EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into this 30th day of December, 2004, by and between Workstream Inc., a Canadian
corporation (the "Company"), and ProAct Technologies Corporation, a Delaware
corporation (the "New Shareholder").
BACKGROUND
WHEREAS, pursuant to an Asset Purchase Agreement dated December 20, 2004
(the "Purchase Agreement") among the Company, Workstream USA, Inc. and the New
Shareholder, the Company is purchasing substantially all of the assets of the
New Shareholder and issuing 950,551 restricted shares of the Company's common
stock, no par value per share (the "Shares"), to the New Shareholder as part of
the consideration therefore; and
WHEREAS, in connection with the Purchase Agreement, the Company is
granting the New Shareholder certain registration rights as more fully set forth
herein under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any other similar successor statute (collectively,
the "Securities Act"), with respect to the Shares.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and intending to be legally bound hereby, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
(a) "Commission" means the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
(b) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission issued under such Exchange Act, as they each may, from time to time,
be in effect.
(c) "Registration Statement" means a registration statement filed by
the Company with the Commission for a public offering and sale or resale of
equity securities of the Company (other than a registration statement on Form
S-8 or Form S-4, or their successors, or any other form for a limited purpose or
for which the Registrable Shares may not be included.
(d) "Registration Expenses" means all expenses incurred by the
Company in complying with this Agreement, including without limitation, all
registration and filing fees, exchange listing fees, printing expenses, the fees
and disbursements of counsel for the Company, the fees and disbursements of the
Company's accountants, and the expense of any special audits incident to or
required by any such registration, but excluding underwriting discounts, selling
commissions and the fees and expenses of the New Shareholder's own counsel.
(e) "Registrable Shares" means the Shares and any other shares of
common stock of the Company issued in respect of such shares (because of stock
splits, stock dividends, reclassifications, recapitalizations, or similar
events); provided, however, that shares of common stock which are Registrable
Shares shall cease to be Registrable Shares (i) when such shares become saleable
pursuant to Rule 144 under the Securities Act (or any successor provision) and
without restriction under Rule 144(e), (ii) when sold pursuant to one or more
Registration Statements or (iii) if earlier, upon any sale or transfer of the
Registrable Shares in any manner to any person or entity, other than
distributions or transfers of Registrable Shares to holders of the New
Shareholder's equity securities.
2. Enforcement. The New Shareholder is required to deliver to the Company
audited financial statements for the year ended December 31, 2004 in accordance
with Section 6.4 of the Purchase Agreement (the "Year End Financials") no later
than February 15, 2005. During the period in which the Year End Financials are
being prepared, the Company will include the Shares in any S-3 Registration
Statement that is initially filed after the Closing Date (as defined in the
Purchase Agreement) and on or before February 15, 2005, in accordance with the
terms of this Agreement; provided that if the Year End Financials are not
delivered to the Company on or prior to February 15, 2005, the Company shall
remove the Shares from the registration covered by such Registration Statement.
In the event that the New Shareholder does not deliver the Year End Financials
on or before February 15, 2005, then the Company will only be required to
include Registrable Shares in a Registration Statement filed following the
delivery by the New Shareholder to the Company of the Year End Financials.
3. Piggy-Back Registration.
(a) Subject to the provisions of Section 2, if the Company proposes
to file a Registration Statement to register any of its securities either for
its own account or the account of a security holder or security holders
(including for this purpose a demand registration effected by the Company for
any security holder), on or prior to the one year anniversary of this Agreement,
it will, prior to such filing, give written notice to the New Shareholder of its
intention to do so, and the Company, subject to the provisions hereof, shall
include all Registrable Shares in such Registration Statement; provided that the
Company shall have the right to cancel, postpone or withdraw any such
registration (before or after effectiveness) without obligation to the New
Shareholder.
(b) In connection with any offering involving an underwriting, the
Company shall not be required to include any Registrable Shares in such
underwriting unless the New Shareholder accepts the terms of the underwriting as
agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company. If, in the opinion of the
managing underwriter, the registration of all of the Registrable Shares would
materially and adversely affect such public offering, then the Company shall be
required to include in the underwriting only that number of Registrable Shares,
if any, which the managing underwriter believes may be sold without causing such
adverse effect. In the event the Company does not include all of the Registrable
Shares in the Registration Statement, the Company will include securities in the
following order of priority: (i) first, any securities the Company proposes to
sell, (ii) second, any securities held by persons who have the right to demand
that the Company register their securities even if the Company does not propose
to make a primary offering of its own securities, and (iii) third, other
securities, including the Registrable Shares, requested to be included in such
Registration Statement ("Requested Securities"). If any, but not all, of the
Requested Securities are included in the Registration Statement, the number of
Requested Securities (including all of the Registrable Shares) to be included in
the Registration Statement for each person requesting to include Requested
Securities in such registration, shall be included on a pro rata basis based
upon the relative number of Requested Securities each such person has requested
to be included in such registration. For purposes of this Section 3, the New
Shareholder shall be deemed to have requested that all of its Registrable Shares
be included in any such registration.
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(c) The Company shall be obligated to comply with this Section 3
until the earlier to occur of the following: (i) all of the Registrable Shares
have been registered in accordance with this Agreement; and (ii) all of the
Registrable Shares cease to be Registrable Shares under this Agreement; provided
that for purposes of this Section 3(c), the Registrable Shares shall not be
deemed to have been registered unless the Registration Statement registering
such Registrable Shares is declared effective by the Commission and such
Registrable Shares covered by such Registration Statement are not subject to any
stop order, injunction or other order or requirement of the Commission (other
than any such action prompted by any act or omission of the holder or holders of
such Registrable Shares).
4. Registration Procedures. If and whenever the Company is required by the
provisions of this Agreement to use its best efforts to effect the registration
of any of the Registrable Shares under the Securities Act, the Company shall:
(a) prepare and file with the Commission a Registration Statement
with respect to such Registrable Shares and use its best efforts to cause such
Registration Statement to become effective, provided, however, that the Company
may, in its sole discretion, discontinue any registration of its securities
which is being effected at any time prior to the effective date of the
Registration Statement relating thereto;
(b) prepare and file with the Commission such amendments,
post-effective amendments and supplements to such Registration Statement and the
prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective as contemplated herein and to comply with the
provisions of the Securities Act with respect to the sale or other disposition
of all securities covered by such Registration Statement whenever the seller or
sellers of such Registrable Shares shall desire to sell or otherwise dispose of
the same, but only to the extent provided in this Agreement;
(c) as soon as reasonably practicable furnish to the New Shareholder
such reasonable numbers of copies of the prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as the New Shareholder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Shares owned
by the New Shareholder which are covered by such Registration Statement;
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(d) register or qualify the Registrable Shares covered by such
Registration Statement under the securities or state "blue sky" laws of such
jurisdictions as each selling holder may request, and do any and all other acts
and things which may be necessary under such state securities or blue sky laws
to enable such selling holder to consummate the public sale or other disposition
in such jurisdictions of the securities owned by such selling holder; provided
that the Company shall not for any such purpose be required to register or
qualify to do business as a foreign corporation in any jurisdiction or consent
to general service of process therein;
(e) use its best efforts to the extent commercially reasonable to
prevent the issuance of any order suspending the effectiveness of a Registration
Statement, and if one is issued immediately notify each selling holder of
Registrable Shares of the receipt of such notice and use its best efforts to the
extent commercially reasonable to obtain the withdrawal of any order suspending
the effectiveness of a Registration Statement at the earliest possible moment;
(f) use its best efforts to cause the Registrable Shares covered by
such Registration Statement to be listed on the securities exchange or quoted on
the quotation system on which the Common Shares of the Company are then listed
or quoted;
(g) during the period when the prospectus is required to be
delivered under the Securities Act, promptly file all documents required to be
filed with the Commission pursuant to Sections 13, 14 or 15(d) of the Exchange
Act; and
(h) otherwise cooperate with the underwriter(s), the Commission and
other regulatory agencies and take all reasonable actions and execute and
deliver or cause to be executed and delivered all documents reasonably necessary
to effect the registration of the Registrable Shares under this Agreement.
If the Company has delivered a preliminary or final prospectus to
the New Shareholder and after having done so (i) the prospectus is amended or
supplemented to comply with the requirements of the Securities Act or (ii) the
Company determines that such an amendment or supplement is required, the Company
shall promptly notify the New Shareholder and, if requested, the New Shareholder
shall immediately cease making offers of Registrable Shares and return all
prospectuses to the Company. The Company shall promptly provide the New
Shareholder with a revised prospectus and, following receipt of the revised
prospectus, the New Shareholder shall be free to resume making offers of the
Registrable Shares, subject to the other provisions of this Agreement.
In addition, upon receipt by the New Shareholder of a written notice
from the Company during such time as a Registration Statement is effective that
sales pursuant to the Registration Statement would materially and adversely
affect an unwritten public offering for the account of the Company or any other
material financing project, the New Shareholder will immediately suspend sales
of shares under any effective Registration Statement until receipt of a written
notice from the Company that sales may be resumed. Upon written notice from the
Company that a Registration Statement is to be suspended or withdrawn, the New
Shareholder will immediately suspend sales of Registrable Shares under such
Registration Statement.
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5.Expenses of Registration. The Company will pay all Registration Expenses
of all registrations under this Agreement.
6. Indemnification.
(a) Indemnification of the New Shareholder. In the event of any
registration of any of the Registrable Shares under the Securities Act pursuant
to this Agreement, the Company will indemnify to the fullest extent permitted by
law and hold harmless the New Shareholder, each of its directors, officers and
agents and each person, if any, who controls the New Shareholder within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages, liabilities and expenses (including reasonable attorneys' fees) to
which the New Shareholder, such directors, officers, agents or controlling
persons may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement under which such Registrable Shares were registered under the
Securities Act, any prospectus or final prospectus contained in the Registration
Statement, or any amendment or supplement to such Registration Statement, or
arise out of or are based upon the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading
or (ii) any violation by the Company of the Securities Act, any state securities
or blue sky laws or any rule or regulation thereunder in connection with such
registration; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon any untrue statement or omission made in such Registration
Statement, preliminary prospectus or prospectus, or any such amendment or
supplement, in reliance upon and in conformity with information furnished in
writing to the Company by or on behalf of the New Shareholder specifically for
use in the preparation thereof; and provided further, however, that any
indemnification contained in this paragraph with respect to any prospectus shall
not inure to the benefit of any person who otherwise is entitled to
indemnification hereunder on account of any loss, liability, claim, damage or
expense if a copy of an amended or supplemental prospectus, or the final
prospectus, shall have been delivered or sent to such person within the time
required by the Securities Act, and the untrue statement or omission of a
material fact was corrected in such amended or supplemental prospectus or final
prospectus and provided that such person did not deliver such amended or
supplemental prospectus or final prospectus on a timely basis.
(b) Indemnification of the Company. In the event of any registration
of any of the Registrable Shares under the Securities Act pursuant to this
Agreement, the New Shareholder will indemnify to the fullest extent permitted by
law and hold harmless the Company, each of its directors, officers and agents
and each person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages,
liabilities and expenses (including reasonable attorneys' fees) to which the
Company, such directors, officers, agents or controlling persons may become
subject under the Securities Act, Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement under which such
Registrable Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained in the Registration Statement, or any
amendment or supplement to the Registration Statement, or arise out of or are
based upon any omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, if, and only if, the
statement or omission was made in reliance upon and in conformity with
information furnished to the Company in writing by or on behalf of the New
Shareholder specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment or supplement; provided that the
New Shareholder's indemnification obligations hereunder shall not exceed the net
proceeds received by the New Shareholder from the sale giving rise to the
indemnity payment.
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(c) Notice of Claim. Each party entitled to indemnification under
this Section 6 (the "Indemnified Party") shall give written notice to the party
required to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom; provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall not
be unreasonably withheld); and, provided, further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 6 unless the failure to
provide such notice materially prejudices the defense by the Indemnifying Party
against such claim. The Indemnified Party may participate in such defense at
such party's expense (provided that the counsel of the Indemnifying Party shall
control the defense of such claim or proceeding); provided, however, that the
Indemnifying Party shall pay such expense if representation of such Indemnified
Party by the counsel retained by the Indemnifying Party would, in the opinion of
counsel of the Indemnified Party, be inappropriate due to actual or potential
differing interests between the Indemnified Party and any other party
represented by such counsel in such proceeding, it being understood, however,
that in such event, the Indemnifying Party shall be liable for the reasonable
fees and expenses of only one counsel for the Indemnified Party. No Indemnifying
Party, in the defense of any such claim or litigation, shall as to an
Indemnified Party, except with the consent of such Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation, and no Indemnified Party shall consent to entry of any judgment or
settle such claim or litigation without the prior written consent of the
Indemnifying Party.
(d) Contribution. If for any reason the indemnity provided for in
this Section 6 is unavailable to, or is insufficient to hold harmless, an
indemnified party, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such losses, claims,
damages, liabilities or expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying party on the one hand
and the indemnified party on the other, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, or provides a lesser sum to
the indemnified party than the amount hereinafter calculated, in such proportion
as is appropriate to reflect not only the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other but
also the relative fault of the indemnifying party and the indemnified party as
well as other relevant equitable considerations, provided that the New
Shareholder's contribution obligations in this Section 6(d) shall not exceed the
net proceeds received by the New Shareholder from the sale giving rise to the
contribution payment. The relative fault of such indemnifying party and
indemnified parties 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 to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties; and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in Section 6(c), any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
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The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person or entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person or entity who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 6, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Sections 6(a) and (b) without regard to the relative fault of said
indemnifying party or indemnified party or any other equitable consideration
provided for in this Section 6.
7. Underwriting Agreement. In the event that Registrable Shares are sold
pursuant to a Registration Statement in an underwritten offering, the New
Shareholder, if such New Shareholder wishes to have its Registrable Shares
included in such Registration Statement, as a condition to such inclusion, must
agree to enter into an underwriting agreement in customary form with the
underwriter or underwriters selected by the Company for the underwriting
(together with the Company and other holders of securities distributing their
shares through such underwriting), containing customary representations and
warranties with respect to the New Shareholder, including without limitation,
customary provisions with respect to indemnification by the New Shareholder of
the underwriters of such offering.
8. Cooperation. The New Shareholder, if requesting inclusion of its
Registrable Shares in a Registration Statement, shall furnish to the Company
such information regarding such New Shareholder as the Company may from time to
time reasonably request in writing, and shall do such reasonable acts and things
as the Company may from time to time request, with respect to any registration,
qualification or compliance referred to in this Agreement and in order to permit
the Company to comply with the requirements of law. Any failure by the New
Shareholder to make available such information or to do such acts and things
shall constitute a waiver by such New Shareholder of its rights to include the
Registrable Shares in any such registration.
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9. Lock-Up Agreement. The New Shareholder, if requesting inclusion of its
Registrable Shares in a Registration Statement with respect to an underwritten
offering in which the Company is making a primary or secondary offering of its
own securities, and if requested by the Company and an underwriter of common
stock or other securities of the Company, shall agree not to sell or otherwise
transfer or dispose of any Registrable Shares or other securities of the Company
held by such New Shareholder for a specified period of time (not to exceed 90
days) following the effective date of a Registration Statement. Such agreement
shall be in writing in a form satisfactory to the Company and such underwriter.
The Company may impose stop transfer instructions with respect to the
Registrable Shares or other securities subject to the foregoing restriction
until the end of the lock-up period.
10. Miscellaneous.
(a) Controlling Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, notwithstanding
conflicts of laws provisions of this or any other jurisdiction to the contrary.
(b) Notices. All notices and other communications hereunder shall be
in writing and shall be sent by certified mail, postage prepaid, return receipt
requested; by an overnight express courier service that provides written
confirmation of delivery; or by facsimile with written confirmation by the
sending machine or with telephone confirmation of receipt, addressed as follows:
If to Company: Workstream Inc.
000 Xxxxx Xxxx, Xxxxx 000
Xxxxxx, XX X0X0X0
Attention: Xxxxxxx Xxxxxxxxx
Facsimile: (000) 000-0000
with a copy to: Cozen X'Xxxxxx
000 Xxxx Xxxxx Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
If to New Shareholder: c/o ProAct Technologies Corporation
000 Xxxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000
Attention: Xxxx Xxxxx
Facsimile: (000) 000-0000
With a copy to: Xxxxx & Xxxxxxx, L.L.P.
One Xxxxx Center, Suite 1500
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
Facsimile: (000) 000-0000
Any party may alter the address to which communications or copies
are to be sent by giving notice of such change of address in conformity with the
provisions of this paragraph for the giving of notice.
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(c) Binding Nature of Agreement. This Agreement shall be binding
upon and inure to the benefit of Company, the New Shareholder and their
respective successors and assigns. The registration rights set forth in this
Agreement are transferable and assignable to any transferee of Registrable
Shares. Each subsequent holder of Registrable Shares must consent in writing to
be bound by the terms and conditions of this Agreement in order to acquire the
rights granted pursuant to this Agreement. Any attempted assignment in violation
of this Section 10(c) shall be null and void and of no effect.
(d) Damages. The Company recognizes and agrees that each holder of
Registrable Shares will not have an adequate remedy if the Company fails to
comply with the terms and provisions of this Agreement and that damages will not
be readily ascertainable. In the event of such failure, the New Shareholder, or
any other person or entity entitled to the benefits of this Agreement, may make
an application requiring specific performance of any and all provisions hereof
or enjoining the Company from continuing to commit any such breach of this
Agreement.
(e) Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
(f) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. This Agreement may not be modified or amended other
than by an agreement in writing.
(g) Paragraph Headings. The paragraph headings in this Agreement are
for convenience only; they form no part of this Agreement and shall not affect
its interpretation.
(h) Disputes. All disputes arising under this Agreement and any
other agreement entered into between the parties related to this Agreement shall
first be attempted to be resolved by negotiation between the Chief Executive
Officer (or a designee thereof) of each party. If the dispute cannot be resolved
by negotiation within 45 days of commencement thereof, the dispute shall be
resolved by arbitration, using the rules of the American Arbitration Association
and the services of one arbitrator thereunder. All arbitration proceedings shall
be in English and be conducted in Chicago, Illinois.
(i) Waiver of Jury Trial. The Company and New Shareholder waive
their respective rights to a jury trial of any claim or cause of action based
upon or arising out of this Agreement.
(j) Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one agreement.
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IN WITNESS WHEREOF, the parties executed and delivered this Agreement on
the date first above written.
WORKSTREAM INC.
By: /s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Xxxxxxx Xxxxxxxxx
Chief Executive Officer
PROACT TECHNOLOGIES CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
------------------------------------
Xxxxxxx Xxxxxxxx
Chief Financial Officer
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