Consolidation”below). 2. Member of the Audit Committee. 3. Member of the Compensation Committee. 4. Member of the Nominating and Corporate Governance Committee. 5. Prior to joining Blackmont Capital in 2005, Mr. Aird was the Senior Relationships Manager, Private Wealth Management,Morgan Stanley Canada (an investment bank). Prior to joining Morgan Stanley Canada in 2003, Mr. Aird was Vice President,Business Development, Mulvihill Capital Management Inc. (a fund manager). Prior to joining Mulvihill Capital ManagementInc. in 2001, Mr. Aird was Vice Chairman of Merrill Lynch Canada Inc., formerly Midland Walwyn Capital Inc. an investmentbank). 6. Until 2005, Mr. Parkes was President and CEO of FreefoneInc.. Prior to joining Freefone Inc. in 2003, Mr. Parkes foundedDavid Parkes & Associates in 2001. Mr. Parkes was President and CEO of Look Communications Inc. until 2001. 7. Mr. Aird first became a director of the Corporation on August 20, 1997. As a resultof personal commitments, Mr. Aird resigned as a director on April 1, 2003. On November 24,2003, Mr. Aird was re-elected as a director of the Corporation. On September 22, 2004,the Board of Directors appointed Mr. Aird the Lead Director (defined under “CorporateGovernance — Mandate of the Board” below) of the Board of Directors.

 

5**Appointment of Auditors**BDO Dunwoody LLP were first appointed as auditors of the Corporation on March 27, 2003. It isproposed that BDO Dunwoody LLP be reappointed as auditors of the Corporation and that the Board ofDirectors be authorized to fix their remuneration. Unless otherwise instructed, the persons namedin the enclosed form of proxy intend to vote for the appointment of BDO Dunwoody LLP as auditors ofthe Corporation until the next annual meeting of the shareholders of the Corporation or until theirsuccessor is appointed, at a remuneration to be fixed by the Directors.**EXECUTIVE COMPENSATION****Summary Executive Compensation**The following table sets forth all compensation for the fiscal years ended September 30, 2003,2004 and 2005 paid to the Chief Executive Officer, the Chief Financial Officer and the three othermost highly compensated officers who served as executive officers of the Corporation during theCorporation’s most recently completed fiscal year (the “Named Executive Officers”):                                           **Long-Term**                    **Compensation**                    **Awards**        **Annual Compensation** **Common Shares**                **Other Annual** **Under Options/** **All Other****Name and Principal**             **Compensation** **SARs Granted** **Compensation****Position** **Year** **Salary($)** **Bonus($)** **($)** **(#)** **($)**Geoffrey B. Genovese  2005   550,000   550,000   218,7501  —   144,3783Chairman, President  2004   541,350   400,000   150,0001  80,000   152,4733and Chief Executive  2003   496,903   —   150,0001  —   — Officer                                                 Linda Gilbert  2005   187,500   —   9,5005  —   — Chief Financial  2004   150,000   50,000   —   20,000   — Officer  2003   131,810   —   —   15,000   —                          John H. Bailey  2005   300,0002  —   —   —   — Executive Vice  2004   200,0002  —   —   40,000   — President and  2003   —   —   —   40,000   — Secretary                                                 Paul Bean 4  2005   72,600   48,750   13,4056  —   9,7507Managing Director,  2004   67,306   27,500   12,3386  15,000   9,3007Watt Gilchrist Limited  2003   52,000   —   11,0006  10,000   7,8007                         Patrick Rodmell  2005   225,000   100,000   —   —   — Managing Director,  2004   225,360   67,000   —   15,000   — Watt International Inc.  2003   204,288   30,000   —   20,000   —  NOTE:1. Represents amounts paid to a corporation related to Mr. Genovese as an annual management fee. 2. Mr. Bailey was appointed Executive Vice President of the Corporation on February 1, 2004. Amount reflects fees paid for thepersonal services of Mr. Bailey provided to the Corporation by Semper Consulting Inc. (see “Employment Contracts andTermination Agreements” below). 3. Represents amounts paid by the Corporation with respect to life insurance for the benefit of Mr. Genovese and with respectto acar allowance. 4. The compensation of Mr. Bean is stated and paid in Pounds Sterling. On February 22, 2006,the Bank of Canada noon rate of exchange for the conversion of one Pound Sterling intoCanadian dollars was $2.0006 (Cdn $1.00 equals£0.49985). 5. Represents amounts paid by the Corporation with respect to a car allowance. 6. Represents amounts paid by Watt Gilchrist Limited with respect to life insurance forthe benefit of Mr. Bean and a car allowance. 7. Represents the annual contribution by Watt Gilchrist Limited to its employee pensionplan.

 
 6The Corporation does not provide any pension, retirement plan or other remuneration for itsdirectors or officers that constitutes an expense to the Corporation, nor are there any plans orarrangements in respect of compensation received or that may be received by executive officers inthe Corporation’s most recently completed or current fiscal year to compensate such officers in theevent of the termination of employment or a change in control of the Corporation.**Stock Option Plan**The Corporation has established a Stock Option/Stock Appreciation Right Plan (the “Stock OptionPlan”) pursuant to which options to purchase Common Shares and stock appreciation rights (“SARs”)may be granted to directors, officers, employees or certain consultants to the Corporation or anyof its subsidiaries, as determined by the Compensation Committee, at exercise prices to be fixed bythe Compensation Committee, subject to limitations imposed by any Canadian stock exchange on whichthe Common Shares are listed for trading and any other regulatory authority having jurisdiction insuch matters. The exercise price per share may not be less than the closing price of the CommonShares on the TSX on the last trading day prior to the grant of the option. The Common Sharessubject to each option shall become purchasable at such time or times as may be determined by theCompensation Committee. All of the options granted under the Stock Option Plan may be exercisedwithin a maximum period of five years following the date of their grant. SARs may only be grantedin conjunction with an option and, when exercised, entitle the holder to receive an amount equal invalue to the excess of the market value of the Common Shares over the price of the related option.The excess amount is payable in Common Shares having a market value equal to such excess.On termination of employment, other than by reason of death, disability or retirement, all unvestedoptions are forfeited and vested options may be exercised for a period of fifteen days followingtermination. If a participant dies, incurs a disability or retires within one year of the date ofgrant of the option, the option expires on the date of death, disability or retirement, as the casemay be. If the participant dies, incurs a disability or retires more than one year following thedate of grant of the option, the option vests immediately and may be exercised within one year ofthe date of death or ninety days of the date of disability or retirement, as the case may be.Options are non-assignable and non-transferable by the option holder and shall be exercisableduring the option holder’s lifetime only by the option holder. SARs are non-transferable andterminate when the related option terminates.Unless otherwise required by law, the Board may amend, suspend or terminate the Stock Option Plan.No amendment to the Stock Option Plan may be made that would increase the available sharesthereunder without the approval of the shareholders of the Corporation. The Stock Option Plan wasamended during the most recently completed fiscal year to reduce the maximum number of CommonShares that may be granted thereunder from 4,000,000 to 800,000. No shareholder approval of theamendment was obtained as it was made to reflect the 1 for 5 consolidation of the Corporation’sCommon Shares (see “Common Share Consolidation” below).As at February 22, 2006, there are 800,000 Common Shares (currently representing 3.81% of theCorporation’s issued and outstanding Common Shares) available under the Stock Option Plan, ofwhich 386,950 are reserved to be issued pursuant to options that have already been granted(currently representing 1.84% of the Corporation’s issued and outstanding Common Shares). 284,383Common Shares (currently representing 1.35% of the Corporation’s issued and outstanding CommonShares) will be available to be issued pursuant to the exercise of options that may be grantedunder the Stock Option Plan in the future. There are no SARs outstanding under the Stock OptionPlan. The aggregate number of Common Shares reserved for issuance to any one individual under theStock Option Plan and all other share compensation arrangements may not exceed 5% of the issuedand outstanding Common Shares. The issuance to all insiders (as defined in the *Securities Act*(Ontario)) of the Corporation, within a one year period, of Common Shares pursuant to the StockOption Plan and all other share compensation arrangements may not exceed 10% of the issued andoutstanding Common Shares. No financial assistance is provided to participants by the Corporationto facilitate the purchase of Common Shares under the Stock Option Plan.
 

 
 7**Options Granted During Most Recently Completed Fiscal Year**The following table sets forth options granted under the Stock Option Plan to the Named ExecutiveOfficers of the Corporation in the most recently completed fiscal year:                   **Market Value of**      **Percentage of**   **Common Shares**      **Total Options**   **Underlying**    **Common Shares** **Granted to**   **Options on Date**    **Under Options** **Employees in** **Exercise Price** **of Grant**  **Name** **Granted (#)** **Financial Year** **($/Share)** **($/Share)** **Expiry Date**Geoffrey B.Genovese — — — — —Linda Gilbert — — — — —John H. Bailey — — — — —Paul Bean — — — — —Patrick Rodmell — — — — —**Aggregate Options Exercised During Most Recently Completed Fiscal Year and FiscalYear-End Option Values**The following table sets out for Named Executive Officers information relating to optionsexercised by them during the most recently completed fiscal year and the value of unexercisedoptions held by them as at the end of the most recently completed fiscal year.                 **Value of**        **Unexercised In-the**      **Number of** **Money Options at**      **Unexercised Options** **September 30, 2005**  **Number of Common** **Aggregate Value** **at September 30, 2005** **Exercisable/**  **Shares Acquired on** **Realized** **Exercisable/** **Unexercisable** **2****Name** **Exercise****1** **($)** **Unexercisable** **1** **($)**Geoffrey B. Genovese — — 80,000/— —/—         Linda Gilbert 1,667 2,084 1,000/— —/—      20,000/— —/—John H. Bailey — — 4,000/— —/—      40,000/— —/—Paul Bean — — 6,667/3,333 9,534/4,766      15,000/— —/—Patrick Rodmell — — 1,500/— —/—      6,667/6,666 9,534/9,534      15,000/— —/— NOTE:1. The number of Common Shares reflects the 1 for 5 consolidation of the Corporation’s CommonShares (see “Common Share Consolidation” below). 2. The closing price of the Common Shares of the Corporation on the TSX on September 30,2005 was $2.43.
 

 
 8**Equity Compensation Plan Information as at September 30, 2005**The following table sets out information with respect to compensation plans under which equitysecurities of the Corporation are authorized for issuance as at the end of the most recentlycompleted fiscal year.             **Number of Common Shares**      **remaining available for future**  **Number of Common Shares to**   **issuance under equity**  **be issued upon exercise of** **Weighted-average exercise** **compensation plans (excluding**  **outstanding options, warrants** **price of outstanding options,** **Common Shares reflected in**  **and rights****1** **warrants and rights****1** **column (a))****Plan Category** **(a)** **(b)** **(c)**Equity compensationplans approved by 401,950 $4.10 269,383securityholders      Equitycompensation plans not approved by         —     —         —securityholders      Total 401,950 $4.10 269,383 NOTE:1. The number of Common Shares and the weighted-average exercise price have been adjusted toreflect the 1 for 5 consolidation of the Corporation’s Common Shares (see “Common ShareConsolidation” below).**Employment Contracts and Termination Agreements**The Corporation and its wholly owned subsidiaries, Watt International Inc. (“Watt”) and WattGilchrist Limited (“Gilchrist”), have entered into employment contracts with the Named ExecutiveOfficers.Geoffrey B. Genovese has agreed to act as the Corporation’s Chairman, President and Chief ExecutiveOfficer at an annual base salary of $550,000, together with a discretionary bonus based on theachievement of agreed upon criteria established from time to time by the Compensation Committee.This agreement provides for a severance payment equal to $300,000 plus three times the totalremuneration and other compensation earned by Mr. Genovese and his management company during thetwelve month fiscal period of the Corporation immediately preceding the date of termination, if Mr.Genovese’s employment is terminated, without cause, by the Corporation. If there is a change ofcontrol (as defined) of the Corporation and Mr. Genovese elects to resign within twelve months ofthe date on which the change of control occurs, Mr. Genovese is entitled to receive a severancepayment equal to three times the total remuneration and other compensation earned by Mr. Genoveseand his management company during the twelve month fiscal period of the Corporation immediatelypreceding the date on which the change of control occurs. If there is a change of control of theCorporation, Mr. Genovese may also receive, at the discretion of the Compensation Committee, aone-time bonus of up to a maximum of $1,000,000, based on a positive impact to the shareholders ofthe Corporation as a result of the change of control.An annual fee of $300,000 is also payable to Mr. Genovese’s management company pursuant to amanagement agreement with the Corporation. The management agreement is automatically renewable onSeptember 30th of each year, unless terminated by Mr. Genovese or the Corporation.John H. Bailey was appointed Executive Vice President of the Corporation on February 1, 2004.Pursuant to the terms of an agreement dated February 1, 2004 between the Corporation and SemperConsulting Inc. (“Semper”), Semper agreed to provide certain financial advisory services as well asgeneral advice of a strategic nature, including the personal services of John H. Bailey. Inconsideration for these services, the Corporation has agreed to pay Semper an annual fee of$300,000 and to reimburse Semper for all expenses
 

 
 9incurred by it in the performance of its services. The agreement has a term ending on May 31, 2010,unless sooner terminated pursuant to the provisions thereof. If the Corporation terminates theagreement for any reason, other than cause, or if there is a change of control (as defined) of theCorporation and Semper elects to terminate the agreement within twelve months of the date on whichthe change of control occurs, Semper shall be entitled to receive a payment equal to three timesthe total fees paid to Semper during the twelve month period ending on the month immediatelypreceding the month in which the agreement is terminated. Semper is wholly-owned by the spouse ofJohn H. Bailey.Linda Gilbert has agreed to act as the Corporation’s Vice President and Chief Financial Officer atan annual salary of $200,000. This agreement provides for a severance payment equivalent to herbase salary for a period of up to six months, if her employment is terminated, without cause, by the Corporation.Linda Gilbert resigned as Vice President and Chief Financial Officer in January of 2006 and wasreplaced as Chief Financial Officer by Joseph Leeder.Paul Bean has agreed to act as the Managing Director of Gilchrist at an annual base salary of72,600 British pounds. This agreement provides for a severance payment equivalent to his basesalary and benefits for a period of twelve months, if his employment is terminated, without cause,by Gilchrist.Patrick Rodmell has agreed to act as the Managing Director of Watt at an annual base salary of$225,000 together with an annual cash bonus based on the performance of Watt. This agreementprovides for a severance payment equivalent to his base salary and benefits for a period of up tofour months, if his employment is terminated, without cause, by the Corporation.Joseph Leeder joined the Corporation in October of 2005 as its Vice President, Mergers andAcquisitions. In January 2006, Joseph Leeder was also appointed Chief Financial Officer of theCorporation, replacing Linda Gilbert. Joseph Leeder’s agreement provides for an annual base salaryof $400,000, together with a discretionary bonus based on the achievement of agreed upon criteriaestablished from time to time by the Compensation Committee. This agreement also provides for aseverance payment equal to the greater of $800,000 and two times the total remuneration and othercompensation earned by Mr. Leeder during the twelve month fiscal period of the Corporationimmediately preceding the date of termination, if Mr. Leeder’s employment is terminated, withoutcause, by the Corporation. If there is a change of control (as defined) of the Corporation and Mr.Leeder elects to resign within twelve months of the date on which the change of control occurs,Mr. Leeder is entitled to receive a severance payment equal to the same amount to which he wouldhave been entitled if his employment had been terminated by the Corporation, without cause.**Indebtedness of Directors and Executive Officers**There is no indebtedness to the Corporation or its subsidiaries by any proposed nominee forelection as a director or any current or former director, executive officer or employee or anassociate of any such person.**Composition of the Compensation Committee**The Compensation Committee is comprised of David Hull (Chairman), David Parkes and Hugh Aird.**Report on Executive Compensation**During the fiscal year ended September 30, 2005, the Corporation’s executive compensation programwas intended to be consistent with the Corporation’s business plans, strategies and goals, whiletaking into account various factors and criteria including competitive factors and theCorporation’s performance; to provide an appropriate overall compensation package that would permitthe Corporation to attract and retain highly qualified and experienced senior executives; and toencourage superior performance by the Corporation. The Corporation’s compensation policies wereintended to motivate individuals to achieve and then to award compensation based on corporate andindividual results.The Compensation Committee reviews and determines the compensation of each executive officer (the“Executive”) of the Corporation, other than the executive officers of the Corporation’ssubsidiaries. The
 

 
10compensation of an executive officer of the Corporation’s subsidiary is based on the executiveofficer’s achievement of specific individual performance goals set and assessed by the ChiefExecutive Officer and on the profitability of the subsidiary for which that executive officer isaccountable.In conducting the review, the Compensation Committee considers, among other things, individualperformance assessments, the Corporation’s performance, the alignment with and balance betweenshort and longer-term performance goals, the value of incentive awards paid to similar positions incomparable companies and previous incentive awards. From time to time, the Compensation Committeeuses the services of an independent external compensation consultant to review the competitivenessof compensation arrangements.The compensation of all executive officers consists of a base salary, bonus and participation inthe Corporation’s Stock Option Plan. Individual performance is recognized by measuring theachievement of specific objectives that are related to concrete, measurable elements (such asearnings before taxes) in each executive officer’s performance and/or functional area ofresponsibility. Base salary levels were based on responsibility, experience, knowledge and oninternal equity criteria and external pay practices. In appropriate circumstances, cashcompensation will be augmented by the payment of bonuses with the intention that overallcompensation be more closely aligned to the profitability of theCorporation or to the executive officer’s individual’s performance. The Stock Option Plan is intended to provide longterm rewards linked directly to the market value of the Common Shares of the Corporation.*Salary*The salary for each of the Executives is targeted at the median of the applicable comparator group.Actual salaries take into consideration the individual’s position and responsibilities in theCorporation, the individual’s contribution to the Corporation’s performance and amounts paid bycompanies in the same industry for comparable positions.*Annual Bonus*Each Executive, other than the Executive Vice President, has an opportunity to earn an annualperformance bonus. Generally, the target bonus for each Executive is expressed as a percentage ofbase salary and is commensurate with bonuses which are competitive in the industry for theposition. Any bonus that is paid is limited to 100% of the Executive’s base salary and is based onthe achievement by the Corporation of specific annual earnings before taxes (“EBT”) targets, aswell as individual performance.*Long Term Incentives*The Corporation’s Stock Option Plan is designed to encourage all eligible employees, officers(including executive officers) and directors of the Corporation to align their interests directlywith those of shareholders and to benefit shareholders by allowing the Corporation to attract andretain employees. Details of the Corporation’s Stock Option Plan are set out above under theheading “Stock Option Plan”.The Compensation Committee is responsible for administering the Stock Option Plan, includingreporting and, where appropriate, providing recommendations to the Board on the Stock Option Plan.On the recommendation of the Chief Executive Officer, the Compensation Committee considers and,where appropriate, approves stock option and SARs grants in accordance with the Stock Option Plan.To date, no SARs have been granted under the Stock Option Plan.Options were granted under the Stock Option Plan based on the level of executive responsibility andoverall compensation levels of comparable corporations. The number of stock options granted to theexecutive officers is based upon similar factors as are relevant in setting the salary and annualbonus of executive officers. In addition, the amount and terms of outstanding options areconsidered when determining new grants for executives officers and all other eligible participantsunder the Stock Option Plan.*Chief Executive Officer’s Compensation*Compensation for the President and Chief Executive Officer is intended to reflect a fairevaluation of his overall performance, responsibility and experience and is intended to becompetitive with levels of
 

 
 11compensation of comparable companies. Each year, an analysis of the President and ChiefExecutive Officer’s performance is based on actual performance, performance relative toanticipated plans and the effectiveness and appropriateness of strategies designed to addressthose factors. Compensation ranges designed to recognize level of responsibility and performanceare based on survey data for the selected comparator group, consisting primarily of selectcompanies considered to be comparable to the Corporation (based on the nature of their businessand size) compiled by the Compensation Committee, and are examined to ensure that the compensationawarded by the Corporation is competitive and adequate. Except for a voluntary 10% reduction inhis base salary between February 2002 and March 2004, the base salary of the President and ChiefExecutive Officer had not changed between October 1, 2001 and April 1, 2005. During the 2005fiscal year, the Compensation Committee increased the fee payable to Mr. Genovese’s managementcompany from $150,000 to $300,000, which placed the President and Chief Executive Officer in themid-range level of compensation paid to the CEO of the companies examined. During the fiscal year,the President and Chief Executive Officer was also paid a bonus of $550,000 for meeting certainpreestablished EBT targets and for the successful completion of acquisitions and financings, majoraccount wins and other factors pertaining to the performance of the President and Chief ExecutiveOfficer.Report presented by the Compensation CommitteeDavid Hull (Chairman)