REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of December 15, 2004, by and among Workstream Inc., a Canadian
corporation (the "Company"), and the purchasers signatory hereto (each such
purchaser, a "Purchaser" and collectively, the "Purchasers").
This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
that are defined in the Purchase Agreement shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:
"Advice" shall have the meaning set forth in Section 6(d).
"Effectiveness Date" means, with respect to the Registration
Statement required to be filed hereunder, the earlier of (a) the 120th
calendar day following the Closing Date of the Purchase Agreement, and (b)
the fifth Trading Day following the date on which the Company is notified
by the Commission that the Registration Statement will not be reviewed or
is no longer subject to further review and comments and there is no
prohibition under the Instructions to Item 7 of Form 8-K on declaring the
Registration Statement effective.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Event" shall have the meaning set forth in Section 2(b).
"Event Date" shall have the meaning set forth in Section 2(b).
"Filing Date" means, with respect to the Registration Statement
required to be filed hereunder, the 45th calendar day following the
Closing Date of the Purchase Agreement.
"Holder" or "Holders" means the holder or holders, as the case may
be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section
5(c).
"Indemnifying Party" shall have the meaning set forth in Section
5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
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"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of
the Registrable Securities covered by the Registration Statement, and all
other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or
deemed to be incorporated by reference in such Prospectus.
"Registrable Securities" means all of the Shares.
"Registration Statement" means the registration statements required
to be filed hereunder, including (in each case) the Prospectus, amendments
and supplements to the registration statement or Prospectus, including
pre- and post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference in the
registration statement.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
"Rule 424" means Rule 424 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
2. Registration.
(a) On or prior to the Filing Date, the Company shall prepare and
file with the Commission a Registration Statement, or include in an
amendment to a previously filed Registration Statement, covering the
resale of all of the Registrable Securities for an offering to be made on
a continuous basis pursuant to Rule 415. The Registration Statement
required hereunder shall be on Form S-3 (except if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3, in
which case the Registration shall be on another appropriate form in
accordance herewith). The Registration Statement required hereunder shall
contain (except if otherwise directed by the Holders) substantially the
"Plan of Distribution" attached hereto as Annex A. Subject to the terms of
this Agreement, the Company shall use its best efforts to cause the
Registration Statement to be declared effective under the Securities Act
as promptly as possible after the filing thereof, but in any event not
later than the Effectiveness Date, and shall use its best efforts to keep
the Registration Statement continuously effective under the Securities Act
until the date when all Registrable Securities covered by the Registration
Statement have been sold or may be sold without volume restrictions
pursuant to Rule 144(k) as determined by the counsel to the Company
pursuant to a written opinion letter to such effect, addressed to the
Company's transfer agent and the affected Holders (the "Effectiveness
Period").
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(b) If: (i) a Registration Statement is not filed on or prior to the
Filing Date (if the Company files a Registration Statement, or an
amendment to a previously filed Registration Statement, without affording
the Holder the opportunity to review and comment on the same as required
by Section 3(a), the Company shall not be deemed to have satisfied this
clause (i)), or (ii) the Company fails to file with the Commission a
request for acceleration in accordance with Rule 461 promulgated under the
Securities Act, within five Trading Days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the Commission
that a Registration Statement will not be "reviewed," or is not subject to
further review, and if the Commission is not then prohibited from
declaring the Registration Statement effective pursuant to the
Instructions to Item 7 of Form 8-K, or (iii) prior to the date when such
Registration Statement is first declared effective by the Commission, the
Company fails to file a pre-effective amendment and otherwise respond in
writing to comments made by the Commission in respect of such Registration
Statement within 30 calendar days after the receipt of comments by or
notice from the Commission that such amendment is required in order for a
Registration Statement to be declared effective, or (iv) a Registration
Statement filed or required to be filed hereunder is not declared
effective by the Commission on or before the Effectiveness Date, or (v)
after a Registration Statement is first declared effective by the
Commission, it ceases for any reason to remain continuously effective as
to all Registrable Securities for which it is required to be effective, or
the Holders are not permitted to utilize the Prospectus therein to resell
such Registrable Securities, for in any such case 10 consecutive calendar
days but no more than an aggregate of 15 calendar days during any 12 month
period (which need not be consecutive Trading Days)(any such failure or
breach being referred to as an "Event," and for purposes of clause (i) or
(iv) the date on which such Event occurs, or for purposes of clause (ii)
the date on which such five Trading Day period is exceeded, or for
purposes of clause (iii) the date which such 30 calendar days is exceeded,
or for purposes of clause (v) the date on which such 10 or 15 calendar day
period, as applicable, is exceeded being referred to as "Event Date"),
then in addition to any other rights the Holders may have hereunder or
under applicable law: (x) on the first monthly anniversary of such Event
Date the Company shall pay to each Holder an amount in cash, as partial
liquidated damages and not as a penalty, equal to 2.0% of the aggregate
purchase price paid by such Holder pursuant to the Purchase Agreement for
any Registrable Securities then held by such Holder; and (y) on each
subsequent monthly anniversary of each such Event Date (if the applicable
Event shall not have been cured by such date) until the applicable Event
is cured, the Company shall pay to each Holder an amount in cash, as
partial liquidated damages and not as a penalty, equal to 1.5% of the
aggregate purchase price paid by such Holder pursuant to the Purchase
Agreement for any Registrable Securities then held by such Holder. If the
Company fails to pay any partial liquidated damages pursuant to this
Section in full within seven days after the date payable, the Company will
pay interest thereon at a rate of 18% per annum (or such lesser maximum
amount that is permitted to be paid by applicable law) to the Holder,
accruing daily from the date such partial liquidated damages are due until
such amounts, plus all such interest thereon, are paid in full. The
partial liquidated damages pursuant to the terms hereof shall apply on a
daily pro-rata basis for any portion of a month prior to the cure of an
Event.
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3. Registration Procedures
In connection with the Company's registration obligations hereunder, the
Company shall:
(a) Not less than five Trading Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or
supplement thereto, the Company shall, (i) furnish to the Holders copies
of all such documents proposed to be filed (including documents
incorporated or deemed incorporated by reference to the extent requested
by such Person) which documents will be subject to the review of such
Holders, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as
shall be necessary, in the reasonable opinion of respective counsel to
conduct a reasonable investigation within the meaning of the Securities
Act. The Company shall not file the Registration Statement or any such
Prospectus or any amendments or supplements thereto to which the Holders
of a majority of the Registrable Securities shall reasonably object in
good faith, provided that the Company is notified of such objection in
writing no later than 5 Trading Days after the Holders have been so
furnished copies of such documents. Each Holder agrees to furnish to the
Company a completed Questionnaire in the form attached to this Agreement
as Annex B (a "Selling Holder Questionnaire") not less than two Trading
Days prior to the Filing Date or by the end of the fourth Trading Day
following the date on which such Holder receives draft materials in
accordance with item (i) of this Section. A delay by any Holder in
providing such completed Questionnaire to the Company shall extend all
time periods in this Agreement for the Company to take action which
requires the information requested by such Questionnaire.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and file
with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable
Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented
or amended to be filed pursuant to Rule 424; (iii) respond as promptly as
reasonably possible to any comments received from the Commission with
respect to the Registration Statement or any amendment thereto and, as
promptly as reasonably possible, upon request, provide the Holders true
and complete copies of all correspondence from and to the Commission
relating to the Registration Statement; and (iv) comply in all material
respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by
the Registration Statement during the applicable period in accordance with
the intended methods of disposition by the Holders thereof set forth in
the Registration Statement as so amended or in such Prospectus as so
supplemented.
(c) Notify the Holders of Registrable Securities to be sold as
promptly as reasonably possible and (if requested by any such Person)
confirm such notice in writing promptly following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) when the Commission
notifies the Company whether there will be a "review" of the Registration
Statement and whenever the Commission comments in writing on the
Registration Statement (the Company shall upon request provide true and
complete copies thereof and all written responses thereto to each of the
Holders); and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental
authority during the period of effectiveness of the Registration Statement
for amendments or supplements to the Registration Statement or Prospectus
or for additional information; (iii) of the issuance by the Commission or
any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for
that purpose; (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event or passage of time that
makes the financial statements included in the Registration Statement
ineligible for inclusion therein or any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
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(d) Use commercially reasonable efforts to avoid the issuance of,
or, if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of the Registration Statement, or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable
moment.
(e) Furnish to each Holder, without charge, at least one conformed
copy of the Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed
to be incorporated therein by reference to the extent requested by such
Person, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after
the filing of such documents with the Commission.
(f) Promptly deliver to each Holder, without charge, as many copies
of the Prospectus or Prospectuses (including each form of prospectus) and
each amendment or supplement thereto as such Persons may reasonably
request in connection with resales by the Holder of Registrable
Securities. Subject to the terms of this Agreement, the Company hereby
consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders in connection with the offering and
sale of the Registrable Securities covered by such Prospectus and any
amendment or supplement thereto, except after the giving on any notice
pursuant to Section 3(c).
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(g) Prior to any resale of Registrable Securities by a Holder, use
its commercially reasonable efforts to register or qualify or cooperate
with the selling Holders in connection with the registration or
qualification (or exemption from the Registration or qualification) of
such Registrable Securities for the resale by the Holder under the
securities or Blue Sky laws of such jurisdictions within the United States
as any Holder reasonably requests in writing, to keep the Registration or
qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things reasonably necessary to
enable the disposition in such jurisdictions of the Registrable Securities
covered by the Registration Statement; provided, that the Company shall
not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified, subject the Company to any material tax
in any such jurisdiction where it is not then so subject or file a general
consent to service of process in any such jurisdiction.
(h) If requested by the Holders, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be delivered to a transferee
pursuant to the Registration Statement, which certificates shall be free,
to the extent permitted by the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holders may
request.
(i) Upon the occurrence of any event contemplated by Section
3(c)(v), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to the Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file
any other required document so that, as thereafter delivered, neither the
Registration Statement nor such Prospectus will contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. If the
Company notifies the Holders in accordance with clauses (ii) through (v)
of Section 3(c) above to suspend the use of any Prospectus until the
requisite changes to such Prospectus have been made, then the Holders
shall suspend use of such Prospectus. The Company will use its best
efforts to ensure that the use of the Prospectus may be resumed as
promptly as is practicable. The Company shall be entitled to exercise its
right under this Section 3(i) to suspend the availability of a
Registration Statement and Prospectus, subject to the payment of
liquidated damages pursuant to Section 2(b), for a period not to exceed 60
days (which need not be consecutive days) in any 12 month period.
(j) Comply with all applicable rules and regulations of the
Commission.
(k) The Company may require each selling Holder to furnish to the
Company a certified statement as to the number of shares of Common Stock
beneficially owned by such Holder and the person thereof that has voting
and dispositive control over the Securities. During any periods that the
Company is unable to meet its obligations hereunder with respect to the
registration of the Registrable Securities solely because any Holder fails
to furnish such information within three Trading Days of the Company's
request, any liquidated damages that are accruing at such time shall be
tolled and any Event that may otherwise occur solely because of such delay
shall be suspended until such information is delivered to the Company.
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4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to
the Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Trading Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities or
Blue Sky laws), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions or, except to the extent
provided for in the Transaction Documents, any legal fees or other costs of the
Holders.
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Holder, the officers, directors, agents and employees of
each of them, each Person who controls any such Holder (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act) and
the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and
against any and all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any
untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus, or
arising out of or relating to any omission or alleged omission of a
material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that
(i) such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information relates
to such Holder or such Holder's proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing
by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement
thereto (it being understood that the Holder has reviewed and approved
Annex A hereto for this purpose) or (ii) in the case of an occurrence of
an event of the type specified in Section 3(c)(ii)-(v), the use by such
Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or
defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(d). The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of
which the Company is aware in connection with the transactions
contemplated by this Agreement.
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(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from and
against all Losses, as incurred, to the extent arising out of or based
solely upon: (x) such Holder's failure to comply with the prospectus
delivery requirements of the Securities Act or (y) any untrue or alleged
untrue statement of a material fact contained in any Registration
Statement, any Prospectus, or any form of prospectus, or in any amendment
or supplement thereto or in any preliminary prospectus, or arising out of
or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein
not misleading (i) to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in
writing by such Holder to the Company specifically for inclusion in the
Registration Statement or such Prospectus or (ii) to the extent that (1)
such untrue statement or omission is based solely upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information relates
to such Holder or such Holder's proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing
by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement
thereto (it being understood that the Holder has reviewed and approved
Annex A hereto for this purpose) or (2) in the case of an occurrence of an
event of the type specified in Section 3(c)(ii)-(v), the use by such
Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or
defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(d). In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of
the net proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in
writing, and the Indemnifying Party shall have the right to assume the
defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees and
expenses incurred in connection with defense thereof; provided, that the
failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this
Agreement, except (and only) to the extent that such failure shall have
prejudiced the Indemnifying Party.
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An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
in writing to pay such fees and expenses; (2) the Indemnifying Party shall
have failed promptly to assume the defense of such Proceeding and to
employ counsel reasonably satisfactory to such Indemnified Party in any
such Proceeding; or (3) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified Party and
the Indemnifying Party, and a material conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not
have the right to assume the defense thereof and the reasonable fees and
expenses of one separate counsel shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent,
which shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified
Party is a party, unless such settlement includes an unconditional release
of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
Subject to the terms of this Agreement, all reasonable fees and
expenses of the Indemnified Party (including reasonable fees and expenses
to the extent incurred in connection with investigating or preparing to
defend such Proceeding in a manner not inconsistent with this Section),
other than legal fees incurred by the Indemnified Party after the
Indemnifying Party has assumed defense of such Proceeding, shall be paid
to the Indemnified Party, as incurred, within ten Trading Days of written
notice thereof to the Indemnifying Party; provided, that the Indemnified
Party shall promptly reimburse the Indemnifying Party for that portion of
such fees and expenses applicable to such actions for which such
Indemnified Party is not entitled to indemnification hereunder, determined
based upon the relative faults of the parties.
(d) Contribution. If a claim for indemnification under Section 5(a)
or 5(b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions
that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material
fact, has been taken or made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by
a party as a result of any Losses shall be deemed to include, subject to
the limitations set forth in this Agreement, any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection
with any Proceeding to the extent such party would have been indemnified
for such fees or expenses if the indemnification provided for in this
Section was available to such party in accordance with its terms.
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The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 5(d),
no Holder shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the proceeds actually received by such
Holder from the sale of the Registrable Securities subject to the
Proceeding exceeds the amount of any damages that such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission, except in the case of fraud by
such Holder.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to
the Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a Holder
of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would
not provide adequate compensation for any losses incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in
respect of such breach, it shall waive the defense that a remedy at law
would be adequate.
(b) Compliance. Each Holder covenants and agrees that it will comply
with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities
pursuant to the Registration Statement.
(c) Discontinued Disposition. Each Holder agrees by its acquisition
of such Registrable Securities that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Section
3(c), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such
Holder's receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company will
use its best efforts to ensure that the use of the Prospectus may be
resumed as promptly as it practicable. The Company agrees and acknowledges
that any periods during which the Holder is required to discontinue the
disposition of the Registrable Securities hereunder shall be subject to
the provisions of Section 2(b).
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(d) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the same shall be in writing and signed by
the Company and each Holder of the then outstanding Registrable
Securities.
(e) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be made in
accordance with the provisions of the Purchase Agreement.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of
each of the parties and shall inure to the benefit of each Holder. Each
Holder may assign their respective rights hereunder in the manner and to
the Persons as permitted under the Purchase Agreement.
(g) Execution and Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed shall be deemed
to be an original and, all of which taken together shall constitute one
and the same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.
(h) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be
determined with the provisions of the Purchase Agreement.
(i) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(j) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their commercially reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
11
(k) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(l) Independent Nature of Holders' Obligations and Rights. The
obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be
responsible in any way for the performance of the obligations of any other
Holder hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Holder
pursuant hereto or thereto, shall be deemed to constitute the Holders as a
partnership, an association, a joint venture or any other kind of entity,
or create a presumption that the Holders are in any way acting in concert
with respect to such obligations or the transactions contemplated by this
Agreement. Each Holder shall be entitled to protect and enforce its
rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Holder to be joined
as an additional party in any proceeding for such purpose.
*************************
12
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
WORKSTREAM, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
-------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Chairman and CEO
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
13
[PURCHASER'S SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
Name of Investing Entity: Rubicon Master Fund
------------------------------------------------------
Signature of Authorized Signatory of
Investing entity: /s/ Xxxxxxx Xxxxxx Xxxxxxxxx
----------------------------------
Name of Authorized Signatory: Xxxxxxx Xxxxxx Xxxxxxxxx
-----------------------------------------
Title of Authorized Signatory: Partner
-------------------------------------------------
[SIGNATURE PAGES CONTINUE]
14
[PURCHASER'S SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
Name of Investing Entity: Union Spring Fund Ltd.
------------------------------------------------------
Signature of Authorized Signatory of Investing entity: /s/ Xxxxxx X. Xxxxx
-------------------------
Name of Authorized Signatory: Xxxxxx X. Xxxxx
--------------------------------------------------
Title of Authorized Signatory: Director
-------------------------------------------------
[SIGNATURE PAGES CONTINUE]
15
[PURCHASER'S SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
Name of Investing Entity: SUNRISE FOUNDATION TRUST
Signature of Authorized Signatory of Investing entity: /s/ Xxxxxx X. Low
Name of Authorized Signatory: Xxxxxx X. Low
Title of Authorized Signatory: __________________________
Name of Investing Entity: Xxxxxx X. Low
Signature of Authorized Signatory of Investing entity: /s/ Xxxxxx X. Low
Name of Authorized Signatory: Xxxxxx X. Low
Title of Authorized Signatory: __________________________
Name of Investing Entity: SUNRISE EQUITY PARTNERS, LP
Signature of Authorized Signatory of Investing entity: /s/ Xxxxxxx Xxxxx
Name of Authorized Signatory: Xxxxxxx Xxxxx
Title of Authorized Signatory: Manager of Level Counter, LLC, the general
partner of Sunrise Equity Partners, LP.
[SIGNATURE PAGES CONTINUE]
16
ANNEX A
Plan of Distribution
The common shares which may be sold by the selling shareholders and any
of their pledgees, donees, transferees or other successors-in-interest, may be
disposed of from time to time in one or more transactions, which may involve:
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
o sales on the NASDAQ Small Cap Market, Boston Stock Exchange, or
any other principal market on which the common shares trade at the time of sale,
including directly with a market maker acting as principal;
o privately-negotiated transactions, which include direct sales to
purchasers and sales effected through agents;
o a block trade in which the broker or dealer will attempt to sell
the common shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker or dealer as principal and resale by that
broker or dealer for its own account;
o an exchange distribution in accordance with the rules of that
exchange or transactions in the over-the-counter market;
o short sales;
o the pledge of the security for any loan or obligation, including
pledges to brokers or dealers who may, from time to time, themselves sell or
transfer the common shares or their interest in such securities;
o the transfer of the common shares by the selling shareholders to
their partners, members or shareholders;
o a combination of any of the above; or
o any other method permitted by applicable law.
The sale price of the common shares pursuant to the prospectus may be:
o a fixed price;
o the market price prevailing at the time of sale;
o a price related to such prevailing market price;
17
o a negotiated price; or
o at any other prices as the selling shareholders may determine,
including sales below the market price.
The selling shareholders may engage broker-dealers to participate in the
sales. Such broker-dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the selling shareholders and/or the
purchasers of the shares for whom broker-dealers may act as agent or to whom
they may sell as principals or both (which compensation as to a particular
broker-dealer may be less than or in excess of customary commissions).
In addition, the selling shareholders may enter into hedging transactions
with broker-dealers who may engage in short sales of our common shares in the
course of hedging the positions they assume with the selling shareholders. The
selling shareholders may also enter into option or other transactions with
broker-dealers that require the delivery to such broker-dealers of our common
shares, which shares may be resold thereafter pursuant to the prospectus.
The common shares covered by the prospectus may also be sold in private
transactions pursuant to Rule 144 under the Securities Act of 1933, rather than
pursuant to the prospectus. The selling shareholders have the sole and absolute
discretion not to accept any purchase offer or make any sale of the common
shares if they deem the purchase price to be unsatisfactory at any particular
time.
In order to comply with the securities laws of certain states, if
applicable, the common shares may be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states, the
common shares may not be sold unless such shares have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
Selling shareholders that are broker dealers are statutory underwriters
under the Securities Act of 1933. Selling shareholders that are affiliates of
broker dealers purchased the shares in the ordinary course of business and at
the time of purchase the seller had no agreements or understandings, directly or
indirectly, with any person to distribute the shares. Under certain
circumstances, the selling shareholders and any broker-dealers that act in
connection with the sales of the shares may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act of 1933, and any
commissions received by them and any profit on the sale of the shares as
principals may be deemed to be underwriting discounts and commissions under the
Securities Act of 1933. Selling shareholders who are "underwriters" within the
meaning of Section 2(11) of the Securities Act of 1933 will be subject to the
prospectus delivery requirements of the Securities Act of 1933.
18
ANNEX B
WORKSTREAM INC.
(the "Company")
QUESTIONNAIRE TO THE SELLING SHAREHOLDERS
This Questionnaire is to be completed, signed and faxed to Xxxxx Xxxxxxx,
Esquire at 000-000-0000 by no later than December __, 2004, by the person or
entity indicated on the cover of this Questionnaire (the "Selling Shareholder")
whose common shares of the Company are being registered pursuant to a
Registration Statement on Form S-3. Retain a duplicate copy for your files.
If you are uncertain about any of the following questions as they apply to
your situation, please supply all relevant facts. Include separate sheets with
details if necessary. If you have any questions, please call Workstream's
counsel, Xxxxx Xxxxxxx, Esquire, at (000) 000-0000.
Please notify me immediately if any of the information disclosed in your
answers changes. Please answer all questions. Indicate "none" or "not
applicable" when appropriate. Information should be given as of the date of this
Questionnaire, even if previously reported to the Company.
IN ANSWERING THESE QUESTIONS, PLEASE REFER TO THE INSTRUCTIONS AT THE
BEGINNING OF THIS QUESTIONNAIRE.
Xxxxx Xxxxxxxx Dated: December __, 2004
Chief Financial Officer
Workstream Inc.
0000 Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Name of Selling Shareholder: _________________________________
19
Instructions and Definitions
The following instructions and definitions are furnished to aid you in
preparing your answers to this Questionnaire.
1. For purposes of this Questionnaire the term "Company" means
Workstream Inc.
2. "Beneficial" ownership. The SEC has taken the position that if you
have sole or shared voting power or dispositive power or the ability
to acquire either sole or shared voting or dispositive power of a
security within 60 days, you are the beneficial owner of that
security, even though that security is not registered in your name.
Thus, for example, you could be the beneficial owner of securities
in a trust or estate of which you are a trustee or executor, or of
which you are one of the trustees or executors, or you could be the
beneficial owner of securities which you have a right to purchase.
3. The term "affiliate" for purposes of this Questionnaire means any
person directly or indirectly controlling, controlled by, or under
common control with the Selling Shareholder.
4. An example response has been provided to assist you in preparing
your response.
20
1. Broker-Dealer Status.
(a) Are you, or are you an affiliate of, a broker-dealer registered under
the Securities Exchange Act of 1934?
Yes |_| No |_|
If "yes," please give details below.
(b) Please confirm the following statement: The Company's equity
securities that are being purchased by you were purchased in the ordinary course
of your business, and at the time the securities were purchased, you did not
have any agreement or understanding, directly or indirectly, with any person to
distribute the securities.
Confirmed |_| Cannot Confirm |_|
If "cannot confirm," please give details below.
2. Relationships with the Company.
(a) Have you held any position or office with the Company, its
predecessors or affiliates within the last three years?
Yes |_| No |_|
If "yes," please give details below.
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(b) Have you had any other material relationship with the Company, its
predecessors or affiliates within the last three years?
Yes |_| No |_|
If "yes," please give details below.
3. Equity Securities Beneficially Owned By You.
(a) Please state the number and type of equity securities of the Company
beneficially owned (please see instructions and definitions on page 2) by you as
of the date of this Questionnaire, including securities which are exercisable or
convertible into equity securities within 60 days of the date of this
Questionnaire.
Class Number of Shares
of Security Beneficially Owned
----------- ------------------
(b) If any natural person or entity other than you holds or shares voting
power or dispositive power with respect to the Company's equity securities
listed in response to Question 3(a), please provide the names of the natural
persons (including titles) or entities that hold or share such voting power or
dispositive power and indicate the number of the Company's equity securities
covered thereby.
22
(c) With respect to the Company's equity securities listed in response to
Questions 3(a) and 3(b) for which an entity holds or shares voting power or
dispositive power, please provide the names of the natural persons (including
titles) or entities that control the entity or entities listed in response to
Questions 3(a) and 3(b).
(d) Please continue to list the natural persons or entities that control
the entities listed in response to Question 3(c) and the entities listed in
response to this Question 3(d) until you have listed only natural persons
(including titles) that control the applicable entity or entities.
(e) If any person or entity disclaims beneficial ownership of any of the
equity securities you have listed in response to Question 3, please so indicate:
23
EXAMPLE RESPONSE
The following is an example of a response to items 1 through 3. Please assume
ABC Corporation is the Selling Shareholder for purposes of this example.
1. Broker-Dealer Status.
ABC Corporation is an affiliate of a broker-dealer because its sole
shareholder, DEF Corporation, is a broker-dealer.
2. Relationships with the Company.
(a) ABC Corporation has not held any position or office with the Company,
its predecessors or affiliates within the last three years.
(b) ABC Corporation provided consulting services to the Company in March
2002.
3. Equity Securities Beneficially Owned By You.
Question 3(a).
Class Number of Shares
of Security Owned Beneficially
----------- -----------------
Common Shares 100,000
Warrants to purchase Common Shares 200,000
Question 3(b).
Not applicable
Question 3(c).
ABC Corporation is controlled by DEF Corporation, ABC Corporation's sole
shareholder.
Question 3(d).
DEF Corporation is controlled by XYZ Corporation, DEF Corporation's sole
shareholder. XYZ Corporation is controlled by Xxxx Xxx, XYZ Corporation's sole
shareholder and its President and Chief Executive Officer.
Question 3(e).
Xxxx Xxx disclaims beneficial ownership of the 100,000 Common Shares and
the Warrants to purchase 200,000 Common Shares.
24
The undersigned hereby acknowledges that the information contained herein
is true to the best of his knowledge and will notify the Company immediately of
any changes in such information.
DATED: December ____, 2004 FOR INDIVIDUALS:
------------------------------------------
Name of Selling Shareholder [please print]
------------------------------------------
Signature
FOR CORPORATIONS, PARTNERSHIPS OR TRUSTS:
------------------------------------------
Name of Selling Shareholder [please print]
By:_________________________________
Signature
Name:___________________________
[please print]
Title:____________________________
[please print]
25
