SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
THINKPATH INC.
--------------
(Name of Registrant as specified in its charter)
(Name of Person(s) Filing Proxy Statement), if other than Registrant
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:_______(A)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
THINKPATH INC.
55 University Avenue, Suite 400
Toronto, Ontario M5J 2H7
----------------------------
NOTICE OF THE ANNUAL MEETING AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 16, 2002
TO THE SHAREHOLDERS OF THINKPATH INC.:
NOTICE IS HEREBY GIVEN, that the Annual Meeting and Special Meeting
(the "Meeting") of shareholders of Thinkpath Inc. (the "Company") will be held
at 10:00 A.M. on October 16, 2002 at the Company's executive offices located at
55 University Avenue, Suite 400, Toronto, Ontario M5J 2H7, for the following
purposes:
1. To elect the Board of Directors of the Company for the ensuing year;
2. To ratify the appointment of Schwartz, Levitsky, Feldman, llp, as the
Company's independent chartered accountants for the ensuing year;
3. To ratify the adoption of the Company's 2002 Stock Option Plan, a copy
of which being attached hereto as Exhibit A;
4. To vote upon the proposal to amend the Company's Articles of
Incorporation to increase the authorized number of the shares of the
Company's common stock from 30,000,000 to 100,000,000 shares, in the
form of special resolution attached hereto as Exhibit B; and
5. To transact such other business as may properly come before the Meeting
and any continuations and adjournments thereof.
Shareholders of record at the close of business on September 13, 2002
are entitled to notice of and to vote at the Meeting.
In order to ensure a quorum, it is important that the shareholders
representing a majority of the total number of shares issued and outstanding and
entitled to vote be present in person or represented by their proxies.
Therefore, whether you expect to attend the Meeting in person or not, please
sign, fill out, date and return the enclosed proxy in the self-addressed,
postage-paid envelope also enclosed. If a shareholder attends the Meeting and
prefers to vote in person, such shareholder can revoke such shareholder's proxy.
In addition, please note that abstentions and broker non-votes are each
included in the determination of the number of shares present and voting for
purposes of determining the presence or absence of a quorum for the transaction
of business. Neither abstentions nor broker non-votes are counted as voted
either for or against a proposal.
By Order of the Board of Directors, September ___, 2002
/s/ Declan A. French
Chairman of the Board of Directors
THINKPATH INC.
55 University Avenue, Suite 400
Toronto, Ontario M5J 2H7
----------------------------
PROXY STATEMENT
----------------------------
ANNUAL MEETING AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 16, 2002
This Proxy Statement is being furnished in connection with the
solicitation by the Board of Directors of Thinkpath Inc. (the "Company") for use
at the Annual Meeting and Special Meeting (the "Meeting") of shareholders of the
Company to be held on October 16, 2002 at 10:00 A.M. at the Company's executive
offices located at 55 University Avenue, Suite 400, Toronto, Ontario M5J 2H7 and
at any continuation and adjournment thereof. Anyone giving a proxy may revoke it
at any time before it is exercised by giving the Chairman of the Board of
Directors of the Company written notice of the revocation, by submitting a proxy
bearing a later date, or by attending the Meeting and voting. This statement,
the accompanying Notice of Meeting and form of Proxy have been first sent to the
shareholders on or about September ___, 2002.
In addition, please note that abstentions and broker non-votes are
included in the determination of the number of shares present and voting for
purposes of determining the presence or absence of a quorum for the transaction
of business. Neither abstentions nor broker non-votes are counted as voted
either for or against a proposal.
All properly executed, unrevoked proxies on the enclosed form, which
are received in time will be voted in accordance with the shareholder's
directions, and unless contrary directions are given, will be voted for the
proposals described below.
Please note that all references to dollar amounts in this Proxy, unless
otherwise indicated, are to United States dollars.
OWNERSHIP OF SECURITIES
Only shareholders of record at the close of business on September 13,
2002, the date fixed by the Board of Directors in accordance with the Company's
By-Laws (the "Record Date"), are entitled to vote at the Meeting. As of the
Record Date there were ________________ issued and outstanding shares of the
Company's common stock.
Each outstanding share of common stock is entitled to one vote on all
matters properly coming before the Meeting. A majority of the shares of the
outstanding common stock is necessary to constitute a quorum for the Meeting.
2
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of September ___, 2002, the names
and beneficial ownership of the Company's common stock beneficially owned,
directly or indirectly, by: (i) each person who is a director or executive
officer of the Company; (ii) all directors and executive officers of the Company
as a group; and (iii) all holders of 5% or more of the outstanding shares of the
common stock of the Company:
Name and Address of Amount and Nature of Percentage of Shares
Beneficial Owner (1) Beneficial Ownership (2) Outstanding
- -------------------- ------------------------ -----------
Declan A. French 2,400,131(3) 8%
Laurie Bradley - - - - - -
Tony French 70,133(4) *
Kelly Hankinson 180,167(5) *
John Dunne 41,424(6) *
Arthur S. Marcus 30,500(7) *
Roger W. Walters 1,868,253(8) 6.3%
Stonestreet Capital 2,928,752(9) 9.9%
Alpha Capital 2,928,752(10) 9.9%
All Directors and Officers as a
Group (6 persons) (3 - 7) 2,722,355 9.2%
* Less than 1%.
(1) Except as set forth above, the address of each individual is 55 University
Avenue, Suite 400, Toronto, Ontario M5J 2H7.
(2) Based upon information furnished to the Company by the directors and
executive officers or obtained from the Company's stock transfer books. The
Company has been informed that these persons hold the sole voting and
dispositive power with respect to the common stock except as noted herein. For
purposes of computing "beneficial ownership" and the percentage of outstanding
common stock held by each person or group of persons named above as of September
___, 2002, or ________________ shares, any security which such person or group
of persons has the right to acquire within 60 days after such date is deemed to
be outstanding for the purpose of computing beneficial ownership and the
percentage ownership of such person or persons, but is not deemed to be
outstanding for the purpose of computing the percentage ownership of any other
person.
(3) Includes 510,563 shares of common stock owned by Christine French, the wife
of Declan A. French and 101,333 shares of common stock issuable upon the
exercise of options granted to Declan A. French that are currently exercisable
or exercisable within the next 60 days. Also includes 1,788,235 shares of common
stock issued to Declan A. French as a bonus pursuant to his employment
agreement.
(4) Includes 126,167 shares of common stock issuable upon the exercise of
options that are currently exercisable or exercisable within the next 60 days.
3
(5) Includes 1,333 shares of common stock issuable upon the exercise of options
that are currently exercisable or exercisable within the next 60 days.
(6) Includes 1,333 shares of common stock issuable upon the exercise of options
that are currently exercisable or exercisable within the next 60 days.
(7) Includes 27,500 shares of common stock issuable upon the exercise of options
that are currently exercisable or exercisable within the next 60 days. Excludes
347,902 shares of common stock issued in the name of Gersten, Savage, Kaplowitz,
Wolf & Marcus, LLP, the Company's United States legal counsel, of which Mr.
Marcus is a partner.
(8) Includes 100,000 shares of common stock issuable upon the exercise of
options that are currently exercisable or exercisable within the next 60 days.
(9) Includes up to 2,928,752 shares of common stock issuable upon the conversion
and exercise of Series C Preferred Stock and warrants that are currently
exercisable or exercisable within the next 60 days. Pursuant to the Series C
Preferred Share Agreement, as amended, such shareholder may not beneficially own
more than 9.9% of the Company's common stock at any time.
(10) Includes 1,309,277 shares of common stock issued upon conversion of 350
Series C Preferred Stock and up to 1,619,475 of common stock issuable upon the
conversion and exercise of Series C Preferred Stock and warrants that are
currently exercisable or exercisable within the next 60 days. Pursuant to the
Series C Preferred Share Agreement, as amended, such shareholder may not
beneficially own more than 9.9% of the Company's common stock at any time.
4
DESCRIPTION OF SECURITIES
The Company's total authorized capital stock currently consists of
30,000,000 shares of common stock, with no par value, and 1,000,000 shares of
preferred stock, with no par value per share. The following descriptions contain
all material terms and features of the Company's securities and are qualified in
all respects by reference to the Company's Articles of Incorporation and
By-Laws, each as amended.
Common Stock
The Company is currently authorized to issue up to 30,000,000 shares of
common stock, no par value per share, of which as September ___, 2002,
_______________ shares of common stock are outstanding, excluding the shares of
common stock to be issued (i) upon the conversion of the outstanding shares of
Series C 7% Convertible Preferred Stock, (ii) upon the exercise of all
outstanding warrants and options, and (iii) as payment for an aggregate of
$2,135,000 in outstanding debt. All outstanding shares of common stock are, and
all shares of common stock to be outstanding upon the conversion of the
outstanding shares of Series C 7% Convertible Preferred Stock, the exercise of
outstanding warrants and options and as payment for outstanding debt will be
(assuming the approval of Proposal 4), validly authorized and issued, fully
paid, and non-assessable.
The holders of common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of shareholders. Holders of
common stock are entitled to receive ratably dividends as may be declared by the
Company's Board of Directors out of funds legally available therefor. In the
event of a liquidation, dissolution or winding up of the Company, holders of the
common stock are entitled to share ratably in all assets remaining, if any,
after payment of liabilities. Holders of common stock have no preemptive rights
and have no rights to convert their shares of common stock into any other
securities.
Pursuant to the Business Corporation Act, Ontario, a shareholder of an
Ontario Corporation has the right to have the corporation pay the shareholder
the fair market value for his shares of the corporation in the event such
shareholder dissents to certain actions taken by the corporation, such as
amalgamation or the sale of all or substantially all of the assets of the
corporation and such shareholder follows the procedures set forth in the
Business Corporation Act, Ontario.
Preferred Stock
The Company's Articles of Incorporation authorize the issuance of up to
1,000,000 shares of preferred stock with designations, rights and preferences
determined from time to time by its Board of Directors. Accordingly, the
Company's Board of Directors is empowered, without shareholder approval, to
issue preferred shares with dividend, liquidation, conversion, or other rights
that could adversely affect the rights of the holders of the common stock.
Series A 8% Convertible Preferred Stock
There were 17,500 shares of Series A 8% Convertible Preferred Stock
authorized and issued, none of which remain outstanding.
5
Series B 8% Convertible Preferred Stock
There were 1,500 shares of Series B 8% Convertible Preferred Stock
authorized and issued, none of which remain outstanding.
Series C 7% Convertible Preferred Stock
Pursuant to a share purchase agreement dated April 18, 2001, (the
"Series C Preferred Stock Purchase Agreement") as amended on June 6, 2001, the
Company issued 1,230 shares of Series C 7% Cumulative Convertible Preferred
Stock (the "Series C Preferred Stock"). Each share of Series C Preferred Stock
has a stated value of $1,000 per share. The shares of Series C Preferred Stock
are convertible into shares of the Company's common stock at the option of the
holders, at any time after issuance until such shares of Series C Preferred
Stock are manditorily converted or redeemed by the Company, under certain
conditions. As of September ___, 2002, there were 600 shares of Series C
Preferred Stock outstanding.
Pursuant to the terms of the original Series C Stock Purchase
Agreement, the Company was obligated to issue to the investors an aggregate of
500 shares of Series C Preferred Stock and common stock purchase warrants in
consideration for an additional $500,000. Such issuance was to take place upon
the effective date of the required registration statement (as discussed below)
and the satisfaction or waiver of the following conditions: (a) that each
investor had delivered immediately available funds; (b) that all representations
and warranties by the parties shall have remained true and correct and (c) that
all permits and qualifications required by any state shall have been obtained.
On June 6, 2001 the Series C Preferred Stock Purchase Agreement was
amended to restructure the terms of the issuance of the additional 500 shares of
Series C Preferred Stock. Pursuant to the amended Series C Preferred Stock, the
Company issued 125 of the 500 shares of Series C Preferred Stock to one investor
in consideration for $125,000. Pursuant to the amended Series C Preferred Stock
Purchase Agreement the Company is obligated to issue the remaining 375 shares of
Series C Preferred Stock to the investors.
The Company is required to register 200% of the shares of common stock
issuable upon the conversion of the 1,230 shares of Series C Preferred Stock. In
the event that a registration statement is not declared effective by the
Securities and Exchange Commission within 120 days of June 6, 2001 then the
Company is obligated to pay each of the investors (pro-rata on a monthly basis),
as liquidated damages and not as a penalty, 3% per month of (i) the then
outstanding stated value of each share of Series C Preferred Stock ($1,000), and
(ii) the value of any outstanding warrants (valued at the difference between the
average closing bid price during the applicable month and the exercise price
multiplied by the number of warrant shares the warrants are exercisable into)
held by such investor until such registration statement is declared effective by
the Securities and Exchange Commission.
The holders of the shares of Series C Preferred Stock are entitled to
receive preferential dividends in cash, on a quarterly basis commencing on
June 30, 2001, out of any of the Company's funds legally available at the time
of declaration of dividends before any other dividend distribution will be paid
or declared and set apart for payment on any shares of the Company's common
stock, or other class of stock presently authorized, at the rate of 7% simple
interest per annum on the stated value per share plus any accrued but unpaid
dividends, when as and if declared. The Company has the option to pay such
dividends in shares of the Company's common stock to be paid (based on an
assumed value of $1,000 per share) in full shares only, with a cash payment
equal to any fractional shares.
6
The number of shares of the Company's common stock into which the
Series C Preferred stock shall be convertible into that number of shares of
common stock equal to (i) the sum of (A) the stated value per share and (B) at
the holder's election, accrued and unpaid dividends on such share, divided by
(ii) the Conversion Price". The "Conversion Price" shall be the lesser of (x)
87.5% of the average of the 5 lowest daily volume weighted average prices of the
Company's common stock during the period of 60 consecutive trading days
immediately prior the date of the conversion notice; or (y) 90% of the average
of the daily volume weighted average prices during the period of the 5 trading
days prior to the applicable closing date ($.4798 with respect to the 1,230
shares of Series C 7% Preferred Stock issued and outstanding). The Conversion
Price is subject to certain floor and time limitations. At any time prior to
October 24, 2001, the Company may, in its sole discretion, redeem in whole or in
part, the then issued and outstanding shares of Series C Preferred Stock at a
price equal to $1,150 per share, plus all accrued and unpaid dividends, and
after October 24, 2001 at a price equal to $1,200 per share, plus all accrued
and unpaid dividends.
As of September ___, 2002, 630 of the 1,230 shares of Series C
preferred stock have been converted into an aggregate of 5,783,922 shares of
common stock. As of September ___, 2002, all 723,436 warrants issued in
connection with the purchase of the Series C Preferred Stock remain outstanding
and none have been exercised.
The Company has received four conversion notices for an aggregate of
435 shares of Series C Preferred Stock requiring the issuance of approximately
5,421,386 shares of its common stock. The Company is unable to honor these
conversions until it files an amendment to its Articles of Incorporation
increasing its authorized capital stock, which amendment is subject to
shareholder approval.
On June 25, 2002, the Company received letters from two of the holders
of the Series C Preferred Stock demanding payment of an aggregate of $253,250 in
liquidated damages as a result of a default of the above described registration
rights. The Company believes that it has reached an oral agreement whereby such
holders have waived any right to such liquidated damages.
Common Stock Purchase Warrants
There are outstanding warrants to purchase an aggregate of 3,276,711
shares of the Company's common stock. 475,000 of the warrants are exercisable at
any time and in any amount until December 30, 2004 at a purchase price of $3.24
per share, 250,000 of the warrants are exercisable at any time and in any amount
until April 16, 2005 at a purchase price of $3.71 per share, 500,000 of the
warrants are exercisable at any time and in any amount until March 15, 2005 at a
purchase price of $3.25 per share, 100,000 of the warrants are exercisable at
any time and in any amount until June 1, 2004 at a purchase price of $3.25 per
share, 225,000 of the warrants are exercisable at any time and in any amount
until July 6, 2005, 532,534 of the warrants are exercisable at any time and in
any amount until August 22, 2005 at a purchase price of $2.4614 per share,
230,693 of the warrants are exercisable at any time and in any amount until
August 22, 2005 at a purchase price of $1.00 per share, 100,000 of the warrants
are exercisable at any time and in any amount until January 20, 2006 at $1.50
per share, 663,484 of the warrants are exercisable at any time and in any amount
until April 18, 2006 at a purchase price of $.5445 per share, 100,000 of the
warrants are exercisable at any time and in any amount until April 4, 2003 at a
purchase price of $.17 per share, and 100,000 of the warrants are exercisable at
any time and in any amount until April 4, 2004 at a purchase price of $.17 per
share. The Company may call any unexercised portion of 963,239 of the 3,276,711
warrants and require their exercise as follows if the Company's common stock, as
reported on the Nasdaq SmallCap Market, closes above the bid price indicated for
any ten consecutive business days: (i) 1/3 of such unexercised warrants at $6.00
per share, (ii) 1/3 of such unexercised warrants at $7.50 per share; and (iii)
1/3 of such unexercised warrants at $9.00 per share.
7
Warrant-holders are not entitled, by virtue of being warrant-holders,
to receive dividends, to vote at or receive notice of any meeting of
shareholders or to exercise any other rights whatsoever as shareholders. In
order to receive one share of the Company's common stock a warrant-holder must
surrender one warrant, accompanied by payment of the aggregate exercise price of
the warrants to be exercised, which payment may be made, at the warrant-holder's
election, in cash or by delivery of a cashiers or certified check or any
combination of the foregoing. Upon receipt of duly executed warrants and payment
of the exercise price, the Company will issue and cause to be delivered to
warrant-holders certificates representing the number of shares of common stock
so purchased.
THIS PROXY STATEMENT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WHICH INVOLVE
RISKS AND UNCERTAINTITIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH BELOW AND ELSEWHERE IN THIS PROXY STATEMENT.
8
PROPOSAL 1
TO ELECT THE BOARD OF DIRECTORS OF THE COMPANY FOR THE ENSUING YEAR.
Five directors are to be elected at the Meeting to hold office until
the next annual meeting of shareholders or until their successors have been duly
elected and qualified. The election of directors requires the affirmative vote
of at least the majority of shares of common stock present or represented at an
annual meeting at which a quorum is present or represented.
The By-Laws of the Company provide that the authorized number of
directors shall be as set by the Board of Directors but shall not be less than
one. The Company has paid directors fees for service on the Board of Directors
by the issuance of options under the 1998 Stock Option Plan and the 2000 Stock
Option Plan.
Shareholder Vote Required
The election of the directors will require the affirmative vote of the
majority of the shares present in person or represented by proxy at the Meeting
and entitled to vote on the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION TO THE BOARD OF DIRECTORS
OF THE COMPANY EACH OF THE FOLLOWING DIRECTOR NOMINEES:
Position Held
Name Age Position with the Company Since
- ---- --- ------------------------- -----
Declan A. French 58 Chairman of the Board of 1994
Directors and Chief Executive
Officer
Kelly Hankinson 32 Chief Financial Officer, 1999
Secretary, Treasurer and
Director
John Dunne 63 Director 1999
Arthur S. Marcus 37 Director 2000
Katherine Seto Evans 50 Director Nominee 2002
9
Set forth below is a biographical description of each of the Company's
director nominees based on information supplied by each of them:
Declan A. French has served as the Company's Chairman of the Board of
Directors and Chief Executive Officer since its inception in February 1994.
Prior to founding Thinkpath, Mr. French was President and Chief Executive
Officer of TEC Partners Ltd., an information technology recruiting firm in
Toronto, Canada. Mr. French has a diploma in Psychology and Philosophy from the
University of St. Thomas in Rome, Italy.
Kelly Hankinson has served as the Company's Chief Financial Officer
since May 2000, as a member of its Board of Directors since June 2000 and as
Secretary and Treasurer since March 2001. Ms. Hankinson served as the Company's
Vice President, Finance and Administration and Group Controller from February
1994 to May 2000. Ms. Hankinson has a Masters Degree and a Bachelors Degree from
York University.
John Dunne has served on the Company's Board of Directors since June
1998. Mr. Dunne has served as Chairman and Chief Executive Officer of the Great
Atlantic & Pacific Company of Canada, Ltd. since August 1997, where he also
served as President and Chief Operating Officer from September 1996 until August
1997. From November 1995 until September 1996, Mr. Dunne was Chairman and Chief
Executive Officer of Food Basics Ltd.
Arthur S. Marcus has served on the Company's Board of Directors since
April 2000. Mr. Marcus is a partner at the New York law firm of Gersten, Savage,
Kaplowitz, Wolf and Marcus, LLP, the Company's United States securities counsel.
Mr. Marcus joined Gersten, Savage & Kaplowitz, LLP in 1991 and became a partner
in 1996. Mr. Marcus specializes in the practice of United States Securities Law
and has been involved in approximately 50 initial public offerings and numerous
mergers and acquisitions. Mr. Marcus received a Juris Doctorate from Benjamin N.
Cardozo School of Law in 1989.
Katherine Seto Evans, director nominee, is an independent consultant
with extensive and diversified experience in financial management, human
resource leadership and organizational administration. From 1974 to 2001, Ms.
Evans was a partner at Schwartz, Levitsky, Feldman, llp, the Company's
independent auditors. From 2001 to present, Ms. Evans has been an independent
consultant to various companies. During this period she has consulted with the
Company and has assisted the Company with various financial and accounting
projects. Ms. Evans became a Certified Public Accountant in 1999 and a Chartered
Accountant in 1978. Ms. Evans received a Bachelors Degree in Science from McGill
University in 1972.
Committees of the Board of Directors
In July 1998, the Company's Board of Directors formalized the creation
of a Compensation Committee, which is currently comprised of John Dunne and
Arthur S. Marcus. The Company's Board of Directors intends to appoint Katherine
Seto Evans as a member of the Company's Compensation Committee, in the event she
is elected to the Company's Board of Directors. The Compensation Committee has:
(i) full power and authority to interpret the provisions of, and supervise the
administration of, the Company's 1998 Stock Option Plan, 2000 Stock Option Plan
and 2001 Stock Option Plan, as well as any stock option plans adopted in the
future; and (ii) the authority to review all compensation matters relating to
the Company. The Compensation Committee has not yet formulated compensation
policies for senior management and executive officers. However, it is
anticipated that the Compensation Committee will develop a company-wide program
covering all employees and that the goals of such program will be to attract,
maintain, and motivate the Company's employees. It is further anticipated that
one of the aspects of the program will be to link an employee's compensation to
his or her performance, and that the grant of stock options or other awards
related to the price of the shares of our common stock will be used in order to
make an employee's compensation consistent with shareholders' gains.
10
It is expected that salaries will be set competitively relative to the
information technology and engineering services and consulting industry and that
individual experience and performance will be considered in setting such
salaries.
In July 1998, the Company's Board of Directors also formalized the
creation of an Audit Committee, which currently consists of Kelly Hankinson and
John Dunne. The Company's Board of Directors intends to appoint Katherine Seto
Evans as a member of the Company's Audit Committee, in the event she is elected
to the Company's Board of Directors. The Audit Committee is charged with
reviewing the following matters and advising and consulting with the Company's
entire Board of Directors with respect thereto: (i) the preparation of the
Company's annual financial statements in collaboration with the Company's
chartered accountants; (ii) annual review of the Company's financial statements
and annual reports; and (iii) all contracts between the Company and the
Company's officers, directors and other of the Company's affiliates. The Audit
Committee, like most independent committees of public companies, does not have
explicit authority to veto any actions of our entire Board of Directors relating
to the foregoing or other matters; however, the Company's senior management,
recognizing their own fiduciary duty to the Company and the Company's
shareholders, is committed not to take any action contrary to the recommendation
of the Audit Committee in any matter within the scope of its review.
The Company has established an Executive committee, comprised of
certain of the Company's executive officers and key employees, which allows for
the exchange of information on industry trends and promotes "best practices"
among the Company's business units. Currently, the Executive Committee consists
of Declan A. French, Laurie Bradley, Tony French, and Kelly Hankinson.
During the year ended December 31, 2001, the Company's Board of
Directors met three times on the following dates: March 28, 2001, June 6, 2001
and November 14, 2001, at which all of the directors were present; and acted by
written consent in lieu of a meeting three times on the following dates: April
12, 2001, May 30, 2001 and August 14, 2001. During the year ended December 31,
2000, the Compensation Committee met on November 30, 2001. The Audit Committee
met on March 28, 2001 and the Executive Committee met monthly.
Indemnification of Officers and Directors
The Company's By-laws provide that the Company shall indemnify to the
fullest extent permitted by Canadian law the Company's directors and officers
(and former officers and directors). Such indemnification includes all costs and
expenses and charges reasonably incurred in connection with the defense of any
civil, criminal or administrative action or proceeding to which such person is
made a party by reason of being or having been the Company's officer or director
if such person was substantially successful on the merits in his or her defense
of the action and he or she acted honestly and in good faith with a view to the
Company's best interests, and if a criminal or administrative action that is
enforced by a monetary penalty, such person had reasonable grounds to believe
his or her conduct was lawful.
11
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted, the Company's directors, officers and
controlling persons pursuant to the foregoing provisions, or otherwise, the
Company has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act of 1933, as amended, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses, incurred or paid by one of the Company's
directors, officers or controlling persons in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person, the Company will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933, as amended, and will
be governed by the final adjudication of such issue.
Executive Compensation
The following table sets forth certain information regarding
compensation paid by the Company during each of the last three fiscal years to
the Company's Chief Executive Officer and to each of the Company's executive
officers who earned in excess of $100,000 during the year ended December 31,
2001:
Summary Compensation Table
Name and Restricted
Principal Annual Stock Other
Position Year Salary Bonus Awards Options/SARs Compensation
- -------- ---- ------ ----- ------ ------------ -------------
Declan A. French, 2001 150,000 100,000(1) -0- -0- -0-
Chief Executive Officer 2000 100,000 750,000(1) -0- 29,000 -0-
and Chairman of the Board 1999 106,342 -0- -0- 100,000 -0-
Laurie Bradley 2001 150,000 -0- -0- -0- -0-
President 2000 -0- -0- -0- -0- -0-
1999 -0- -0- -0- -0- -0-
Tony French, 2001 94,500 -0- -0- -0- 25,000(2)
Executive Vice President 2000 94,500 -0- -0- 75,000 47,000(2)
1999 75,000 -0- -0- -0- -0-
Kelly Hankinson 2001 100,000 -0- -0- -0- -0-
Chief Financial Officer, 2000 75,000 -0- -0- 100,000 -0-
Director 1999 75,000 -0- -0- -0- -0-
Mike Reid 2001 120,000 -0- -0- -0- -0-
Chief Information Officer 2000 120,000 -0- -0- 100,000 -0-
1999 -0- -0- -0- -0- -0-
John R. Wilson, 2001 60,000 -0- -0- -0- $47,000(3)
President-Systemsearch 2000 80,000 -0- -0- 4,000 80,000(3)
Consulting Services 1999 81,600 -0- -0- 24,000 76,915(3)
(1) This reflects the dollar value of 588,235 shares of common stock issued to
Mr. French in lieu of cash bonuses for the fiscal year 2001 and 1,200,000
shares for the fiscal years of 1999 and 2000 pursuant to his employment
agreement.
(2) This reflects commissions paid pursuant to Mr. French's employment
agreement.
(3) This reflects commissions paid pursuant to Mr. Wilson's employment
agreement. Mr. Wilson was terminated April 8, 2002.
12
Employment Agreements
The Company has entered into an employment agreement with Declan A.
French whereby he will serve as Chairman of the Board and Chief Executive
Officer for a period of two years commencing on November 28, 2001. Mr. French
shall be paid a base salary of $150,000 and a bonus to be determined by our
EBITDA (earnings before interest, taxes, depreciation and amortization) as a
percentage of annual gross revenue with a minimum guaranteed bonus of $100,000.
The bonus will be paid in cash or shares at the Company's discretion. In April
2002, the Company issued 588,235 shares of its common stock to Mr. French as
payment in full for the bonus due for the fiscal year 2001. In February 2001,
the Company issued 1,200,000 shares of its common stock as payment in full for
the bonuses due to Mr. French for the fiscal years of 1999 and 2000 pursuant to
the terms of his previous employment agreement. Mr. French continues to serve as
Chairman and Chief Executive Officer. Declan French is the father of Tony
French.
In February 1998, in connection with the acquisition of Systemsearch
Consulting Services Inc., the Company entered into a three-year employment
agreement with John R. Wilson whereby he served as President of Systemsearch
Consulting Services Inc. at annual salary of $120,000 plus commissions. The
agreement was effective as of January 2, 1997. Pursuant to the agreement, Mr.
Wilson had control of the day-to-day management of Systemsearch Consulting
Services Inc. Mr. Wilson's contract was not renewed, though he continued to be
employed on a month-to-month basis at an annual salary of $67,000 plus
commissions. On April 8, 2002, this office was closed and certain assets of
Systemsearch Consulting Services Inc. were sold to Mr. Wilson in consideration
of his assumption of the lease and certain liabilities. Existing contracts were
transferred to head office and all sales and administrative staff were
terminated. Mr. Wilson was terminated in April 2002.
In September 1999, in connection with the acquisition of Cad Cam, Inc.,
Roger W. Walters was elected to the Board of Directors. On March 14, 2001, Mr.
Walters resigned from the Board of Directors effective March 30, 2001.
On January 1, 2000, in connection with the acquisition of ObjectArts
Inc., the Company entered into an employment agreement with Marilyn Sinclair
whereby she was to serve as Vice President and as President of ObjectArts Inc.
The employment agreement was for a term of three years commencing on January 1,
2000 with an annual salary of $82,000. The agreement was terminated on March 9,
2001, the effective date of Ms. Sinclair's resignation from the Company. Ms.
Sinclair resigned from the Board of Directors effective April 4, 2001.
On April 1, 2000, in connection with the acquisition of MicroTech
Professionals, Inc., the Company entered into an employment agreement with
Denise Dunne-Fushi pursuant to which she served as Vice-President and as
President of MicroTech Professionals, Inc. The employment agreement was for a
term of one year commencing on April 25, 2000, with an annual salary of $125,000
and a bonus of $25,000. The agreement was terminated on July 29, 2002.
On November 15, 2000, in connection with the business combination with
TidalBeach Inc., the Company entered into an employment agreement with Michael
Reid pursuant to which Mr. Reid will serve as Chief Information Officer and as
the President of TidalBeach Inc. The employment agreement is for a term of two
years commencing on November 15, 2000, with an annual salary of $120,000.
Pursuant to the Share Purchase Agreement governing the sale of the Company's
subsidiary, Njoyn Software Incorporated to Cognicase Inc., Mr. Reid is being
contracted as a consultant to Cognicase for a period of six months until
September 1, 2002.
On January 29, 2001, the Company entered into an employment agreement
with Laurie Bradley whereby she will serve as President. Ms. Bradley shall be
paid an annual salary of $150,000 and a performance bonus. The employment
agreement is for an indeterminate period of time.
13
On March 1, 2001, the Company entered into an employment agreement with
Tony French whereby he will serve as Executive Vice President. Mr. French shall
be paid an annual salary of $100,000 and a performance bonus. The employment
agreement is for an indeterminate period of time. In the event Mr. French is
terminated for any reason, including but not limited to, the acquisition of
Thinkpath, Mr. French shall be entitled to a severance payment equal to one
year's salary. Tony French is the son of Declan A. French.
On March 1, 2001, the Company entered into an employment agreement with
Kelly Hankinson whereby she will serve as Chief Financial Officer, Secretary and
Treasurer. Ms. Hankinson shall be paid an annual salary of $100,000. The
employment agreement is for an indeterminate period of time. In the event Ms.
Hankinson is terminated for any reason, including but not limited to, the
acquisition of Thinkpath, Ms. Hankinson shall be entitled to a severance payment
equal to one year's salary.
No other officer or director has an employment contract with the
Company.
Compensation of Directors
Effective August 28, 2002, each non-employee member of the Company's
Board of Directors shall receive the following annual compensation in
consideration for services rendered as a director: (i) five-year option to
purchase up to 50,000 shares of the Company's common stock exercisable at a
price equal to fair market value of the Company's common stock as of the date of
grant; (ii) a cash amount of $4,000 per annum, paid on a quarterly basis; and,
(iii) reimbursement of reasonable and ordinary expenses in connection with such
member's attendance at Board or committee meetings.
Directors who receive a salary from the company shall not be entitled
to receive any additional compensation for their services as a member of the
Company's Board of Directors.
The Board of Directors and the Company's shareholders have adopted a
1998 Stock Option Plan, 2000 Stock Option Plan, and 2001 Stock Option Plan
pursuant to which options have been granted to officers, directors, consultants,
key employees, advisors and similar parties who provide their skills and
expertise to the Company.
Options, Warrants or Rights
On August 19, 1999, Declan A. French was issued an option to purchase
100,000 shares of the Company's common stock at an exercise price of $3.19 per
share. The option was issued in consideration for services rendered to the
Company in his capacity as Chairman of the Board and Chief Executive Officer.
The option is immediately exercisable and expires on August 19, 2004.
On August 19, 1999, Tony French was issued an option to purchase 50,000
shares of the Company's common stock at an exercise price of $3.19 per share.
The option was issued in consideration for services rendered to the Company in
his capacity as an employee. The option is immediately exercisable and expires
on August 19, 2004.
On August 19, 1999, John R. Wilson was issued an option to purchase
20,000 shares of the Company's common stock at an exercise price of $3.19 per
share. The option was issued in consideration for services rendered to the
Company in his capacity as President of Systemsearch Consulting Services Inc.
The option is immediately exercisable and expires on August 19, 2004.
14
On August 19, 1999, Kelly Hankinson was issued an option to purchase
25,000 shares of the Company's common stock at an exercise price of $3.19 per
share. The option was issued in consideration for services rendered to the
Company in her capacity as Vice President, Finance and Administration and Group
Controller. The option is immediately exercisable and expires on August 19,
2004.
On August 19, 1999, Arthur S. Marcus was issued an option to purchase
2,500 shares of the Company's common stock at an exercise price of $3.19 per
share. The option was issued in consideration for services legal services
rendered to the Company. The option expires on August 19, 2004.
On January 1, 2000, Roger W. Walters was issued an option to purchase
25,000 shares of the Company's common stock at an exercise price of $3.25 per
share. The option was issued in connection with the Company's acquisition of Cad
Cam, Inc. The option was immediately exercisable and expired on December 31,
2000. Such option was never exercised by Mr. Walters.
On March 22, 2000, Declan A. French was issued an option to purchase
4,000 shares of the Company's common stock at an exercise price of $3.19 per
share. The option was issued in consideration for services rendered to the
Company in his capacity as Chairman of the Board and Chief Executive Officer.
The option shall vest at a rate of 1,333 shares of common stock per year and
shall be fully vested on March 22, 2003. The option expires on March 22, 2005.
On March 22, 2000, Thomas E. Shoup, the Company's former President and
Chief Operating Officer, was issued an option to purchase 4,000 shares of the
Company's common stock at an exercise price of $3.19 per share. The option was
issued in connection with the Company's acquisition of Cad Cam, Inc. and in
consideration services rendered to the Company in his capacity as President and
Chief Operating Officer. The option was to vest at a rate of 1,333 shares of
common stock per year and was to be fully vested on March 22, 2003. The option
was to expire on March 22, 2005. Such option terminated on December 22, 2000,
the effective date of Mr. Shoup's resignation as an officer of the Company.
On March 22, 2000, Tony French was issued an option to purchase 4,000
shares of the Company's common stock at an exercise price of $3.19 per share.
The option was issued in consideration for services rendered to the Company in
his capacity as Executive Vice President. The option shall vest at a rate of
1,333 shares of common stock per year and shall be fully vested on March 22,
2003. The option expires on March 22, 2005.
On March 22, 2000, Kelly Hankinson was issued an option to purchase
3,500 shares of the Company's common stock at an exercise price of $3.19 per
share. The option was issued in consideration for services rendered to the
Company in her capacity as Vice President, Finance and Administration and Group
Controller. The option shall vest at a rate of 1,167 shares of common stock per
year and shall be fully vested on March 22, 2003. The option expires on
March 22, 2005.
On March 22, 2000, Roger W. Walters was issued an option to purchase
4,000 shares of the Company's common stock at an exercise price of $3.19 per
share. The option was issued in consideration for services rendered to the
Company in his capacity as Executive Vice President of US Operations and as a
Director. The option shall vest at a rate of 1,333 shares of common stock per
year and shall be fully vested on March 22, 2003. The option expires on
March 22, 2005.
15
On March 22, 2000, John R. Wilson was issued an option to purchase
4,000 shares of the Company's common stock at an exercise price of $3.19 per
share. The option was issued in consideration for services rendered to the
Company in his capacity as President of Systemsearch Consulting Services Inc.
The option shall vest at a rate of 1,333 shares of common stock per year and
shall be fully vested on March 22, 2003. The option expires on March 22, 2005.
On March 22, 2000, John A. Irwin was issued an option to purchase 4,000
shares of the Company's common stock at an exercise price of $3.19 per share.
The option was issued in consideration for services rendered to the Company in
his capacity as President of International Career Specialists Ltd. The option
shall vest at a rate of 1,333 shares of common stock per year and shall be fully
vested on March 22, 2003. The option expires on March 22, 2005.
On March 22, 2000, William J. Neil, a former director, was issued an
option to purchase 10,000 shares of the Company's common stock at an exercise
price of $3.19 per share. The option was issued in consideration for services
rendered to the Company in his capacity as a director. The option shall vest at
a rate of 3,333 shares of common stock per year and shall be fully vested on
March 22, 2003. The option expires on March 22, 2005.
On March 22, 2000, John Dunne was issued an option to purchase 10,000
shares of the Company's common stock at an exercise price of $3.19 per share.
The option was issued in consideration for services rendered to the Company in
his capacity as director. The option shall vest at a rate of 3,333 shares of
common stock per year and shall be fully vested on March 22, 2003. The option
expires on March 22, 2005.
On March 22, 2000, James Reddy, a former director, was issued an option
to purchase 10,000 shares of the Company's common stock at an exercise price of
$3.19 per share. The option was issued in consideration for services rendered to
the Company in his capacity as Director. The option shall vest at a rate of
3,333 shares of common stock per year and shall be fully vested on March 22,
2003. The option expires on March 22, 2005.
On March 31, 2000, Roger W. Walters was issued an option to purchase
25,000 shares of the Company's common stock at an exercise price of $2.75 per
share. The option was issued in connection with the Company's acquisition of Cad
Cam, Inc. The option was immediately exercisable and expired on December 31,
2000. Such option was never exercised by Mr. Walters.
On May 9, 2000, Marilyn Sinclair, a former officer and director, was
issued an option to purchase 4,000 shares of the Company's common stock at an
exercise price of $3.25 per share. The option was issued in consideration for
services rendered to the Company in her capacity as Vice President and
President, Object Arts Inc. The option shall vest at a rate of 1,333 shares of
common stock per year and shall be fully vested on May 9, 2003. The option
expires on May 9, 2005
On June 30, 2000, Roger W. Walters was issued an option to purchase
25,000 shares of the Company's common stock at an exercise price of $3.00 per
share. The option was issued in connection with the Company's acquisition of Cad
Cam, Inc. The option was immediately exercisable and expired on December 31,
2000. Such option was never exercised by Mr. Walters.
16
On September 30, 2000, Roger W. Walters was issued an option to
purchase 25,000 shares of the Company's common stock at an exercise price of
$2.12 per share. The option was issued in connection with the Company's
acquisition of Cad Cam, Inc. The option was immediately exercisable and expired
on December 31, 2000. Such option was never exercised by Mr. Walters.
On December 26, 2000, Declan A. French was issued an option to purchase
25,000 shares of the Company's common stock at an exercise price of $0.70 per
share. Such option expires on December 26, 2005. The option was issued in
consideration for services rendered to the Company in his capacity as Chairman
of the Board. The option shall vest at a rate of 8,333 shares of common stock
per year and shall be fully vested on December 26, 2003. The option expires on
December 26, 2005
On December 26, 2000, Kelly Hankinson was issued an option to purchase
100,000 shares of the Company's common stock at an exercise price of $0.70 per
share. The option was issued in consideration for services rendered to the
Company in her capacity as director. Such option expires on December 26, 2005.
On December 26, 2000, John Dunne was issued an option to purchase
25,000 shares of the Company's common stock at an exercise price of $0.70 per
share. Such option expires on December 26, 2005. The option was issued in
consideration for services rendered to the Company in his capacity as director.
The option shall vest at a rate of 8,333 shares of common stock per year and
shall be fully vested on December 26, 2003. The option expires on December 26,
2005
On December 26, 2000, Arthur S. Marcus was issued an option to purchase
25,000 shares of the Company's common stock at an exercise price of $0.70 per
share. Such option expires on December 26, 2005. The option was issued in
consideration for services rendered to the Company in his capacity as director.
The option shall vest at a rate of 8,333 shares of common stock per year and
shall be fully vested on December 26, 2003. The option expires on December 26,
2005.
On December 26, 2000, Ronan McGrath was issued an option to purchase
25,000 shares of the Company's common stock at an exercise price of $0.70 per
share. Such option expires on December 26, 2005. The option was issued in
consideration for services rendered to the Company in his capacity as director.
The option shall vest at a rate of 8,333 shares of common stock per year and
shall be fully vested on December 26, 2003. The option expires on December 26,
2005.
On December 26, 2000, Mike Reid was issued an option to purchase
100,000 shares of the Company's common stock at an exercise price of $0.70 per
share. Such option expires on December 26, 2005.
On December 26, 2000, Joel Schoenfeld was issued an option to purchase
25,000 shares of the Company's common stock at an exercise price of $0.70 per
share. Such option expires on December 26, 2005. The option was issued in
consideration for services rendered to the Company in his capacity as director.
The option shall vest at a rate of 8,333 shares of common stock per year and
shall be fully vested on December 26, 2003. The option expires on December 26,
2005.
17
On March 14, 2001, the Company repriced 100,000 options belonging to
Roger W. Walters to $1.00 per share in consideration of debt forgiveness of
$75,000 and restructuring of debt totaling $250,000 on the notes payable to Mr.
Walters in connection with the Company's purchase of Cad Cam, Inc. The options
shall be exercisable during the period April 1, 2001 to April 4, 2004.
No options were issued to any of the Company's officers or directors
during 2001.
18
INTERESTS OF MANAGEMENT IN CERTAIN TRANSACTIONS
In April 1998, the Company acquired all the issued and outstanding
capital stock of Systemsearch Consulting Services Inc. and Systems PS Inc. from
John R. Wilson for aggregate consideration of $98,000 and 174,551 shares of the
Company's common stock. The acquisition was effective as of January 2, 1997.
Systems PS Inc. is currently inactive but holds certain assets utilized by
Systemsearch Consulting Services Inc. in its operations. Mr. Wilson was not
affiliated with the Company prior to the acquisition. Mr. Wilson was terminated
on April 8, 2002.
On May 19, 1998, the Company completed the acquisition of all the
issued and outstanding capital stock of International Career Specialists Ltd.
for $326,000 in cash and 130,914 shares of the Company's common stock to John A.
Irwin. In connection with the acquisition, International Career Specialists Ltd.
made a distribution to Mr. Irwin of certain of its assets that were not
necessary for the operation of the business. The transaction was effective as of
January 1, 1998. Mr. Irwin was not affiliated with the Company prior to the
acquisition. Mr. Irwin was terminated on August 1, 2000.
In October 1997, in consideration for business consulting services,
including identifying, structuring and effecting the acquisitions of
Systemsearch Consulting Services Inc. and International Career Specialists Ltd.,
the Company issued 113,459 shares its common stock to Globe Capital Corporation,
which is controlled by Lloyd MacLean, the Company's former Chief Financial
Officer and a former director.
In May 1998, the Company entered into a consulting agreement with
Robert M. Rubin, one of the Company's former directors, pursuant to which Mr.
Rubin will assist the Company in structuring and negotiating acquisitions,
strategic partnerships and other expansion opportunities. In exchange for such
services, Mr. Rubin received an option to purchase 200,000 shares of the
Company's common stock at a purchase price of $2.10 per share. Mr. Rubin has
agreed not to sell, transfer, assign, hypothecate or otherwise dispose of the
shares of the Company's common stock issuable upon exercise of the options for a
period of 2 years after exercise without the Company's consent. As of the Record
Date, the Company issued 64,778 shares of common stock upon Mr. Rubin's exercise
of such option.
In November 1998, the Company purchased certain assets of Southport
Consulting, Inc. from Michael Carrazza, one of the Company's former directors,
for an aggregate of $250,000.00 in cash and shares of the Company's common
stock. In February 2001, Mr. Carrazza instituted an action against the Company
in the Supreme Court of the State of New York alleging breach of contract and
unjust enrichment and seeking at least $250,000 in damages. Specifically, Mr.
Carrazza claimed that the Company failed to deliver cash or stock under an asset
purchase agreement, and that he was entitled to recovery of his attorney's fees.
The Company filed a counterclaim against Mr. Carrazza, seeking $162,000 in
damages, plus punitive damages and attorneys' fees, on the ground that Mr.
Carrazza, as then president and sole stockholder of Southport Consulting Co.,
fraudulently induced the Company into executing the asset purchase agreement by
misrepresenting the value of the assets being purchased. After the commencement
of discovery, Mr. Carrazza filed a motion for summary judgment, which was
granted in his favor in the sum of $264,602. The Company intends to file a
notice of appeal.
19
In September 1999, the Company completed the acquisition of all the
issued and outstanding capital stock of Cad Cam, Inc. for $2,000,000 in cash,
$2,500,000 pursuant to a promissory note and the issuance of $1,500,000 worth of
shares of the Company's common stock to Roger W. Walters, Cad Cam, Inc.'s former
president. As part of the transaction, Mr. Walters was elected to serve on the
Company's Board of Directors. The share purchase agreement was executed on
January 1, 1999 and the transaction was effective as of September 16, 1999. Mr.
Rogers was not affiliated with the Company prior to the acquisition.
On January 1, 2000, the share purchase agreement by and among the
Company, Cad Cam, Inc., and Roger W. Walters was amended. Pursuant to the
amendment, the parties agreed that $1,000,000 of the $2,000,000 cash payment to
be made to Mr. Walters was to be paid in 4 equal quarterly payments of $250,000
commencing on January 1, 2000. In consideration for accepting the cash payment
in installments, the Company issued Mr. Walters options to purchase an aggregate
of 100,000 shares of common stock at an exercise prices ranging from $2.12 to
$3.25 per share, which options expired on December 31, 2000. On March 14, 2001,
the Company repriced such options belonging to Roger W. Walters to an exercise
price of $1.00 per share in consideration of debt forgiveness of $75,000 and
restructuring of debt totaling $250,000 on the notes payable to Mr. Walters in
connection with the Company's purchase of Cad Cam, Inc. In addition, the term of
such option was extended to April 4, 2004.
In September 2001, the note payable to Rogers Walters was further
amended whereby the principal was reduced from $1,200,000 to $750,000 in
consideration of capital stock of $450,000 or 1,756,655 shares. In addition, all
principal payments were postponed until January 1, 2003, at which time, the
Company was to pay $12,500 per month plus interest at 4.5% until December 31,
2006. The balance of $150,000 was to be due on December 31, 2006. The Company
agreed to issue additional shares of its common stock in the event its common
stock traded below $0.26 with a floor price of $0.14 per share. The Company
would be obligated to issue shares for the differential or approximately
1,400,000 shares.
On July 31, 2002, the Company further restructured its note payable to
Roger Walters, reducing the principal from $675,000 to $240,000 in consideration
of the issuance of 1,000,000 shares of its common stock. The Company agreed to
issue and register the shares upon obtaining shareholder approval of an
amendment to its Articles of Incorporation increasing its authorized capital
stock. Principal payments of $4,000 per month will begin September 1, 2002
bearing no interest until August 1, 2007.
On January 1, 2000, the Company completed the acquisition of all of the
issued and outstanding capital stock of Object Arts Inc., an Ontario
corporation, in consideration of: (i) the issuance of $900,000 worth of the
Company's common stock to Working Ventures Custodian Fund in exchange for the
retirement of outstanding subordinated debt; (ii) the issuance to Working
Ventures Custodian Fund an amount of the Company's common stock equal to the
legal fees and professional fees incurred and paid by Working Ventures Custodian
Fund in connection with the Company's acquisition of Object Arts Inc.; and (iii)
the issuance of $1,100,000 worth of the Company's common stock to the existing
shareholders of Object Arts Inc. As part of the transaction, the Company entered
into employment agreements with Marilyn Sinclair and Lars Laakes, former
officers of Object Arts Inc. Such employment agreements were for a term of 3
years commencing on January 1, 2000, the effective date of the acquisition, with
annual salaries of $82,000 and $75,000 per year, respectively. Neither Ms.
Sinclair nor Mr. Laakes were affiliated with the Company prior to the
acquisition. On March 9, 2001 Ms. Sinclair resigned as an officer of the
Company. On April 9, 2001, Ms. Sinclair resigned from the Board of Directors.
Ms. Sinclair was terminated in April 2001 and Mr. Laakes was terminated in
August 2001.
20
On April 1, 2000, the Company completed the acquisition of all of the
issued and outstanding capital stock of Micro Tech Professionals, Inc., a
Massachusetts corporation in consideration of up to an aggregate of $4,500,000
in a combination of cash, notes payable and shares of our common stock, subject
to specific performance criteria be met. On April 25, 2000, the Company paid to
Denise Dunne-Fushi, the sole shareholder of Micro Tech Professionals, Inc.,
$2,500,000 of the aggregate of $4,500,000, which was paid in accordance with the
following schedule: (i) $1,250,000 in cash; (ii) the issuance of a $750,000
principal amount unsecured promissory note; and (iii) the issuance of 133,333
shares of the Company's common stock. As part of the transaction, the Company
entered into an employment agreement with Mrs. Dunne-Fushi, the former President
of Micro Tech Professionals, Inc. Such employment agreement was for a term of
one year commencing on April 25, 2000, the effective date of the acquisition,
with an annual salary of $125,000 per year and a bonus of $25,000. Mrs.
Dunne-Fushi was not affiliated with the Company prior to the acquisition.
On July 31, 2002, the Company restructured its note payable to Mrs.
Dunne-Fushi, reducing the principal from $1,740,000 to $600,000 in consideration
of the issuance of 3,000,000 shares of its common stock. The Company agreed to
issue and register the shares upon obtaining shareholder approval of an
amendment to its Articles of Incorporation increasing its authorized capital
stock. Principal payments of $10,000 per month will begin November 1, 2002
bearing 5% interest until October 1, 2007. In addition, the Company agreed to
cover the monthly expense associated with Mrs. Dunne-Fushi's family health
benefits and vehicle lease for a period of four years.
On November 15, 2000, the Company consummated a business combination
with TidalBeach Inc., an Ontario-based Web development company. In consideration
for the business combination, the Company issued 250,000 shares of common stock
to the 2 shareholders of TidalBeach Inc. As part of the transaction, the Company
entered into an employment agreement with Michael Reid, the former President of
TidalBeach Inc. Such employment agreement is for a term of 2 years commencing on
November 1, 2000 with an annual salary of $123,000. Mr. Reid was not affiliated
with the Company prior to the acquisition. Pursuant to the Share Purchase
Agreement governing the sale of the Company's subsidiary, Njoyn Software
Incorporated to Cognicase Inc., Mr. Reid is being contracted as a consultant to
Cognicase for a period of six months until September 1, 2002.
Effective December 26, 2000, shares and options were issued to the
following: Declan French, Tony French, Mike Reid, Kelly Hankinson, and Globe
Capital. These issuances were made pursuant to contracts and, or as bonuses with
regards to the various acquisitions throughout the course of the fiscal year
2000. The amounts issued were as follows: 1,200,000 shares to Declan French;
50,000 shares to Tony French; 100,000 options priced at $0.70 to Mike Reid; and
50,000 shares and 100,000 options priced at $0.70 to Kelly Hankinson; and
500,000 shares to Globe Capital Corporation.
During the fiscal year ended December 31, 2000, the Company paid to
Gersten, Savage, Kaplowitz, Wolf & Marcus, LLP, the Company's United States
legal counsel, approximately $100,000 and issued 30,632 shares of common stock
in consideration for legal services rendered. Arthur S. Marcus, one of the
Company's directors, is a partner of Gersten, Savage, Kaplowitz, Wolf & Marcus,
LLP.
During the fiscal year ended December 31, 2001, the Company paid to
Gersten, Savage, Kaplowitz, Wolf & Marcus, LLP, the Company's United States
legal counsel, approximately $180,000 and issued 158,635 shares of common stock
in consideration for legal services rendered. Arthur S. Marcus, one of the
Company's directors, is a partner of Gersten, Savage, Kaplowitz, Wolf & Marcus,
LLP. The Company agreed to issue additional shares of its common stock in the
event that the Company's common stock traded below $0.10 for ten consecutive
trading days or more. The Company would be obligated to issue shares for the
differential or approximately 160,000 shares.
21
During the six months ended June 30, 2002, the Company issued 100,336
shares of common stock to Katherine Seto Evans in consideration for financial
and accounting advisory services rendered.
While the Company was private, it lacked sufficient independent
directors to ratify many of the foregoing transactions. However, the Company's
management believes that the foregoing transactions were on terms no less
favorable to the Company than could have been obtained from unaffiliated third
parties. All future transactions between the Company and the Company's officers,
directors or 5% shareholders, and their respective affiliates, will be on terms
no less favorable than could be obtained from unaffiliated third parties. In the
event that the Company's enters into future affiliated transactions, they will
be approved by the Company's independent directors who do not have an interest
in the transactions and who have access, at the Company's expense, to the
Company's counsel or independent legal counsel.
22
PROPOSAL NO. 2
THE RATIFICATION OF THE APPOINTMENT OF SCHWARTZ, LEVITSKY, FELDMAN, llp, AS THE
COMPANY'S INDEPENDENT CHARTERED ACCOUNTANTS FOR THE ENSUING YEAR.
The Board of Directors has unanimously approved and unanimously
recommends that the shareholders ratify the appointment of Schwartz, Levitsky,
Feldman, llp, as the Company's independent chartered accountants for the ensuing
year.
Shareholder Vote Required
Ratification of the appointment of Schwartz, Levitsky, Feldman, llp, as
the Company's independents chartered accountants for the ensuing year will
require the affirmative vote of the majority of the shares present in person or
represented by proxy at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT
OF SCHWARTZ, LEVITSKY, FELDMAN, llp, AS THE COMPANY'S INDEPENDENT CHARTERED
ACCOUNTANTS FOR THE ENSUING YEAR.
23
PROPOSAL NO. 3
RATIFICATION OF THE ADOPTION OF THE COMPANY'S
2002 STOCK OPTION PLAN
At the Meeting a vote will be taken on a proposal to ratify the
adoption of the Company's 2002 Stock Option Plan (the "2002 Stock Option Plan"),
which contains 6,500,000 shares of common stock underlying stock options
available for grant thereunder. The 2002 Stock Option Plan was adopted by the
Board of Directors on August 28, 2002. A COPY OF THE 2002 STOCK OPTION PLAN IS
ATTACHED HERETO AS EXHIBIT A. As of the date of this Proxy, no options to
purchase shares of the Company's common stock have been granted to the Company's
employees, directors and outside consultants under the 2002 Stock Option Plan.
Description of the 2002 Plan
The 2002 Stock Option Plan will be administered by the Company's
Compensation Committee, which will determine among other things, those
individuals who shall receive options, the time period during which the options
may be partially or fully exercised, the number of shares of the Company's
common stock issuable upon the exercise of the options and the option exercise
price
The 2002 Stock Option Plan is effective for a period for ten years,
expiring in 2012. Options to acquire 6,500,000 shares of the Company's common
stock may be granted to officers, directors, consultants, key employees,
advisors and similar parties who provide the Company with their skills and
expertise. The 2002 Stock Option Plan is designed to enable management to
attract and retain qualified and competent directors, employees, consultants and
independent contractors. Options granted under the 2002 Stock Option Plan may be
exercisable for up to ten years, generally require a minimum three-year vesting
period, and shall be at an exercise price all as determined by the Company's
Compensation Committee provided that, the exercise price of any options may not
be less than the fair market value of the shares of the Company's common stock
on the date of the grant. Options are non-transferable, and are exercisable only
by the participant (or by his or her guardian or legal representative) during
his or her lifetime or by his or her legal representatives following death.
If: (i) the Company shall not be the surviving entity in any merger,
consolidation or other reorganization (or survives only as a subsidiary of an
entity); (ii) the Company sells, leases or exchanges all or substantially all of
its assets to any other person or entity; (iii) the Company is to be dissolved
and liquidated; (iv) any person or entity, including a "group" as contemplated
by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, acquires
or gains ownership or control (including, without limitation, power to vote) of
more than 50% of the outstanding shares of the Company's voting stock (based
upon voting power); or (v) as a result of or in connection with a contested
election of directors, the persons who were directors of the Company before such
election shall cease to constitute a majority of the Board of Directors (each
such event is referred to herein as a "Corporate Change"); no later than (a) ten
days after the approval by the shareholders of the Company of such merger,
consolidation, reorganization, sale, lease or exchange of assets or dissolution
or such election of directors or (b) 30 days after a change of control of the
type described in clause (iv), the Company's Compensation Committee, acting in
its sole discretion without the consent or approval of any optionee, shall act
to effect 1 or more of the following alternatives, which may vary among
individual optionees and which may vary among options held by any individual
optionee: (1) accelerate the time at which options then outstanding may be
exercised so that such options may be exercised in full for a limited period of
time on or before a specified date (before or after such Corporate Change) fixed
by the Company's Compensation Committee, after which specified date all
unexercised options and all rights of optionees thereunder shall terminate; (2)
require the mandatory surrender to the Company by selected optionees of some or
all of the outstanding Options held by such optionees (irrespective of whether
such options are then exercisable under the provisions of the 2002 Stock Option
Plan) as of a date before or after such Corporate Change, specified by the
Company's Compensation Committee, in which event the Company's Compensation
Committee shall thereupon cancel such options and the Company shall pay to each
optionee an certain amount of cash per share; (3) make such adjustments to
options then outstanding as the Company's Compensation Committee deems
appropriate to reflect such Corporate Change (provided, however, that the
Company's Compensation Committee may determine in its sole discretion that no
adjustment is necessary to options then outstanding); or (4) provide that the
number and class of shares covered by an option theretofore granted shall be
adjusted so that such option shall thereafter cover the number and class of
shares or other securities or property (including, without limitation, cash) to
which the optionee would have been entitled pursuant to the terms of the
agreement of merger, consolidation or sale of assets and dissolution if,
immediately prior to such merger, consolidation or sale of assets, and
dissolution, the optionee had been the holder of record of the number of shares
of common stock then covered by such option.
24
If a participant ceases affiliation with the Company by reason of
death, permanent disability or retirement at or after age 65, the option remains
exercisable for one year from such occurrence but not beyond the option's
expiration date. Other types of termination allow the participant 90 days to
exercise the option, except for termination for cause, which results in
immediate termination of the option.
Any unexercised options that expire or that terminate upon an
employee's ceasing to be employed by the Company become available again for
issuance under the 2002 Stock Option Plan, subject to applicable securities
regulation.
The 2002 Stock Option Plan may be terminated or amended at any time by
the Company's Board of Directors, except that the number of shares of the
Company's common stock reserved for issuance upon the exercise of options
granted under the 2002 Stock Option Plan may not be increased without the
consent of the Company's shareholders.
Shareholder Vote Required
Approval of the Company's 2002 Stock Option Plan requires the
affirmative vote of the holders of a majority of the shares of common stock
present in person or represented by proxy at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE COMPANY'S 2002
STOCK OPTION PLAN.
25
PROPOSAL NO. 4
TO VOTE UPON THE PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF ORGANIZATION TO
INCREASE THE AUTHORIZED NUMBER OF THE SHARES OF THE COMPANY'S COMMON STOCK FROM
30,000,000 TO 100,000,000 SHARES.
The Board has adopted a resolution unanimously approving and
recommending to the Company's shareholders for their approval an amendment to
the Company's Articles of Incorporation to provide for an increase in the
authorized number of shares of common stock from 30,000,000 to 100,000,000
shares IN THE FORM OF A SPECIAL RESOLUTION ATTACHED HERETO AS EXHIBIT B.
As of the September _____, 2002, there were _______ shares issued and
outstanding shares of common stock excluding: (i) 1,870,000 shares issuable upon
the exercise of options issued under the Company's 1998, 2000, and 2001 Stock
Option Plans; (ii) 9,300,000 shares of common stock underlying warrants issued
in private transactions with exercise prices ranging between $0.08 and $3.71;
(iii) up to approximately 5,000,000 shares of common stock underlying various
debt settlement agreements; and, (iv) up to approximately 7,100,000 shares of
common stock issuable upon the conversion of the outstanding Series C
Convertible Preferred Stock (the actual number of shares to be issued upon such
conversion(s) is dependent upon the market price of the Company's common stock
at the time of such conversion(s)).
The Board of Directors believes the increase in the authorized number
of shares of common stock is in the best interests of the Company to have them
available for, among other things, the possible issuance in connection with
future acquisitions or financing activities. In addition, it is necessary to
authorize such shares to have them available: (i) for issuance upon the
conversion of the outstanding shares of Series Preferred Stock; (ii) for
issuance upon the exercise of the issued and outstanding warrants; (iii) for
issuance upon the exercise of the issued and outstanding options; and (iv) for
the settlement of up to $2,135,000 in outstanding debt. In addition, the
additional shares of common stock would be available for any proper corporate
purpose including, without limitation, the issuance in private or public sales
as a means of raising working capital, as consideration to be paid by the
Company for the acquisition of other businesses and properties, the issuance of
stock splits or dividends and the implementation of employee benefit plans.
26
The additional shares of common stock could be issued for any proper
corporate purpose by the Board of Directors at any time without further
shareholder approval, subject to applicable law and to the rules of the Nasdaq
Stock Market, Inc. that apply to the Company as a result of the quotation of the
common stock on the Nasdaq SmallCap Market so long as the common stock is so
quoted. Except as described above, further authorization from the Company's
shareholders will not be solicited prior to the issuance of common stock. The
voting and equity ownership rights of the Company's shareholders will be diluted
by such issuances. Shareholders will not have preemptive rights to subscribe for
shares of common stock, unless the Company grants such rights at the time of
issue. Except as contemplated herein, the Company currently has no plans or
proposals to issue any of the additional shares of common stock.
The Board of Directors is required to make any determination to issue
shares of common stock based on its judgment as to the best interests of the
Company. Except as contemplated herein, the Company's Board of Directors has no
present intention of issuing additional shares of common stock. Addition
issuances of shares of common stock (which would be made within the limits
imposed by applicable laws and the Nasdaq rules as described above) could,
depending on the circumstances, make more difficult or discourage any attempt to
obtain control of the Company by means of a merger, tender offer, proxy contest
or otherwise. When in the judgment of the Board of Directors such use would be
in the best interest of the Company, such shares could be used to create voting
or other impediments or to discourage persons seeking to gain control of the
Company. Such shares could be privately placed with purchasers favorable to the
Board of Directors in opposing such action. The issuance of new shares of common
stock also could be used to dilute the stock ownership of a person or entity
seeking to obtain control of the Company should the Board consider the action of
such entity or person not to be in the best interest of the Company. Any such
issuance could also have the effect of diluting the earnings per share, book
value per share and/or voting power of the common stock.
Shareholder Vote Required
The ratification of the proposal to amend the Company's Articles of
Incorporation to increase the authorized number of the shares of the Company's
common stock from 30,000,000 to 100,000,000 shares will require the affirmative
vote of 2/3 of the shares of common stock in person or represented by proxy at
the Meeting and entitled to vote on the change of the corporate name. If 2/3 of
the shares of common stock present in person or represented by proxy at the
Meeting vote in favor of amending the Company's Articles of Incorporation to
increase the authorized number of shares of the Company's common stock from
30,000,000 to 100,000,000 shares, the Company will file with the Minister of
Consumer and Business Services for the Province of Ontario articles of amendment
to effect such increase in the authorized shares of the Company's common stock.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE IN FAVOR OF THE
RATIFICATION OF THE PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION TO
INCREASE THE AUTHORIZED NUMBER OF THE SHARES OF THE COMPANY'S COMMON STOCK FROM
30,000,000 TO 100,000,000 SHARES.
27
SECTION 16(a) REPORTING
Under the securities laws of the United States, the Company's
directors, its executive (and certain other) officers, and any persons holding
10% or more of the Company's common stock must report their ownership of the
Company's common stock and any changes in that ownership to the Securities and
Exchange Commission. Specific due dates for these reports have been established.
During the year ended December 31, 2001, the Company believes all reports
required to be filed under Section 16(a) were filed on a timely basis.
OTHER MATTERS
The Board of Directors does not know of any matters other than those
referred to in the Notice of Meeting, which will be presented for consideration
at the Meeting. However, it is possible that certain proposals may be raised at
the Meeting by one or more shareholders. In such case, or if any other matter
should properly come before the meeting, it is the intention of the person named
in the accompanying proxy to vote such proxy with his or her or its best
judgement.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company.
Solicitations may be made by mail, personal interview, telephone, and telegram
by directors, officers and employees of the Company. The Company will reimburse
banks, brokerage firms, other custodians, nominees and fiduciaries for
reasonable expenses incurred in sending proxy material to beneficial owners of
the Company's capital stock.
SHAREHOLDER PROPOSALS
In order to be included in the proxy materials for the Company's next
Annual Meeting of shareholders, shareholder proposals must be received by the
Company on or before January 24, 2003.
FORM 10-KSB
A copy of the Company's annual report on Form 10-KSB for the fiscal
year ended December 31, 2001 as filed with the Securities and Exchange
Commission is available to shareholders free of charge by writing to:
Thinkpath Inc.
55 University Avenue, Suite 400
Toronto, Ontario M5J 2H7
Attention: Corporate Secretary
28
FINANCIAL STATEMENTS
The Company's audited consolidated financial statements for the fiscal
year ended December 31, 2001 and the related Management's Discussion and
Analysis of Financial Condition and Results of Operations are included in the
Company's Form 10-KSB and are incorporated by herein by reference.
By order of the Board of Directors, September _____, 2002
/s/ Declan A. French
Chairman of the Board of Directors
29
EXHIBIT A
THINKPATH INC.
2002 STOCK OPTION PLAN
I. Purpose of the Plan
The THINKPATH INC. 2002 STOCK OPTION PLAN (the "Plan") is intended to
provide a means whereby certain employees of THINKPATH INC., an Ontario
corporation (the "Company"), and its affiliates may develop a sense of
proprietorship and personal involvement in the development and financial success
of the Company, and to encourage them to remain with and devote their best
efforts to the business of the Company, thereby advancing the interests of the
Company and its shareholders. Accordingly, the Company may grant to certain
service providers ("Optionees") the option ("Option") to purchase common shares
of the Company ("Shares"), as hereinafter set forth.
Options granted under the Plan may be either incentive stock options,
within the meaning of section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code") ("Incentive Stock Options"), or options which do not
constitute Incentive Stock Options.
30
II. Administration
(a) The Plan shall be administered by a committee (the "Committee") of,
and appointed by, the Board of Directors of the Company (the "Board"), and the
Committee shall be (a) comprised solely of two or more outside directors (within
the meaning of section 162(m) of the Code and applicable interpretive authority
thereunder), and (b) constituted so as to permit the Plan to comply with Rule
16b-3, as currently in effect or as hereinafter modified or amended ("Rule
16b-3"), promulgated under the United States Securities Exchange Act of 1934, as
amended (the "1934 Act"). The Committee shall have sole authority to select the
Optionees from among those individuals eligible hereunder and to establish the
number of shares which may be issued under each Option. The limitation set forth
in the preceding sentence shall be applied in a manner which will permit
compensation generated under the Plan to constitute "performance-based"
compensation for purposes of section 162(m) of the Code, including, without
limitation, counting against such maximum number of shares, to the extent
required under section 162(m) of the Code and applicable interpretive authority
thereunder, any shares subject to Options that are cancelled or repriced. In
selecting the Optionees from among individuals eligible hereunder and in
establishing the number of shares that may be issued under each Option, the
Committee may take into account the nature of the services rendered by such
individuals, their present and potential contributions to the Company's success
and such other factors as the Committee in its discretion shall deem relevant.
(b) The Committee is authorized to interpret the Plan and may from time
to time adopt such rules and regulations, consistent with the provisions of the
Plan, as it may deem advisable to carry out the Plan. All decisions made by the
Committee in selecting the Optionees, in establishing the number of shares which
may be issued under each Option and in construing the provisions of the Plan
shall be final.
(c) The provisions of the Plan shall be interpreted and construed in
accordance with the laws of the Province of Ontario
31
III. Option Agreements
(a) Each Option shall be evidenced by a written agreement between the
Company and the Optionee ("Option Agreement") which shall contain such terms and
conditions as may be approved by the Committee. The terms and conditions of the
respective Option Agreements need not be identical. Specifically, an Option
Agreement may provide for the surrender of the right to purchase shares under
the Option in return for a payment in cash or Shares or a combination of cash
and Shares equal in value to the excess of the fair market value of the shares
with respect to which the right to purchase is surrendered over the option price
therefor ("Stock Appreciation Rights"), on such terms and conditions as the
Committee in its sole discretion may prescribe; provided that, except as
provided in subparagraph VIII(c) hereof, the Committee shall retain final
authority (i) to determine whether an Optionee shall be permitted, or (ii) to
approve an election by an Optionee, to receive cash in full or partial
settlement of Stock Appreciation Rights. Moreover, an Option Agreement may
provide for the payment of the option price, in whole or in part, by the
delivery of a number of Shares (plus cash if necessary) having a fair market
value equal to such option price.
(b) For all purposes under the Plan, the fair market value of a Share
on a particular date shall be equal to the mean of the high and low sales prices
of the Shares (i) reported by the SmallCap Market of NASDAQ on that date or (ii)
if the Shares are listed or quoted on a national stock exchange or quotation
system, reported on the stock exchange composite tape on that date; or, in
either case, if no prices are reported on that date, on the last preceding date
on which such prices of the Shares are so reported. If the Shares are traded
over the counter at the time a determination of its fair market value is
required to be made hereunder, its fair market value shall be deemed to be equal
to the average between the reported high and low or closing bid and asked prices
of the Shares on the most recent date on which the Shares were publicly traded.
In the event the Shares are not publicly traded at the time a determination of
its value is required to be made hereunder, the determination of its fair market
value shall be made by the Committee in such manner as it deems appropriate.
(c) Each Option and all rights granted thereunder shall not be
transferable and shall be exercisable during the Optionee's lifetime only by the
Optionee or the Optionee's guardian or legal representative.
32
(d) The Committee shall have the discretion to determine a vesting
schedule for any Option granted under the Plan. Unless otherwise determined by
the Committee, Options granted under the Plan shall vest at a rate of 1/3 per
year over three years and be exercisable prior to the day following the first
anniversary of the date on which the Options concerned are granted.
(e) The expiry date of an Option (the "Expiry Date") shall be the
earlier of the date fixed by the Committee, as set forth in the individual
Option Agreement, and the date established, if applicable, in clauses (i) to
(iii) below, provided that such date shall not be later than the tenth
anniversary of the date on which the Option is granted.
(i) If an Optionee ceases affiliation with the Company or an
affiliate by reason of death, permanent disability or
retirement at or after age 65, the Expiry Date shall be the
first anniversary of the occurrence.
(ii) If an Optionee ceases affiliation with the Company or an
affiliate for any other reason (other than termination of his
or her employment or other service for cause), the Expiry Date
shall be the date that is 90 days following the occurrence.
(iii) If an Optionee ceases affiliation with the Company or an
affiliate upon the termination of his or her employment or
other service for cause, then the Expiry Date shall be the
date on which the Company or its affiliate gives notice to the
Optionee of his or her termination.
33
IV. Eligibility of Optionee
(a) Options may be granted only to individuals who are employees
(including officers and directors who are also employees) of the Company or any
parent or subsidiary corporation (as defined in section 424 of the Code) of the
Company at the time the Option is granted; provided, however, that Options which
do not constitute Incentive Stock Options may be granted to individuals who are
directors (but not also employees) of the Company or any such parent or
subsidiary corporation. Subject to required regulatory approvals, Options may
also be granted to consultants, advisors and similar parties who provide their
skills and expertise to the Company or its affiliates. Options may be granted to
the same individual on more than one occasion.
(b) No Incentive Stock Option shall be granted to an individual if, at
the time the Option is granted, such individual owns shares possessing more than
10% of the total combined voting power of all classes of capital stock of the
Company or of its parent or subsidiary corporation, within the meaning of
section 422(b)(6) of the Code, unless (i) at the time such Option is granted the
option price is at least 110% of the fair market value of the Shares subject to
the Option and (ii) such Option by its terms is not exercisable after the
expiration of five years from the date of grant. To the extent that the
aggregate fair market value (determined at the time the respective Incentive
Stock Option is granted) of shares with respect to which Incentive Stock Options
are exercisable for the first time by an individual during any calendar year
under all incentive stock option plans of the Company and its parent and
subsidiary corporations exceeds US$100,000, such excess Incentive Stock Options
shall be treated as Options which do not constitute Incentive Stock Options. The
Committee shall determine, in accordance with applicable provisions of the Code,
Treasury Regulations and other administrative pronouncements, which of an
Optionee's Incentive Stock Options will not constitute Incentive Stock Options
because of such limitation and shall notify the Optionee of such determination
as soon as practicable after such determination.
34
(c) The aggregate number of Shares reserved for issuance pursuant to
Options granted to any one Optionee shall not exceed 5% of the number of Shares
outstanding (on a non-diluted basis) at the time of such grant.
V. Shares Subject to the Plan
(a) The aggregate number of shares which may be issued under Options
granted under the Plan shall not exceed 6,500,000 Shares. Such shares may
consist of authorized but unissued Shares or previously issued Shares reacquired
by the Company. Any of such shares which remain unissued and which are not
subject to outstanding Options at the termination of the Plan shall cease to be
subject to the Plan but, until termination of the Plan, the Company shall at all
times make available a sufficient number of shares to meet the requirements of
the Plan. Should any Option hereunder expire or terminate prior to its exercise
in full, the shares theretofore subject to such Option may again be subject to
an Option granted under the Plan to the extent permitted under Rule 16b-3 and
applicable Canadian securities legislation.
(b) The aggregate number of shares which may be issued under the Plan
shall be subject to adjustment in the same manner as provided in Paragraph VIII
hereof with respect to Shares subject to Options then outstanding. Exercise of
an Option in any manner, including an exercise involving a Stock Appreciation
Right, shall result in a decrease in the number of Shares which may thereafter
be available, both for purposes of the Plan and for sale to any one individual,
by the number of shares as to which the Option is exercised. Separate share
certificates shall be issued by the Company for those shares acquired pursuant
to the exercise of an Incentive Stock Option and for those shares acquired
pursuant to the exercise of any Option which does not constitute an Incentive
Stock Option.
35
VI. Option Price
The purchase price of Shares issued under each Option shall be
determined by the Committee, but in no case shall such purchase price be less
than the fair market value of the Shares subject to the Option on the date the
Option is granted.
VII. Term of Plan
The Plan, shall be effective upon the date of its adoption by the
Board, provided the Plan is approved by the shareholders of the Company within
twelve months thereafter. Notwithstanding any provision in this Plan or in any
Option Agreement, no Option shall be exercisable prior to such shareholder
approval. Except with respect to Options then outstanding, if not sooner
terminated under the provisions of Paragraph IX, the Plan shall terminate upon
and no further Options shall be granted after the expiration of ten years from
the date of its adoption by the Board.
VIII. Recapitalization or Reorganization
(a) The existence of the Plan and the Options granted hereunder shall
not affect in any way the right or power of the Board or the shareholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities, the
dissolution or liquidation of the Company or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any other corporate
act or proceeding.
(b) The shares with respect to which Options may be granted are Shares
as presently constituted, but, if and whenever, prior to the expiration of an
Option theretofore granted, the Company shall effect a subdivision or
consolidation of Shares or the payment of a stock dividend on Shares without
receipt of consideration by the Company, the number of Shares with respect to
which such Option may thereafter be exercised (i) in the event of an increase in
the number of outstanding shares shall be proportionately increased, and the
purchase price per share shall be proportionately reduced, and (ii) in the event
of a reduction in the number of outstanding shares shall be proportionately
reduced, and the purchase price per share shall be proportionately increased.
36
(c) If the Company recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure ( a "recapitalization"), the number and
class of Shares covered by an Option theretofore granted shall be adjusted so
that such Option shall thereafter cover the number and class of shares of stock
and securities to which the Optionee would have been entitled pursuant to the
terms of the recapitalization if, immediately prior to the recapitalization, the
Optionee had been the holder of record of the number of Shares then covered by
such Option. If:
(i) the Company shall not be the surviving entity in any merger,
consolidation or other reorganization (or survives only as a
subsidiary of an entity);
(ii) the Company sells, leases or exchanges all or substantially
all of its assets to any other person or entity;
(iii) the Company is to be dissolved and liquidated;
(iv) any person or entity, including a "group" as contemplated by
Section 13(d)(3) of the 1934 Act, acquires or gains ownership
or control (including, without limitation, power to vote) of
more than 50% of the outstanding shares of the Company's
voting stock (based upon voting power); or
37
(v) as a result of or in connection with a contested election of
directors, the persons who were directors of the Company
before such election shall cease to constitute a majority of
the Board (each such event is referred to herein as a
"Corporate Change");
no later than (a) ten days after the approval by the shareholders of the Company
of such merger, consolidation, reorganization, sale, lease or exchange of assets
or dissolution or such election of directors or (b) thirty days after a change
of control of the type described in clause (iv), the Committee, acting in its
sole discretion without the consent or approval of any Optionee, shall act to
effect one or more of the following alternatives, which may vary among
individual Optionees and which may vary among Options held by any individual
Optionee:
(1) accelerate the time at which Options then outstanding may be
exercised so that such Options may be exercised in full for a
limited period of time on or before a specified date (before
or after such Corporate Change) fixed by the Committee, after
which specified date all unexercised Options and all rights of
Optionees thereunder shall terminate;
(2) require the mandatory surrender to the Company by selected
Optionees of some or all of the outstanding Options held by
such Optionees (irrespective of whether such Options are then
exercisable under the provisions of the Plan) as of a date
before or after such Corporate Change, specified by the
Committee, in which event the Committee shall thereupon cancel
such Options and the Company shall pay to each Optionee an
amount of cash per share equal to the excess, if any, of the
amount calculated in subparagraph (d) below (the "Change of
Control Value") of the shares subject to such Option over the
exercise price(s) under such Options for such shares;
38
(3) make such adjustments to Options then outstanding as the
Committee deems appropriate to reflect such Corporate Change
(provided, however, that the Committee may determine in its
sole discretion that no adjustment is necessary to Options
then outstanding); or
(4) provide that the number and class of shares covered by an
Option theretofore granted shall be adjusted so that such
Option shall thereafter cover the number and class of shares
or other securities or property (including, without
limitation, cash) to which the Optionee would have been
entitled pursuant to the terms of the agreement of merger,
consolidation or sale of assets and dissolution if,
immediately prior to such merger, consolidation or sale of
assets, and dissolution, the Optionee had been the holder of
record of the number of Shares then covered by such Option.
(d) For the purposes of clause (2) in subparagraph (c) above, the
"Change of Control Value" shall equal the amount determined in clause (i), (ii)
or (iii), whichever is applicable, as follows:
(i) the per share price offered to shareholders of the Company in
any such merger, consolidation, reorganization, sale of assets
or dissolution transaction;
(ii) the price per share offered to shareholders of the Company in
any tender offer or exchange offer whereby a Corporate Change
takes place; or
39
(iii) if such Corporate Change occurs other than pursuant to a
tender or exchange offer, the fair market value per share of
the shares into which such Options being surrendered are
exercisable, as determined by the Committee as of the date
determined by the Committee to be the date of cancellation and
surrender of such Options.
In the event that the consideration offered to shareholders of the Company in
any transaction described in this subparagraph (d) or in subparagraph (c) above
consists of anything other than cash, the Committee shall determine the fair
cash equivalent of the portion of the consideration offered which is other than
cash.
(e) Any adjustment provided for in subparagraphs (b) or (c) above shall
be subject to any required shareholder action.
(f) Except as hereinbefore expressly provided, the issuance by the
Company of shares of any class or securities convertible into shares of any
class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
Shares subject to Options theretofore granted or the purchase price per share.
IX. Amendment or Termination of the Plan
The Board in its discretion may terminate the Plan at any time with
respect to any shares for which Options have not theretofore been granted. The
Board shall have the right to alter or amend the Plan or any part thereof from
time to time, provided that no change in any Option theretofore granted may be
made which would impair the rights of the Optionee without the consent of such
Optionee, and provided further that the Board may not make any alteration or
amendment which would increase the aggregate number of shares which may be
issued pursuant to the provisions of the Plan or change the class of individuals
eligible to receive Options under the Plan without the approval of the
shareholders of the Company.
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X. Securities Laws
(a) The issue of Shares by the Company pursuant to the exercise of an
Option is subject to this Plan and compliance with the laws, rules and
regulations of all regulatory bodies applicable to the issuance and distribution
of the Company's securities and to the listing requirements of any stock
exchange or market on which the Shares may then be listed or quoted. The Company
shall not be obligated to issue any Shares pursuant to any Option granted under
the Plan at any time when the offering of the Shares covered by such Option has
not been registered under the United States Securities Act of 1933 or otherwise
qualified for distribution under such other U.S. state and federal and Canadian
provincial laws, rules or regulations as the Company or the Committee deems
applicable and, in the opinion of legal counsel for the Company, there is no
exemption from applicable prospectus and registration requirements of such laws,
rules or regulations available for the offering and sale of such shares.
(b) It is intended that the Plan and any grant of an Option made to a
person subject to Section 16 of the 1934 Act meet all of the requirements of
Rule 16b-3 thereunder. If any provision of the Plan or any such Option would
disqualify the Plan or such Option under, or would otherwise not comply with,
Rule 16b-3, such provision or Option shall be construed or deemed amended to
conform to Rule 16b-3.
Additional Plan Provisions, if required:
In addition, until such time as the Plan has been approved by a
majority of the votes cast at a meeting of shareholders (other than votes
attaching to securities beneficially owned by (A) an insider (within the meaning
of the Securities Act (Ontario)) of the Company, other than a person who falls
within that definition solely by virtue of being a director or senior officer of
a subsidiary of the Company, and (B) an associate (within the meaning of the
Securities Act (Ontario)) of any person who is an insider by virtue of (A) above
(such persons herein referred to as "Insiders"):
(i) the number of Shares reserved for issuance pursuant to Options
granted to Insiders shall not exceed 10% of the number of
Shares outstanding at the time of the grant (on a non-diluted
basis), less the aggregate number of Shares reserved for
issuance under any other stock option, stock option plan,
employee stock purchase plan or any other compensation or
incentive mechanism involving the issuance or potential
issuance of Shares to one or more service providers, including
a share purchase from treasury that is financially assisted by
the Company by way of loan, guarantee or otherwise (a "Share
Compensation Arrangement") over the preceding one-year period;
(ii) the issuance to any one Insider and such Insider's Associates,
within a one-year period, of Shares on the exercise of Options
may not exceed 5% of the number of Shares outstanding at the
time of the grant (on a non-diluted basis), less the aggregate
number of Shares reserved for issuance under any other Share
Compensation Arrangement over the preceding one-year period;
and
41
(iii) the issuance to all Insiders, within a one-year period, of
Shares on the exercise of Options, may not exceed 10% of the
number of Shares outstanding at the time of the grant (on a
non-diluted basis) less the aggregate number of Shares
reserved for issuance under any other Share Compensation
Arrangement over the preceding one-year period.
42
EXHIBIT B
SPECIAL RESOLUTION OF THE SHAREHOLDERS
OF
THINKPATH INC.
(the "Corporation")
RESOLVED THAT
RECITALS:
A. The Articles of the Corporation be amended as follows:
1. to change the authorized share capital of the Corporation by
increasing the number of common shares that the Corporation is
authorized to issue from 30,000,000 to 100,000,000
B. any one officer or director of the Corporation is hereby authorized
and directed on behalf of the Corporation to deliver Articles of Amendment, in
duplicate, to the Director under the Business Corporations Act and to sign and
execute all documents and to do all things necessary or advisable in connection
with the foregoing; and
C. the board of directors of the Corporation is hereby authorized to revoke
this special resolution without further approval of the shareholders of the
Corporation at any time prior to the endorsement by the Director under the
Business Corporations Act, of a certificate of amendment of articles in respect
of the amendments referred to above.
43
EXHIBIT C
GENERAL PROXY - ANNUAL MEETING OF SHAREHOLDERS OF THINKPATH INC.
The undersigned hereby appoints Declan A. French, with full power of
substitution, proxy to vote all of the shares of common stock of the undersigned
and with all of the powers the undersigned would possess if personally present,
at the Annual Meeting and Special Meeting of Shareholders of Thinkpath Inc. (the
"Company"), to be held at the principal executive offices of the Company located
at 55 University Avenue, Suite 400, Toronto, Ontario, Canada on October 16, 2002
at 10:00 A.M. local time and at all adjournments thereof, upon the matters
specified below, all as more fully described in the Proxy Statement dated
September ___, 2002 and with the discretionary powers upon all other matters
which come before the meeting or any adjournment thereof.
This Proxy is solicited on behalf of Thinkpath Inc.'s Board of Directors.
1. To elect five directors to hold office for the term of one year:
_____ FOR ALL NOMINESS _____WITHELD FOR ALL NOMINEES
INSTRUCTION: To withhold authority to vote for any individual director
nominee, write that director nominee's name in the space provided
below.
2. To ratify the appointment of Schwartz, Levitsky, Feldman, llp, as the
Company's independent chartered accountants for the ensuing year:
_____ FOR _____AGAINST _____ABSTAIN
3. To adopt the Company's 2002 Stock Option Plan:
_____ FOR _____AGAINST _____ABSTAIN
4. To vote upon the proposal to amend the Company's Articles of
Incorporation to increase the authorized number of shares of the
Company's common stock from 30,000,000 to 100,000,000 shares.
_____ FOR _____AGAINST _____ABSTAIN
5. In their discretion, upon such other matter or matters that may
properly come before the meeting, or any adjournments thereof.
(Continued and to be signed on the other side)
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(Continued from other side)
Every properly signed proxy will be voted in accordance with the specifications
made thereon. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, 3 and 4.
The undersigned hereby acknowledges receipt of a copy of the accompanying Notice
of Annual Meeting and Special Meeting and Proxy Statement and hereby revokes any
proxy or proxies heretofore given.
Please mark, date, sign and mail your proxy promptly in the envelope provided.
Date: , 2002
-----------------------
(Print name of Shareholder)
(Print name of Shareholder)
Signature
Signature
Number of Shares
45