EXHIBIT 10.2
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of
___________ by and between Workstream Inc., a Canadian corporation (the
"COMPANY"), and _____________ (the "PURCHASER").
WHEREAS, the Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "SECURITIES
ACT"), and Rule 506 of Regulation D as promulgated by the United States
Securities and Exchange Commission (the "COMMISSION") under the Securities Act;
WHEREAS the Purchaser desires to purchase from the Company, and the
Company desires to sell to the Purchaser, ___________ Common Shares, no par
value per share, of the Company (the "SHARES"); and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, substantially in the form attached hereto as Exhibit A (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company has agreed to
provide certain registration rights with respect to the Shares under the
Securities Act and the rules and regulations promulgated thereunder.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchaser agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated:
"AFFILIATE" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed
under Rule 144.
"AGENT" means Sunrise Securities Corp.
"BUSINESS DAY" means any day other than Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
"CLOSING" means the closing of the purchase and sale of the Shares
pursuant to Section 2.1.
"CLOSING DATE" means ________________ or such later date as the
Company and the Purchaser mutually agree.
"COMMISSION" has the meaning specified in the preamble to this
Agreement.
"COMMON SHARES" means the common shares of the Company, no par value
per share.
"COMPANY COUNSEL" means Xxxxxx-Xxxxxxxxx, Xxxx & XxXxxxxxx LLP.
"EFFECTIVE DATE" means the date that the Registration Statement
described in the Registration Rights Agreement is first declared effective
by the Commission.
"ELIGIBLE MARKET" means any of the New York Stock Exchange, the
American Stock Exchange, the Nasdaq National Market or the Nasdaq Small
Cap.
"EXCHANGE ACT" means the United States Securities Exchange Act of
1934, as amended.
"LIEN" means any lien, charge, claim, security interest,
encumbrance, right of first refusal or other restriction.
"LOSSES" means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including, without limitation, costs of
preparation and reasonable attorneys' fees.
"PERSON" means any individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or any court or other federal, state, local or other
governmental authority or other entity of any kind.
"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.
"REGISTRATION RIGHTS AGREEMENT" has the meaning specified in the
preamble to this Agreement.
"SECURITIES ACT" has the meaning specified in the preamble to this
Agreement.
"SHARES" has the meaning specified in the preamble to this
Agreement.
"SUBSIDIARY" means the following subsidiaries of the Company:
Workstream USA, Inc., Xylo, Inc., Xxxxx Xxxxx Holdings, Inc., Rezlogic,
Inc., The Omni Partners, Inc., 0Xxxxxxxxxx.xxx, Inc. and Icarian, Inc.
"TRADING DAY" means (a) any day on which the Common Shares are
listed or quoted and traded on its primary Trading Market, (b) if the
Common Shares are not then listed or quoted and traded on any Eligible
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Market, then a day on which trading occurs on the NASDAQ Small Cap Market
(or any successor thereto), or (c) if trading does not occur on the NASDAQ
Small Cap Market (or any successor thereto), any Business Day.
"TRADING MARKET" means the NASDAQ Small Cap Market or any other
Eligible Market on which the Common Shares are then listed or quoted.
"TRANSACTION DOCUMENTS" means this Agreement, the Registration
Rights Agreement and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
"TRANSFER AGENT" means American Stock Transfer and Trust Company or
any other transfer agent selected by the Company and specified in writing
to the Purchaser.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to the Purchaser, and
the Purchaser shall purchase from the Company, the Shares for a purchase price
of US$1.60 per Share for an aggregate purchase price of US$____________ (the
"Purchase Price"). The Closing shall take place at the offices of
Xxxxxx-Xxxxxxxxx, Xxxx & XxXxxxxxx LLP, 00 Xxxxxx Xxxxxx, 0xx Xxxxx, Xxxxxx,
Xxxxxxx X0X 0X0 immediately following the execution hereof, or at such other
location or time as the parties may agree.
2.2 Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause to be
delivered to the Purchaser the following:
(i) one or more stock certificates, free and clear of all
restrictive and other legends (except as expressly provided in Section
4.1(b) hereof), evidencing the Shares registered in the name of the
Purchaser;
(ii) the Registration Rights Agreement executed by the
Company; and
(iii) a legal opinion of Company Counsel, in the form of
Exhibit B, executed by such counsel and delivered to the Purchaser.
(b) At the Closing, the Purchaser shall deliver or cause to be
delivered to the Company the Purchase Price, in United States dollars and in
immediately available funds, by wire transfer to the account designated in
writing by the Company for such purpose.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows:
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(a) Subsidiaries. The Company owns, directly or indirectly,
all of the capital stock or comparable equity interests of the Subsidiaries,
free and clear of any Lien, and all the issued and outstanding shares of capital
stock or comparable equity interests of each Subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights. Other
than the Subsidiaries, no other direct or indirect subsidiary of the Company
constitutes a "significant subsidiary" as defined in Regulation S-X of the
Exchange Act.
(b) Organization and Qualification. Each of the Company and
each Subsidiary is an entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. To the knowledge of the Company, each of
the Company and the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate, (i)
adversely affect the legality, validity or enforceability of any Transaction
Document, (ii) have or result in a material adverse effect on the results of
operations, assets, business or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or (iii) adversely impair the
Company's ability to perform fully on a timely basis its obligations under any
of the Transaction Documents (any of (i), (ii) or (iii), a "MATERIAL ADVERSE
EFFECT").
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further consent or action is
required by the Company, its Board of Directors or its stockholders. Each of the
Transaction Documents has been (or upon delivery will be) duly executed by the
Company and is, or when delivered in accordance with the terms hereof, will
constitute, the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms.
(d) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby do not and will not (i)
conflict with or violate any provision of the Company's or any Subsidiary's
certificate or articles of incorporation, bylaws or other organizational or
charter documents, (ii) conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
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affected, except to the extent that such conflict, default or termination right
could not reasonably be expected to have a Material Adverse Effect, or (iii), to
the knowledge of the Company, result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations and the rules and
regulations of any self-regulatory organization to which the Company or its
securities are subject), or by which any property or asset of the Company or a
Subsidiary is bound.
(e) Issuance of the Shares. The Shares are duly authorized
and, when issued and paid for in accordance with the Transaction Documents, will
be duly and validly issued, fully paid and nonassessable, free and clear of all
Liens (except for Liens created by the placement of the legend set forth in
Section 4.1(b) on any certificate evidencing the Shares) and shall not be
subject to preemptive rights or similar rights of stockholders.
(f) Capitalization. The authorized capital stock of the
Company consists of an unlimited number of shares of Common Shares, of which as
of December 2, 2003, 23,200,659 Common Shares were issued and outstanding, and
an unlimited number of shares of Class A Preferred Shares, of which as of
December 2, 2003, 0 shares were issued and outstanding. All outstanding shares
of capital stock are duly authorized, validly issued, fully paid and
nonassessable and have been issued in compliance with all applicable securities
laws, except where the failure to be so authorized, issued or in compliance
could not reasonably be expected to result in a Material Adverse Effect.
(g) SEC Reports; Financial Statements. The Company has filed
all reports required to be filed by it under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date
hereof (or such shorter period as the Company was required by law to file such
material) (the foregoing materials being collectively referred to herein as the
"SEC REPORTS") on a timely basis or has received a valid extension of such time
of filing and has filed any such SEC Reports prior to the expiration of any such
extension. The Company has delivered to the Purchaser true, correct and complete
copies of all SEC Reports, if any, filed within the ten (10) days preceding the
date hereof. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements or
the notes thereto, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments. All material agreements to which the Company or any
Subsidiary is a party or to which the property or assets of the Company or any
Subsidiary are subject are included as part of or specifically identified in the
SEC Reports.
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(h) Material Changes. Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has been no event, occurrence or
development that, individually or in the aggregate, has had or that could result
in a Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting or the
identity of its auditors, (iv) the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock, and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans.
(i) Absence of Litigation. Except as set forth in the SEC
Reports, there is no action, suit, claim, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of the Subsidiaries that could,
individually or in the aggregate, have a Material Adverse Effect.
(j) Compliance. Neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
to the knowledge of the Company, is or has been in violation of any statute,
rule or regulation of any governmental authority, including without limitation
all foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not, individually or
in the aggregate, have or result in a Material Adverse Effect.
(k) Title to Assets. Except as set forth on Schedule 3.1(k),
the Company and the Subsidiaries have good and marketable title in all personal
property owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for Liens as do
not materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
the Subsidiaries. To the knowledge of the Company, any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance.
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(l) Certain Fees. Except for the fees to the Agent, all of
which are payable to registered broker-dealers, no brokerage or finder's fees or
commissions are or will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by this Agreement, and the
Company has not taken any action that would cause any Purchaser to be liable for
any such fees or commissions.
(m) Private Placement. Neither the Company nor any Person
acting on the Company's behalf has sold or offered to sell or solicited any
offer to buy the Shares by means of any form of general solicitation or
advertising. Neither the Company nor any of its Affiliates nor any Person acting
on the Company's behalf has, directly or indirectly, at any time within the past
six months, made any offer or sale of any security or solicitation of any offer
to buy any security under circumstances that would eliminate the availability of
the exemption from registration under Regulation D under the Securities Act in
connection with the offer and sale of the Shares as contemplated hereby. The
offer and sale of the Shares hereby, together with any other offerings
integrated therewith, do not require stockholder approval under the applicable
provisions of the rules and regulations of the Trading Market. The Company is
not, and is not an Affiliate of, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(n) Form S-3 Eligibility. The Company is eligible to register
its Common Stock for resale by the Purchaser using Form S-3 promulgated under
the Securities Act.
(o) Listing and Maintenance Requirements. The Company is in
compliance with the listing or maintenance requirements of its Trading Market
and will take all steps necessary to have its Common Shares continue to be
traded and listed on its Trading Market. The Company has no reason to believe
that it will not in the foreseeable future continue to be in compliance with all
such listing and maintenance requirements, except for such listing and
maintenance requirements relating to the maintenance of a minimum trading price.
(p) Application of Takeover Protections. There is no control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Company's charter documents or the laws of its state of incorporation that is or
could become applicable to any of the Purchaser as a result of the Purchaser and
the Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, as a result of the
Company's issuance of the Shares and the Purchaser's ownership of the Shares.
(q) Disclosure. The Company confirms that neither it nor any
other Person acting on its behalf has provided the Purchaser or their agents or
counsel with any information that constitutes or might constitute material,
nonpublic information. The Company understands and confirms that the Purchaser
will rely on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Purchaser regarding
the Company, its business and the transactions contemplated hereby, including
the Schedules to this Agreement, furnished by or on behalf of the Company are
true and correct and do not contain any untrue statement of a material fact or
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omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or information exists with
respect to the Company or any of its Subsidiaries or its or their business,
properties, operations or financial conditions, which, under applicable law,
rule or regulation, requires public disclosure or announcement by the Company
but which has not been so publicly announced or disclosed. The Company
acknowledges and agrees that the Purchaser has not made nor will it make any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2.
(r) Acknowledgment Regarding Purchaser's Purchase of Shares.
The Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by the Purchaser or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Purchaser's purchase of the
Shares. The Company further represents to the Purchaser that the Company's
decision to enter into this Agreement has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company and its
representatives.
(s) Patents and Trademarks. The Company and the Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
other similar rights that are necessary or material for use in connection with
their respective businesses as described in the SEC Reports and which the
failure to so have could have a Material Adverse Effect (collectively, the
"INTELLECTUAL PROPERTY RIGHTS"). Neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any Person.
To the knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any of
the Intellectual Property Rights.
(t) Regulatory Permits. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except where the
failure to possess such permits could not, individually or in the aggregate,
have or result in a Material Adverse Effect ("MATERIAL PERMITS"), and neither
the Company nor any Subsidiary has received any notice of proceedings relating
to the revocation or modification of any Material Permit.
(u) Solvency. Based on the financial condition of the Company
as of the Closing Date after giving effect to the transactions contemplated
herein: (i) the Company's fair saleable value of its assets exceeds the amount
that will be required to be paid on or in respect of the Company's existing
debts and other liabilities (including known contingent liabilities) as they
mature; (ii) the Company's assets do not constitute unreasonably small capital
to carry on its business for the current fiscal year as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company, and
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projected capital requirements and capital availability thereof; and (iii) the
current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its debt when such amounts are required to be paid. The Company does
not intend to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be payable on or in
respect of its debt).
(v) Internal Accounting Controls. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(w) Xxxxxxxx-Xxxxx Act. The Company is in compliance with any
and all applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that are
effective as of the date hereof, and any and all applicable rules and
regulations promulgated by the Commission thereunder that are effective as of
the date hereof, except where such noncompliance would not have, individually or
in the aggregate, a Material Adverse Effect.
(x) Foreign Corrupt Practices. Neither the Company, nor the
Subsidiaries, nor to the knowledge of the Company any director, officer, agent,
employee or other Person acting on behalf of the Company or any Subsidiary has,
in the course of its actions for, or on behalf of, the Company (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
3.2 Representations and Warranties of the Purchaser. The Purchaser hereby,
represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable) with the
requisite power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The purchase by the Purchaser of the
Shares hereunder has been duly authorized by all necessary action on the part of
the Purchaser. This Agreement and the Registration Rights Agreement have been
duly executed and delivered by the Purchaser and each constitutes the valid and
binding obligation of such Purchaser, enforceable against it in accordance with
its terms.
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(b) Securities Filings. The Purchaser acknowledges that it has
been provided with copies of and has reviewed the following documents, which
have been filed by the Company with the Commission pursuant to the Exchange Act
(collectively, the "DISCLOSURE REPORTS" and, and, together with this Agreement
and the Schedules to this Agreement, the "DISCLOSURE MATERIALS"): (i) the
Company's Annual Report on Form 10-K, as amended, for the fiscal year ended May
31, 2003; (ii) the Company's Quarterly Report on Form 10-Q for the quarter ended
August 31, 2003; and (iii) the Company's proxy statement with respect to its
2003 annual meeting.
(c) Investment Intent. The Purchaser is acquiring the Shares
as principal for its own account for investment purposes only and not with a
view to or for distributing or reselling the Shares or any part thereof, without
prejudice, however, to the Purchaser's right, subject to the provisions of this
Agreement and the Registration Rights Agreement, at all times to sell or
otherwise dispose of all or any part of the Shares pursuant to an effective
registration statement under the Securities Act or under an exemption from such
registration and in compliance with applicable federal and state securities
laws. The Purchaser does not have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Shares.
(d) Purchaser Status. At the time the Purchaser was offered
the Shares it was, and at the date hereof it is, an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
(e) Experience of the Purchaser. The Purchaser, either alone
or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Shares, and has so
evaluated the merits and risks of such investment. The Purchaser is able to bear
the economic risk of an investment in the Shares and, at the present time, is
able to afford a complete loss of such investment.
(f) Offering Exemption. The Purchaser understands that the
Shares are being offered and sold in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgements and understandings set forth herein in
order to determine the applicability of such exemptions and the suitability of
the undersigned to acquire the Shares.
(g) Access to Information. The Purchaser acknowledges that it
has reviewed the Disclosure Materials and has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the
offering of the Shares and the merits and risks of investing in the Shares; (ii)
access to information about the Company and the Subsidiaries and their
respective financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and
(iii) the opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
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investment. Neither such inquiries nor any other investigation conducted by or
on behalf of the Purchaser or its representatives or counsel shall modify, amend
or affect the Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Shares may only be disposed of pursuant to an
effective registration statement under the Securities Act or pursuant to an
available exemption from the registration requirements of the Securities Act,
and in compliance with any applicable state securities laws. In connection with
any transfer of the Shares other than pursuant to an effective registration
statement or to the Company or pursuant to Rule 144(k), except as otherwise set
forth herein, the Company may require the transferor to provide to the Company
an opinion of counsel selected by the transferor, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration under the Securities Act.
(b) The Purchaser agrees to the imprinting, so long as is
required by this Section 4.1(b), of a legend on any certificate evidencing the
Shares in substantially the form set forth below:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS. NOTWITHSTANDING THE FOREGOING,
THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY SUCH SECURITIES.
Certificates evidencing the Shares shall not be required to contain such legend
(i) if a registration statement covering the resale of the Shares is effective
under the Securities Act and the Shares are sold or transferred pursuant to such
registration statement under the Securities Act, (ii) following any sale of the
Shares pursuant to Rule 144, or (iii) if the Shares are eligible for sale under
Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission). The Company shall cause
its counsel to issue a legal opinion to the Transfer Agent on the Effective Date
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if required by the Transfer Agent to effect the removal of the legend hereunder.
At such time as a legend is no longer required for the Shares, the Company will
no later than three Trading Days following the delivery by the Purchaser to the
Company or the Transfer Agent of a legended certificate representing the Shares,
use its best efforts to cause to be delivered to the Purchaser a certificate
representing the Shares that is free from all restrictive and other legends.
Unless required under applicable law, the Company may not make any notation on
its records or give instructions to any transfer agent of the Company that
enlarge the restrictions on transfer set forth in this Section.
4.2 Furnishing of Information. As long as the Purchaser owns Shares, the
Company covenants to use its best efforts to timely file (or obtain extensions
in respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of the Purchaser, the Company shall deliver to
the Purchaser a written certification of a duly authorized officer as to whether
it has complied with the preceding sentence. As long as the Purchaser owns
Shares, from the Closing until the Purchaser is eligible to use Rule 144(k)
under the Securities Act, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Purchaser and make
publicly available in accordance with paragraph (c) of Rule 144 such information
as is required for the Purchaser to sell the Shares under Rule 144. The Company
further covenants that it will take such further action as the Purchaser or
subsequent holder of Shares may reasonably request to satisfy the provisions of
Rule 144 applicable to the issuer of securities relating to transactions for the
sale of securities pursuant to Rule 144, but only to the extent that the
Company, or counsel of the Company agree that the Purchaser or subsequent holder
is able to avail themselves of the exemption created by Rule 144.
4.3 Integration. From and after the date hereof, the Company shall not,
and shall use its best efforts to ensure that no Affiliate of the Company shall,
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect
of any security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Shares in a manner that would require
the registration under the Securities Act of the sale of the Shares to the
Purchaser, or that would be integrated with the offer or sale of the Shares for
purposes of the rules and regulations of any Trading Market.
4.4 Listing of Shares. The Company shall take all steps necessary to cause
its Common Shares to be approved for listing on its Trading Market and maintain
the listing of such Common Shares on such Trading Market or another Eligible
Market. The Company covenants to promptly file any listing application required
by its Trading Market with respect to the Shares.
4.5 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Shares hereunder and the Canadian Offering (as defined below) in the
following order: (i) first, to repay or otherwise cause the satisfaction in full
of all amounts outstanding under any convertible notes of the Company, (ii)
second, to pay any and all expenses incurred in connection with the sale of the
Shares hereunder and the filing and maintaining of any registration statement
required by this Agreement and the Registration Rights Agreement and (iii)
third, any remaining proceeds to be used for general working capital
requirements of the Company.
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4.6 Securities Laws Disclosure; Publicity. Within three Business Days of
the Closing Date, the Company shall issue a press release disclosing the
material terms of the transactions contemplated hereby (the "PRESS RELEASE").
Thereafter, the Company shall timely file any filings and notices required by
the Commission or applicable law with respect to the transactions contemplated
hereby. Notwithstanding the foregoing, the Company shall not publicly disclose
the name of the Purchaser, or include the name of the Purchaser in any filing
with the Commission or any regulatory agency or Trading Market, without the
prior written consent of the Purchaser, except to the extent such disclosure is
required by applicable law or the rules and regulations under the Trading
Market. The Purchaser shall not request and the Company shall not, and shall
cause each of its Subsidiaries and its and each of their respective officers,
directors, employees and agents not to, provide the Purchaser with any material
nonpublic information regarding the Company or any of its Subsidiaries from and
after the issuance of the Press Release without the express written consent of
the Purchaser. In the event of a breach of the foregoing covenant by the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees and agents, in addition to any other remedy provided herein
or in the Transaction Documents, the Purchaser shall have the right to require
the Company to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material nonpublic information. The
Purchaser shall not have any liability to the Company, its Subsidiaries, or any
of its or their respective officers, directors, employees, stockholders or
agents for any such disclosure. Subject to the foregoing, neither the Company
nor the Purchaser shall issue any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of the Purchaser, to
make any press release or other public disclosure with respect to such
transactions as is required by applicable law and regulations.
4.7 Canadian Offering; U.S. Offering.
(a) The Purchaser acknowledges that prior to the Closing, the
Company sold 2,500,000 Common Shares for gross proceeds to the Company of
US$4,000,000 of Common Shares to various purchasers in Canada (the "Canadian
Offering") and, in connection therewith, the Company's agent received a cash
commission of US$280,000 from the gross proceeds of such offering received by
the Company and a warrant to purchase up to 400,000 Common Shares at an exercise
price of US$1.60 and a expiration date of December 9, 2005.
(b) The Purchaser further acknowledges that prior to the
Closing the Company sold 625,000 Common Shares for gross proceeds to the Company
of US$1,000,000 to a U.S. investor and, in connection therewith, the Agent
received a commission equal to US$100,000 which was paid in 62,500 Common Shares
in lieu of cash and a warrant to purchase up to 62,500 Common Shares at an
exercise price of US$1.60 and an expiration date of December 11, 2008.
4.8 Agent's Fee. The Purchaser acknowledges that the Company has retained
the Agent to act as the Agent in connection with the sale of the Shares
hereunder. For the services rendered by the Agent in such capacity, the Company
has agreed to pay the Agent a cash commission of 10% of the gross proceeds
received by the Company in connection with the sale of the Shares hereby. In
addition, as part consideration for the services rendered by the Agent, the
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Company has agreed, subject to regulatory approval, to issue the Agent or its
designee a warrant (the "Agent's Warrant") exercisable at any time up to five
years following the Closing entitling the Agent to purchase that number of
Common Shares equal to 10% of the number of Shares sold hereby at an exercise
price equal to $1.60 per Common Share. At the option of the Agent and subject to
any required regulatory approval, the Agent or its designee shall be entitled to
receive all or a portion of the commission by way of Common Shares issued at a
value of $1.60 per Common Share.
4.9 Reimbursement. If the Purchaser or any of its Affiliates or any
officer, director, partner, controlling Person, employee or agent of the
Purchaser or any of its Affiliates (a "RELATED PERSON") becomes involved in any
capacity in any Proceeding brought by or against any Person in connection with
or as a result of the transactions contemplated by the Transaction Documents,
the Company will indemnify and hold harmless the Purchaser or Related Person for
its reasonable legal and other expenses (including the costs of any
investigation, preparation and travel) and for any Losses incurred in connection
therewith, as such expenses or Losses are incurred, excluding only Losses that
result from the Purchaser's or Related Person's gross negligence, willful
misconduct or breaches of the Purchaser's representations, warranties, covenants
and agreements contained in the Transaction Documents. In addition, the Company
shall indemnify and hold harmless the Purchaser and Related Person from and
against any and all Losses, as incurred, arising out of or relating to any
breach by the Company of any of the representations, warranties or covenants
made by the Company in this Agreement or any other Transaction Document, or any
allegation by a third party that, if true, would constitute such a breach. The
conduct of any Proceedings for which indemnification is available under this
paragraph shall be governed by the indemnification provisions of the
Registration Rights Agreement. The indemnification obligations of the Company
under this paragraph shall be in addition to any liability that the Company may
otherwise have and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Purchaser and any
such Related Persons. The Company also agrees that neither the Purchaser nor any
Related Persons shall have any liability to the Company or any Person asserting
claims on behalf of or in right of the Company in connection with or as a result
of the transactions contemplated by the Transaction Documents except to the
extent that any Losses incurred by the Company result from (a) the gross
negligence or willful misconduct of the Purchaser or Related Person in
connection with such transactions or (b) breaches of the Purchaser's
representations, warranties, covenants or agreements contained in the
Transaction Documents. If the Company breaches its obligations under any
Transaction Document, then, in addition to any other liabilities the Company may
have under any Transaction Document or applicable law, the Company shall pay or
reimburse the Purchaser on demand for all costs of collection and enforcement
(including reasonable attorneys fees and expenses). The Company specifically
agrees to reimburse the Purchaser on demand for all costs of enforcing the
indemnification obligations in this paragraph.
ARTICLE V
CONDITIONS
5.1 Conditions Precedent to the Obligations of the Purchaser. The
obligation of the Purchaser to acquire the Share at the Closing is subject to
the satisfaction or waiver by the Purchaser, at or before the Closing, of each
of the following conditions:
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(a) Representations and Warranties. The representations and
warranties of the Company contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
on and as of such date; and
(b) Performance. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or
complied with by it at or prior to the Closing.
5.2 Conditions Precedent to the Obligations of the Company. The obligation
of the Company to sell the Shares at the Closing is subject to the satisfaction
or waiver by the Company, at or before the Closing, of each of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Purchaser contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made on and as of such date; and
(b) Performance. The Purchaser shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or
complied with by the Purchaser at or prior to the Closing.
ARTICLE VI
MISCELLANEOUS
6.1 Termination. This Agreement may be terminated by the Company or the
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third Trading Day following the date of this Agreement;
provided that no such termination will affect the right of any party to xxx for
any breach by the other party (or parties).
6.2 Fees and Expenses. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all Transfer
Agent fees, stamp taxes and other taxes and duties levied in connection with the
issuance of the Shares.
6.3 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, each of the Company and
the Purchaser agree that it will execute and deliver to the other such further
documents as may be reasonably requested in order to give practical effect to
the intention of the parties under the Transaction Documents.
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6.4 Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an overnight courier service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
Workstream Inc.
000 Xxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxx
X0X 0X0
Attention: Mr. Xxxxxxx Xxxxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx-Xxxxxxxxx, Xxxx and XxXxxxxxx LLP
00 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
If to the Purchaser:
6.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and the Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
6.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
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6.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser. The Purchaser may assign its
rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Shares, provided such transferee agrees in writing to be bound,
with respect to the transferred Shares, by the provisions hereof that apply to
the Purchaser.
6.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary of Section 4.9 and may enforce the provisions of such Section
directly against the parties with obligations thereunder.
6.9 Governing Law; Venue; Waiver Of Jury Trail. all questions concerning
the construction, validity, enforcement and interpretation of this Agreement
shall be governed by and construed and enforced in accordance with the laws of
the state of new york. THE COMPANY AND THE PURCHASER Hereby Irrevocably Submit
To The Exclusive Jurisdiction Of The State And Federal Courts Sitting In The
CITY OF NEW YORK, BOROUGH OF MANHATTAN For The Adjudication Of Any Dispute
BROUGHT BY THE COMPANY OR ANY PURCHASER Hereunder, In Connection Herewith Or
With Any Transaction Contemplated Hereby Or Discussed Herein (Including With
Respect To The Enforcement Of Any Of The Transaction Documents), And Hereby
Irrevocably Waive, And Agree Not To Assert In Any Suit, Action Or ProceedinG
BROUGHT BY THE COMPANY OR ANY PURCHASER, Any Claim That It Is Not Personally
Subject To The Jurisdiction Of Any Such Court, OR That Such Suit, Action Or
Proceeding Is Improper. Each party Hereby Irrevocably Waives Personal Service Of
Process And Consents To Process Being Served In Any Such Suit, Action Or
Proceeding By Mailing A Copy Thereof Via Registered Or Certified Mail Or
Overnight Delivery (With Evidence Of Delivery) To Such Party At The Address In
Effect For Notices To It Under This Agreement And Agrees That Such Service Shall
Constitute Good And Sufficient Service Of Process And Notice Thereof. Nothing
Contained Herein Shall Be Deemed To Limit In Any Way Any Right To Serve Process
In Any Manner Permitted By Law. The Company AND THE PURCHASER Hereby Waive All
Rights To A Trial By Jury.
6.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery of the Shares.
6.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
-17-
6.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
6.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever the Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then the
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
6.14 Replacement of Shares. If any certificate or instrument evidencing
any Shares is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Shares.
6.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchaser
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
6.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to the Purchaser hereunder or the Purchaser enforces or exercises its
rights hereunder or thereunder, and such payment or payments or the proceeds of
such enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company
by a trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
[Signature pages to follow]
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IN WITNESS WHEREOF, the parties have executed this Securities Purchase
Agreement as of the date first written above.
COMPANY:
workstream inc.
By: /s/ Xxxxxxx Xxxxxxxxx
----------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Chairman and CEO
PURCHASER:
By:
----------------------------------------
Name:
Title:
SCHEDULE A
PURCHASERS OF WORKSTREAM INC. COMMON SHARES
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NAME DATE NO. OF SHARES PURCHASE PRICE
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Smithfield Fiduciary LLC December 11, 2003 625,000 $1,000,000
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Pequot Scout Fund, L.P. December 31, 2003 648,000 $1,036,800
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Pequot Navigator Offshore Fund, Inc. December 31, 2003 200,000 $320,000
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Pequot Navigator Onshore Fund, L.P. December 31, 2003 152,000 $243,200
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