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
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|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 240.14a-12
Workstream Inc.
--------------------------------------------------
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(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 Wednesday, October 27,
2004 at the offices of Workstream Inc. located at 495 March Road, Suite 300,
Ottawa, Ontario K2K 3G1 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
Steve Singh
2. to approve a resolution to amend the Corporation's stock option plan
to increase the number of shares available for issuance under the
plan and to permit awards of restricted stock under the plan;
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, 2004 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, 2004, which is not a part of
the proxy soliciting materials.
The financial statements referred to in paragraph 5 above are set out in our
2004 annual report, a copy of which is enclosed with 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 27th day of September, 2004.
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
OCTOBER 27, 2004
--------------------
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 Wednesday, the 27th day of October, 2004 at the hour of 10:00 a.m.
(Ottawa time) at the offices of Workstream, 495 March Road, Suite 300, Ottawa,
Ontario K2K 3G1 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 September 27, 2004.
The Notice of Annual and Special Meeting, this document and the Form of
Proxy will be mailed commencing on or about October 1, 2004 to shareholders of
record as of the close of business on September 24, 2004, 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 Canadian Business Corporation 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 (as defined below) 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 of amending the stock option plan; (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 September 24, 2004 are entitled to receive notice of, and vote at,
the Meeting. As of that date, 41,800,139 Common Shares were issued and
outstanding and entitled to vote. As of September 24, 2004, 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 September 27, 2004 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 4,275,000 10.2%
c/o Workstream Inc., 495 March Road,
Suite 300, Ottawa, Ontario, K2K 3G1
- -------------------------------------------------------------------------------------------
Paul Champagne 3,463,625 8.2%
P.O. Box 4085 Station A Toronto, Ontario
M5W2X6
- -------------------------------------------------------------------------------------------
William Blair Small Cap Growth Fund 2,418,160 5.7%
222 West Adams Street
Chicago, IL
60606
- --------------------------------------------------------------------------------------------
(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 September 27, 2004.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of September 27, 2004 certain
information with respect to the beneficial ownership of (i) each director, (ii)
each nominee for election to the board of directors, (iii) our chief executive
officer and each other executive officer who earned more than $100,000 during
fiscal year 2004 (collectively, the "Named Executive Officers") and (iv) all the
directors and executive officers as a group.
- -----------------------------------------------------------------------------------------------
NAME OF BENEFICIAL OWNER NUMBER OF SHARES(1) PERCENT OF CLASS
- -----------------------------------------------------------------------------------------------
Michael Mullarkey 4,275,000 10.2%
- -----------------------------------------------------------------------------------------------
Matthew J. Ebbs 113,333(2) *
- -----------------------------------------------------------------------------------------------
Michael A. Gerrior 37,667(3) *
- -----------------------------------------------------------------------------------------------
Cholo Manso 35,333(4) *
- -----------------------------------------------------------------------------------------------
Thomas Danis 13,333(5) --
- -----------------------------------------------------------------------------------------------
Arthur Halloran 6,667(6) --
- -----------------------------------------------------------------------------------------------
Steve Singh -- --
- -----------------------------------------------------------------------------------------------
David Polansky 16,667(7) --
- -----------------------------------------------------------------------------------------------
All executive officers and directors as 4,505,000(8) 10.7%
a group (9 persons)
- -----------------------------------------------------------------------------------------------
* Less than 1%
(1) With respect to each shareholder, includes any shares issuable upon
exercise of options held by such shareholder that are or will become
exercisable within 60 days of September 27, 2004.
(2) Consists of 113,333 Common Shares issuable upon the exercise of stock
options.
(3) Consists of 7,667 Common Shares issuable upon the exercise of stock
options.
(4) Consists of 13,333 Common Shares issuable upon the exercise of stock
options.
(5) Consists of 13,333 Common Shares issuable upon the exercise of stock
options.
(6) Consists of 6,667 Common Shares issuable upon the exercise of stock
options.
(7) Consists of 16,667 Common Shares issuable upon the exercise of stock
options.
(8) Consists of 178,000 Common Shares issuable upon the exercise of stock
options.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that our officers, directors
and persons who beneficially own more than 10% of a registered class of our
equity securities file with the SEC initial reports of ownership and reports of
changes in ownership of our Common Stock and other equity securities. Officers,
directors and greater than 10% beneficial owners are required by SEC regulation
to furnish us with copies of all Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such reports
furnished to us and written representations that no other reports were required,
during the year ended May 31, 2004, all Section 16(a) filing requirements
applicable to our officers, directors and greater than 10% beneficial owners
were complied with, except that due to an administrative oversight, a Form 4
reflecting the grant of options to Mr. Mullarkey was not filed in a timely
manner.
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.
At the Meeting, seven directors are to be elected to the Board of
Directors. Six of the nominees, Michael Mullarkey, Thomas Danis, Matthew Ebbs,
Michael Gerrior, Arthur Halloran and Cholo Manso, currently serve as members of
the Board of Directors and are standing for re-election. Steve Singh is standing
for election for the first time and was recommended by Michael Mullarkey, our
Chairman and Chief Executive Officer. The term of office of each of the current
directors is due to expire immediately prior to the election of directors at the
Meeting.
Set forth below is more detailed information regarding each of the
nominees.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE NOMINEES FOR DIRECTOR
SET FORTH BELOW.
Director
Name Age Since Position
- ---- --- -------- --------
Michael Mullarkey 36 2001 Chairman of the Board of Directors,
President and Chief Executive Officer
Thomas Danis 57 2001 Director (1)
Matthew Ebbs 39 1999 Director (1)
Michael Gerrior 54 2001 Director
Arthur Halloran 58 2001 Director
Cholo Manso 41 2001 Director (1)
Steve Singh 43 2004 Director
(1) 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 the President, Secretary and a Director of Paula Allen Holdings,
Inc., a full service outplacement firm in the United States, which we acquired
in April 2001. From October 1999 to December 2000, Mr. Mullarkey returned to
Sony Corporation where he served as General Manager. 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 October 1989 to February 1997, Mr. Mullarkey was employed by
Sony Corporation of America, a subsidiary of Sony Corporation, where his most
recent position was Vice President and General Manager. Prior to serving as Sony
Corporation of America's Vice President and General Manager, Mr. Mullarkey
served as its National Sales Manager, a position he held from 1992 to 1994, and
prior to that he served as one of its Sales Executives.
Thomas Danis joined our Board of Directors and audit committee in July 2001. Mr.
Danis is currently an insurance broker with Aon Corporation, a provider of risk
management services, insurance and reinsurance brokerage, human capital and
management consulting, and specialty insurance underwriting. 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 a Managing Director of the Mergers & Acquisitions Practice for Aon, as well
as their St. Louis office. Mr. Danis serves on the Board of Directors of
International Wire Group, Inc. and International Wire Holding Company.
International Wire Group, Inc. files reports pursuant to the Securities Exchange
Act of 1934. Mr. Danis serves on the Board of RCP Advisors, a fund to funds
private equity firm.
Matthew Ebbs has been a member of our Board of Directors and audit committee
since October 1999. From October 2003 to September 2004, Mr. Ebbs was the
Business Development Manager for WorldHeart Corporation. From October 2001 to
September 2003, Mr. Ebbs was the Recovery Service Manager with Export
Development Corporation. From April 1999 to 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.
Since April 2004, Mr. Halloran has been the Director of Business Development for
RSM McGladrey, Inc., an accounting and consulting firm and is responsible for
all business development activities for the New York/ Connecticut Economic Unit.
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 employed in a number of positions by 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 September 2003, Mr. Manso has been an
Independent Consultant whose main focus was 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 Government
and the Private Sector.
Steve Singh is nominated to join our Board of Directors. Since 1996 Mr. Singh
has served as President and Chief Executive Officer of Concur Technologies Inc.,
a provider of Corporate Expense Management solutions, and as a director since
1993, including service as Chairman of the Board of Directors since September
1999. From 1993 to 1996, Mr. Singh was General Manager of the Contact Management
Division at Symantec Corporation, a computer software and services company.
EXECUTIVE OFFICER INFORMATION
David Polansky, age 39, has been our Chief Financial Officer since May 2003. He
is in charge of our financial, human resources, legal and administrative
affairs. From July 2000 until May 2003, Mr. Polansky was the Senior Vice
President and Chief Financial Officer of Arnold Palmer Golf Management, a
company that owns and manages golf courses, where he was responsible for
accounting, finance, information technology and human resources. From February
1999 until July 2000, Mr. Polansky was employed by Sunterra Resorts, a company
that owns and manages timeshare resorts throughout the world. During his
employment with Sunterra Resorts, Mr. Polansky held various positions, with his
most recent position being National Controller. From June 1991 until February
1999, Mr. Polansky was employed by Interstate Hotels, a company that owns and
operates hotels around the world, in various positions, with his most recent
position being Director of Central Accounting.
Tammie Brown, age 40, joined us in May 2000 as our Investor Relations Officer.
Currently Ms. Brown is the Vice President of Human Resources and also
responsible for Investor Relations. She was previously employed by NetManage,
Inc. from July 1998 to May 2000, where she was responsible for Investor
Relations. From October 1995 to July 1998, Ms. Brown was the Executive
Assistant/Investor Relations Officer for Milkyway Networks, an internet security
software provider.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended May 31, 2004 ("fiscal 2004"), 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 2004.
The Board has established an Audit Committee. The Audit Committee is
comprised of three non-employees, Matthew Ebbs (Chairman), Thomas Danis and
Cholo Manso. The Board has determined that all members of the Audit Committee
are `independent' as that term is currently defined in Rule 4200(a)(15) of the
listing standards of the NASD and Rule 10A-3(b)(1) of the Securities Exchange
Act of 1934. The Board of Directors has also determined that Mr. Ebbs meets the
SEC criteria of an "audit committee financial expert." 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.
The Audit Committee held 4 meetings during fiscal year 2004. The Board has
adopted a written charter for the Audit Committee.
NOMINATIONS OF CANDIDATES FOR DIRECTOR
The Company does not currently have a Nominating Committee, and as a
result it does not maintain a Nominating Committee Charter. Rather a majority of
the "independent" directors, as determined in accordance with the applicable
listing standards of the NASD, recommend candidates for nomination and election
to the Company's Board of Directors and when appropriate review the requisite
skills and characteristics required of individual Board members in the context
of the current composition of the Board, including such factors as business
experience, diversity, personal skills in technology, finance, marketing,
financial reporting and other areas that are expected to contribute to an
effective Board.
The majority of the "independent" directors also consider candidates
recommended by shareholders. The names and biographies of any such proposed
nominees should be sent to Workstream Inc., 495 March Road, Suite 300, Ottawa,
Ont. K2K 3G1, ATTN: Tammie Brown.
SHAREHOLDER COMMUNICATIONS WITH DIRECTORS
The Board of Directors welcomes communication from the Company's
shareholders. Any shareholder may communicate with either the Board as a whole,
or with any individual director by sending a written communication c/o the
Company's Chief Executive Officer at the Company's office located at 495 March
Road, Suite 300, Ottawa, Ont. K2K 3G1. All such communication sent to the
Company's Chief Executive Officer will be forwarded to the Board, as a whole, or
to the individual director to whom such communication was addressed.
The Company encourages, but does not require, the members of the Board to
attend the annual meeting of shareholders. One of our Board members attended
last year's annual and special meeting.
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 $1,000 for each committee meeting
attended. In addition, each director is eligible to participate in our 2002
Amended and Restated Stock Option Plan.
COMPANY EMPLOYEE CODE OF CONDUCT
The Board has adopted a Code of Conduct that applies to the Company's
officers and employees, including its principal executive, financial and
accounting officers and persons performing similar functions. The Code of
Conduct will be made available, without charge, upon written request made to
Tammie Brown of the Company at its principal executive offices located at 495
March Road, Suite 300, Ottawa, Ont. K2K 3G1. In addition, it is also available
on the Company's website at www.workstreaminc.com.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash compensation as well as certain
other compensation earned during the fiscal years indicated by certain of our
executive officers (our "Named Executive Officers").
- -------------------------------------------------------------------------------------------------------------------
Long- Term
Compensation All Other
Annual Compensation Awards Compensation
- ----------------------------------------------------------------------------- -------------------- ($)
- -------------------------------------------------------------------------------------------------------------------
Name and Year Salary Bonus Other Annual Securities
Principal ($) ($) Compensation Underlying
Position ($) Options (#)(1)
- -------------------------------------------------------------------------------------------------------------------
Michael 2004 $216,667 $150,000 -- 300,000 $49,410(3)
Mullarkey, 2003 $200,000 (2) $214,547 -- 300,000
Chief Executive 2002 $ 83,333 (4) $300,000 -- -- $4,710 (3)
Officer $2,279 (3)
- -------------------------------------------------------------------------------------------------------------------
David Polansky, 2004 $140,000 $15,000 -- -- $15,478 (6)
Chief Financial 2003 -- (5) -- -- 50,000 --
Officer
- -------------------------------------------------------------------------------------------------------------------
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) Consists of $5,344 of insurance premiums paid with respect to a $5,000,000
term life insurance policy on the life of Mr. Mullarkey, a $30,166.15 lump
sum car allowance, which covers years 2001 through 2004, and health and
dental insurance premiums of $13,899.28.
(4) Mr. Mullarkey joined the Company in April 2001 and received no salary
until January 1, 2002. From January 1, 2002, to January 2004, Mr.
Mullarkey's annual salary was $200,000. Starting in January 2004, Mr.
Mullarkey's annual salary was $250,000.
(5) Mr. Polansky joined the Company in May 2003.
(6) Consists of a car allowance of $6,000.02 and health and dental insurance
premiums of $9,478.44.
STOCK OPTION GRANTS
The following table sets forth certain information with respect to stock
options to purchase our Common Shares that were granted to each of the Named
Executive Officers during the year ended May 31, 2004.
- ---------------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
OPTION TERM (2)
- ---------------------------------------------------------------------------------------------------------------------------
NAME NUMBER OF % OF TOTAL EXERCISE MARKET VALUE EXPIRATION 5% ($) 10% ($)
COMMON OPTIONS PRICE PER OF OPTION DATE
SHARES GRANTED TO SHARE SHARES ON
UNDERLYING EMPLOYEES IN ($/SHARE) THE DATE OF
OPTIONS FISCAL YEAR GRANT
GRANTED (1) 2004
- ---------------------------------------------------------------------------------------------------------------------------
Michael Mullarkey 300,000 (3) 70% $2.15 $2.15 1/28/2009 $178,202 $393,779
- ---------------------------------------------------------------------------------------------------------------------------
David Polansky -- -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
(1) The options were granted under our 2002 Amended and Restated Stock Option
Plan.
(2) Illustrates the value that might be received upon exercise of options
immediately prior to the assumed expiration of their term at the specified
compounded rates of appreciation based on the market price for the Common
Shares when the options were granted. Assumed rates of appreciation are
not necessarily indicative of future stock performance.
(3) Option vests 100,000 shares on January 28, 2005, 100,000 shares on January
28, 2006 and 100,000 shares on January 28, 2007.
STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth for each of the Named Executive Officers
certain information with respect to stock options exercised during the year
ended May 31, 2004 and the number and value of exercisable and unexercisable
options held by the Named Executive Officers as of May 31, 2004.
- -----------------------------------------------------------------------------------------------------------------
SHARES VALUE
NAME ACQUIRED REALIZED NUMBER OF SECURITIES Value of Unexercised
ON EXERCISE ($) UNDERLYING UNEXERCISED In-the-Money Options at Fiscal
(#) OPTIONS AT FISCAL YEAR-END Year-End (1)
EXERCISABLE/UNEXERCISABLE (#) EXERCISABLE/UNEXERCISABLE
($)
- -----------------------------------------------------------------------------------------------------------------
Michael Mullarkey 100,000 $100,000 0/500,000 $0/$565,000
- -----------------------------------------------------------------------------------------------------------------
David Polansky -- -- 16,667/33,333 $31,167/$62,333
- -----------------------------------------------------------------------------------------------------------------
(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, 2004 ($2.82) and the exercise price
of the options, multiplied by the number of options.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Michael Mullarkey Employment Agreement. We entered into an employment
agreement as of January 2004 with Michael Mullarkey to serve as our Chief
Executive Officer at a minimum annual salary of $250,000. The employment
agreement has a three year term unless written notice is given by either party
at least ninety (90) days before the end of the first year term or any extension
thereof, that they wish the Agreement to terminate at the end of that Term, the
Agreement will be automatically be extended by successive one year terms. Mr.
Mullarkey is also entitled to receive a bonus of up to $200,000 to be awarded
should certain mutually agreed upon goals and objectives be achieved. Mr.
Mullarkey is also entitled to an Accelerator Bonus which is an additional bonus
payable of 5% of revenue for revenue growth in excess of 20% to 40% inclusive,
7% of revenue growth in excess of 41%. EBITDA must be positive during the
evaluation period. This Accelerator Bonus would be payable over a three year
period, one third each year as long as Mr. Mullarkey is employed with the
Company.
In addition, we granted Mr. Mullarkey an option to purchase 300,000 Common
Shares at an exercise price of $2.15 per share, which option vests in three
equal annual installments beginning in January 2005. 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. Should there be a change in control of
the Company and Mr. Mullarkey is released for any reason save and except for
cause, Workstream shall pay Mr. Mullarkey, three years' severance. The severance
amount is due and payable upon completion of the transaction and is further
based on the average of the previous three years total compensation. Should Mr.
Mullarkey be released for any reason except for cause, all stock options, stocks
and warrants and bonuses shall vest immediately. Change in control shall be
defined as ownership of an amount greater than 50% of the total issued and
outstanding shares of Workstream.
David Polansky Employment Agreement. In September 2004, we entered into an
employment agreement with David Polansky to serve as our Chief Financial Officer
at a minimum annual salary of $160,000. The employment agreement has a one year
term expiring in September 2005 that automatically renews at the end of its term
for an additional year unless either party gave notice of nonrenewal. Mr.
Polansky is also entitled to receive a bonus in an amount up to $90,000 upon the
achievement of mutually agreed objectives. Under the agreement, Mr. Polansky
also receives a car allowance of $500 per month. If we elect to terminate Mr.
Polansky's employment other than for "cause" (as defined in the agreement), Mr.
Polansky would be entitled to three months' salary and benefits. Mr. Polansky
must give not less than three months prior written notice to Workstream which we
may waive, in part or whole, if he wishes to resign.
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.
[LINE CHART OMITTED]
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 16.00 33.20 67.70
May 2004 47.00 42.27 78.74
DIRECTORS AND OFFICER'S INSURANCE
During the fiscal year ended May 31, 2004, we paid a premium of $210,445
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.
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. Having a compensation
program that allows the Company to successfully attract and retain key employees
permits us to provide useful products and service to customers, enhance
stockholder value, stimulate technological innovation, reinforce Company values
and adequately reward employees. The Audit Committee targets a base salary
market position for each Named Executive Officer that is competitive with peer
software companies, subject to variations depending on the officer's experience
in his or her respective position and individual performance. The bonus plan is
structured to deliver total cash compensation that is competitive with peer
companies.
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 2004, 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 $2.15 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 2004 and our Chief Financial
Officer entered into a new employment agreement in September 2004.
During fiscal 2004, our Chief Executive Officer earned a base salary of
$200,000 and pursuant to the terms of our Chief Executive Officer's prior
employment a bonus of $150,000. The Audit Committee believes that the Chief
Executive Officer's performance bonus should be paid in relation to the success
and strength of the Company, which is the ultimate measure of Chief Executive
Officer's effectiveness and aligns Chief Executive Officer's compensation to
shareholder expectations. Mr. Mullarkey's bonus was awarded as follows: (1) Mr.
Mullarkey achieved the maximum bonus level of greater than 40% gross profit
margin vs. previous fiscal year end and therefore was awarded $45,000; (2) Mr.
Mullarkey achieved the minimum bonus level of positive EBITDA and therefore was
awarded a $10,000 bonus; (3) Mr. Mullarkey achieved the maximum bonus level of
$40,000 based upon the completion of a professional development course and
participation in an international business trip outside of North America to
promote the Company; and (4) Mr. Mullarkey was awarded a $55,000 discretionary
bonus by the Audit Committee to Mr. Mullarkey.
Under his current employment agreement, our Chief Executive Officer's
minimum base salary is $250,000 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's achieving certain personal
objectives (e.g. becoming a member of an HR Industry Association, taking a
Professional Development course, assisting a charitable organization). 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. Our Chief Executive
Officer is also entitled to an Accelerator Bonus which is an additional bonus
payable of 5% of revenue for revenue growth in excess of 20% to 40% inclusive,
7% of revenue growth in excess of 41%. EBITDA must be positive during the
evaluation period. This Accelerator Bonus would be payable over a three year
period, one third each year as long as the Chief Executive Officer is employed
with the company.
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,
2004. Prior to fiscal 2004, Cholo Manso served as a non-employee officer of the
Company.
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, 2004, 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 2004 and
fiscal 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 2004
and for the reviews of our quarterly financial statements, and an audit of the
Kadiri acquisition were CDN $305,500 (U.S. $224,072 based on an exchange rate of
$0.73 effective May 31, 2004). Amounts billed by PricewaterhouseCoopers LLP for
service rendered in connection with the audit of our financial statements for
the fiscal year 2003 and the reviews of our quarterly financial statements were
CDN $216,334 (U.S. $155,760.48 based on an exchange rate of $.72 effective May
31, 2003).
Audit-Related Fees
Amounts billed by PricewaterhouseCoopers LLP for audit-related services
for the fiscal years 2004 and 2003 were CDN $28,500 (U.S. $20,903 based on an
exchange rate of $0.73 effective May 31, 2004), and CDN $80,000, (U.S. $57,600
based on an exchange rate of $0.72 effective May 31, 2003), respectively. These
fees relate to work performed with respect to registration statements and other
filings with the Securities and Exchange Commission. All of these fees were
pre-approved by the audit committee.
Tax fees
Amounts billed by PricewaterhouseCoopers LLP for tax services for fiscal
2004 and fiscal 2003 were CDN $319,725 (U.S. $234,505 based on an exchange rate
of $0.73 effective May 31, 2004), and CDN $135,000 (U.S. $97,200 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. All of these fees were pre-approved by the Audit Committee.
All Other Fees
There were no other fees paid to PricewaterhouseCoopers LLP in fiscal 2004
and fiscal 2003.
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
Section 10A(i)(1) of the Exchange Act and related SEC rules require that
all auditing and permissible non-audit services to be performed by the Company's
principal accountants be approved in advance by the Audit Committee of the Board
of Directors. Pursuant to Section 10A(i)(3) of the Exchange Act and related SEC
rules, the Audit Committee has established procedures by which the Chairman of
the Audit Committee may pre-approve such services provided that the pre-approval
is detailed as to the particular service or category of services to be rendered
and the Chairman reports the details of the services to the full Audit Committee
at its next regularly scheduled meeting.
PROPOSAL NUMBER 2 - AMENDMENT TO STOCK OPTION PLAN
AMENDMENT TO STOCK OPTION PLAN
On September 21, 2004, the Board resolved that, subject to the approval of
the shareholders, the maximum number of Common Shares which are reserved for
issuance under our 2002 Amended and Restated Stock Option Plan be increased by
2,000,000 shares to a total of 5,000,000 shares (the "Plan Shares"). Further,
the Board resolved that 4,000,000 of the Plan Shares be reserved from time to
time for issuance pursuant to the exercise of options and 1,000,000 of the Plan
Shares be reserved from time to time for issuance of restricted share grants or
restricted share unit grants. The purpose of this amendment to the plan is to
provide us with a greater ability to attract and retain qualified individuals as
employees, consultants, officers and directors by the granting of options,
restricted share grants and restricted share unit grants. Management views the
granting of stock options, restricted share grants and restricted share unit
grants as a key part of employee compensation, retention and attraction.
As of September 27, 2004, options to purchase 2,861,217 shares have been
granted under the plan. This leaves us with only 138,783 shares remaining to be
granted under the plan, which may be subject to new options, including options
to be granted pursuant to acquisitions and to directors as compensation for
services rendered to us. Consequently, our ability to issue any further options
will be limited unless the number of shares issuable under the plan is
increased. A larger pool of shares, which may be subject to new options and
restrictions, will also allow us to grant options, restricted share grants or
restricted share unit grants to individuals who may join us in the future.
The key provisions of the plan, as proposed to be amended, are below. The
summary of the plan is qualified in its entirety by the text of the 2002 Amended
and Restated Stock Option Plan which is included as Appendix A to this proxy
circular and proxy statement.:
o ELIGIBILITY. All of our employees, officers, directors, consultants and
advisors are eligible to receive options and Share Grants. To be eligible to
receive options and Share Grants, consultants and advisors must have performed
services for us or one of our affiliates under a written contract. As of
September 27, 2004, there were approximately 215 eligible employees.
o NUMBER OF SHARES. The aggregate maximum number of shares that may be
issued under the plan will be increased to 5,000,000 if the amendment is
approved, subject to adjustment upon the occurrence of any subdivision,
redivision, consolidation, or other similar change affecting the shares. If any
shares subject to any option, grant or award are forfeited, or an option, grant
or award is terminated without issuance of shares, the shares subject to such
option, grant or award will again be available under the plan.
o TERM OF STOCK OPTION PLAN. No options or Share Grants may be granted
under the plan after five years from the date the plan was approved by a
majority of our shareholders.
o ADMINISTRATION OF THE PLAN. The plan is administered by the Audit
Committee of the Board of Directors. The Audit Committee shall have the
authority to make such adjustments, not inconsistent with the terms of the plan,
to the terms of currently outstanding options and Share Grants as it shall deem
appropriate in order to achieve reasonable comparability or other equitable
relationship between: (i) outstanding employee awards or the right or obligation
to make future awards in connection with the acquisition of another business or
another corporation or business entity; and (ii) the options and Share Grants as
so adjusted.
o RESTRICTED SHARE GRANTS AND RESTRICTED SHARE UNIT GRANTS ("SHARE
GRANTS"). We will be able to issue shares or award units (one Share for each
unit) that are issued or awarded subject to certain restrictions on their sale
by the participant as determined by our Audit Committee (including, without
limitation, any limitation on the right to vote the shares or the right to
receive any dividend or other right or property), which restrictions may lapse
separately or in combination at such time or times in such installments or
otherwise, as our Audit Committee may deem appropriate.
o FORFEITURE OF SHARE GRANTS. Any Share Grants that have not yet vested in
a participant shall be terminated as of the termination of the participant's
employment with us.
o CREDITOR STATUS. To the extent that any person acquires a right to
receive Share Grants from us under the plan, such right will be no greater than
the right of any of our unsecured general creditors.
o BENEFICIARY DESIGNATIONS. A participant shall have the right to
designate a beneficiary to whom shares otherwise due to the participant shall be
distributed in the event of his or her death while serving in the employee or
other relationship with us. If there is no effective beneficiary of the
participant then the payment of any remaining benefits payable pursuant to the
plan shall be made to the participant's estate.
o PAYMENT PURSUANT TO COURT ORDER. At the time any restricted Share Grants
become payable, we will pay to, or to the participant for the benefit of, the
participant's spouse or former spouse the portion of what the participant is
then entitled to specified in a valid court order entered into in a domestic
relations proceeding involving the participant's divorce or legal separation.
Any such payments will be made net of any amounts we may be required to withhold
under applicable federal, state, provincial or local laws.
o OPTIONS. Options granted under the plan may be either incentive stock
options (ISOs) or non-qualified stock options. ISOs are intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code. If the options are granted to a U.S. employee, the Audit Committee
will designate the options granted under the plan as ISOs or non-qualified stock
options.
o EXERCISE PRICE. The exercise price of an option granted under the plan
is determined by the Audit Committee, but in any event the option price shall
not be lower than the fair market value of a share on the date the option is
granted. The exercise price must be at least 110% of the fair market value of
our shares on the date an ISO is granted if the recipient owns shares possessing
more than 10% of the total voting power of our shares.
o TERMINATION OF OPTIONS. All options terminate on the earliest of: (a)
the expiration of the term specified in the option, which may not exceed five
years from the date of grant, unless the Audit Committee specifies otherwise;
(b) the expiration of two months from the date an optionee's employment or
service with us or our affiliates terminates for any reason other than
disability, death or retirement; or (c) the expiration of six months from the
date an optionee's employment or service with us or our affiliates terminates by
reason of disability, death or retirement. The Audit Committee, in its
discretion, may provide for additional limitations on the terms of any option.
o TRANSFERS. No option or Share Grant awarded under the plan may be
transferred, except by will or the laws of descent and distribution.
o PAYMENT. An optionee may pay for shares covered by an option in cash,
certified check, bank draft, money order or by such other mode of payment as the
Audit Committee may approve.
o PROVISIONS RELATING TO A CHANGE OF CONTROL. Unless otherwise determined
by the Board of Directors, upon the occurrence of a change of control, all
options and Share Grants become immediately vested and exercisable in full,
provided that optionees are not required to exercise their options if the
exercise price is greater than the price per share of the offer received in
connection with the change of control.
A change of control will occur upon approval by a majority of the
shareholders of an offer to acquire greater than fifty percent of the combined
voting power of our outstanding securities or an offer to acquire us through the
purchase of all of our assets, by amalgamation or otherwise.
o AMENDMENTS. The Audit Committee, with the approval of a majority of the
shareholders, may amend the plan from time to time in such manner as it may deem
advisable, provided the plan is not amended more than once every six months
other than to comply with changes in the tax and employee benefit laws.
Nevertheless, the Audit Committee may not, without obtaining an optionee's
approval, alter or impair the rights or increase the obligations with respect to
an option previously granted.
o VESTING. Unless otherwise specified by the Audit Committee, options
granted under the plan vest in three equal annual installments beginning on the
first anniversary of their grant. The exercise period for the options may be
accelerated from time to time, as determined by the Audit Committee.
In order to be effective, the amendment to the 2002 Amended and Restated
Stock Option Plan must be approved by a majority of votes cast by our
shareholders who vote in respect of such resolution. In the event the resolution
is not approved by the shareholders, the number of options available for
employees and directors will remain at 3,000,000 shares and we will not be
permitted to make Share Grants.
Copies of the 2002 Amended and Restated Stock Option Plan may be obtained
without payment and on request by contacting Tammie Brown at 613-270-0619,
extension 263, (toll-free 1-877-327-8483) or via e-mail at
tammie.brown@workstreaminc.com. In addition, copies of the 2002 Amended and
Restated Stock Plan will be available for review at the Meeting.
BOARD'S RECOMMENDATION
OUR BOARD OF DIRECTORS RECOMMENDS THAT ALL SHAREHOLDERS VOTE "FOR" THE
RESOLUTION AUTHORIZING THE AMENDMENTS TO THE PLAN.
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, our directors have negotiated with our auditors on an
arms-length basis in determining the fees to be paid to the auditors in
connection with the provision of audit services. 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
During fiscal 2003, Michael Mullarkey, the Company's Chief Executive
Officer, agreed to defer until after June 1, 2004, a total of $797,880 in
compensation earned as of May 31, 2003, as well as any additional compensation
earned thereafter, with interest accruing on the balance at a rate of 8.0% per
annum. In February 2004, the Company agreed to pay to Mr. Mullarkey $149,468
related to this compensation, of which $49,468 was withheld for taxes. The
remaining $100,000 was not paid to Mr. Mullarkey in the form of a cash payment,
but was applied as payment in full for Mr. Mullarkey's exercise of options to
purchase 100,000 common shares at an exercise price of $1.00 per share. In April
2004, the Company and Mr. Mullarkey agreed to terminate his deferred
compensation agreement and the Company paid in full the outstanding deferred
compensation of $783,867 and any accrued interest incurred through March 31,
2004.
During fiscal years 2003 and 2002, the Company received $500,000 and
$750,000 respectively, in working capital loans from Mr. Mullarkey. These loans
accrued interest at 4.75%. In January 2003, the Company consolidated the loans
made by Mr. Mullarkey to the Company along with the interest accrued thereon
into a five year term loan accruing interest at 8% per annum. During the third
quarter ended February 29, 2004, the entire amount of the loan of $1,287,901 and
accrued interest in an amount equal to $51,506 was paid in full. In January
2003, Mr. Mullarkey agreed to provide the Company with a $1,200,000 credit
facility bearing interest at 8% per annum. The Company did not draw against this
facility. In April 2004, the Company and Mr. Mullarkey agreed to terminate Mr.
Mullarkey's commitment to provide the credit facility.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
A copy of our Annual Report on Form 10-K, as amended, for fiscal year
2004, 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 2005 ANNUAL MEETING
Shareholders wishing to submit proposals for inclusion in the proxy
circular and proxy statement for the 2005 Annual Meeting of Shareholders must
submit such proposals to us at 495 March Road, Suite 300, Ottawa, Ontario K2K
3G1, Attention: Tammie Brown, on or before June 30, 2005. 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 27th day of September, 2004.
BY ORDER OF THE BOARD
Signed by:
/s/ Michael Mullarkey
Michael Mullarkey
Chairman
Appendix A
WORKSTREAM INC.
2002 AMENDED AND RESTATED STOCK OPTION PLAN,
AS AMENDED IN OCTOBER, 2004
1. PURPOSE OF THE PLAN
The purpose of the Workstream Inc 2004 Amended and Restated Stock Plan is
to develop the interest of and provide an incentive to eligible employees,
consultants and directors of Workstream Inc. (the "Corporation") in the
Corporation's growth and development by granting to eligible employees,
consultants and directors from time to time options to purchase or
conditional grants of Common Shares of the Corporation, thereby advancing
the interests of the Corporation and its shareholders.
2. DEFINITIONS
In this Plan:
a) "Account" means the unfunded and unsecured journal entry account
established on the books and records of the Corporation to record an
Account Balance under the Plan;
b) "Account Balance" means the Restricted Stock Units credited to a
Participant's Account, as adjusted in accordance with Section 22 to
reflect the addition of dividend equivalents and any changes in
capitalization and as adjusted in accordance with Section 33;
c) "Affiliate" means, other than the Corporation, (i) any corporation
or limited liability company in an unbroken chain of corporations or
limited liability companies ending with the Corporation if each
corporation or limited liability company owns stock or membership
interests (as applicable) possessing more than fifty percent (50%)
of the total combined voting power of all classes of stock in one of
the other corporations or limited liability companies in such chain;
(ii) any corporation, trade or business (including, without
limitation, a partnership or limited liability company) which is
more than fifty percent (50%) controlled (whether by ownership of
stock, assets or an equivalent ownership interest or voting
interest) by the Corporation or one of its Affiliates; or (iii) any
other entity, approved by the Board as an Affiliate under the Plan,
in which the Corporation or any of its Affiliates has a material
equity interest;
d) "Audit Committee" means the Audit Committee of the Corporation's
Board of Directors, as constituted from time to time, and which
shall at all times be composed of not less than 2 members who shall
be (i) "Non-Employee Directors" within the meaning of Rule
16(b)-3(b)(3) (or any successor rule) promulgated under the United
States Securities Act of 1934, as amended and (ii) "Outside
Directors" within the meaning of Treasury Regulation section
1.162-27(e)(3) under Section 162(m) of the Code, or such other
committee ("Committee") or persons designated by the Board of
Directors for the purpose of administering the Plan;
e) "Board of Directors" means the Board of Directors of the Corporation
as constituted from time to time;
f) "Code" means the United States Internal Revenue Code of 1986, as
amended;
g) "Common Shares" means the common shares of the Corporation issued
and outstanding from time to time;
h) "Conditional Share Grant" means a Restricted Share Grant or a
Restricted Share Unit Grant;
i) "Consultant" means a person, other than an employee, executive
officer or director of the Corporation, who performs or has
performed services for the Corporation or an Affiliate under a
written contract and who spends, has spent or will spend a
significant amount of time and attention on the affairs and business
of the Corporation or an Affiliate, and "Consultants" means more
than one Consultant;
j) "Corporations Act" means the Canada Business Corporations Act, as
amended, and the regulations promulgated thereunder;
k) "Date of Grant" means, for any Option or Conditional Share Grant
under the Plan, the date specified by the Audit Committee, or its
designate, at the time it grants the Option or Conditional Share
Grant; provided that (a) such date shall not be prior to the date
the Audit Committee effects the amended and restated Plan with
approval of a majority of the Corporation's shareholders, and (b)
the Option or Conditional Share Grant is granted within five (5)
years from the date the Plan is approved by the shareholders;
l) "Disability" means permanent and total disability as determined
under procedures established by the Audit Committee for the purposes
of the Plan;
m) "Exercise Date" means the date the Corporation receives from a
Participant a completed Notice of Option exercise form pursuant to
Section 13 with full payment for the Option Shares being purchased;
n) "Exercise Period" means, with respect to any Option Shares, the
period during which a Participant may purchase such Option Shares;
o) "Exercise Price" with respect to an Option shall mean the price per
Common Share as determined herein from time to time;
p) "Incentive Stock Option" means an Option granted under this Plan to
a United States resident, designated as such by the Audit Committee,
and constitutes an "Incentive Stock Option" within the meaning of
section 422 of the Code;
q) "Non-Qualified Stock Option" means an option granted under this Plan
to a United States resident, designated as such by the Audit
Committee and does not constitute an Incentive Stock Option within
the meaning of section 422 of the Code;
r) "Option" means a non-transferable option to purchase Common Shares
granted pursuant to the Plan;
s) "Optionee" means a Participant who has been granted one or more
Options;
t) "Option Shares" means Common Shares which are subject to purchase
upon the exercise of outstanding Options;
u) "Participant" means a current or former full-time employee,
Consultant or director of the Corporation or an Affiliate;
v) "Payment" means the distribution of Common Stock to a Participant in
accordance with Sections 24, and it shall also include any Payment
made pursuant to Section 29 and Section 38;
w) "Plan" means the Workstream Inc. 2004 Amended and Restated Stock
Plan as set out herein and approved by majority of shareholders of
the Corporation;
x) "Plan Shares" means the 4,000,000 Common Shares reserved from time
to time for issuance pursuant to the exercise of Options plus
1,000,000 Common Shares reserved from time to time for issuance of
Conditional Share Grants, subject to adjustment for changes in the
capitalization of the Corporation as provided in Section 33. The
Plan Shares may be granted as Incentive Stock Options, Non-Qualified
Options, Restricted Share Grants, Restricted Share Unit Grants or
have no designation. Common Shares issued under the Plan may be
authorized but unissued Common Shares, issued Common Shares held in
or acquired for the Corporation's treasury of Common Shares or
Common Shares reacquired by the Corporation upon purchase in the
open market;
y) "Restricted Share Grant" means a grant by the Corporation of a
Common Share that is issued subject to certain restrictions on its
sale by the Participant as determined by the Audit Committee shall
be subject to such restrictions as the Audit Committee may impose
(including, without limitation, any limitation on the right to vote
the Common Share or the right to receive any dividend or other right
or property), which restrictions may lapse separately or in
combination at such time or times, in such installments or
otherwise, as the Audit Committee may deem appropriate;
z) "Restricted Share Unit Grant" or "RSU" means a grant of a unit
representing the Corporation 's obligation to deliver or issue to a
Participant one Common Share for each such unit in accordance with
the terms of the Plan;
aa) "Retirement" means retirement from active employment with the
Corporation at or after age 65, or with the consent for purposes of
the Plan of such officer of the Corporation as may be designated by
the Audit Committee, at or after such earlier age and upon the
completion of such years of service as the Committee may specify;
bb) "Third Party Offer" means the happening of any of the following:
a) When a third party, acting at arm's length, as defined in the
Income Tax Act (Canada), as amended, makes an offer to acquire
the "beneficial ownership", as defined in the Corporations
Act, directly or indirectly, of securities of the Corporation
representing 50.1 percent or more of the combined voting power
of the Corporation's then outstanding securities; or
b) When a third party, acting at arm's length, as defined in the
Income Tax Act (Canada), as amended, makes an offer to acquire
the Corporation through the purchase of all of its assets, by
amalgamation or otherwise, and
cc) "Vested" means, with respect to a Restricted Share Grant or a RSU
credited to a Participant's Account, that such Restricted Share or
RSU is no longer subject to forfeiture in accordance with any notice
given by the Corporation to the Participant at the time of the
Grant, or any agreement between the Corporation and the Participant.
3. OPERATION OF THE PLAN
The Plan has been designed for both Canadian and United States employees.
For United States Participants, any Option grant shall be designated, at
the Date of Grant, as an Incentive Stock Option or a Non-Qualified Stock
Option. For Canadian Participants, no such Option designation shall be
made.
Any Conditional Share Grant shall be designated at the Date of Grant as a
Restricted Share Grant or a Restricted Share Unit Grant.
4. CURRENCY
All dollar amounts referred to in this Plan are in Canadian or
United States funds as specified.
5. EXTENDED MEANINGS
In this Plan, words importing the singular number
include the plural and vice versa and words importing the masculine gender
include the feminine and neuter genders.
6. HEADINGS
Article headings are not to be considered part of the Plan and are
included solely for convenience of reference and are not intended to be
full or accurate descriptions of the contents thereof.
7. ELIGIBILITY
All Participants shall be eligible to participate in the Plan.
Eligibility to participate shall not confer upon any Participant any right
to be granted Options or Conditional Share Grants pursuant to the Plan.
The extent to which any Participant shall be entitled to Options and/or
Conditional Share Grants pursuant to the Plan shall be determined in the
sole and absolute discretion of the Audit Committee.
OPTION GRANTS
8. NUMBER OF OPTION SHARES AVAILABLE FOR GRANTS
No Option may be granted by the Audit Committee which would have the
effect of causing the total number of all Option Shares subject to
purchase under outstanding Options to exceed the number of Plan Shares
reserved for Option grants.
Upon the expiration, surrender, cancellation or termination, in whole or
in part, of an unexercised Option, the Option Shares subject to such
Option shall be available for other Options to be granted from time to
time.
9. GRANTING OF OPTIONS
The Audit Committee may from time to time grant Options to Participants to
purchase a specified number of Option Shares at a specified exercise price
per share. The number of Option Shares to be granted, the exercise period,
the exercise price, the Date of Grant, and such other terms and conditions
of the Option shall be as determined by the Audit Committee.
Options granted to a 10% shareholder which are designated as Incentive
Stock Options shall have an exercise price equal to at least 110% of the
fair market value of the Common Shares on the date the Options are
granted.
10. OPTION EXERCISE PRICE
The Exercise Price per Common Share purchasable under an Option shall be
determined by the Audit Committee but in any event shall not be lower than
the fair market value of a Common Share on the Date of Grant. Fair market
value shall be determined in good faith using common practices for such
determination without regard to any restriction on the Common Shares.
11. OPTION EXERCISE PERIOD
Unless otherwise specified by the Audit Committee at the time of granting
an Option, and except as otherwise provided in the Plan, each Option shall
be exercisable in the following installments:
Percentage of Total Number of Option
Shares Which May be Purchased Exercise Period
------------------------------------ ---------------
33 1/3% After the first anniversary of the Date of Grant and up to
immediately before the fifth anniversary of the Date of Grant
33 1/3% After the second anniversary of the Date of Grant and up to
immediately before the fifth anniversary of the Date of Grant
33 1/3% After the third anniversary of the Date of Grant and up to
immediately before the fifth anniversary of the Date of Grant
Once an Option installment becomes exercisable it shall remain exercisable
until expiration or termination of the Option, unless otherwise specified
by the Audit Committee. Each Option or Option installment may be exercised
at any time or from time to time, in whole or in part, for up to the total
number of Common Shares with respect to which it is then exercisable. The
Audit Committee shall have the right to accelerate the date which any
installment of any Option is exercisable.
12. TERM OF OPTIONS
Subject to accelerated termination as provided for in the Plan, each
Option shall, unless otherwise specified by the Audit Committee, expire on
the fifth anniversary of the Date of Grant.
13. EXERCISE OF OPTIONS
An Optionee may at any time within the Exercise Period elect to purchase
all or a portion of the Option Shares which such Optionee is then entitled
to purchase by delivering to the Corporation a completed Notice of Option
Exercise, specifying the Date of Grant of the Option being exercised, the
Exercise Price of the Option and the number of Option Shares the Optionee
desires to purchase. The Notice of Option Exercise shall be accompanied by
payment in full of the purchase price for such Option Shares. Payment can
be made by cash, certified cheque, bank draft, money order or the
equivalent payable to the order of the Corporation or by such other means
as may be specified by the Audit Committee.
14. LIMITATION ON DISPOSITION OF INCENTIVE STOCK OPTION SHARES
It is understood and intended that Options granted under this plan may
qualify as an"incentive stock option" as defined in Section 422 of the
Code. Accordingly, the Optionee understands that in order to obtain the
benefits of an incentive stock option under section 421 of the Code, no
sale or disposition may be made of any Common Shares acquired upon
exercise of the Option within the one year period beginning on the day
after the day of the transfer of such Common Shares to him, nor within the
two year period beginning on the day after the date an Optionee is granted
Options pursuant to this agreement. If the Optionee intends to dispose or
does dispose (whether by sale, exchange, gift, transfer or otherwise) of
any such Common Shares within said periods, he will notify the Corporation
in writing within ten days after such disposition.
15. COMMON SHARE CERTIFICATES
Upon exercise of an Option and payment in full of the purchase price and
any applicable tax withholdings, the Corporation shall cause to be issued
and delivered to the Optionee within a reasonable period of time a
certificate or certificates in the name of or as directed by the Optionee
representing the number of Common Shares the Optionee has purchased.
16. OPTION EXERCISE PERIOD ON TERMINATION OF EMPLOYMENT
Unless otherwise determined by the Audit Committee, if an Optionee's
employment terminate for any reason other than death, Disability or
Retirement, any Option held by such Optionee shall thereupon terminate,
except that each such Option, to the extent then exercisable, may be
exercised for the lesser of 60 days or the balance of such Option's term.
Options shall not be affected by any change of an Optionee's employment
within or among the Corporation or Affiliate, or unless otherwise
determined by the Audit Committee, so long as the Participant continues to
be an employee of the Corporation or an Affiliate.
17. OPTION EXERCISE PERIOD ON TERMINATION BY REASON OF DEATH, DISABILITY OR
RETIREMENT
If an Optionee's employment terminates by reason of death, Disability or
Retirement, any Option held by such Optionee may thereafter be exercised,
to the extent then exercisable or to such other extent as the Audit
Committee may determine, for a period of 180 days (or such other period as
the Audit Committee may specify) from the date of such death, Disability
or Retirement or until the expiration of the stated term of such Option,
whichever period is the shorter.
CONDITIONAL SHARE GRANTS
18. ELIGIBILITY FOR CONDITIONAL SHARE GRANTS
The Audit Committee may from time to time make Conditional Share Grants to
Participants. The number of Conditional Share Grants to be granted, the
Date of Grant, and such other terms and conditions of the Conditional
Share Grants shall be as determined by the Audit Committee.
No Conditional Share Grants may be granted by the Audit Committee which
would have the effect of causing the total number of all Conditional Share
Grants to exceed the number of Plan Shares reserved for Conditional Share
Grants.
Upon the expiration, surrender, cancellation or termination, in whole or
in part, of a Conditional Share Grant, the number of Shares subject to
such grant shall be available for other Conditional Share Grants to be
made from time to time.
19. VESTING OF CONDITIONAL SHARE GRANTS
The Audit Committee may provide, in a notice given to the Participant as
of the Date of Grant, or in an agreement between the Corporation and the
Participant, a vesting schedule for the Conditional Share Grants being
credited to the Participant, such that some or all of the Conditional
Share Grants credited to the Participant shall be forfeited if the
Participant does not continue in employment with the Corporation until
such Conditional Share Grants are Vested as specified in such notice or
agreement.
20. RESTRICTED SHARE GRANTS
Restricted Share Grants shall be subject to such restrictions as the Audit
Committee may impose (including, without limitation, any limitation on the
right to vote the Common Shares issued in the Participant's name or the
right to receive any dividend or other right or property with respect to
the said Common Shares), which restrictions may laps separately or in
combination at such time or times, in such installments or otherwise, as
the Audit Committee may deem appropriate.
Common Share certificates that are issued in connection with Restricted
Share Grants shall bear an appropriate legend referring to the
restrictions to which they are subject, and any attempt to dispose of any
such Common Shares in contravention of such restrictions shall be null and
void and without effect. The aforesaid certificates shall be held by the
Corporation until the restrictions are satisfied.
21. FORFEITURE OF RESTRICTED SHARE GRANTS
Except as otherwise determined by the Audit Committee, upon termination of
employment (as determined under criteria established by the Audit
Committee), for any reason during the applicable restriction period, all
Restricted Share Grants still subject to restriction shall be forfeited
and reacquired by the Corporation; provided, however, that the Committee
may, when it finds that a waiver would be in the best interests of the
Corporation, waive in whole or in part any or all of the remaining
restrictions with respect to the Restricted Share Grants, evidenced in
such manner as the Committee shall deem appropriate, which waiver shall be
delivered to the Participant promptly after such Restricted Share Grants
become unrestricted.
22. RESTRICTED SHARE UNIT GRANTS
Each Participant receiving Restricted Share Unit Grants shall have an
Account established in his or her name by the Corporation. In connection
with such grant, there shall be credited to the Participant's Account as
of the Grant Date, the number of RSUs authorized by the Audit Committee.
Whenever a cash dividend is paid on Common Shares, a Participant's Account
will be adjusted by adding to the Account Balance the number of RSUs
determined by multiplying the per share amount of the cash dividend by the
number of RSUs credited to the Account Balance on the record date for the
cash dividend, dividing the result by the current fair market value of a
Common Share on the date the cash dividend is paid, and rounding the
result to the nearest 1/100th of a RSU as the case may be (with .005 being
rounded upwards); provided that, if a Participant's Account Balance is
reduced to zero in accordance with the Plan between the record date and
the payment date for such cash dividend, then, in lieu of such adjustment
to the Participant's Account, the dividend equivalent amount with respect
to such record date will be determined by multiplying the per share amount
of the cash dividend by the portion of the Participant's Account Balance
that is payable on the record date for the cash dividend and rounding the
result to the nearest whole cent, which amount shall be paid to the
Participant in cash. Any adjustment with respect to a Participant's
Account pursuant to this Section 22 which is made with respect to any RSUs
which are not then Vested shall become Vested at the same time as such
RSUs.
23. FORFEITURE OF RSUS ON TERMINATION OF EMPLOYMENT
Notwithstanding any provision herein to the contrary, in the event that a
Participant's employment is terminated, before any (or all) of his or her
RSUs have become Vested, as provided in the notice or agreement described
in Section 19, then all such RSUs in the Participant's Account which are
not then Vested (including any Units attributable to such Units pursuant
to Section 22, as determined by the Corporation) shall be forfeited, and
no amount or Common Shares shall be payable with respect to such RSUs
under any provision of this Plan.
24. PAYMENT OF COMMON SHARES ON ACCOUNT OF RESTRICTED STOCK UNITS
The Account Balance with respect to a particular RSU Grant will become
payable in Common Shares on the date that the RSUs become Vested in
accordance with Section 19, and one Common Share will be delivered in full
satisfaction of each RSU to be paid, after rounding any fractional RSU
upwards to the nearest whole share.
The Audit Committee at its sole discretion may substitute an equivalent
amount of cash, determined on the basis of the then fair market value of
the Common Shares, if payment of the Account Balance in Common Shares is
not reasonably practicable due to the requirements of applicable law.
Notwithstanding the foregoing, if the payment date occurs on a date that
is not during a "window period", then, unless the Corporation determines
otherwise, the payment date shall automatically be deferred to the first
trading day of the first "window period" beginning after such date. A
"window period" means a period designated by the Corporation during which
a Participant is permitted to purchase or sell Common Shares of the
Corporation.
If the Audit Committee finds that any person who is at the time entitled
to any Payment hereunder is a minor or is unable to care for his or her
affairs because of disability or incompetence, payment of the Account
Balance may be made to anyone found by the Audit Committee to be the
authorized representative of such person, or to be otherwise entitled to
such Payment, in the manner and under the conditions that the Audit
Committee determines. Such Payment will be a complete discharge of the
liabilities of the Corporation hereunder with respect to the amounts so
paid.
25. DEBITING OF RESTRICTED SHARE UNIT ACCOUNT
If and when Common Shares are distributed to a Participant in accordance
with Section 24, the Participant's Account shall be debited with the
number of RSUs equivalent to the number of Common Shares that have been
distributed.
26. CREDITOR STATUS OF RESTRICTED SHARE UNIT ACCOUNTS
Nothing contained herein and no action taken pursuant hereto will be
construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company and any Participant, the Participant's
beneficiary or estate, or any other person. Title to and beneficial
ownership of any Common Shares or funds represented by the Account Balance
will at all times remain with the Corporation; such Common Shares or funds
will continue for all purposes to be a part of the general assets of the
Corporation and may be used for any corporate purpose. No person will, by
virtue of the provisions of this Plan, have any interest whatsoever in any
specific assets of the Corporation.
TO THE EXTENT THAT ANY PERSON ACQUIRES A RIGHT TO RECEIVE PAYMENTS FROM
THE CORPORATION UNDER THIS PLAN, SUCH RIGHT WILL BE NO GREATER THAN THE
RIGHT OF ANY UNSECURED GENERAL CREDITOR OF THE CORPORATION.
GENERAL PROVISIONS
27. WITHHOLDING OF TAX
If the Corporation determines that under the requirements of applicable
taxation laws it is obliged to withhold for remittance to a taxing
authority any amount upon exercise of an Option, the Corporation may,
prior to and as a condition of issuing the Option Shares, require the
Optionee exercising the Option to pay to the Corporation, in addition to
and in the same manner as the purchase price for the Option Shares, such
amount as the Corporation is obliged to remit to such taxing authority in
respect of the exercise of the Option. Any such additional payment shall,
in any event, be due no later than the date as of which any amount with
respect to the Option exercised first becomes includable in the gross
income of the Optionee for tax purposes.
The Corporation shall be authorized to withhold from any Restricted Stock
Grant or RSU Payment the amount it determines necessary to satisfy any
Canadian, United States and/or foreign federal, provincial, state, local
or other withholding tax requirements relating to such Restricted Stock
Grant or RSU Payment, or to require as a condition of delivery that the
Participant remit or, in appropriate cases, agree to remit when due the
amount necessary to satisfy all federal, state, local, foreign, or other
withholding tax requirements relating thereto. At the option of the
Corporation, such amount may be remitted by check payable to the
Corporation, in Common Shares (which may include Common Shares received
pursuant to this Plan), by the Corporation's withholding of Common Shares,
or any combination thereof.
28. BENEFICIARY DESIGNATIONS
A Participant may file with the Corporation, on such form as may be
prescribed by the Audit Committee, a designation of one or more
beneficiaries (each, a Beneficiary) to whom Common Shares otherwise due to
the Participant shall be distributed in the event of his death while
serving in the employ or other relationship with the Corporation.
The Participant shall have the right to change the Beneficiary or
Beneficiaries from time to time; provided, however, that any change shall
not become effective until received in writing by the Corporation. If any
designated Beneficiary survives the Participant but dies before receiving
all of Participant's benefits hereunder, any remaining benefits due the
Participant shall be distributed to the deceased Participant's estate.
If there is no effective Beneficiary designation on file with the
Corporation at the time of the Participant's death, or if the designated
Beneficiary or Beneficiaries have all predeceased the Participant, the
payment of any remaining benefits hereunder shall be made to the
Participant's estate.
29. TRANSFER
Options or Conditional Share Grants granted under the Plan are not
assignable or transferable by the Participant or subject to any other
alienation, sale, pledge or encumbrance by such Participant except by will
or by the laws of descent and distribution. The obligations of each
Participant shall be binding on his/her heirs, executors and
administrators.
During the Participant's lifetime Options shall be exercisable only by the
Participant.
Notwithstanding the foregoing, at the time any RSUs become payable, the
Corporation will pay to, or to the Participant for the benefit of, the
Participant's spouse or former spouse the portion of the Participant's
Account Balance specified in a valid court order entered into in a
domestic relations proceeding involving the Participant's divorce or legal
separation. Any such Payment will be made net of any amounts the
Corporation may be required to withhold under applicable federal, state,
provincial or local laws.
30. NO RIGHT TO EMPLOYMENT
The granting of an Option or a Conditional Share Grant to a Participant
under the Plan does not confer upon the Participant any right to
expectation of employment by, or to continue in the employment of, the
Corporation, or to be retained as a Consultant by the Corporation.
31. RIGHTS AS SHAREHOLDERS
An Optionee shall not have any rights as a shareholder with respect to
Option Shares until full payment has been made to the Corporation and a
share certificate or share certificates have been duly issued.
A Participant's rights as a shareholder with respect to any Common Shares
issued in connection with Restricted Stock Grants shall be subject to such
restrictions as are imposed by the Audit Committee pursuant to Section 20.
A Participant shall not have any rights as a shareholder with respect to
any Vested RSUs in his Account until a share certificate or share
certificates have been duly issued with respect to the Vested RSUs.
32. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Audit Committee which shall have the
authority to:
a) determine the individuals and entities (from among the class
of individuals and entities eligible to receive Options or
Conditional Share Grants) to whom Options or Conditional Share
Grants may be granted;
b) make such adjustments, not inconsistent with the terms of the
Plan, to the terms of currently outstanding Options and
Conditional Share Grants as it shall deem appropriate in order
to achieve reasonable comparability or other equitable
relationship between (i) outstanding employee awards or the
right or obligation to make future awards in connection with
the acquisition of another business or another corporation or
business entity and (ii) the Option Shares and Conditional
Share Grants as so adjusted;
c) determine the number of Common Shares to be subject to each
Option or Conditional Share Grants;
d) determine the terms and conditions of any grant of Option or
Conditional Share Grants, including but not limited to:
o the time or times at which Options or Conditional Share
Grants may be granted;
o the exercise price at which Option Shares subject to
each Option may be purchased;
o the time or times when each Option shall be come
exercisable and the duration of the Exercise Period but,
in any case shall not exceed five years from the Date of
Grant;
o whether restrictions or limitations are to be imposed on
Option Shares or Conditional Share Grants, and the
nature of such restrictions or limitations, if any; and
o any acceleration of exercisability or waiver of
termination regarding any Option or Conditional Share
Grant, based on such factors as the Audit Committee may
determine; and
o interpret the Plan and prescribe and rescind rules and
regulations relating to the Plan.
The interpretation and construction by the Audit Committee of any
provisions of the Plan or of any Option or Conditional Share Grant shall
be final and binding on all persons. Nothing in the Plan shall be
interpreted, amended or altered in such a manner as to disqualify the Plan
under section 422 of the Code. No members of the Audit Committee shall be
liable for any action or determination made in good faith with respect to
the Plan or any Option or Conditional Share Grant granted under it. The
day-to-day administration of the Plan may be delegated to such officers
and employees of the Corporation or any Affiliate as the Audit Committee
shall determine.
33. RECAPITALIZATION AND REORGANIZATION
The number of Option Shares subject to each outstanding Option, the
purchase price for such Option Shares and the number of Conditional Share
Grants shall be appropriately adjusted for any subdivision, redivision,
consolidation or any similar change affecting the Common Shares.
34. CONDITIONS
The Plan and each Option and Conditional Share Grant shall be subject to
the requirement that, if at any time the Audit Committee determines that
the listing, registration or qualification of the Common Shares subject to
such Option or Conditional Share Grant upon any securities exchange or
under any provincial, state or federal law, or the consent or approval of
any governmental body, securities exchange, or the holders of the Common
Shares generally, is necessary or desirable, as a condition of, or in
connection with, the granting of such Option or Conditional Share Grant or
the issue or purchase of Common Shares thereunder, no such Option may be
granted or exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been affected
or obtained free of any conditions not acceptable to the Audit Committee.
35. NOTICES
All written notices to be given by the Participant to the Corporation
shall be delivered personally or by registered mail, postage prepaid,
addressed as follows:
WORKSTREAM INC
495 MARCH ROAD, SUITE 300
OTTAWA, ON K2K 3G1
ATTENTION: CEO
Any notice given by the Participant pursuant to the terms of an Option or
Conditional Share Grant shall not be effective until actually received by
the Corporation at the above address.
36. CORPORATE ACTION
Nothing contained in the Plan or in an Option or Conditional Share Grant
shall be construed so as to prevent the Corporation from taking corporate
action which is deemed by the Corporation to be appropriate or in its best
interest, whether or not such action would have an adverse effect on the
Plan or any Option or Conditional Share Grant.
37. AMENDMENTS
The Audit Committee, with approval of a majority of shareholders, shall
have the right, in its sole discretion, to alter, amend, modify or
terminate the Plan or any Option or Conditional Share Grant granted under
the Plan at any time without notice. The Plan shall not, however, be
altered, amended or modified more often than once every six months other
than to comport with changes to applicable tax and employee benefit laws
and the respective rules and regulations thereunder. No such amendment,
however, may, without the consent of the Participant, alter or impair any
rights or increase any obligations with respect to an Option or
Conditional Share Grant previously granted under the Plan.
38. THIRD PARTY OFFER
In the event of a Third Party Offer, which is accepted by a majority of
the shareholders of the Corporation, unless otherwise determined by the
Board of Directors prior to the occurrence of such Third Party Offer, any
a) Options, outstanding as of the date of the Third Party Offer and
then not exercisable shall become fully exercisable at the Exercise
Price, provided that Optionees are not required to exercise their
Options if the Third Party Offer per Common Share is less than the
Exercise Price; and
b) Restricted Share Grants and/or RSUs, outstanding as of the date of
the Third Party Offer and then not fully Vested shall become fully
Vested.
39. TERMINATION OF PLAN
Except as otherwise provided herein, Options and Conditional Share Grants
may be granted only within the five year period from the date the Plan has
been approved by a majority of common shareholders. The termination of the
Plan shall have no effect on outstanding Options or Conditional Share
Grants, which shall continue in effects in accordance with their terms and
conditions and the terms and conditions of the Plan, provided that no
Option or Conditional Share Grant may be exercised after the fifth
anniversary of its Date of Grant.
40. FURTHER ASSURANCES
Each Participant shall, when requested to do so by the Corporation, sign
and deliver all such documents relating to the granting or exercise of
Options or Conditional Share Grants deemed necessary or desirable by the
Corporation.
41. GOVERNING LAW
The Plan is established under the laws of the Province of Ontario, and the
rights of all parties and the construction and effect of each provision of
the Plan shall be according to the laws of the Province of Ontario.
DATED this day of , 2004.
WORKSTREAM INC
----------------------------------
Michael Mullarkey, Chairman
WORKSTREAM INC.
PROXY
FOR USE AT THE
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
WEDNESDAY, OCTOBER 27, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE MANAGEMENT OF THE 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
27TH DAY OF OCTOBER, 2004, 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 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; Steve Singh; and Cholo Manso.
2. VOTE [ ] FOR OR [ ] AGAINST in the approval of the amendments to
the Corporation's stock option plan, the particulars of which are
set out in the Management Proxy Circular.
3. VOTE [ ] FOR OR [ ] WITHHOLD/ABSTAIN FROM VOTING in the appointment
of PricewaterhouseCoopers LLP as auditors of the Corporation.
4. VOTE [ ] FOR OR [ ] AGAINST 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 AMENDMENTS TO THE STOCK OPTION PLAN (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 _________________, 2004.
_____________________________________ ________________________________
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.