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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|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss. 240.14a-12
Workstream Inc.
----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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and 0-11.
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WORKSTREAM INC.
NOTICE OF ANNUAL AND SPECIAL MEETING
OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN THAT the annual and special meeting of the shareholders
of WORKSTREAM INC. (the "Corporation") will be held on Thursday, October 20,
2005 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 ratify the appointment of PricewaterhouseCoopers LLP as auditors
of the Corporation;
3. To authorize the directors to fix the remuneration of the auditors;
4. To receive and consider the financial statements of the Corporation
for the fiscal year ended May 31, 2005 together with the auditors'
report thereon and the Annual Report to the shareholders; and
5. 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, 2005, which is not a part of
the proxy soliciting materials. The financial statements referred to in item 4
above are included as part of the 2005 annual report.
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 23rd day of September 2005,
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.
2
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 20, 2005
--------------------
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., incorporated under the laws of Canada, for use at the annual and special
meeting of our shareholders (the "Meeting") to be held on Thursday, the 20th day
of October 2005 at 10:00 a.m. (Ottawa time) at our executive offices at 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
16, 2005.
The Notice of Meeting, this document and the Form of Proxy will be mailed
commencing on or about September 23, 2005 to shareholders of record as of the
close of business on September 16, 2005, 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.
Page 3
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 our executive offices
at 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.
Page 4
On any ballot that may be called for regarding the matters listed in the
Notice of Meeting and in the Form of Proxy, the common shares of Workstream
(hereinafter sometimes called the "Common Shares") will be voted or withheld
from voting in accordance with the instructions of the shareholder indicated on
the Form of Proxy 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 appointment of
auditors; and (iii) "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 16, 2005 are entitled to receive notice of, and vote at,
the Meeting. As of that date, 49,194,178 Common Shares were issued and
outstanding and entitled to vote. As of September 16, 2005, 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.
Page 5
Security Ownership of Principal Shareholders
The following table sets forth as of September 16, 2005 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
- ------------------------------------------ -------------------------- ----------
Janus Capital Management 5,334,687 10.84%
- ------------------------------------------ -------------------------- ----------
Hewlett Packard
3000 Hanover St. 4,835,746 9.83%
Palo Alto, CA 94304
- ------------------------------------------ -------------------------- ----------
Michael Mullarkey 4,437,000 8.98%
c/o Workstream Inc.
495 March Road, Suite 300
Ottawa, Ontario, K2K 3G1
- ------------------------------------------ -------------------------- ----------
William Blair Capital Management, LLC 3,534,317 7.18%
222 West Adams Street
Chicago, IL 60606
- ------------------------------------------ -------------------------- ----------
Rubicon Master Fund 2,500,000 7.43%
25 Cabot Square
Canary Wharf
London, UK
- ------------------------------------------ -------------------------- ----------
(1) With respect to each shareholder, includes any shares issuable upon exercise
of options or warrants held by such shareholder that are or will become
exercisable within 60 days of September 16, 2005.
Page 6
Security Ownership of Management
The following table sets forth as of September 16, 2005 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 2005 (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 4,437,000 (2) 8.98%
- ------------------------------------ -------------------- ----------------------
Matthew J. Ebbs 126,666 (3) *
- ------------------------------------ -------------------- ----------------------
Michael A. Gerrior 45,334 (4) *
- ------------------------------------ -------------------- ----------------------
Cholo Manso 48,666 (5) *
- ------------------------------------ -------------------- ----------------------
Thomas Danis 26,666 (6) *
- ------------------------------------ -------------------- ----------------------
Arthur Halloran 13,332 (7) *
- ------------------------------------ -------------------- ----------------------
Steve Singh -- --
- ------------------------------------ -------------------- ----------------------
Stephen Lerch 25,000 *
- ------------------------------------ -------------------- ----------------------
All executive officers and 4,722,667(8) 9.53%
directors as a group (8 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 16, 2005.
(2) Includes 200,000 Common Shares issuable upon the exercise of stock options.
(3) Includes 86,666 Common Shares issuable upon the exercise of stock options.
(4) Includes 15,334 Common Shares issuable upon the exercise of stock options.
(5) Includes 13,334 Common Shares issuable upon the exercise of stock options.
(6) Includes 26,666 Common Shares issuable upon the exercise of stock options.
(7) Includes 13,332 Common Shares issuable upon the exercise of stock options.
(8) Includes 355,332 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 Shares 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, 2005, all Section 16(a) filing requirements
applicable to our officers, directors and greater than 10% beneficial owners
were complied with.
Page 7
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. All of the nominees currently serve as members of the Board of
Directors and are standing for re-election. The term of office of each of the
current directors is due to expire immediately prior to the election of
directors at the Meeting.
We do not know of any reason why any of these nominees would not accept
the nomination. However, if any nominee does not accept the nomination, the
persons' names in the Form of Proxy will vote for the substitute nominee that
the Board recommends.
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 37 2001 Chairman of the Board of Directors,
President and Chief Executive Officer
Thomas Danis 58 2001 Director (1)
Matthew Ebbs 40 1999 Director (1)
Michael Gerrior 55 2001 Director
Arthur Halloran 59 2001 Director
Cholo Manso 42 2001 Director (1)
Steve Singh 44 2004 Director (1)
(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
held 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.
Page 8
Thomas Danis joined our Board of Directors in July 2001. Mr. Danis is currently
an insurance executive 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 also 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 since October 1999.
Currently Mr. Ebbs is an independent consultant. In May 2004, Mr. Ebbs received
his Executive M.B.A. from Queen's University. From December 2004 to July 2005,
he was an Executive Vice-President at SC Stormont Inc. From October 2003 to
September 2004, Mr. Ebbs was the Vice-President of Business Development and
Managing Director of Europe for WorldHeart Corporation. From October 2001 to
September 2003, Mr. Ebbs was the Recovery Service Manager with Export
Development Canada. Export Development Canada is a Crown corporation that
provides trade finance and risk management services for Canadian exporters and
investors. 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 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.
Page 9
Cholo Manso joined our Board of Directors 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 was 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 joined our Board of Directors in October 2004. 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
Stephen Lerch, age 51 has been our Executive Vice President, Chief Operating and
Financial Officer since April 2005. He is in charge of our financial, human
resources, legal and administrative affairs and has operational oversight
responsibility. From April 2003 to January 2004, Mr. Lerch was the Executive
Vice President and Chief Operating Officer of Rewards Network Inc/iDine Rewards
Network Inc. Rewards Network Inc. is a provider of dining and hotel rewards and
credit card loyalty programs. In this position, Mr. Lerch directed operations of
merchant sales and support, contract administration, information technology and
corporate and partner development. Prior to this position, Mr. Lerch held the
position of Executive Vice President and Chief Financial Officer from February
1997 to August 2003 where he was responsible for all traditional CFO
responsibilities including internal and external reporting, budgeting, treasury,
banking, human resources and Audit Committee and Board meetings.
Tammie Brown, age 41, 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.
Page 10
Meetings and Committees of the Board of Directors
Each of our directors other than Messrs. Mullarkey and Halloran qualifies
as "independent" in accordance with the published listing requirements of
Nasdaq. As required by the Nasdaq rules, the Board has made a subjective
determination as to each independent director that no relationships exist which,
in the opinion of the Board, would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director. In making these
determinations, the directors reviewed and discussed information provided by the
directors with regard to each director's business and personal activities as
they may relate to us and our management.
During the year ended May 31, 2005 ("fiscal 2005"), the Board of Directors
held six 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 2005. The Board has established an Audit
Committee. The Audit Committee is comprised of four non-employees, Matthew Ebbs
(Chairman), Thomas Danis, Steve Singh 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. Mr. Ebbs has been
determined to be an "audit committee financial expert" as defined by the SEC.
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 Board does not have a formal Compensation Committee
but instead the Audit Committee provides the functions typically performed by a
compensation committee.
The Audit Committee held eight meetings during fiscal year 2005. The Board
has adopted a written charter for the Audit Committee. This charter may be found
on our website at www.workstreaminc.com.
Nominations of Candidates for Director
The Board 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, recommends candidates for nomination and election to our
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.
Page 11
Shareholder Communications with Directors
The Board of Directors welcomes communication from our shareholders. Any
shareholder may communicate with either the Board as a whole, or with any
individual director by sending a written communication c/o our Chief Executive
Officer at our executive office located at 495 March Road, Suite 300, Ottawa,
Ont. K2K 3G1. All such communication sent to the Chief Executive Officer will be
forwarded to the Board, as a whole, or to the individual director to whom such
communication was addressed.
We encourage, but do not require, the members of the Board to attend the
annual meeting of shareholders. Two 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 were paid an annual fee of $15,000 for fiscal year 2005.
Directors who are members of our Audit Committee were paid an additional $1,000
for each committee meeting attended in fiscal year 2005. In addition, each
director is eligible to participate in our 2002 Amended and Restated Stock
Option Plan.
Company Employee Code of Conduct
The Board has adopted a Code of Conduct that applies to our directors,
officers and employees, including our principal executive, financial and
accounting officers and persons performing similar functions. The Code of
Conduct will be made available, without charge, upon written request made to
Tammie Brown of the Company at its principal executive offices located at 495
March Road, Suite 300, Ottawa, Ont. K2K 3G1. In addition, it is also available
on our website at www.workstreaminc.com.
Certain Transactions
Michael Gerrior, a member of our Board of Directors, is a partner in the
law firm of Perley-Robertson, Hill & McDougall, LLP which provides ongoing legal
services to us.
Page 12
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the cash compensation as well as certain
other compensation earned during the fiscal years indicated by certain of the
Named Executive Officers.
- ------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term
Compensation
Awards
- ------------------------------------------------------------------------------------------------------------
Name and Year Salary Bonus Other Annual Securities All Other
Principal ($) ($) Compensation Underlying Compensation
Position ($) Options (#)(1) ($)
- ------------------------------------------------------------------------------------------------------------
Michael 2005 $239,615 $775,619 -- -- $31,271(2)
Mullarkey, 2004 $216,667 $150,000 -- 300,000 $49,410(3)
Chairman, Chief 2003 $200,000 $214,547 -- 300,000 $ 4,710(3)
Executive -- --
Officer and
President
- ------------------------------------------------------------------------------------------------------------
Stephen Lerch, 2005 $ 23,077(4) $ 8,344 100,000(5) $ 1,000(7)
Executive Vice 50,000(6)
President, Chief
Operating and
Financial 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, as Amended.
(2) Consists of $7,159 of insurance premiums paid with respect to a
$5,000,000 term life insurance policy on the life of Mr. Mullarkey,
$9,600 car allowance, health and dental insurance premiums of
$14,512.
(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 lump sum car allowance, which covers years 2001 through
2004, and health and dental insurance premiums of $13,899.
(4) Mr. Lerch joined the Company in April 2005. His base pay, on an
annual basis, is $200,000.
(5) Mr. Lerch received 100,000 stock options that vest 1/3 equally over
3 years.
(6) Mr. Lerch received 50,000 Restricted Stock Units that vest 1/3
equally over 3 years.
(7) Mr. Lerch received a car allowance of $1,000.
Page 13
Stock Option Grants
The following table sets forth certain information with respect to stock
options to purchase our Common Shares that were granted to each of the Named
Executive Officers during the year ended May 31, 2005.
Option Grants in Last Fiscal Year
- ---------------------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Option Term (2)
- ---------------------------------------------------------------------------------------------------------------------------
Name Number of % of Total Exercise Market Value Expiration 5% ($) 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) 2005
- ---------------------------------------------------------------------------------------------------------------------------
Michael Mullarkey 0 -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Stephen Lerch 100,000(3) 5.70% $4.02 $4.02 4/4/2010 $111,065 $135,497
- ---------------------------------------------------------------------------------------------------------------------------
(1) The options were granted under our 2002 Amended and Restated Stock
Option Plan, as Amended.
(2) Illustrates the value that might be received upon exercise of
options immediately prior to the assumed expiration of their term at
the specified compounded rates of appreciation based on the market
price for the Common Shares when the options were granted. Assumed
rates of appreciation are not necessarily indicative of future stock
performance.
(3) Options vest 33,333 on April 4, 2006, 33,333 on April 4, 2007 and
33,334 on April 4, 2008.
Page 14
Stock Option Exercises and Holdings
The following table sets forth for each of the Named Executive Officers
certain information with respect to stock options exercised during the year
ended May 31, 2005 and the number and value of exercisable and unexercisable
options held by the Named Executive Officers as of May 31, 2005.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
- --------------------------- ------------ ------------ ---------------------------------- --------------------------------
Shares Value
Name Acquired Realized Number of Securities Underlying Value of Unexercised
on Exercise ($) Unexercised Options at Fiscal In-the-Money Options at Fiscal
(#) Year-End Year-End (1)
Exercisable/Unexercisable (#) Exercisable/Unexercisable ($)
- --------------------------- ------------ ------------ ---------------------------------- --------------------------------
Michael Mullarkey -- -- 200,000/500,000 $72,000/$144,000
- --------------------------- ------------ ------------ ---------------------------------- --------------------------------
Stephen Lerch -- -- 0/100,000 --
- --------------------------- ------------ ------------ ---------------------------------- --------------------------------
(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, 2005
($1.72) and the exercise price of the options, multiplied by the
number of options.
Page 15
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 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 options vest 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 is defined as
a change in ownership of an amount greater than 50% of the total issued and
outstanding shares of Workstream.
Page 16
Stephen Lerch Employment Agreement. On April 4, 2005, we entered into an
employment agreement with Stephen Lerch, pursuant to which Mr. Lerch was
appointed as the Executive Vice President and Chief Financial Officer/Chief
Operating Officer of the Company.
Mr. Lerch's employment agreement has a one-year term expiring in April
2006 that automatically renews at the end of the initial or any renewal term for
an additional one-year term unless either party provides prior notice of non
renewal. Mr. Lerch will earn an annual base salary of not less than $200,000 and
will also be entitled to a bonus of $200,000 based on mutually agreed objectives
being achieved. However, in no event shall such bonus be less than 25% of the
entitled amount paid on a quarterly basis. Mr. Lerch also receives a car
allowance of $500 per month. In addition, we granted Mr. Lerch an option to
purchase 100,000 Common Shares at an exercise price of $4.02 per share, the
closing price of the shares on April 4, 2005, in accordance with the terms and
conditions of our 2002 Amended and Restated Stock Option Plan, as Amended. We
also granted Mr. Lerch 50,000 Restricted Stock Units that vest one third per
year over a three-year period beginning on the first anniversary of the grant.
If we elect to terminate Mr. Lerch's employment other than for "cause", Mr.
Lerch would be entitled to a payment equal to six months' salary and benefits.
Page 17
Performance Graph
[OBJECT OMITTED]
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.
CUMULATIVE VALUE OF $100 INVESTMENT
Workstream Monster Worldwide Standard & Poor's
December 1999 100.00 100.00 100.00
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
May 2005 29.17 83.71 44.06
Page 18
Directors and Officer's Insurance
During the fiscal year ended May 31, 2005, we paid a premium of $256,194
for our directors' and officers' liability insurance policy. The amount of
coverage under such policy is $10,000,000.
Report on Executive Compensation
Our Audit Committee performs the 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 Executive Vice President
and Chief Financial Officer/Chief Operating Officer are determined by the Audit
Committee upon reliance on market data to assess their adequacy. During fiscal
2005, we granted our Executive Vice President and Chief Financial Officer/Chief
Operating Officer options to purchase 100,000 Common Shares, at an exercise
price of $4.02 per share, the market price per share of our Common Shares on the
date of grant. The options vest in three equal annual installments beginning on
the first anniversary of their grant date. We also granted him 50,000 Restricted
Stock Units that vest one-third each year over three years beginning on the
one-year anniversary of the grant. Our Chief Executive Officer and Executive
Vice President and Chief Financial Officer/Chief Operating Officer have written
employment agreements that establish their annual salary, bonus and fringe
benefits. Our Chief Executive Officer entered into an employment agreement dated
as of January 2004 and our Executive Vice President and Chief Financial
Officer/Chief Operating Officer entered into an employment agreement dated as of
April 2005.
Page 19
During fiscal 2005, our Chief Executive Officer earned a base salary of
$250,000 and pursuant to the terms of our Chief Executive Officer's employment
agreement, a bonus of $775,619, consisting of $100,000 in regular bonus and an
accelerator bonus, as defined in the employment agreement, of $675,619. 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 the
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 acquisition revenue versus plan and, therefore, was awarded
$50,000; and (2) Mr. Mullarkey achieved the maximum bonus level of individual
objectives and, therefore, was awarded a $50,000 bonus. The remaining amount for
Mr. Mullarkey's bonus was related to an accelerator bonus provision that was
provided for in Mr. Mullarkey's employment agreement as incentive compensation
deemed appropriate for a fast growth corporate strategy. Mr. Mullarkey was
entitled to an accelerator bonus payable of 5% of revenue for revenue growth in
excess of 20% to 40% inclusive and 7% of revenue growth in excess of 41%. EBITDA
was to be positive during the evaluation period commencing January 31, 2004 and
the bonus would be payable over a three year period, one third each year as long
as Mr. Mullarkey was employed with the Company. The Board of Directors passed a
resolution providing that the evaluation period be changed to June 1, 2004
through June 1, 2005 to coincide with the Company's fiscal year. Further, the
Board of Directors also waived the provisions that EBITDA must be positive
during the evaluation period, recognizing that the reprioritized Board strategy
of growth through acquisition was somewhat in conflict with the original EBITDA
provision, and that the payments would be made over a three-year period. These
actions were taken by the Board after commissioning an independent third party
executive compensation study as well as evaluating the work that Mr. Mullarkey
has done for the Company, specifically over the past few years in the
identification and acquisition of strategic businesses, successfully raising
capital and building and growing a sustainable business.
Submitted by the Audit Committee:
Matthew Ebbs (Chairman)
Thomas Danis
Cholo Manso
Steve Singh
Page 20
Report of the Audit Committee
The Audit Committee reviews our financial reporting process on behalf of
the Board of Directors. The Audit Committee is comprised solely of independent
directors meeting the requirements of applicable Securities and Exchange
Commission and Nasdaq rules. 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, 2005, for filing with the Securities and Exchange Commission.
We have appointed PricewaterhouseCoopers as our independent auditors for
fiscal year 2006, subject to shareholder ratification of such appointment.
Submitted by the Audit Committee:
Matthew Ebbs (Chairman)
Thomas Danis
Cholo Manso
Steve Singh
Page 21
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 2005 and
fiscal 2004 are as follows:
Fiscal Year 2004 Fiscal Year 2005
---------------- ----------------
Audit Fees $305,500 CDN $318,054 CDN
Audit Related Fees $313,155 CDN $ 28,500 CDN
Tax Fees $ 75,520 CDN $319,725 CDN
All Other Fees $ -- $ --
Audit Fees
Audit fees include fees billed by PricewaterhouseCoopers LLP for services
rendered in connection with the audit of our annual financial statements and for
the reviews of our quarterly financial statements and for audit of our internal
control over financial reporting.
Audit-Related Fees
Audit-related fees were incurred in connection with work performed with
respect to audits and reviews of acquired entities and registration statements
and other filings with the Securities and Exchange Commission. All of these fees
were pre-approved by the audit committee.
Tax Fees
Tax 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 2005
and fiscal 2004.
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.
Page 22
PROPOSAL 2 - RATIFICATION OF THE APPOINTMENT AUDITORS
(Item 2 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 3 - AUTHORIZATION TO FIX THE REMUNERATION OF AUDITORS -
(Item 3 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.
Page 23
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
A copy of our Annual Report on Form 10-K, as amended, for fiscal year
2005, 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 or on our website at www.workstreaminc.com
SHAREHOLDER PROPOSALS FOR 2006 ANNUAL MEETING
Shareholders wishing to submit proposals for inclusion in the proxy
circular and proxy statement for the 2006 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, 2006. 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 23rd day of September 2005.
BY ORDER OF THE BOARD
Signed by:
/s/ Michael Mullarkey
- ----------------------------
Michael Mullarkey
Chairman
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