REGISTRATION RIGHTS AGREEMENT
This
REGISTRATION RIGHTS AGREEMENT
(this
“Agreement”),
dated
as of October ___, 2006, by and between Workstream Inc., a corporation existing
pursuant to the Canada Business Corporations Act with headquarters located
at
000 Xxxx Xxxx, Xxxxx 000, Xxxxxx, Xxxxxxx X0X 0X0, Xxxxxx
(the ”Company”),
and
the undersigned lender (“Lender”).
RECITALS
A. In
connection with the Transaction Agreement by and between the parties hereto,
dated as of September 28, 2006 (the “Transaction
Agreement”),
the
Company has agreed, upon the terms and subject to the conditions set forth
in
the Transaction Agreement, to issue to the Lender the Warrants (as defined
in
the Transaction Agreement) which will be exercisable to purchase Warrant Shares
(as defined in the Transaction Agreement).
B. To
induce
the Lender to execute and deliver the Transaction Agreement, the Company has
agreed to provide certain registration rights under the Securities Act of 1933,
as amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, the “1933
Act”),
and
applicable state securities laws.
AGREEMENT
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants contained herein and
for
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Company and the Lender hereby agree as
follows:
1. Definitions.
Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Transaction Agreement. As used in this Agreement,
the
following terms shall have the following meanings:
(a) “Business
Day”
means
any day other than Saturday, Sunday or any other day on which commercial banks
in Chicago, Illinois are authorized or required by law to remain
closed.
(b) “Closing
Date”
shall
have the meaning set forth in the Transaction Agreement.
(c) “Effective
Date”
means
the date that the Registration Statement has been declared effective by the
SEC.
(d) “Effectiveness
Deadline”
means
the date which is 90 days (or 120 days if reviewed by the SEC) after the Closing
Date.
(e) “Filing
Deadline”
means
forty-five (45) Business Days after the Closing Date.
(f) “Investor”
or
“Investors”
means
the Lender or any transferee or assignee
of
any Registrable Securities or Warrants, as applicable, to whom the Lender
assigns its rights under this Agreement and who agrees to become bound by the
provisions of this Agreement in accordance with Section 9
and any
transferee or assignee thereof to whom a transferee or assignee of any
Registrable Securities or Warrants, as applicable, assigns its rights under
this
Agreement and who agrees to become bound by the provisions of this Agreement
in
accordance with Section 9.
Each
Investor who may from time to time hold Registrable Securities shall have the
rights and be subject to the obligations created by this Agreement.
(g) “Person”
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
(h) “register,”
“registered,”
and
“registration”
refer
to a registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant
to
Rule 415 and the declaration of effectiveness of such Registration Statement(s)
by the SEC.
(i) “Registrable
Securities”
means
(i) the Warrant Shares issued or issuable upon exercise of the Warrants and
(ii) any capital stock of the Company issued or issuable with respect to the
Warrant Shares or the Warrants, including, without limitation, (1) as a result
of any share split, share dividend, recapitalization, exchange or similar event
or otherwise and (2) including shares of capital stock of the Company into
which
the Common Shares are converted or exchanged and shares of capital stock of
a
Successor Entity (as defined in the Warrants) into which the Common Shares
are
converted or exchanged, in each case, without regard to any limitations on
exercise of the Warrants.
(j) “Registration
Statement”
means
a
registration statement or registration statements of the Company filed under
the
1933 Act covering the Registrable Securities.
(k) “Required
Holders”
means
the holders of at least a majority of the Registrable Securities.
(l) “Required
Registration Amount”
means
the maximum number of Warrant Shares issued and issuable pursuant to the
Warrants as of the trading day immediately preceding the applicable date of
determination (without taking into account any limitations on the exercise
of
the Warrants set forth in the Warrants), all subject to adjustment as provided
in Section 2(e).
(m) “Rule
415”
means
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis.
(n) “SEC”
means
the United States Securities and Exchange Commission.
2. Registration.
(a) Mandatory
Registration.
The
Company shall prepare, and, as soon as practicable, but in no event later than
the Filing Deadline, file with the SEC the Registration Statement on Form S-3
covering the resale of all of the Registrable Securities. In the event that
Form
S-3 is unavailable for such a registration, the Company shall use such other
form as is available for such a registration on another appropriate form
reasonably acceptable to the Required Holders, subject to the provisions of
Section 2(d).
The
Registration Statement prepared pursuant hereto shall register for resale at
least the number of Common Shares equal to the Required Registration Amount
as
of the date the Registration Statement is initially filed with the SEC. The
Registration Statement shall contain (except if otherwise directed by the
Required Holders) the “Selling
Stockholders”
and
“Plan
of Distribution”
sections in substantially the form attached hereto as Exhibit
B;
provided that the Company may make any changes to such sections as requested
by
the SEC so long as none of such changes are materially inconsistent with the
form attached hereto as Exhibit
B or
adversely affect any Investor (including, without limitation, any restrictions
on the manner of disposition). The Company shall use its best efforts to have
the Registration Statement declared effective by the SEC as soon as practicable,
but in no event later than the Effectiveness Deadline. By 9:30 a.m. on the
Business Day immediately following the Effective Date, the Company shall file
with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus
to be used in connection with sales pursuant to such Registration
Statement.
Notwithstanding anything to the contrary contained in this Agreement, other
than
during an Allowable Grace Period the Company shall ensure that, when filed
and
at all times while effective, each Registration Statement and the prospectus
used in connection with such Registration Statement will disclose (whether
directly or through incorporation by reference to other SEC filings to the
extent permitted) all material information regarding the Company and its
securities.
(b) Allocation
of Registrable Securities.
In no
event shall the Company include any securities other than Registrable Securities
on any Registration Statement without the prior written consent of the Required
Holders.
(c) Legal
Counsel.
Subject
to Section 5
hereof,
the Lender shall have the right to select one legal counsel to review and
oversee, solely on its behalf, any registration pursuant to this Section
2
(“Legal
Counsel”),
which
shall be Xxxxxxxxx Xxxxxxx, LLP or such other counsel as thereafter designated
by the Lender. The Company and Legal Counsel shall reasonably cooperate with
each other in regards to the performance of the Company’s obligations under this
Agreement.
(d) Ineligibility
for Form S-3.
In the
event that Form S-3 is not available for the registration of the resale of
Registrable Securities hereunder, the Company shall (i) register the resale
of
the Registrable Securities on Form SB-2 or another appropriate form reasonably
acceptable to the Required Holders and (ii) undertake to register the
Registrable Securities on Form S-3 as soon as such form is available, provided
that the Company shall maintain the effectiveness of the Registration Statement
then in effect until such time as a Registration Statement on Form S-3 covering
the Registrable Securities has been declared effective by the SEC.
(e) Sufficient
Number of Shares Registered.
In the
event the number of shares available under a Registration Statement filed
pursuant to Section 2(a)
is
insufficient to cover the resale of all of the Registrable Securities required
to be covered by such Registration Statement or an Investor’s allocated portion
of the Registrable Securities pursuant to Section 2(b),
the
Company shall amend the applicable Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable),
or
both, so as to cover at least the Required Registration Amount as of the trading
day immediately preceding the date of the filing of such amendment or new
Registration Statement, in each case, as soon as practicable, but in any event
not later than fifteen (15) days after the necessity therefor arises. The
Company shall use its best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following
the
filing thereof. For purposes of the foregoing provision, the number of shares
available under a Registration Statement shall be deemed “insufficient to cover
all of the Registrable Securities” if at any time the number of Common Shares
available for resale under the Registration Statement is less than the Required
Registration Amount. The determination set forth in this paragraph shall be
made
without regard to any limitations on the exercise of the Warrants and such
calculation shall assume that the Warrants are then exercisable for Common
Shares at the then prevailing applicable Exercise Price.
(f) Effect
of Failure to File and Obtain and Maintain Effectiveness of Registration
Statement.
If (i)
a Registration Statement covering the resale of all of the Registrable
Securities required to be covered thereby and required to be filed by the
Company pursuant to this Agreement is (A) not filed with the SEC on or before
the Filing Deadline (a “Filing
Failure”)
(it
being understood that if the Company files a Registration Statement without
affording the Investor the opportunity to review and comment on the same as
required by Section 3(c)
hereof,
the
Company shall not be deemed to have satisfied this clause (i)(A) and such event
shall be deemed to be a Filing Failure)
or (B)
not declared effective by the SEC on or before the applicable Effectiveness
Deadline (an “Effectiveness
Failure”)
(it
being understood that if the Business Day immediately following the Effective
Date the Company shall not have filed a “final” prospectus for the Registration
Statement with the SEC under Rule 424(b) in accordance with Section 2(a)
above
(whether or not such a prospectus is technically required by such rule), the
Company shall not be deemed to have satisfied this clause (i)(B) and such event
shall be deemed to be an Effectiveness Failure) or (ii) on any day after the
Effective Date sales of all of the Registrable Securities required to be
included on such Registration Statement cannot be made (other than during an
Allowable Grace Period (as defined in Section 3(r))
pursuant to such Registration Statement (including, without limitation, because
of a failure to keep such Registration Statement effective, to disclose such
information as is necessary for sales to be made pursuant to such Registration
Statement, a suspension or delisting of (or a failure to timely list) the Common
Shares on its principal trading market or exchange, or to register a sufficient
number of Common Shares) (a “Maintenance
Failure”)
(provided that if an Investor transfers its rights hereunder pursuant to Section
9
and the
transferee requests inclusion in such Registration Statement which requires
the
Company under applicable law to file a post-effective amendment to such
Registration Statement, then a Maintenance Failure shall not be deemed to have
occurred solely with respect to the filing of such post-effective amendment
only
if the Company is using its best efforts to file such amendment and have such
amendment declared effective as soon as practicable), then, as partial relief
for the damages to any holder by reason of any such delay in or reduction of
its
ability to sell the underlying Common Shares (which remedy shall not be
exclusive of any other remedies available at law or in equity) the Company
shall
pay to each holder of Registrable Securities relating to such Registration
Statement an amount in cash equal to two percent (2%) of the initial aggregate
principal amount of the Notes (as such term is defined in the Transaction
Agreement) issued on the Closing Date with respect to each thirty (30) day
period occurring after any (X) Filing Failure; (Y) Effectiveness Failure; or
(Z)
Maintenance Failure (in each case, pro rated for periods totaling less than
thirty (30) days). The payments to which a holder shall be entitled pursuant
to
this Section 2(f)
are
referred to herein as “Registration
Delay Payments.”
Registration Delay Payments shall be paid on the earlier of (a) the thirtieth
(30th)
day
after the event or failure giving rise to the Registration Delay Payments has
occurred and (b) the third (3rd)
Business Day after the event or failure giving rise to the Registration Delay
Payments is cured. In the event the Company fails to make Registration Delay
Payments in a timely manner in accordance with the foregoing, such Registration
Delay Payments shall bear interest at the rate of one and one-half percent
(1.5%) per month (prorated for partial months) until paid in full.
Notwithstanding anything contained in this Section 2(f)
to the
contrary, in no event shall the Registration Delay Payments exceed $3,000,000
in
the aggregate.
3. Related
Obligations.
The
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
(a) The
Company shall promptly prepare and file with the SEC a Registration Statement
with respect to the Registrable Securities (but in no event later than the
Filing Deadline) and use its best efforts to cause such Registration Statement
relating to the Registrable Securities to become effective as soon as
practicable after such filing (but in no event later than the Effectiveness
Deadline). Subject to allowable Grace Periods (as defined below), the Company
shall keep each Registration Statement effective pursuant to Rule 415 at all
times until the earlier of (i) the date as of which the Investor may sell all
of
the Registrable Securities required to be covered by such Registration Statement
without restriction pursuant to Rule 144(k) (or any successor thereto)
promulgated under the 1933 Act or (ii) the date on which the Investor shall
have
sold all of the Registrable Securities covered by such Registration Statement
(the “Registration
Period”).
The
Company shall ensure that each Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain,
with respect to the Company, any 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 the case of prospectuses, in the light of the
circumstances in which they were made) not misleading. The Company shall submit
to the SEC, within two (2) Business Days after the later of the date that (i)
the Company learns that no review of a particular Registration Statement will
be
made by the staff of the SEC or that the staff has no further comments on a
particular Registration Statement (as the case may be) and (ii) the approval
of
Legal Counsel is sought pursuant to Section 3(c)
(which
approval is immediately sought), a request for acceleration of effectiveness
of
such Registration Statement to 4:00 p.m. on the second (2nd)
Business Day after the submission of such request.
(b) Subject
to Section 3(r)
of this
Agreement, the Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition
of
all Registrable Securities of the Company by the Investor. In the case of
amendments and supplements to a Registration Statement which are required to
be
filed pursuant to this Agreement (including pursuant to this Section
3(b))
by
reason of the Company filing a report on Form 10-Q or Form 10-K or any analogous
report under the Securities Exchange Act of 1934, as amended (the “1934
Act”),
the
Company shall have incorporated such report by reference into such Registration
Statement, if applicable, or shall file such amendments or supplements with
the
SEC on the same day on which the 1934 Act report is filed which created the
requirement for the Company to amend or supplement such Registration
Statement.
(c) The
Company shall (A) permit Legal Counsel to review and comment upon (i) a
Registration Statement at least five (5) Business Days prior to its filing
with
the SEC and (ii) all amendments and supplements to all Registration Statements
(except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, and any similar or successor reports) within a reasonable
number of days prior to their filing with the SEC, and (B) not file any
Registration Statement or amendment or supplement thereto in a form to which
Legal Counsel reasonably objects. The Company shall not submit a request for
acceleration of the effectiveness of a Registration Statement or any amendment
or supplement thereto without the prior approval of Legal Counsel, which consent
shall not be unreasonably withheld. The Company shall furnish to Legal Counsel,
without charge, (i) copies of any correspondence from the SEC or the staff
of
the SEC to the Company or its representatives relating to any Registration
Statement, (ii) promptly after the same is prepared and filed with the SEC,
one copy of any Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, if requested by the Investor, and all exhibits and (iii) upon
the effectiveness of any Registration Statement, one copy of the prospectus
included in such Registration Statement and all amendments and supplements
thereto. The Company shall reasonably cooperate with Legal Counsel in performing
the Company’s obligations pursuant to this Section 3.
(d) The
Company shall furnish to the Investor whose Registrable Securities are included
in any Registration Statement, without charge, (i) promptly after the same
is
prepared and filed with the SEC, at least one copy of any Registration Statement
and any amendment(s) thereto, including financial statements and schedules,
all
documents incorporated therein by reference, if requested by the Investor,
all
exhibits and each preliminary prospectus, (ii) upon the effectiveness of any
Registration Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such
other
number of copies as the Investor may reasonably request from time to time)
and
(iii) such other documents, including copies of any preliminary or final
prospectus, as the Investor may reasonably request from time to time in order
to
facilitate the disposition of the Registrable Securities owned by the
Investor.
(e) The
Company shall use its best efforts to (i) register and qualify, unless an
exemption from registration and qualification applies, the resale by the
Investor of the Registrable Securities covered by a Registration Statement
under
such other securities or “blue sky” laws of all applicable jurisdictions in the
United States, (ii) prepare and file in those jurisdictions, such amendments
(including post-effective amendments) and supplements to such registrations
and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary
to
maintain such registrations and qualifications in effect at all times during
the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(e),
(y)
subject itself to general taxation in any such jurisdiction, or (z) file a
general consent to service of process in any such jurisdiction. The Company
shall promptly notify Legal Counsel and each Investor who holds Registrable
Securities of the receipt by the Company of any notification with respect to
the
suspension of the registration or qualification of any of the Registrable
Securities for sale under the securities or “blue sky” laws of any jurisdiction
in the United States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.
(f) The
Company shall notify Legal Counsel and the Investor in writing of the happening
of any event, as promptly as practicable after becoming aware of such event,
as
a result of which the prospectus included in a Registration Statement, as then
in effect, includes an untrue statement of a material fact or omission to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (provided that in no event shall such notice contain any
material, nonpublic information), and, subject to Section 3(r),
promptly prepare a supplement or amendment to such Registration Statement to
correct such untrue statement or omission and deliver ten (10) copies of such
supplement or amendment to Legal Counsel and the Investor (or such other number
of copies as Legal Counsel and the Investor may reasonably request from time
to
time). The Company shall also promptly notify Legal Counsel and the Investor
in
writing (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, when a Registration Statement or any post-effective
amendment has become effective (notification of such effectiveness shall be
delivered to Legal Counsel and the Investor by facsimile or e-mail on the same
day of such effectiveness and by overnight mail), and when the Company receives
written notice from the SEC that a Registration Statement or any post-effective
amendment will be reviewed by the SEC, (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus
or
related information, and (iii) of the Company’s reasonable determination that a
post-effective amendment to a Registration Statement would be
appropriate.
(g) The
Company shall use its best efforts to prevent the issuance of any stop order
or
other suspension of effectiveness of a Registration Statement, or the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible moment and
to
notify Legal Counsel and each Investor who holds Registrable Securities being
sold of the issuance of such order and the resolution thereof or its receipt
of
actual notice of the initiation or threat of any proceeding for such
purpose.
(h) If
the
Investor may be required under applicable securities law to be described in
the
Registration Statement as an underwriter, at the request of the Investor, the
Company shall furnish to the Investor, on the date of the effectiveness of
the
Registration Statement and thereafter from time to time on such dates as the
Investor may reasonably request (i) a letter, dated such date, from the
Company’s independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters
in
an underwritten public offering, addressed to the Investor, and (ii) an opinion,
dated as of such date, of counsel representing the Company for purposes of
such
Registration Statement, in form, scope and substance as is customarily given
in
an underwritten public offering, addressed to the Investor.
(i) [Reserved].
(j) The
Company shall hold in confidence and not make any disclosure of information
concerning the Investor provided to the Company unless (i) disclosure of such
information is necessary to comply with federal or state securities laws, (ii)
the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to
the
public other than by disclosure in violation of this Agreement or any other
Transaction Document. The Company agrees that it shall, upon learning that
disclosure of such information concerning the Investor is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt written notice to the Investor and allow the Investor, at the
Investor’s expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.
(k) Without
limiting any obligation of the Company under the Transaction Agreement, the
Company shall use its best efforts either to (i) cause all of the Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (ii) secure designation and
quotation of all of the Registrable Securities covered by a Registration
Statement on The
Nasdaq Capital Market
and the
Boston Stock Exchange, or (iii) if, despite the Company’s best efforts to
satisfy the preceding clauses (i) or (ii) the Company is unsuccessful in
satisfying the preceding clauses (i) or (ii), to secure the inclusion for
quotation on The Nasdaq Capital Market and the Boston Stock Exchange for such
Registrable Securities and, without limiting the generality of the foregoing,
to
use its best efforts to arrange for at least two market makers to register
with
the National Association of Securities Dealers, Inc. (“NASD”)
as
such with respect to such Registrable Securities. The Company shall pay all
fees
and expenses in connection with satisfying its obligation under this Section
3(k).
(l) The
Company shall cooperate with the Investors who hold Registrable Securities
being
offered and, to the extent applicable, facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legend) representing
the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case
may
be, as the Investors may reasonably request and registered in such names as
the
Investors may request.
(m) If
requested by the Investor, the Company shall as soon as practicable after
receipt of notice from the Investor and subject to Section 3(r)
hereof,
(i) incorporate in a prospectus supplement or post-effective amendment such
information as the Investor reasonably requests to be included therein relating
to the sale and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable Securities
being offered or sold, the purchase price being paid therefor and any other
terms of the offering of the Registrable Securities to be sold in such offering;
(ii) make all required filings of such prospectus supplement or post-effective
amendment after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii) supplement or
make
amendments to any Registration Statement if reasonably requested by an Investor
holding any Registrable Securities.
(n) The
Company shall use its best efforts to cause the Registrable Securities covered
by a Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to consummate the
disposition of such Registrable Securities.
(o) The
Company shall make generally available to its security holders as soon as
practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with, and in the
manner provided by, the provisions of Rule 158 under the 0000 Xxx) covering
a
twelve-month period beginning not later than the first day of the Company’s
fiscal quarter next following the effective date of the Registration
Statement.
(p) The
Company shall otherwise use its best efforts to comply with all applicable
rules
and regulations of the SEC in connection with any registration
hereunder.
(q) Within
one (1) Business Day after a Registration Statement which covers Registrable
Securities is declared effective by the SEC, the Company shall deliver, and
shall cause legal counsel for the Company to deliver, to the transfer agent
for
such Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form
attached hereto as Exhibit
A.
(r) Notwithstanding
anything to the contrary herein (but subject to the last sentence of this
Section 3(r)),
at any
time after the Effective Date, the Company may delay the disclosure of material,
non-public information concerning the Company the disclosure of which at the
time is not, in the good faith opinion of the Board of Directors of the Company,
in the best interest of the Company and, in the opinion of counsel to the
Company, otherwise required (a “Grace
Period”);
provided, that the Company shall promptly (i) notify the Investor in writing
of
the existence of material, non-public information giving rise to a Grace Period
(provided that in each notice the Company will not disclose the content of
such
material, non-public information to the Investor) and the date on which the
Grace Period will begin, and (ii) notify the Investor in writing of the
date on which the Grace Period ends; and, provided further, that no Grace Period
shall exceed ten (10) consecutive days and during any three hundred sixty five
(365) day period such Grace Periods shall not exceed an aggregate of thirty
(30)
days and the first day of any Grace Period must be at least five (5) trading
days after the last day of any prior Grace Period (each, an “Allowable
Grace Period”);
provided,
that no
Allowable Grace Period may exist prior to the Effective Date or during the
first
sixty (60) Business Days after the Effective Date. For purposes of determining
the length of a Grace Period above, the Grace Period shall begin on and include
the date the Investor receive the notice referred to in clause (i) and shall
end
on and include the later of the date the Investor receives the notice referred
to in clause (ii) and the date referred to in such notice. The provisions of
Section 3(g)
hereof
shall not be applicable during the period of any Allowable Grace Period. Upon
expiration of the Grace Period, the Company shall again be bound by the first
sentence of Section 3(f)
with
respect to the information giving rise thereto unless such material, nonpublic
information is no longer applicable. Notwithstanding anything to the contrary
contained in this Section 3(r),
the
Company shall cause its transfer agent to deliver unlegended Common Shares
to a
transferee of an Investor in accordance with the terms of the Transaction
Agreement in connection with any sale of Registrable Securities with respect
to
which an Investor has entered into a contract for sale, and delivered a copy
of
the prospectus included as part of the applicable Registration Statement (unless
an exemption from such prospectus delivery requirement exists), prior to the
Investor’s receipt of the notice of a Grace Period and for which the Investor
has not yet settled.
(s) The
Company shall use its best efforts to maintain eligibility for use of Form
S-3
(or any successor form thereto) so that such form is available for the
registration of the resale of Registrable Securities.
4. Obligations
of the Investor.
(a) At
least
five (5) Business Days prior to the first anticipated filing date of a
Registration Statement, the Company shall notify the Investor in writing of
the
information the Company requires from the Investor. It shall be a condition
precedent to the obligations of the Company to complete the registration
pursuant to this Agreement with respect to the Registrable Securities of the
Investor that the Investor shall furnish to the Company such information
regarding itself, the Registrable Securities held by it and the intended method
of disposition of the Registrable Securities held by it, as shall be reasonably
required to effect and maintain the effectiveness of the registration of such
Registrable Securities and shall execute such documents in connection with
such
registration as the Company may reasonably request.
(b) The
Investor, by the Investor’s acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of any Registration Statement hereunder, unless
the Investor has notified the Company in writing of the Investor’s election to
exclude all of the Investor’s Registrable Securities from such Registration
Statement.
(c) The
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(g)
or the
first sentence of 3(f),
the
Investor will immediately discontinue disposition of Registrable Securities
pursuant to any Registration Statement(s) covering such Registrable Securities
until the Investor’s receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(g)
or the
first sentence of Section 3(f)
or
receipt of notice that no supplement or amendment is required. Notwithstanding
anything to the contrary in this Section 4(c),
the
Company shall cause its transfer agent to deliver unlegended Common Shares
to a
transferee of the Investor in accordance with the terms of the Transaction
Agreement in connection with any sale of Registrable Securities with respect
to
which the Investor has entered into a contract for sale prior to the Investor’s
receipt of a notice from the Company of the happening of any event of the kind
described in Section 3(g)
or the
first sentence of Section 3(f)
and for
which the Investor has not yet settled.
(d) The
Investor covenants and agrees that it will comply with the prospectus delivery
requirements of the 1933 Act as applicable to it in connection with sales of
Registrable
Securities pursuant to the Registration Statement.
(e) The
Investor convents and agrees to deliver a Registration Statement Questionnaire,
in the form attached hereto as Exhibit
C,
no
later than five (5) Business Days prior to the Filing Deadline.
5. Expenses
of Registration.
All
reasonable expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to Sections
2
and
3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, and fees and disbursements of counsel for
the Company shall be paid by the Company. The Lender shall be responsible for
the fees and disbursements of Legal Counsel in connection with registration,
filing or qualification pursuant to Sections 2
and
3
of this
Agreement.
6. Indemnification.
In
the
event any Registrable Securities are included in a Registration Statement under
this Agreement:
(a) To
the
fullest extent permitted by law, the Company will, and hereby does, indemnify,
hold harmless and defend the Investor, the directors, officers, members,
partners, employees, agents, representatives of, and each Person, if any, who
controls the Investor within the meaning of the 1933 Act or the 1934 Act (each,
an “Indemnified
Person”),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, reasonable attorneys’ fees, amounts paid in settlement or
expenses, joint or several, (collectively, “Claims”)
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto (“Indemnified
Damages”),
to
which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out
of
or are based upon: (i) any untrue statement or alleged untrue statement of
a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other “blue sky” laws of any jurisdiction in
which Registrable Securities are offered (“Blue
Sky Filing”),
or
the omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, (ii) any
untrue statement or alleged untrue statement of a material fact contained in
any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented,
if
the Company files any amendment thereof or supplement thereto with the SEC)
or
the omission or alleged omission to state therein any material fact necessary
to
make the statements made therein, in light of the circumstances under which
the
statements therein were made, not misleading, (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (iv) any violation of this
Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, “Violations”).
Subject to Section 6(b),
the
Company shall reimburse the Indemnified Persons, promptly as such expenses
are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any
such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a):
(i)
shall not apply to a Claim by an Indemnified Person arising out of or based
upon
a Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person for such
Indemnified Person expressly for use in connection with the preparation of
the
Registration Statement or any such amendment thereof or supplement thereto
and
(ii) shall not be available to the extent such Claim is based on a failure
of
the Investor to deliver or to cause to be delivered the prospectus made
available by the Company, including a corrected prospectus, if such prospectus
or corrected prospectus was timely made available by the Company pursuant to
Section 3(d)
and then
only if, and to the extent that, following the receipt of the corrected
prospectus no grounds for such Claim would have existed; and (iii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld or delayed. Such indemnity shall remain in full force
and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of any of the Registrable Securities
by
the Investor pursuant to Section 9.
(b) In
connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a),
the
Company, each of its directors, each of its officers who signs the Registration
Statement and each Person, if any, who controls the Company within the meaning
of the 1933 Act or the 1934 Act (each, an “Indemnified
Party”),
against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim
or
Indemnified Damages arise out of or are based upon any Violation, in each case
to the extent, and only to the extent, that such Violation occurs in reliance
upon and in conformity with written information furnished to the Company by
such
Investor expressly for use in connection with such Registration Statement;
and,
subject to Section 6(b),
such
Investor will reimburse any legal or other expenses reasonably incurred by
an
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section
6(b)
and the
agreement with respect to contribution contained in Section 7
shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which consent
shall
not be unreasonably withheld or delayed; provided, further, however, that such
Investor shall be liable under this Section 6(b)
for only
that amount of a Claim or Indemnified Damages as does not exceed the net
proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of any of the Registrable
Securities by any of the Investors pursuant to Section 9.
(c) Promptly
after receipt by an Indemnified Person or Indemnified Party (as the case may
be)
under this Section 6
of
notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person
or
Indemnified Party (as the case may be) shall, if a Claim in respect thereof
is
to be made against any indemnifying party under this Section 6,
deliver
to the indemnifying party a written notice of the commencement thereof, and
the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person
or
the Indemnified Party (as the case may be); provided, however, that an
Indemnified Person or Indemnified Party (as the case may be) shall have the
right to retain its own counsel with the fees and expenses of such counsel
to be
paid by the indemnifying party if: (i) the indemnifying party has agreed in
writing to pay such fees and expenses; (ii) the indemnifying party shall have
failed promptly to assume the defense of such Claim and to employ counsel
reasonably satisfactory to such Indemnified Person or Indemnified Party (as
the
case may be) in any such Claim; or (iii) the named parties to any such Claim
(including any impleaded parties) include both such Indemnified Person or
Indemnified Party (as the case may be) and the indemnifying party, and such
Indemnified Person or such Indemnified Party (as the case may be) shall have
been advised by counsel that a conflict of interest is likely to exist if the
same counsel were to represent such Indemnified Person or such Indemnified
Party
and the indemnifying party (in which case, if such Indemnified Person or such
Indemnified Party (as the case may be) notifies the indemnifying party in
writing that it elects to employ separate counsel at the expense of the
indemnifying party, then the indemnifying party shall not have the right to
assume the defense thereof and such counsel shall be at the expense of the
Indemnifying Party, provided further, that in the case of clause (iii) above
the
indemnifying party shall not be responsible for the reasonable fees and expenses
of more than one (1) separate legal counsel for such Indemnified Person or
Indemnified Party (as the case may be). In the case of an Indemnified Person,
legal counsel referred to in the immediately preceding sentence shall be
selected by the Investors holding at least a majority in
interest of the Registrable Securities included in the Registration Statement
to
which the Claim relates. The Indemnified Party or Indemnified Person (as the
case may be) shall reasonably cooperate with the indemnifying party in
connection with any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person (as the
case
may be) which relates to such action or Claim. The indemnifying party shall
keep
the Indemnified Party or Indemnified Person (as the case may be) reasonably
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party shall be liable for
any
settlement of any action, claim or proceeding effected without its prior written
consent, provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the prior written consent of the Indemnified Party or Indemnified Person (as
the
case may be), consent to entry of any judgment or enter into any settlement
or
other compromise which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party or Indemnified
Person (as the case may be) of a release from all liability in respect to such
Claim or litigation, and such settlement shall not include any admission as
to
fault on the part of the Indemnified Party. Following indemnification as
provided for hereunder, the indemnifying party shall be subrogated to all rights
of the Indemnified Party or Indemnified Person (as the case may be) with respect
to all third parties, firms or corporations relating to the matter for which
indemnification has been made. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party (as the case may be) under this Section
6,
except
to the extent that the indemnifying party is materially and adversely prejudiced
in its ability to defend such action.
(d) No
Person
involved in the sale of Registrable Securities who is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
in
connection with such sale shall be entitled to indemnification from any Person
involved in such sale of Registrable Securities who is not guilty of fraudulent
misrepresentation.
(e) The
indemnification required by this Section 6
shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
(f) The
indemnity agreements contained herein shall be in addition to (i) any cause
of
action or similar right of the Indemnified Party or Indemnified Person against
the indemnifying party or others, and (ii) any liabilities the indemnifying
party may be subject to pursuant to the law.
7. Contribution.
To
the
extent any indemnification by an indemnifying party is prohibited or limited
by
law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6
to the
fullest extent permitted by law; provided, however, that: (i) no contribution
shall be made under circumstances where the maker would not have been liable
for
indemnification under the fault standards set forth in Section 6
of this
Agreement, (ii) no Person involved in the sale of Registrable Securities which
Person is guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 0000 Xxx) in connection with such sale shall be entitled to
contribution from any Person involved in such sale of Registrable Securities
who
was not guilty of fraudulent misrepresentation; and (iii) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount
of
proceeds received by such seller from the sale of such Registrable Securities
pursuant to such Registration Statement.
8. Reports
Under the 1934 Act.
With
a
view to making available to the Investor the benefits of Rule 144 promulgated
under the 1933 Act or any other similar rule or regulation of the SEC that
may
at any time permit the Investor to sell securities of the Company to the public
without registration (“Rule
144”),
the
Company agrees to:
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144;
(b) file
with
the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains
subject to such requirements (it being understood that nothing herein shall
limit the Company’s obligations under Section 4(c) of the Transaction Agreement)
and the filing of such reports and other documents is required for the
applicable provisions of Rule 144; and
(c) furnish
to the Investor so long as the Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company, if true, that it has
complied with the reporting requirements of Rule 144, the 1933 Act and the
1934
Act, (ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company if such reports
are
not publicly available via XXXXX, and (iii) such other information as may be
reasonably requested to permit the Investor to sell such securities pursuant
to
Rule 144 without registration.
9. Assignment
of Registration Rights.
The
rights under this Agreement shall be automatically assignable by the Investor
to
any transferee of all or any portion of the Investor’s Registrable Securities
if: (i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within
a
reasonable time after such assignment; (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a)
the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned;
(iii) immediately following such transfer or assignment the further disposition
of such securities by the transferee or assignee is restricted under the 1933
Act or applicable state securities laws if so required; (iv) at or before the
time the Company receives the written notice contemplated by clause (ii) of
this
sentence the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein; (v) such transfer shall have
been made in accordance with the applicable requirements of the Transaction
Agreement; and (vi) such transfer shall have been conducted in accordance with
all applicable federal and state securities laws.
10. Amendment
of Registration Rights.
Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Required
Holders, provided that the Investor may give a waiver in writing as to itself.
Any amendment or waiver effected in accordance with this Section 10
shall be
binding upon the Investor and the Company. No such amendment or waiver (unless
given pursuant to the foregoing proviso) shall be effective to the extent that
it applies to less than all of the holders of the Registrable Securities. No
consideration shall be offered or paid to any Person to amend or consent to
a
waiver or modification of any provision of any of this Agreement unless the
same
consideration also is offered to all of the parties to this
Agreement.
| 11. |
Miscellaneous.
|
(a) Solely
for purposes of this Agreement, a Person is deemed to be a holder of Registrable
Securities whenever such Person owns or is deemed to own of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from such record owner of such Registrable
Securities.
(b) 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);
(iii) with respect to Section 3(c) by electronic mail (provided confirmation
of
transmission is electronically generated and kept on file by the sending party)
or (iv) one (1) Business Day after deposit with a nationally recognized
overnight delivery service with next day delivery specified, 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:
000
Xxxxx
Xxxx
Xxxxxx,
Xxxxxxx, Xxxxxx X0X-0X0
Telephone:
000-000-0000
Facsimile:
000-000-0000
Attention:
CEO
With
a
copy (for informational purposes only) to:
Cozen
X’Xxxxxx
0000
Xxxxxx Xxxxxx
Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Attention:
Xxxxx X. Xxxxxx, Esq.
If
to the
Lender:
Hilco
Financial, LLC
c/o
Hilco
Trading Co., Inc.
0
Xxxxxx
Xxxxx, Xxxxx 000
Xxxxxxxxxx,
Xxxxxxxx 00000
Telephone:
000-000-0000
Facsimile:
000-000-0000
Attention:
CEO
If
to
Legal Counsel:
Xxxxxxxxx
Xxxxxxx, LLP
000
Xxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Telephone:
000-000-0000
Facsimile:
212-801-6400
Attention:
Xxxxx X. Xxxxxxxxx, Esq.
Xxxxxxxx
X. Ain, Esq.
Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated
by
the sender’s facsimile machine or electronic mail transmission containing the
time, date, recipient facsimile number or electronic mail address and an image
of the first page of such transmission or (C) provided by a courier or overnight
courier service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service
in
accordance with clause (i), (ii) or (iii) above, respectively.
(c) Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as
a
waiver thereof.
(d) The
parties hereby agree that pursuant to 735
Illinois Compiled Statutes 105/5-5 they have chosen that all
questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of Illinois,
without giving effect to any choice of law or conflict of law provision or
rule
(whether of the State of Illinois or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of
Illinois. Each party hereby irrevocably submits to the exclusive jurisdiction
of
the state and federal courts sitting in The City of Chicago, Xxxx County, for
the adjudication of any dispute hereunder or in connection herewith or with
any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that
the
venue of 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 to
such
party at the address for such 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. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
(e) This
Agreement, the other Transaction Documents (as defined in the Transaction
Agreement), the schedules and exhibits attached hereto and thereto and the
instruments referenced herein and therein constitute the entire agreement among
the parties hereto with respect to the subject matter hereof and thereof. There
are no restrictions, promises, warranties or undertakings, other than those
set
forth or referred to herein and therein. This Agreement, the other Transaction
Documents, the schedules and exhibits attached hereto and thereto and the
instruments referenced herein and therein supersede all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof and thereof.
(f) Subject
to the requirements of Section 9,
this
Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.
(g) The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof. Unless the context clearly
indicates otherwise, each pronoun herein shall be deemed to include the
masculine, feminine, neuter, singular and plural forms thereof. The terms
“including,”
“includes,”
“include”
and
words of like import shall be construed broadly as if followed by the words
“without limitation.” The terms “herein,”
“hereunder,”
“hereof”
and
words of like import refer to this entire Agreement instead of just the
provision in which they are found.
(h) This
Agreement may be executed in two or more identical counterparts, all of which
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.
In
the event that any signature is delivered by facsimile transmission or by an
e-mail which contains an electronic file of an executed signature page, such
signature page 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 or electronic file signature page (as the case
may be) were an original thereof.
(i) Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(j) All
consents and other determinations required to be made by the Investor pursuant
to this Agreement shall be made, unless otherwise specified in this Agreement,
by the Required Holders.
(k) 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.
(l) This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, other than the Persons
referred to in Section 6
and
7
hereof.
(m) The
obligations of each Investor under this Agreement and the other Transaction
Documents are several and not joint with the obligations of any other Investor,
and no Investor shall be responsible in any way for the performance of the
obligations of any other Investor under this Agreement or any other Transaction
Document. Nothing contained herein or in any other Transaction Document, and
no
action taken by any Investor pursuant hereto or thereto, shall be deemed to
constitute the Investors as a partnership, an association, a joint venture
or
any other kind of group or entity, or create a presumption that the Investors
are in any way acting in concert or as a group or entity with respect to such
obligations or the transactions contemplated by the Transaction Documents or
any
matters, and the Company acknowledges that the Investors are not acting in
concert or as a group with respect to such obligations or the transactions
contemplated by this Agreement or any of the other the Transaction Documents.
Each Investor shall be entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement or
out
of any other Transaction Documents, and it shall not be necessary for any other
Investor to be joined as an additional party in any proceeding for such purpose.
The use of a single agreement with respect to the obligations of the Company
contained was solely in the control of the Company, not the action or decision
of any Investor, and was done solely for the convenience of the Company and
not
because it was required or requested to do so by any Investor.
[signature
pages follow]
IN
WITNESS WHEREOF,
the
Lender and the Company have caused their respective signature page to this
Registration Rights Agreement to be duly executed as of the date first written
above.
| COMPANY: | ||
| WORKSTREAM INC. | ||
| By: |
|
|
|
Name:
__________________
Title:
__________________
|
||
IN
WITNESS WHEREOF,
the
Lender and the Company have caused their respective signature page to this
Registration Rights Agreement to be duly executed as of the date first written
above.
|
LENDER:
|
||
| HILCO FINANCIAL, LLC | ||
| By: |
|
|
|
Name:
__________________
Title:
__________________
|
||
EXHIBIT
A
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
______________________
______________________
______________________
Attention:
_____________
Re: Workstream
Inc.
Ladies
and Gentlemen:
[We
are][I am] counsel to Workstream Inc., a corporation existing pursuant to the
Canada Business Corporations Act (the “Company”),
and
have represented the Company in connection with that certain Transaction
Agreement (the “Transaction
Agreement”)
entered into by and among the Company and the Lender named therein (the
“Holder”)
pursuant to which the Company issued to the Holder warrants exercisable for
Common Shares (the “Warrants”).
Pursuant to the Transaction Agreement, the Company also has entered into a
Registration Rights Agreement with the Holder (the “Registration
Rights Agreement”)
pursuant to which the Company agreed, among other things, to register the
Registrable Securities (as defined in the Registration Rights Agreement),
including the Common Shares issuable upon exercise of the Warrants, under the
Securities Act of 1933, as amended (the “1933
Act”).
In
connection with the Company’s obligations under the Registration Rights
Agreement, on ____________ ___, 200_, the Company filed a Registration Statement
on Form S-3 (File No. 333-_____________) (the “Registration
Statement”)
with
the Securities and Exchange Commission (the “SEC”)
relating to the Registrable Securities which names the Holder as a selling
stockholder thereunder.
In
connection with the foregoing, [we][I] advise you that a member of the SEC’s
staff has advised [us][me] by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at
[ENTER
TIME OF EFFECTIVENESS]
on
[ENTER
DATE OF EFFECTIVENESS]
and
[we][I] have no knowledge, that any stop order suspending its effectiveness
has
been issued or that any proceedings for that purpose are pending before, or
threatened by, the SEC and the Registrable Securities are available for resale
under the 1933 Act pursuant to the Registration Statement.
You
are
hereby informed that the Common Shares are freely transferable by the Holder
pursuant to the Registration Statement, subject to the prospectus delivery
requirements of the 1933 Act, which the selling
stockholders
have
agreed to comply with to the extent applicable and which we have assumed
compliance with in issuing this letter.
|
Very
truly yours,
[ISSUER’S
COUNSEL]
|
| By:_____________________ |
CC: [LIST
NAMES OF HOLDER(S); # OF SHARES; CERTIFICATE #S]
EXHIBIT
B
SELLING
STOCKHOLDERS
The
Common Shares being offered by the selling stockholders are issuable upon
exercise of the warrants. For additional information regarding the issuance
of
the warrants, see “Private Placement of Notes and Warrants” above. We are
registering the Common Shares in order to permit the selling stockholders to
offer the shares for resale from time to time. Except for the ownership of
the
warrants issued pursuant to the Transaction Agreement, the selling stockholders
have not had any material relationship with us within the past three
years.
The
table
below lists the selling stockholders and other information regarding the
beneficial ownership (as determined under Section 13(d) of the Securities
Exchange Act of 1934, as amended) of the Common Shares by each of the selling
stockholders. The second column lists the number of Common Shares beneficially
owned by each selling stockholder, based on its ownership of the warrants,
as of
________, 200_, assuming exercise of the warrants held by the selling
stockholders on that date.
The
third
column lists the Common Shares being offered by this prospectus by the selling
stockholders.
In
accordance with the terms of a registration rights agreement with the selling
stockholders, this prospectus generally covers the resale of the maximum number
of Common Shares issuable upon exercise of the warrants as of the trading day
immediately preceding the date the registration statement is initially filed
with the SEC, without taking into account any limitations on the exercise of
the
warrants. The fourth column assumes the sale of all of the shares offered by
the
selling stockholders pursuant to this prospectus.
Under
the
terms of the warrants, a selling stockholder may not exercise the warrants
to
the extent such exercise would cause such selling stockholder, together with
its
affiliates, to beneficially own a number of Common Shares which would exceed
4.90% of our then outstanding Common Shares following such exercise, excluding
for purposes of such determination Common Shares issuable upon exercise of
the
warrants which have not been exercised. The number of shares in the second
column does not reflect this limitation. The selling stockholders may sell
all,
some or none of their shares in this offering. See “Plan of
Distribution.”
|
Name
of Selling Stockholder
|
Number
of Common Shares
Owned
Prior to Offering
|
Maximum
Number of
Common
Shares to be Sold
Pursuant
to this Prospectus
|
Number
of Common
Shares
Owned After
Offering
|
|||
PLAN
OF DISTRIBUTION
We
are
registering the Common Shares issuable upon exercise of the warrants to permit
the resale of these Common Shares by the holders of the warrants from time
to
time after the date of this prospectus. We will not receive any of the proceeds
from the sale by the selling stockholders of the Common Shares. We will bear
all
fees and expenses incident to our obligation to register the Common
Shares.
The
selling stockholders may sell all or a portion of the Common Shares beneficially
owned by them and offered hereby from time to time directly or through one
or
more underwriters, broker-dealers or agents. If the Common Shares are sold
through underwriters or broker-dealers, the selling stockholders will be
responsible for underwriting discounts or commissions or agent’s commissions.
The Common Shares may be sold in one or more transactions at fixed prices,
at
prevailing market prices at the time of the sale, at varying prices determined
at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions,
| · |
on
any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of
sale;
|
| · |
in
the over-the-counter market;
|
| · |
in
transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
|
| · |
through
the writing of options, whether such options are listed on an options
exchange or otherwise;
|
| · |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
| · |
block
trades in which the broker-dealer will attempt to sell the shares as
agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
| · |
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
| · |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| · |
privately
negotiated transactions;
|
| · |
short
sales made after the date the Registration Statement is declared effective
by the SEC;
|
| · |
sales
pursuant to Rule 144;
|
| · |
broker-dealers
may agree with the selling securityholders to sell a specified number
of
such shares at a stipulated price per
share;
|
| · |
a
combination of any such methods of sale;
and
|
| · |
any
other method permitted pursuant to applicable
law.
|
If
the
selling stockholders effect such transactions by selling Common Shares to or
through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the Common Shares for whom they may act as agent or to whom they
may sell as principal (which discounts, concessions or commissions as to
particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales
of
the Common Shares or otherwise, the selling stockholders may enter into hedging
transactions with broker-dealers, which may in turn engage in short sales of
the
Common Shares in the course of hedging in positions they assume. The selling
stockholders may also sell Common Shares short and deliver Common Shares covered
by this prospectus to close out short positions and to return borrowed shares
in
connection with such short sales. The selling stockholders may also loan or
pledge Common Shares to broker-dealers that in turn may sell such
shares.
The
selling stockholders may pledge or grant a security interest in some or all
of
the warrants or Common Shares owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the Common Shares from time to time pursuant to this prospectus
or any amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act of 1933, as amended, amending, if necessary,
the
list of selling stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this prospectus. The
selling stockholders also may transfer and donate the Common Shares in other
circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The
selling stockholders and any broker-dealer participating in the distribution
of
the Common Shares may be deemed to be “underwriters” within the meaning of the
Securities Act, and any commission paid, or any discounts or concessions allowed
to, any such broker-dealer may be deemed to be underwriting commissions or
discounts under the Securities Act. At the time a particular offering of the
Common Shares is made, a prospectus supplement, if required, will be distributed
which will set forth the aggregate amount of Common Shares being offered and
the
terms of the offering, including the name or names of any broker-dealers or
agents, any discounts, commissions and other terms constituting compensation
from the selling stockholders and any discounts, commissions or concessions
allowed or reallowed or paid to broker-dealers.
Under
the
securities laws of some states, the Common Shares may be sold in such states
only through registered or licensed brokers or dealers. In addition, in some
states the Common Shares may not be sold unless such shares have been registered
or qualified for sale in such state or an exemption from registration or
qualification is available and is complied with.
There
can
be no assurance that any selling stockholder will sell any or all of the Common
Shares registered pursuant to the shelf registration statement, of which this
prospectus forms a part.
The
selling stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of
1934,
as amended, and the rules and regulations thereunder, including, without
limitation, to the extent applicable, Regulation M of the Exchange Act, which
may limit the timing of purchases and sales of any of the Common Shares by
the
selling stockholders and any other participating person. To the extent
applicable, Regulation M may also restrict the ability of any person engaged
in
the distribution of the Common Shares to engage in market-making activities
with
respect to the Common Shares. All of the foregoing may affect the marketability
of the Common Shares and the ability of any person or entity to engage in
market-making activities with respect to the Common Shares.
We
will
pay all expenses of the registration of the Common Shares pursuant to the
registration rights agreement, estimated to be $[ ]
in total, including, without limitation, Securities and Exchange Commission
filing fees and expenses of compliance with state securities or “blue sky” laws;
provided, however, that a selling stockholder will pay all underwriting
discounts and selling commissions, if any. We will indemnify the selling
stockholders against liabilities, including some liabilities under the
Securities Act, in accordance with the registration rights agreements, or the
selling stockholders will be entitled to contribution. We may be indemnified
by
the selling stockholders against civil liabilities, including liabilities under
the Securities Act, that may arise from any written information furnished to
us
by the selling stockholder specifically for use in this prospectus, in
accordance with the related registration rights agreements, or we may be
entitled to contribution.
Once
sold
under the shelf registration statement, of which this prospectus forms a part,
the Common Shares will be freely tradable in the hands of persons other than
our
affiliates.
EXHIBIT
C
(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 five (5) Business Days after receipt, 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 do not return the Questionnaire by the foregoing deadline, your shares
may not be included in the Registration Statement.
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.
Name
of
Selling Shareholder: _________________________________
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.
Beneficial ownership shall have the meaning ascribed to it in Section
13(d) of the Securities Exchange Act of 1934, as amended. 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.
|
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
issued to you were acquired in the ordinary course of your business, and at
the
time the securities were issued to you, 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.
(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.
(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:
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.
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: __________, 2006 | 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] |
||
