SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
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| | DEFINITIVE PROXY STATEMENT
| | DEFINITIVE ADDITIONAL MATERIALS
| | SOLICITING MATERIAL PURSUANT TO RULE 14A-11(C) OR RULE 14A-12
WORKSTREAM INC.
--------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
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WORKSTREAM INC.
NOTICE OF ANNUAL AND SPECIAL MEETING
OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN THAT the annual and special meeting of the shareholders
of WORKSTREAM INC. (the "Corporation") will be held on Thursday, November 20,
2003 at the offices of Workstream Inc. located at 495 March Road, Suite 300,
Ottawa, Ontario commencing at 10:00 a.m. (Ottawa time) for the following
purposes:
1. to elect the following persons as directors of the Corporation:
Michael Mullarkey
Thomas Danis
Matthew Ebbs
Michael Gerrior
Arthur Halloran
Cholo Manso
2. to approve the Corporation's ability to issue common shares in an
aggregate amount exceeding 19.99% of the Corporation's outstanding
shares pursuant to convertible notes, Class A Series A Convertible
Preferred Shares and warrants;
3. to appoint PricewaterhouseCoopers LLP as auditors of the Corporation;
4. to authorize the directors to fix the remuneration of the auditors;
5. to receive and consider the financial statements of the Corporation for
the fiscal year ended May 31, 2003 together with the auditors' report
thereon and the Annual Report to the shareholders; and
6. to transact such further and other business as may properly be brought
before the meeting or any adjournment or any adjournments thereof.
The enclosed proxy is solicited by our management. We have enclosed a copy of
our annual report for the fiscal year ended May 31, 2003, which is not a part of
the proxy soliciting materials.
The financial statements referred to in paragraph 5 above are set out in our
2003 annual report, a copy of which is enclosed to this Notice of Meeting.
Your vote is important. Please sign, date and return your proxy card promptly so
your shares can be represented, even if you plan to attend the meeting. Please
see the proxy card for instructions on how to vote. You can revoke a proxy at
any time prior to its exercise at the meeting by following the instructions in
the proxy circular and proxy statement or by attending the meeting and voting in
person.
DATED this ____ day of October, 2003.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Michael Mullarkey
Michael Mullarkey, Chairman
NOTE:
IF YOU ARE UNABLE TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE AND RETURN
THE ENCLOSED FORM OF PROXY. A POSTAGE PAID ADDRESSED ENVELOPE HAS BEEN ENCLOSED.
WORKSTREAM INC.
495 MARCH ROAD
SUITE 300
OTTAWA, ONTARIO CANADA K2K 3G1
(613) 270-0619
--------------------
PROXY CIRCULAR AND PROXY STATEMENT
FOR
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
NOVEMBER 20, 2003
--------------------
This Proxy Circular and Proxy Statement is furnished in connection with
the solicitation of proxies by, or on behalf of, the management of Workstream
Inc. ("Workstream"), incorporated under the laws of Canada, for use at the
annual and special meeting of the shareholders of Workstream (the "Meeting") to
be held on Thursday, the 20th day of November, 2003 at the hour of 10:00 a.m.
(Ottawa time) at the offices of Workstream, 495 March Road, Suite 300, Ottawa,
Ontario and at any adjournment or adjournments thereof for the purposes set
forth in the Notice of Meeting. Except as otherwise stated, the information
contained herein is given as of October ___, 2003.
The Notice of Annual and Special Meeting, this document and the Form of
Proxy will be mailed commencing on or about October 27, 2003 to shareholders of
record as of the close of business on October ___, 2003, the record date for the
Meeting.
SOLICITATION OF PROXIES BY MANAGEMENT
THE ENCLOSED PROXY IS BEING SOLICITED BY, OR ON BEHALF OF, OUR
MANAGEMENT and the cost of such solicitation will be borne by us, including the
cost of preparing, assembling and mailing proxy materials, handling and
tabulating the proxies returned, and charges of brokerage houses, nominees and
fiduciaries in forwarding proxy materials to our beneficial owners. The
solicitation of proxies will be primarily by mail, but proxies may also be
solicited by telephone or other personal contact by our directors, officers and
employees or by our transfer agent and registrar. We will reimburse their
expenses for doing this.
INFORMATION ON VOTING
APPOINTMENT OF PROXIES
The persons named in the enclosed Form of Proxy are our directors and
officers. A shareholder desiring to appoint some other person to represent
him/her at the Meeting may do so by inserting such person's name in the blank
space provided in the Form of the Proxy or by completing another form of proxy
and in either case delivering the completed proxy to American Stock Transfer &
Trust Company, 59 Maiden Lane, New York, New York 10038, Attention: Proxy
Department, not later than the day preceding the Meeting or by depositing it
with the Chairman of the Meeting prior to the commencement of the Meeting. It is
the responsibility of the shareholder appointing some other person to represent
him/her to inform such person that he/she has been so appointed. The proxy must
be executed by the shareholder or his attorney authorized in writing or, if the
shareholder is a corporation, by an officer or attorney thereof, duly
authorized.
REVOCABILITY OF PROXIES
A shareholder executing the enclosed Form of Proxy has the right to
revoke it under subsection 148(4) of the Act. A shareholder may revoke a proxy
by depositing an instrument in writing executed by him/her or by his/her
attorney authorized in writing at the offices of Workstream, 495 March Road,
Suite 300, Ottawa, Ontario K2K 3G1 at any time up to and including the last
business day preceding the day of the Meeting, or any adjournment or
adjournments thereof, at which the proxy is to be used, or with the Chairman of
the Meeting on the day of the Meeting or any adjournment or adjournments thereof
or in any other manner permitted by law.
VOTING BY PROXY
For the purpose of voting by proxy, proxies marked as
"WITHHOLD/ABSTAIN" will be treated as present for the purpose of determining a
quorum but will not be counted as having been voted in respect of any matter to
which the instruction to "WITHHOLD/ABSTAIN" is indicated.
Your Common Shares may not be registered in your name but in the name
of an intermediary (which is usually a bank, trust company, securities dealer or
broker, or a clearing agency in which an intermediary participates). If your
Common Shares are registered in the name of an intermediary, you are a
non-registered shareholder.
We have distributed copies of this document to intermediaries for
distribution to non-registered shareholders. Unless you have waived your rights
to receive these materials, intermediaries are required to deliver them to you
as a non-registered shareholder of Workstream and to seek your instructions as
to how to vote your Common Shares. Proxies returned by intermediaries as
"non-votes" because the intermediary has not received instructions from the
non-registered shareholder with respect to the voting of certain shares or,
under applicable stock exchange or other rules, the intermediary does not have
the discretion to vote those shares on one or more of the matters that come
before the meeting, will be treated as not entitled to vote on any such matter
and will not be counted as having been voted in respect of any such matter.
Common Shares represented by such broker "non-votes" will, however, be counted
in determining whether there is a quorum.
On any ballot that may be called for regarding the matters listed in
the Notice of Annual and Special Meeting and in the Form of Proxy, the common
shares of Workstream (hereinafter sometimes called the "Common Shares")
represented by the enclosed Form of Proxy will be voted or withheld from voting
in accordance with the instructions of the shareholder indicated thereon by
marking an "X" in the boxes provided for that purpose on the Form of Proxy. In
the absence of such instructions the Common Shares will be voted: (i) "FOR" the
election of directors; (ii) "FOR" the approval to issue Common Shares in an
aggregate amount exceeding 19.99% of the our outstanding shares pursuant to
convertible notes, Class A Series A Convertible Preferred Shares and warrants;
(iii) "FOR" the appointment of auditors; and (iv) "FOR" authorizing the
directors to fix the auditors' remuneration, in each case, as referred to in
this Proxy Circular and Proxy Statement.
EXERCISE OF DISCRETION BY PROXIES
If any amendments or variations to matters identified in the Notice of
Meeting are proposed at the Meeting or if any other matters properly come before
the Meeting, the enclosed Form of Proxy confers discretionary authority to vote
on such amendments or variations or such other matters according to the best
judgment of the person voting the proxy at the Meeting. Management knows of no
matters to come before the Meeting other than the matters referred to in the
Notice of Meeting.
AUTHORIZED CAPITAL, VOTING SHARES AND
PRINCIPAL HOLDERS THEREOF
We are authorized to issue an unlimited number of Common Shares, an
unlimited number of Class A Preferred Shares and an unlimited number of Series A
Convertible Preferred Shares. Our shareholders of record as at the close of
business on October ___, 2003 are entitled to receive notice of, and vote at,
the Meeting. As of that date, 23,067,326 Common Shares were issued and
outstanding and entitled to vote. As of October ___, 2003, there were no Class A
Preferred Shares or Series A Convertible Preferred Shares outstanding. The
holders of the Common Shares are entitled to one (1) vote at any meeting of our
shareholders for each common share held.
The presence at the Meeting, in person or by proxy, of the holders of
at least 33-1/3% of the outstanding Common Shares entitled to be voted at the
Meeting constitutes a quorum for the transaction of business at the Meeting.
Unless otherwise indicated, all references in this document to dollar
amounts are to U.S. dollars.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS
The following table sets forth as of October ___, 2003 certain
information with respect to the beneficial ownership of each person whom we knew
to be the beneficial owner of more than 5% of our Common Shares.
- -------------------------------------------------------- -----------------------------------------------------------
COMMON SHARES
- -------------------------------------------------------- -----------------------------------------------------------
NAME AND ADDRESS OF
BENEFICIAL OWNER NUMBER OF SHARES (1) PERCENT
- -------------------------------------------------------- ---------------------------------- ------------------------
Michael Mullarkey 4,175,000 18.1%
c/o Workstream Inc., 495 March Road, Suite 300,
Ottawa, Ontario, K2K 3G1
- -------------------------------------------------------- ---------------------------------- ------------------------
Paul Champagne 3,463,625 15.0%
P.O. Box 4085 Station A Toronto, Ontario M5W2X6
- -------------------------------------------------------- ---------------------------------- ------------------------
Sands Brothers Venture Capital III LLC 1,578,205 (2) 6.4%
90 Parks Avenue
New York, N.Y. 10016
- -------------------------------------------------------- ---------------------------------- ------------------------
(1) With respect to each shareholder, includes any shares issuable upon
exercise of options and conversion of convertible notes held by such
shareholder that are or will become exercisable or convertible within
60 days of October __, 2003.
(2) Includes shares beneficially owned by affiliates of Sands Brothers
Venture Capital III LLC. Also includes 1,535,636 Common Shares issuable
upon conversion of convertible notes.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of October ___, 2003 certain
information with respect to the beneficial ownership of (i) each director, (ii)
our chief executive officer and each other executive officer who earned more
than $100,000 during fiscal year 2003 (collectively, the "Named Executive
Officers") and (iii) all the directors and executive officers as a group.
- -------------------------------------------------- --------------------------------- -----------------------------
NAME OF BENEFICIAL OWNER NUMBER OF SHARES(1) PERCENT OF CLASS
- -------------------------------------------------- --------------------------------- -----------------------------
- -------------------------------------------------- --------------------------------- -----------------------------
Michael Mullarkey 4,175,000 18.1%
- -------------------------------------------------- --------------------------------- -----------------------------
Matthew J. Ebbs 66,667 (2) *
- -------------------------------------------------- --------------------------------- -----------------------------
Michael A. Gerrior 30,000 *
- -------------------------------------------------- --------------------------------- -----------------------------
Cholo Manso 22,000 *
- -------------------------------------------------- --------------------------------- -----------------------------
Thomas Danis -- --
- -------------------------------------------------- --------------------------------- -----------------------------
Andrew Hinchliff (3) -- --
- -------------------------------------------------- --------------------------------- -----------------------------
Arthur Halloran (4) -- --
- -------------------------------------------------- --------------------------------- -----------------------------
Paul Haggard (5) -- --
- -------------------------------------------------- --------------------------------- -----------------------------
All executive officers and directors as a group 4,297,667 (6) 18.6%
(9 persons)
- -------------------------------------------------- --------------------------------- -----------------------------
* Less than 1%
(1) With respect to each shareholder, includes any shares issuable upon
exercise of options s held by such shareholder that are or will become
exercisable within 60 days of October __, 2003.
(2) Consists of 66,667 Common Shares issuable upon the exercise of stock
options.
(3) Mr. Hinchliff resigned from his position as Senior Vice President,
North American Sales, in August 2003.
(4) Mr. Halloran resigned from his positions as President and Chief
Operating Officer in April 2003.
(5) Mr. Haggard resigned from his position as Chief Financial Officer in
May 2003.
(6) Includes 70,667 Common Shares issuable upon the exercise of stock
options.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During the fiscal year ended May 31, 2003, we were a "foreign private
issuer," as that term is defined in Rule 3b-4 of the Securities Exchange Act of
1934 (the "Exchange Act"). A foreign private issuer is exempt from Section 16 of
the Exchange Act pursuant to Rule 3a12-3 under the Exchange Act. Accordingly,
our executive officers, directors and beneficial owners of more than ten percent
of our Common Shares were not subject to Section 16 of the Exchange Act and were
not required to file reports with the Securities and Exchange Commission (the
"SEC") relating to their ownership of and transactions in our equity securities.
We determined that as of August 27, 2003, we no longer qualified as a foreign
private issuer.
PROPOSAL 1--ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
At the Meeting, shareholders will be asked to approve the election of
directors, as a group, by resolution, which requires that a majority of the
votes cast at the Meeting be voted "FOR" the resolution for the election of
nominees as a group. Unless a contrary choice is specified, proxies solicited by
Management will be voted "FOR" the nominees for director set forth below.
The term of office of each of the current directors is due to expire
immediately prior to the election of directors at the Meeting.
The name of each person nominated for election to the Board of
Directors, together with certain information about them, is set forth below. The
Board does not have a nominating or similar committee.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE NOMINEES FOR
DIRECTOR SET FORTH BELOW.
Director
Name Age Since Position
- ---- --- ----- --------
Michael Mullarkey 35 2001 Chairman of the Board of Directors, President and
Chief Executive Officer (1)
Thomas Danis 56 2001 Director (1)(2)
Matthew Ebbs 38 1999 Director (1)(2)
Michael Gerrior 53 2001 Director (1)
Arthur Halloran 57 2001 Director (1)
Cholo Manso 40 2001 Director (1)(2)
(1) Term expires at 2003 annual meeting of shareholders.
(2) Member of the Audit Committee of the Board of Directors.
Michael Mullarkey has been the Chairman of our Board of Directors since November
2001 and our Chief Executive Officer since April 2001. In April 2003, Mr.
Mullarkey assumed the responsibilities of President, a position he previously
served from April 2001 until November 2001. From January 2001 to April 2001, Mr.
Mullarkey was a major investor in Paula Allen Holdings, Inc., a full service
outplacement firm in the United States, which we acquired in April 2001. From
January 1998 to September 1999, Mr. Mullarkey was the co-founder and managing
director of Information Technology Mergers & Acquisitions, LLC, an investment
capital group managing private equity funding and investing in emerging
technology markets and organizations. From March 1997 to December 1998, he was
the Senior Vice President of sales and marketing for Allin Corporation, a
publicly traded enterprise solution provider. From October 1989 to February
1997, Mr. Mullarkey was Vice President and General Manager at Sony Corporation
of America, a US subsidiary of Sony Corporation.
Thomas Danis joined our Board of Directors and audit committee in July 2001. Mr.
Danis is currently the Managing Director of Aon Corporation. During 2001, Mr.
Danis was the Market Area Leader for Southern California with Aon Risk Services
and was responsible for the offices in this area. From 1993 to 2000, Mr. Danis
was the Managing Director of the Mergers & Acquisitions Practice as Global Head
Senior Executive of Sales in charge of the sales offices of the mid-River area
of Aon Risk Services. Mr. Danis serves on the Board of Directors of
International Wire Group, Inc., which manufactures and markets wire products,
and the Board of Directors of its parent, International Wire Holding Company.
International Wire Group, Inc. files reports pursuant to the Securities Exchange
Act of 1934.
Matthew Ebbs has been a member of our Board of Directors and audit committee
since October 1999. Presently, Mr. Ebbs is the Recovery Service Manager with
Export Development Corporation. Until October 2001, Mr. Ebbs was the Chairman,
Chief Executive Officer and a director of LuxurySquare.com Corporation, an
electronic business and online catalogue company. From January 1997 to April
1999, Mr. Ebbs was an attorney at Perley-Robertson, Hill & McDougall LLP, our
Canadian legal counsel.
Michael Gerrior has been a member of our Board of Directors since April 2001.
From 1988 to present, Mr. Gerrior has been a partner at Perley-Robertson, Hill &
McDougall LLP, our Canadian legal counsel. Mr. Gerrior assists his clients with
mergers and acquisitions, securities matters and corporate governance. He has
concluded private placements, venture capital transactions, and public offerings
on various exchanges, including NASDAQ, the TSX Venture Exchange, the Toronto
Stock Exchange and the Montreal Exchange.
Arthur Halloran has been a member of our Board of Directors since May 2001. From
October 2001 until April 2003, Mr. Halloran also served as our President and
Chief Operating Officer. From October 1989 until October 2001, Mr. Halloran was
with Sony Electronics Inc., with his most recent position being Senior General
Manager Specialty Sales and Marketing where he was responsible for retail
operations and incentive marketing. From September 1999 to April 2000, Mr.
Halloran was the President, Business Solutions Company, responsible for the
creation and development of the first Sony company to address all of the Sony
Electronic business units. From December 1990 to September 1999, Mr. Halloran
was the Vice President, Diversified Markets, where he was responsible for the
non-retail/non-traditional markets of Sony Electronics.
Cholo Manso joined our Board of Directors and audit committee in July 2001.
Since January 2002, Mr. Manso has served as the Chief Executive Officer of
Netlano Services Inc., which is a Managed Service Provider of mobility software
applications. From September 1999 to present, Mr. Manso has been the President
of Avemore International Inc., which is a consulting company that focuses on
advising angel investors. From November 1996 to September 1999, Mr. Manso was
the Chief Executive Officer and founder of Quarterdeck Consulting Inc., a
company that specialized in sales of security software, hardware, consulting and
maintenance services to the Canadian Federal Government and the private sector.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended May 31, 2003 ("fiscal 2003"), the Board of
Directors held 4 meetings. Each director attended more than 75% of the aggregate
of the total number of meetings of the Board and meetings held by all committees
of the Board on which he served during fiscal 2003.
The Board has established an Audit Committee. The Audit Committee is
comprised of Matthew Ebbs (Chairman), Thomas Danis and Cholo Manso. The Audit
Committee recommends to the Board the annual engagement of a firm of independent
accountants and reviews with the independent accountants the scope and results
of audits, internal accounting controls and audit practices and professional
services rendered to us by such independent accountants. The Audit Committee
also makes recommendations to the Board on the compensation of the Chief
Executive Officer, President and Chief Financial Officer and administers our
stock option plan. We do not have a Compensation Committee.
The Audit Committee held 9 meetings during fiscal year 2003. Each
member of the Audit Committee is "independent" as defined in NASD Rule 4200(a).
The Board has adopted a written charter for the Audit Committee. A copy of the
Audit Committee Charter is attached as Appendix A to this Proxy Circular and
Proxy Statement.
COMPENSATION OF DIRECTORS
All directors are entitled to reimbursement of their reasonable
out-of-pocket expenses incurred in attending Board and committee meetings.
Directors who are not also Workstream employees or professionals on retainer
with Workstream are paid $15,000 annually. Directors who are members of our
audit committee are paid an additional $1,000 for each committee meeting
attended. In addition, each director is eligible to participate in our 2002
Amended and Restated Stock Option Plan. In June 2003, we granted our
non-employee directors, Cholo Manso, Thomas Danis, Matthew Ebbs, Michael Gerrior
and Arthur Halloran, options to purchase 40,000, 40,000, 40,000, 23,000 and
20,000 of our Common Shares, respectively. These options have an exercise price
of $0.98 per share and vest in three equal annual installments commencing on the
first anniversary of the grant date. These options terminate on the fifth
anniversary of the grant date.
PROPOSAL 2 - APPROVAL TO ISSUE COMMON SHARES IN AN AGGREGATE
AMOUNT EXCEEDING 19.99% OF THE OUTSTANDING COMMON SHARES
PURSUANT TO OUR CONVERTIBLE NOTES, SERIES A SHARES AND WARRANTS
(ITEM 2 ON PROXY CARD)
OVERVIEW
In April and May 2002, we sold an aggregate of $2,900,000 principal
amount of our 8% Senior Subordinated Convertible Notes and warrants to purchase
an aggregate of 658,000 of our Common Shares to a group of institutional
investors in a private placement. The aggregate principal amount of the
Convertible Notes has been reduced to $2,100,000 as a result of the conversion
of $800,000 of the principal amount of the Convertible Notes. In April and May
2004, $1,500,000 and $600,000, respectively, of the principal amount of the
Convertible Notes mature and become due and payable.
CONVERTIBLE NOTES
The Convertible Notes are convertible into a class of preferred shares
designated Class A Series A Convertible Preferred Shares, no par value per share
(the "Series A Shares"). The conversion price of the Convertible Notes into
Series A Shares is $100 per share. The conversion price of the Convertible Notes
is subject to adjustment under certain circumstances. If certain changes occur
to our capitalization, such as a stock split, dividend of Series A Shares or
other capital reorganization, then the conversion price of the Convertible Notes
will be adjusted appropriately. At the election of the holder, the Convertible
Notes may be converted directly into our Common Shares at a conversion price
equal to 80% of the average closing price of our Common Shares for the five day
period before such conversion.
SERIES A SHARES
The Series A Shares are convertible into a number of Common Shares
determined by dividing the conversion price of the Convertible Notes into Series
A Shares by a floating conversion price based on the market price of our Common
Shares (not to exceed the lesser of $0.75 or 80% of the market price of our
Common Shares for the five day period immediately preceding conversion). The
conversion price of the Series A Shares is subject to adjustment under certain
circumstances. If certain changes occur to the our capitalization, such as a
stock split, dividend of Common Shares or other capital reorganization, then the
conversion price of the Series A Shares will be adjusted appropriately. In
addition, the conversion price will be adjusted downward if we issue securities
at a per share price less than the then-applicable conversion price (a
"Conversion Price Adjustment Issuance"), excluding, among other things,
issuances of options to employees, consultants and directors. After a Conversion
Price Adjustment Issuance, the new conversion price of the Series A Shares would
equal the per share price of such Conversion Price Adjustment Issuance.
Accordingly, as a result of our sale of Common Shares at $0.75 per share to a
private investor in May 2003, the conversion price of the Series A Shares was
adjusted from the original conversion price of $3.00 per share to $0.75 per
share.
In February and June 2003, certain holders of our Convertible Notes
exercised their option to convert a portion of the Convertible Notes. This
resulted in a conversion of $200,000 and $600,000, respectively, of the
principal amount of the Convertible Notes into Series A Shares, which Series A
Shares were immediately converted into Common Shares. The conversion of $200,000
of the principal amount of the Convertible Notes in February 2003 resulted in
210,525 Common Shares being issued at a conversion price $0.95 per share, which
was equal to 80% of the average market price of our Common Shares for the five
days prior to conversion. The conversion of $600,000 of the principal amount of
the Convertible Notes in June 2003 resulted in the issuance of 800,000 Common
Shares at a conversion price equal to $0.75 per share, which was the equal to
the price we sold our Common Shares in May 2003.
WARRANTS
The purchasers of the Convertible Notes also received warrants to
purchase an aggregate of 658,000 of our Common Shares at an exercise price of
$3.70 per share, which are exercisable until April 18, 2007. The exercise price
and the number of Common Shares issuable upon exercise of the Warrants are
subject to adjustment under certain circumstances. If certain changes occur to
the our capitalization, such as a stock split, dividend of Common Shares or
other capital reorganization, then the exercise price and number of shares
issuable upon exercise of the Warrants will be adjusted appropriately. In
addition, the exercise price and the number of Common Shares issuable upon
exercise of the Warrants will be adjusted if we issue securities at a per share
price less than the then-applicable exercise price (a "Warrant Adjustment
Issuance"), excluding, among other things, issuances of options to employees,
consultants and directors. After a Warrant Adjustment Issuance, the new exercise
price and number of Common Shares issuable upon exercise of the Warrants would
be based on a weighted-average formula. Accordingly, as a result of our issuance
of various securities since the issuance of the Warrants, the number of Common
Shares issuable upon exercise of the Warrants is 733,619 Common Shares and the
exercise price per share is equal to $3.32 per share.
REASONS FOR SHAREHOLDER APPROVAL
Our Common Shares are listed on the Nasdaq SmallCap Market, and, as a
result, we are subject to Nasdaq's rules. Nasdaq Marketplace Rule 4350(i)(1)(D)
requires Nasdaq-listed companies to obtain shareholder approval prior to the
issuance of securities under certain circumstances, including a transaction
involving the sale and issuance of common stock (or securities convertible into
or exercisable for common stock) at a price below the book value or market value
of the common stock, where the amount of stock being issued is equal to 20% or
more of the issuer's common stock outstanding before such issuance.
Immediately prior to the sale of the Convertible Notes and Warrants, we
had 14,851,905 Common Shares outstanding. The Convertible Notes are currently
convertible into 21,000 Series A Shares, which are then immediately convertible
into 2,800,000 Common Shares, and the Warrants are exercisable for 733,619
Common Shares, for a total, together with the 1,010,525 Common Shares already
issued in connection with prior conversions, of 4,544,144Common Shares. This
total constitutes 31% of the Common Shares outstanding immediately prior to the
sale of the Convertible Notes and Warrants. In addition, if there are further
adjustments to the conversion price of the Convertible Notes and Series A Shares
and the exercise price and number of Common Shares issuable upon exercise of the
Warrants, we will be required to issue a number of Common Shares exceeding 31%
of the Common Shares outstanding immediately prior to the sale of the
Convertible Notes and Warrants. Accordingly, under Nasdaq Marketplace Rule
4350(i)(1)(D) and pursuant to the terms of the Convertible Notes, Series A
Shares and the Warrants, we are required to obtain shareholder approval before
we can issue Common Shares in excess of 19.99% of the Common Shares outstanding
immediately prior to the sale of the Convertible Notes and Warrants.
In addition, Nasdaq Marketplace Rule 4350(i)(1)(B) requires shareholder
approval in connection with the issuance of securities that could result in a
"change of control" of an issuer, as such term is defined by Nasdaq. While we do
not believe that the issuance of the Common Shares upon conversion of the
Convertible Notes and Series A Shares and upon exercise of the Warrants will
result in a change of control, and therefore we do not believe that Rule
4350(i)(1)(B) applies to this issuance, a substantial adjustment to the
conversion price of the Convertible Notes and Series A Shares or the exercise
price and number of Common Shares issuable upon exercise of the Warrants could
result in a sufficient number of Common Shares being issued upon conversion of
the Convertible Notes and Series A Shares and exercise of the Warrants to
constitute a change in control.
The purchasers of the Convertible Notes and Warrants agreed that unless
we obtained shareholder approval they would not convert the Convertible Notes or
Series A Shares into, or exercise the Warrants for, an aggregate amount of
Common Shares exceeding 19.99% of the Common Shares outstanding immediately
prior to the date we sold the Convertible Notes and Warrants. Michael Mullarkey
and Paul Champagne have agreed to vote their Common Shares in favor of this
Proposal 2.
Absent shareholder approval of this Proposal 2, we will not be able to
convert the Convertible Notes and Series A Shares or exercise the Warrants to
the extent such conversion or exercise, when combined with all prior conversions
of Convertible Notes and Series A Shares and Warrant exercises, would exceed
19.99% of the Common Shares outstanding immediately prior to the sale of the
Convertible Notes and Warrants.
Any amount of the Convertible Notes that holders of the Convertible
Notes are unable to convert in excess of the 19.99% threshold would remain a
cash liability, due and payable at the maturity date of the Convertible Notes.
In that event, we may be required to raise additional funds in order to meet
this obligation. We may not be able to raise sufficient funds at that time, and,
even if we are able to raise sufficient funds, the terms of such financing may
not be favorable to us.
We granted the purchasers of the Convertible Notes and Warrants
registration rights with respect to the Common Shares issuable upon conversion
of the Convertible Notes and Series A Shares and upon exercise of the Warrants.
In connection with the sale of the Convertible Notes and Warrants, we filed a
registration statement on Form F-3 with the SEC which was declared effective by
the SEC on January 17, 2003. That registration statement covers the resale of
the Common Shares that are issuable upon conversion of the Convertible Notes and
Series A Shares and upon exercise of the Warrants. If the shareholders approve
this Proposal 2, we may be obligated to file an additional registration
statement covering the resale of the Common Shares that exceed the 19.99%
threshold that are issuable upon conversion of the Convertible Notes and Series
A Shares and upon exercise of the Warrants.
If the shareholders approve this Proposal 2, a significant number of
additional Common Shares may be sold into the market, which could decrease the
price of the Common Shares. In that case, we could be required to issue an
increasingly greater number of Common Shares upon future conversions of the
Series A Shares, sales of which could further depress the price of the Common
Shares. In addition, if the sale of a large amount of Common Shares upon
conversion of the Convertible Notes or Series A Shares or upon the exercise of
the Warrants results in a decline in the price of the Common Shares, this event
could encourage short sales by the holders or others. Short sales could place
further downward pressure on the price of the Common Shares.
A copy of the form of Convertible Note and form of Warrant were filed
by us with the SEC as exhibits to our annual report on Form 10-K for the year
ended May 31, 2002. A copy of the Articles of Amendment, setting forth the terms
and conditions of the Series A Shares was filed by us with the SEC as an Exhibit
to registration statement on Form F-3 (File No. 333-101502).
The affirmative vote of a majority of votes present or represented by
proxy at the Meeting is required to approve the issuance of Common Shares in an
aggregate amount exceeding 19.99% of the outstanding Common Shares pursuant to
the Convertible Notes, Series A Shares and Warrants. Michael Mullarkey and Paul
Champagne have agreed to vote their Common Shares, representing an aggregate of
7,638,625 Common Shares or 33.1% of the outstanding Common Shares, in favor of
this Proposal 2. Unless a contrary choice is specified, proxies solicited by
Management will be voted "FOR" approval to issue Common Shares in an aggregate
amount exceeding 19.99% of the outstanding Common Shares pursuant to the
Convertible Notes, Series A Shares and Warrants.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" APPROVAL TO ISSUE COMMON
SHARES IN AN AGGREGATE AMOUNT EXCEEDING 19.99% OF THE OUTSTANDING COMMON SHARES
PURSUANT TO THE CONVERTIBLE NOTES, SERIES A SHARES AND WARRANTS.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash compensation as well as certain
other compensation earned during the fiscal years indicated by our Named
Executive Officers.
- ---------------------------- -------------------------------------------------- ------------------- -------------------
Annual Compensation Long- Term
Compensation
Awards
- ------------------ --------- ---------------- ------------- ------------------- ------------------- -------------------
Name and Year Salary Bonus Other Annual Securities All Other
Principal ($) ($) Compensation Underlying Compensation
Position ($) Options (#)(1) ($)
- ------------------ --------- ---------------- ------------- ------------------- ------------------- -------------------
Michael 2003 $200,000 (2) $214,547 -- 300,000 $4,710 (3)
Mullarkey, 2002 $ 83,333 (4) $300,000 -- -- $2,279 (3)
Chief Executive 2001 -- -- -- -- --
Officer
- ------------------ --------- ---------------- ------------- ------------------- ------------------- -------------------
Andrew 2003 $129,808 $51,751 -- -- --
Hinchliff, 2002 $ 81,364 $39,038 -- -- --
Senior Vice 2001 $ 59,682 $31,841 -- 107,000 --
President, North
American Sales
(5)
- ------------------ --------- ---------------- ------------- ------------------- ------------------- -------------------
Arthur Halloran, 2003 $156,202 -- -- -- --
President (6) 2002 $ 91,823 -- -- 100,000 --
2001 -- -- -- -- --
- ------------------ --------- ---------------- ------------- ------------------- ------------------- -------------------
Paul Haggard, 2003 $126,923 -- -- -- --
Chief Financial 2002 $ 84,134 -- -- 50,000 --
Officer (7) 2001 -- -- -- -- --
- ------------------ --------- ---------------- ------------- ------------------- ------------------- -------------------
Notes to Summary Compensation Table:
(1) Represents the number of Common Shares underlying options
granted under our 2002 Amended and Restated Stock Option Plan.
(2) All salary and bonuses earned by Mr. Mullarkey through May 31,
2003 have been deferred.
(3) Represents insurance premiums paid with respect to a
$5,000,000 term life insurance policy on the life of Mr.
Mullarkey.
(4) Mr. Mullarkey joined us in April 2001 and received no salary
until January 1, 2002. Beginning January 1, 2002, Mr.
Mullarkey's annual salary was $200,000.
(5) Mr. Hinchliff resigned from his position as Senior Vice
President, North American Sales, in August 2003.
(6) Mr. Halloran resigned from his positions as President and
Chief Operating Officer in April 2003.
(7) Mr. Haggard resigned from his position as Chief Financial
Officer in May 2003.
STOCK OPTION GRANTS
The following table sets forth certain information with respect to
stock options to purchase our Common Shares that were granted to each of the
Named Executive Officers during the year ended May 31, 2003.
- -------------------------- ------------- --------------- ------------ -------------- --------------- ----------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
OPTION TERM (2)
- -------------------------- ------------- --------------- ------------ -------------- --------------- --------- ------------
NAME NUMBER OF % OF TOTAL EXERCISE MARKET VALUE EXPIRATION 5% ($) 10% ($)
COMMON OPTIONS PRICE PER OF OPTION DATE
SHARES GRANTED TO SHARE SHARES ON
UNDER EMPLOYEES IN ($/SHARE) THE DATE OF
OPTIONS FISCAL YEAR GRANT
GRANTED (1) 2003
- -------------------------- ------------- --------------- ------------ -------------- --------------- --------- ------------
Michael Mullarkey 300,000 (3) 65% $1.00 $1.00 1/27/2008 $82,884 $183,153
- -------------------------- ------------- --------------- ------------ -------------- --------------- --------- ------------
Andrew Hinchliff (4) -- -- -- -- -- -- --
- -------------------------- ------------- --------------- ------------ -------------- --------------- --------- ------------
Arthur Halloran (5) -- -- -- -- -- -- --
- -------------------------- ------------- --------------- ------------ -------------- --------------- --------- ------------
Paul Haggard (6) -- -- -- -- -- -- --
- -------------------------- ------------- --------------- ------------ -------------- --------------- --------- ------------
(1) The options were granted under our 2002 Amended and Restated
Stock Option Plan.
(2) Illustrates the value that might be received upon exercise of
options immediately prior to the assumed expiration of their
term at the specified compounded rates of appreciation based
on the market price for the Common Shares when the options
were granted. Assumed rates of appreciation are not
necessarily indicative of future stock performance.
(3) Option vests 100,000 shares on January 27, 2004, 100,000
shares on January 27, 2005 and 100,000 shares on January 28,
2006.
(4) Mr. Hinchliff resigned from his position as Senior Vice
President, North American Sales, in August 2003.
(5) Mr. Halloran resigned from his positions as President and
Chief Operating Officer in April 2003.
(6) Mr. Haggard resigned from his position as Chief Financial
Officer in May 2003.
STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth for each of the Named Executive Officers
certain information with respect to stock options exercised during the year
ended May 31, 2003 and the number and value of exercisable and unexercisable
options held by the Named Executive Officers as of May 31, 2003.
- --------------------------- ------------ ------------ ---------------------------------- --------------------------------
SHARES VALUE
NAME ACQUIRED REALIZED NUMBER OF SECURITIES UNDERLYING Value of Unexercised
ON EXERCISE ($) UNEXERCISED OPTIONS AT FISCAL In-the-Money Options at Fiscal
(#) YEAR-END Year-End (1)
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
(#) ($)
- --------------------------- ------------ ------------ ---------------------------------- --------------------------------
Michael Mullarkey -- -- 0/0 $0/$0
- --------------------------- ------------ ------------ ---------------------------------- --------------------------------
Andrew Hinchliff (2) -- -- 71,334/35,666 $0/$0
- --------------------------- ------------ ------------ ---------------------------------- --------------------------------
Arthur Halloran (3) -- -- 33,333/66,667 $0/$0
- --------------------------- ------------ ------------ ---------------------------------- --------------------------------
Paul Haggard (4) -- -- 16,666/33,334 $0/$0
- --------------------------- ------------ ------------ ---------------------------------- --------------------------------
(1) The value of unexercised in-the-money options is based on the
difference between the last sale price of a share of our
Common Shares as reported on the NASDAQ Small Cap Market on
May 31, 2003 ($0.96) and the exercise price of the options,
multiplied by the number of options.
(2) Mr. Hinchliff resigned from his position as Senior Vice
President, North American Sales, in August 2003 and his
options subsequently expired without being exercised.
(3) Mr. Halloran resigned from his positions as President and
Chief Operating Officer in April 2003 and his options
subsequently expired without being exercised.
(4) Mr. Haggard resigned from his position as Chief Financial
Officer in May 2003 and his options subsequently expired
without being exercised.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Michael Mullarkey Employment Agreement. We entered into an employment
agreement as of January 2003 with Michael Mullarkey to serve as our Chief
Executive Officer at a minimum annual salary of $200,000. The employment
agreement has a one year term expiring in January 2004 that automatically renews
at the end of its term for an additional year unless either party gives notice
of nonrenewal. Mr. Mullarkey is also entitled to receive a bonus of up to
$175,000 to be awarded should certain mutually agreed upon goals and objectives
be achieved. In addition, we granted Mr. Mullarkey an option to purchase 300,000
of our Common Shares at an exercise price of $1.00 per share, which option vests
in three equal annual installments beginning in January 2004. Under the
agreement, Mr. Mullarkey also receives a car allowance of $800 per month as well
as short-term and long-term disability coverage and term life insurance coverage
of $5,000,000. If we elect to terminate Mr. Mullarkey's employment other than
for "cause" (as defined in the agreement) within one year of the signing of the
agreement, Mr. Mullarkey would be entitled to six months salary and benefits. If
after one year of the signing of the agreement we elect to terminate Mr.
Mullarkey's employment other than for "cause," or do not renew his employment
agreement and fail to offer him continued employment on comparable terms, Mr.
Mullarkey would be entitled to 12 months salary and benefits. If we elect to
terminate Mr. Mullarkey's employment for "cause" at any time during the
agreement, Mr. Mullarkey will continue to receive his salary and benefits until
the date his employment is terminated.
Mr. Mullarkey has agreed to defer until June 1, 2004, a total of
$797,880 in compensation earned as of May 31, 2003, with interest accruing on
the balance at an annual rate of 8%. If we elect to terminate Mr. Mullarkey's
employment for any reason prior to June 1, 2004 or if a change of control occurs
prior to June 1, 2004, all deferred compensation and interest accrued thereon
will become immediately due and payable. After June 1, 2004, Mr. Mullarkey and
Workstream will mutually agree on the repayment terms of his deferred
compensation.
Paul Haggard Employment Agreement. In October 2001, we entered into an
employment agreement with Paul Haggard to serve as our Chief Financial Officer
at a minimum annual salary of $125,000. The employment agreement had a one year
term expiring in October 2002 that automatically renewed at the end of its term
for an additional year unless either party gave notice of nonrenewal. Mr.
Haggard was also entitled to receive a one time bonus in an amount to be
mutually agreed upon based upon Mr. Haggard's performance. In May 2003, Mr.
Haggard resigned from his position as our Chief Financial Officer. We agreed to
provide Mr. Haggard with continued salary and benefits for approximately three
months following his resignation in partial consideration for his efforts in
assisting in the transitioning of our new Chief Financial Officer.
PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative
total shareholder return on the Common Shares from the date of our initial
public offering in December 1999 with the cumulative total return of Standard &
Poor's 500 Stock Index and a peer's results during such period. The company used
as the peer is Monster Worldwide Inc., which provides recruiting solutions. The
comparison assumes that $100 was invested at the beginning of such period in our
Common Shares and in the Standard & Poor's 500 Stock Index and Monster Worldwide
Inc. and assumes the reinvestment of any dividends.
[PERFORMANCE GRAPH GRAPHIC]
CUMULATIVE VALUE OF $100 INVESTMENT
Workstream Monster Worldwide Standards & Poor
---------- ----------------- ----------------
December 1999 100 100 100
May 2000 58.33 92.28 99.81
May 2001 57.50 97.32 88.23
May 2002 65.32 45.11 74.97
May 2003 16 33.20 67.70
DIRECTORS' AND OFFICERS' INSURANCE
During the fiscal year ended May 31, 2003, we paid a premium of
$112,717 for our directors' and officers' liability insurance policy. The amount
of coverage under such policy is $5,000,000.
Report on Executive Compensation
We do not have a compensation committee but instead our audit committee
performs equivalent functions of a compensation committee. Matthew Ebbs, Thomas
Danis and Cholo Manso served on our audit committee during fiscal year 2003.
Our philosophy in determining the compensation of our executive
officers is to encourage performance in order to maintain our position in a
highly competitive environment. As a result, the compensation package consists
of a combination of salary, bonus opportunity and stock options. The Audit
Committee believes that base salaries must be "competitive" and also recognize
the job performance and contribution of employees. Each executive officer's base
salary is determined by reviewing his or her sustained job performance over
time, based on individual performance and performance of the business or staff
unit over which the executive officer exercises responsibility.
The salaries of the Chief Executive Officer and Chief Financial Officer
are determined by the Audit Committee upon reliance on market data to assess
their adequacy. During fiscal 2003, we granted our Chief Executive Officer and
our Chief Financial Officer options to purchase 300,000 and 50,000 Common
Shares, respectively, at an exercise price of $1.00 and $0.95 per share,
respectively. The options vest in three equal annual installments beginning on
the first anniversary of their grant date. Our Chief Executive Officer and Chief
Financial Officer have written employment agreements that establish their annual
salary, bonus and fringe benefits. Our Chief Executive Officer entered into a
new employment agreement dated as of January 2003.
During fiscal 2003, our Chief Executive Officer earned a base salary of
$200,000 and a bonus of $214,547 pursuant to the terms of our Chief Executive
Officer's prior employment agreement. Under his prior employment agreement, our
Chief Executive Officer was entitled to receive a minimum annual base salary of
$200,000 and a performance bonus as well as an additional bonus of $100,000 for
any significant approved corporate transaction. As a result of our acquisition
of Icarian, Inc. and Xylo, Inc. in fiscal 2003, our Chief Executive Officer
earned a $100,000 additional bonus for each acquisition.
In connection with the negotiation of his new employment agreement, the
Audit Committee engaged the services of an executive compensation consulting
firm to provide advice on compensation for the Chief Executive Officer position.
The executive compensation consulting firm compiled competitive information on
CEO positions with other high technology firms ranging in revenues from $25
million to $100 million. The Audit Committee took into consideration the report
of the executive compensation consulting firm when determining the CEO's annual
salary and bonus. Under his new employment agreement, our Chief Executive
Officer's minimum base salary remained at $200,000 per year. However, the annual
bonus was changed and is now based on improvements in Workstream's financial
performance from the prior fiscal year and our Chief Executive Officer achieving
certain personal objectives. More specifically, the amount of the annual bonus
is dependent upon the amount by which Workstream's revenues and gross profit
margins increase from the prior fiscal year and Workstream's earnings before
interest, taxes, depreciation and amortization (EBITDA) for the applicable
fiscal year.
Submitted by the Audit Committee:
Matthew Ebbs
Thomas Danis
Cholo Manso
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We do not have a compensation committee but instead our audit committee
performs equivalent functions of a compensation committee. Matthew Ebbs, Thomas
Danis and Cholo Manso served on our audit committee during the fiscal year ended
May 31, 2003.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee reviews our financial reporting process on behalf
of the Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process. Our independent auditors are
responsible for expressing an opinion on the conformity of our audited financial
statements to accounting principles generally accepted in the United States.
In this context, the Audit Committee has reviewed and discussed with
management and the independent auditors the audited financial statements. The
Audit Committee has discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61 (Communication with
Audit Committees). In addition, the Audit Committee has received from the
independent auditors the written disclosures covered under the letter from
independent auditors, required by Independent Standards Board No. 1 (Independent
Discussions with Audit Committees), and has discussed with the auditors their
independence from Workstream and its management. Finally, the Audit Committee
has considered whether the provision of non-audit services by the independent
auditors is compatible with maintaining the auditors' independence.
Based on the reviews and the discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in Workstream's Annual Report on Form 10-K for the year
ended May 31, 2003, for filing with the Securities and Exchange Commission.
Submitted by the Audit Committee:
Matthew Ebbs (Chairman)
Thomas Danis
Cholo Manso
FEES PAID TO AUDITORS
As part of its duties, the Audit Committee has also considered whether
the provision of services other than audit services by the independent auditors
to us is compatible with maintaining the auditors' independence. The fees for
all services provided by our independent auditors to us during fiscal year 2003
are as follows:
AUDIT FEES
Amounts billed by PricewaterhouseCoopers LLP for services rendered in
connection with the audit of our financial statements for the fiscal year ended
May 31, 2003 and the reviews of our quarterly financial statements were
CDN$154,000 ($ 111,135 U.S. based on an exchange rate of $.72 effective May 31,
2003).
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
PricewaterhouseCoopers LLP provided no information technology services
relating to financial information systems design and implementation during
fiscal year 2003.
ALL OTHER FEES
Amounts billed by PricewaterhouseCoopers LLP for all other professional
services rendered to us in fiscal 2003 were CDN$265,000 ($191,239 U.S. based on
an exchange rate of $0.72 effective May 31, 2003). These fees relate to tax
consultation and compliance services, and work performed with respect to
registration statements and other filings with the Securities and Exchange
Commission.
PROPOSAL 3 - RATIFICATION OF THE APPOINTMENT AUDITORS
(ITEM 3 ON PROXY CARD)
Upon recommendation of the Audit Committee, the Board of Directors
proposes to reappoint PricewaterhouseCoopers LLP as the auditors of Workstream,
to hold office until the close of the next annual meeting of shareholders.
PricewaterhouseCoopers LLP was first appointed auditor of Workstream on November
28, 1997. If the shareholders do not ratify this appointment by the affirmative
vote of a majority of the votes present or represented by proxy at the Meeting,
other independent public accountants will be considered by the Board of
Directors upon recommendation of the Audit Committee.
A representative of PricewaterhouseCoopers LLP is expected to be at the
Meeting. Such representative will have the opportunity to make a statement and
will be available to respond to appropriate questions.
The affirmative vote of a majority of votes present or represented by
proxy at the Meeting is required to ratify the appointment of
PricewaterhouseCoopers LLP as auditors of Workstream. Unless a contrary choice
is specified, proxies solicited by Management will be voted "FOR" ratification
of the appointment of PricewaterhouseCoopers LLP as auditors of Workstream.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS AUDITORS OF WORKSTREAM.
PROPOSAL 4 - AUTHORIZATION TO FIX THE REMUNERATION OF AUDITORS
(ITEM 4 ON PROXY CARD)
In the past, the directors have negotiated with our auditors on an
arms-length basis in determining the fees to be paid to the auditors. Such fees
have been based upon the complexity of the matters in question and the time
incurred by the auditors. The affirmative vote of a majority of votes present or
represented by proxy at the Meeting is required to authorize the directors to
fix the remuneration of the auditors. Unless a contrary choice is specified,
proxies solicited by Management will be voted "FOR" the authorization of the
directors to fix the remuneration of the auditors.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE AUTHORIZATION OF THE
DIRECTORS TO FIX THE REMUNERATION OF THE AUDITORS.
CERTAIN TRANSACTIONS
Michael Mullarkey, our Chief Executive Officer, provided us with
short-term loans in the aggregate principal amount of $500,000 during the fiscal
year ended May 31, 2003 and $750,000 during fiscal year ended May 31, 2002. In
January 2003 those loans were consolidated into a term loan maturing in five
years. The consolidated term loan is collateralized by certain inventory,
equipment, accounts receivable and other assets and bears interest at 8% per
annum. Under the consolidated term loan, we are required to make monthly
interest only payments during the first 24 months and monthly interest and
principal payments beginning in January 2005. As at May 31, 2003, the total
amount of the consolidated term loan was $1,287,901. In addition, Mr. Mullarkey
has agreed to provide us with an additional $1,200,000 credit facility bearing
interest at 8% per annum. With respect to each draw against the credit facility,
we are required to make monthly interest only payments during the first 24
months from the draw date and thereafter monthly interest and principal payments
over a three year period. We are allowed to draw against this credit facility as
needed. Mr. Mullarkey also agreed to defer until June 1, 2004, a total of
$797,880 in compensation earned as of May 31, 2003, with interest accruing on
the balance at an annual rate of 8%. After June 1, 2004, Mr. Mullarkey and
Workstream will mutually agree on the repayment terms of his deferred
compensation.
In March 2003, the Board of Directors approved the release of the final
500,000 Common Shares from escrow to the former shareholders of Paula Allen
Holdings Inc. Pursuant to the agreement dated April 3, 2001 whereby we acquired
100% of the outstanding stock of Paula Allen Holdings, the release of the Common
Shares was made following the achievement of certain revenue and profit targets
at December 31, 2002. As a result, capital stock increased by $750,000
representing the value of 500,000 shares at $1.50 per share and goodwill also
increased by $750,000 in the period ended February 28, 2003 recognizing the
achievement of these targets. Michael Mullarkey, our Chief Executive Officer,
owned a majority of the outstanding shares of Paula Allen Holdings. Mr.
Mullarkey's portion of the 500,000 escrow shares distributed to the former
shareholders of Paula Allen Holdings was 437,500 shares.
During the fiscal year ended May 31, 2003, no funds were advanced by us
to any of our shareholders or any affiliate of a shareholder who is one of our
directors, officers or employees, or to an associate of any such shareholder.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
A copy of our Annual Report on Form 10-K, as amended, for fiscal year
2003, as filed with the Securities and Exchange Commission, may be obtained
without charge upon written request to Investor Relations, Workstream Inc., 495
March Road, Suite 300, Ottawa, Ontario K2K 3G1 or by calling Tammie Brown at
(613) 270-0619, extension 263.
SHAREHOLDER PROPOSALS FOR 2004 ANNUAL MEETING
Shareholders wishing to submit proposals for inclusion in the proxy
circular and proxy statement for the 2004 Annual Meeting of Shareholders must
submit such proposals to us at 495 March Road, Suite 300, Ottawa, Ontario K2K
3G1, Attention: Corporate Secretary, on or before June 30, 2004. In order for
the proposal to be included in the proxy circular and proxy statement, the
shareholder submitting the proposal must meet certain eligibility standards and
comply with the procedures established by the SEC as set forth in Rule 14a-8 of
the Securities Exchange Act of 1934.
CERTIFICATE
The contents of this Proxy Circular and Proxy Statement, and the
sending of it to the holders of shares of Workstream, to each director of
Workstream and to the appropriate governmental agencies have been approved by
the Board of Directors.
DATED at Ottawa, Ontario, this __ day of October, 2003.
BY ORDER OF THE BOARD
Signed by:
/s/ Michael Mullarkey
Michael Mullarkey
Chairman
APPENDIX A
AUDIT COMMITTEE CHARTER
Introduction
Workstream Inc. executive management is primarily responsible for the
completeness and accuracy of its financial reporting and the adequacy of its
internal financial and operating controls. Its Board of Directors (the "Board")
has responsibility to oversee management's exercise of these responsibilities.
To assist the Board, the Company has established, an Audit Committee (the
"Committee") whose authority and responsibilities are described by this Charter.
Purpose
This Charter is created in order to define the Committee's objectives,
the range of its authority, the scope of its activities and its duties and
responsibilities. It is intended to give Committee members, management, external
and internal auditors a clear understanding of their respective roles. The
Committee and the Board will review and assess the adequacy of this Charter
annually.
Mission Statement
Oversight of the financial reporting process, the system of internal
controls, the audit process, employee/director stock options and CEO
compensation.
General Guidelines
Size, Composition and Term of Appointment
o The Committee is a committee of the Board and shall consist of
no fewer than three directors, each of whom shall be
independent and financially literate, and at least one of whom
shall have the requisite accounting or related financial
management expertise, in each case as defined by the rules
promulgated by the Securities and Exchange Commission ("SEC")
applicable to companies with securities listed for trading on
the National Market System of the National Association of
Securities Dealers, Inc. ("NASD") or similar successor system.
The Board shall appoint the Committee's Chairperson and
members annually.
Meetings
o The Committee will meet on a quarterly basis and special
meetings may be called when circumstances require.
Oversight by the Board
o The Committee will report its activities to the full Board on
a regular basis so that the Board is kept informed of its
activities on a current basis. The Committee will perform all
duties determined by the Board.
o The Board will determine annually that the Committee's members
are independent and that the Committee has fulfilled its
duties and responsibilities. The Board also will review and
assess the adequacy of the Committee's Charter.
Authority
o The Committee acts on the Board's behalf in matters outlined
below.
Independent Auditors
o The Committee, as representatives of the shareholders, has the
ultimate authority to select, evaluate and, where appropriate,
replace the independent public accountants, or to nominate the
independent public accountants to be proposed for shareholder
approval in the proxy statement. The Committee will consider
management's recommendation of the appointment of the
independent public accountants. The Committee will review with
management the performance, appointment and/or termination of
the independent public accountants.
o The Committee will ensure that the independent public
accountants provide a formal written statement to the
Committee setting forth all relationships between the
independent public accountants and the Company, consistent
with the Independence Standards Board Standard No. 1.
o The Committee will discuss with the independent public
accountants any disclosed relationships or services which may
impact the objectivity and independence of the independent
public accountants.
o The Committee will take, or recommend that the full Board
take, appropriate action to ensure the independence of the
independent public accountants.
o The Committee will also review with management and the
independent public accountants the annual audit scope and
approach, significant accounting policies, audit conclusions
regarding significant accounting estimates/reserves, and
proposed fee arrangements for ongoing and special projects.
o The Committee will review with management and the independent
public accountants their assessments of the adequacy of
internal controls, and the resolution of identified material
weaknesses and reportable conditions in internal controls,
including the prevention or detection of management override
or compromise of the internal control system.
o The Committee will review with management and the independent
public accountants the Company's compliance with laws and
regulations having to do with accounting and financial
matters.
o The Committee and the Board should consider whether the
independent public accountants should meet with the full Board
to discuss any matters relative to the financial statements
and/or any potentially relevant matters, and to answer any
questions that other directors may have.
Financial Statements
o The Committee will review with management and the independent
public accountants, the Company's interim and year-end
financial statements, including management's discussion and
analysis, and audit findings. Such review will include a
discussion of significant adjustments recorded or adjustments
passed.
o The Committee will request from financial management and the
independent public accountants, a briefing on any significant
accounting and reporting issues, including any changes in
accounting standards or rules promulgated by the Financial
Accounting Standards Board ("FASB"), SEC or other regulatory
bodies, that have an effect on the financial statements.
o The Committee will inquire about the existence and substance
of any significant accounting accruals, reserves, or estimates
made by management that had a material impact on the financial
statements.
o The Committee will inquire of management and the independent
public accountants if there were any significant financial
accounting or reporting issues discussed during the accounting
period and, if so, how they were resolved or if not resolved,
inquire as to the disagreements.
o The members of the Committee will discuss among themselves,
without management or the independent public accountants
present, the quality of the accounting principles applied in
the preparation of the Company's financial statements and
significant judgments affecting the financial statements; and
the independent public accountants' view of the quality of
those principles and such judgments.
Private Discussions with Independent Public Accountants
o The Committee will meet privately with the independent public
accountants to request their opinion on various matters
including the quality of the Company's accounting principles
as applied in its financial reporting, and the quality and
performance of its financial and accounting personnel.
o The Committee will also discuss privately with the independent
public accountants any issues required by rules of the SEC,
FASB and NASD.
Areas Requiring Special Attention
o The Committee will instruct the independent public accountants
that the Committee expects to be advised if there are any
areas that require special attention.
Post-Audit Review
o The Committee will review with management and the independent
public accountants the annual Management Letter comments and
management's responses to each.
o The Committee will ask the independent public accountants what
their greatest concerns were (including any serious
difficulties encountered) and if they believe anything else
should be discussed with the Committee that has not been
raised or covered elsewhere.
Litigation
o The Committee will discuss/review with management, company
counsel, and the independent public accountants the substance
of any significant issues raised by counsel concerning
litigation, contingencies, claims or assessments. The
Committee should understand how such matters are reflected in
the Company's financial statements.
WORKSTREAM INC.
PROXY
FOR USE AT THE
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
THURSDAY, NOVEMBER 20, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE MANAGEMENT OF WORKSTREAM INC.
The undersigned shareholder of WORKSTREAM INC. (the
"Corporation") hereby appoints, MICHAEL MULLARKEY, Chairman and Chief
Executive Officer of the Corporation, or failing him, DAVID POLANSKY,
Chief Financial Officer of the Corporation, OR INSTEAD OF EITHER OF THE
FOREGOING, ___________________, as the nominee of the undersigned to
attend and act for and on behalf of the undersigned at the annual and
special meeting of the shareholders of the Corporation to be held on
the 20TH DAY OF NOVEMBER, 2003, and at any adjournment or adjournments
thereof, to the same extent and with the same power as if the
undersigned were personally present at the said meeting or such
adjournment or adjournments thereof and, without limiting the
generality of the power hereby conferred, the nominees designated above
are specifically directed to vote the shares registered in the name of
the undersigned, as specified below:
1. VOTE [ ] FOR [ ] AGAINST OR [ ] WITHHOLD/ABSTAIN FROM VOTING in the
election of the nominees for directors of the Corporation as a
group listed below: Michael Mullarkey; Thomas Danis; Matthew Ebbs;
Michael Gerrior; Arthur Halloran; and Cholo Manso.
2. VOTE [ ] FOR [ ] AGAINST OR [ ] WITHHOLD/ABSTAIN FROM VOTING to
issue common shares in an aggregate amount exceeding 19.99% of the
outstanding common shares pursuant to convertible notes, Class A
Series A Convertible Preferred Shares and warrants.
3. VOTE [ ] FOR [ ] AGAINST OR [ ] WITHHOLD/ABSTAIN FROM VOTING in the
appointment of PricewaterhouseCoopers LLP as auditors of the
Corporation.
4. VOTE [ ] FOR [ ] AGAINST OR [ ] WITHHOLD/ABSTAIN FROM VOTING in a
resolution authorizing the directors to fix the remuneration of the
auditors of the Corporation.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED, OR IF NO
SPECIFICATIONS ARE MADE, WILL BE VOTED (I) "FOR" THE ELECTION OF DIRECTORS, (II)
"FOR" THE APPROVAL TO ISSUE COMMON SHARES IN AN AGGREGATE AMOUNT EXCEEDING
19.99% OF THE OUTSTANDING SHARES PURSUANT TO CONVERTIBLE NOTES, CLASS A SERIES A
CONVERTIBLE PREFERRED SHARES AND WARRANTS, (III) "FOR" THE APPOINTMENT OF
AUDITORS, AND (IV) "FOR" AUTHORIZING THE DIRECTORS TO FIX THE AUDITORS'
REMUNERATION, AND IN ACCORDANCE WITH THE NOMINEES' DISCRETION ON ANY OTHER
MATTER AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
Dated the ______ day of _________________, 2003.
- ------------------------------------- ------------------------------
Name of Shareholder (please print) Signature of Shareholder
Note: Please sign exactly as name appears hereon. When shares are held by
joint tenants, all joint tenants should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give
the full title as such. If a corporation, please sign in the full
corporate name by the President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Make sure that the name on your stock certificate(s) is exactly as
you indicate above.
A SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON TO REPRESENT HIM/HER AND TO
ATTEND AND ACT FOR HIM/HER ON HIS/HER BEHALF AT THE MEETING OTHER THAN THE
NOMINEES DESIGNATED ABOVE AND MAY EXERCISE SUCH RIGHT BY INSERTING THE NAME OF
HIS/HER NOMINEE IN THE SPACE PROVIDED ABOVE FOR THAT PURPOSE.
Please mark, sign, date and return this proxy using the enclosed
self-addressed, postage prepaid envelope no later than the close
of business on the last business day preceding the meeting or any
adjournment thereof with American Stock Transfer & Trust Company,
59 Maiden Lane, New York, New York 10038.